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Dynamic quotes 
OFFON

OVERSTOCK.COM, INC.

(OSTK)
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OVERSTOCK.COM, INC MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

11/04/2021 | 05:14am EST
The following discussion provides information that we believe to be relevant to
an understanding of our consolidated financial condition and results of
operations. The statements in this section regarding industry outlook, our
expectations regarding the performance of our business and any other
non-historical statements are forward-looking statements. Our actual results may
differ materially from those contained in or implied by any forward-looking
statements contained herein. These forward-looking statements are subject to
numerous risks and uncertainties, including, but not limited to, the risks and
uncertainties described in "Special Cautionary Note Regarding Forward Looking
Statements" and in Part II, Item 1A, "Risk Factors" included in this Quarterly
Report on Form 10-Q. You should read the following discussion together with our
consolidated financial statements and related notes included in this Quarterly
Report on Form 10-Q and with the sections entitled "Special Cautionary Note
Regarding Forward-Looking Statements," Part I, Item 1A, "Risk Factors," and our
consolidated financial statements and related notes included in our Annual
Report on Form 10-K for the year ended December 31, 2020.

We are an online retailer and technology company. As used herein, "Overstock,"
"the Company," "we," "our" and similar terms include Overstock.com, Inc. and our
majority-owned subsidiaries, unless the context indicates otherwise.

Overview


Overstock seeks to provide goods to furnish and accessorize "Dream Homes for
All," particularly for our target customers-consumers who seek smart value on
quality, stylish merchandise 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, particularly as millennials
and younger generations start families and move into new homes. As a result of
the COVID-19 pandemic, consumers migrated to online shopping. 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.
We sell our products and services primarily 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. Nearly all our retail sales through our Website were
from transactions in which we fulfilled orders through our network of
manufacturers, distributors and other suppliers ("partners") selling on our
Website. 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 a proprietary technology platform and
services for order fulfillment, customer service, returns handling, and other
services. Our supply chain allows us to ship directly to our customers from our
suppliers or from our warehouses.

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Strategies for our Business

Our business initiatives enable our long-term focus on our three brand pillars,
"Product Findability," "Smart Value," and "Easy Delivery and Support." Current
initiatives for the business include:

•Improve Product Findability - Directly supporting our "Product Findability"
brand pillar by improving customer search and navigation through refinement of
our taxonomy and attribute infrastructure with the goal of enhanced search
relevancy and recommendations.

•Grow Canada Market Share - Expanding geographical engagement to grow our Canadian customer base by providing a wholesale change in our Canadian "Smart Value" and "Easy Delivery and Support" customer shopping experience.


•Grow Government Market Share - Improving our Government website with more
competitive market features and products that offer an intuitive procurement
experience, and provide the flexibility to expand the platform to additional
government customers.

•Improve Enterprise Platform - Improving our data strategy to connect
high-quality, intuitive data with our business users to enable faster insights.
Additionally, embracing the public cloud in order to promote greater resilience
for the business in the event of unforeseen circumstances.

Financial Reporting Presentation Relating to the Pelion Transaction


Unless otherwise specified, disclosures throughout Management's Discussion and
Analysis of Financial Conditions, Results of Operations, and Liquidity and
Capital Resources, reflect continuing operations only. See Note 3-Discontinued
Operations in the Notes to Unaudited Consolidated Financial Statements included
in Item 1, Part I, Financial Statements (Unaudited) of this Quarterly Report on
Form 10-Q for further information.

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," as well as 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."

Revenue decreased 3.9% for the three months ended September 30, 2021, compared
to the same period in 2020. This decrease was primarily due to a 22% decrease in
the number of customer orders, partially offset by a 24% increase in average
order value driven by a continued product mix shift into home furniture
categories. This decreased order activity was largely driven by tapering of the
accelerated customer growth we experienced at the peak of the COVID-19 pandemic
related to restrictions in the third quarter of 2020. While we observed
acceleration of new customer acquisition and demand for our products and
resulting sales during the peak of the pandemic, we cannot estimate the impact
that the ongoing COVID-19 pandemic, the intensity of additional waves of the
pandemic or the subsiding of the pandemic and return to prior patterns of
economic activity will have on our business in the future due to the
unpredictable nature of the ultimate development and duration of the COVID-19
pandemic.

Gross profit decreased 7.1% for the three months ended September 30, 2021,
compared to the same period in 2020, primarily due to lower sales and a decrease
in gross margin. Gross margin decreased to 22.7% for the three months ended
September 30, 2021, compared to 23.5% for the same period in 2020, primarily due
to the one-time benefits realized in 2020 such as lower promotional discounting
environment and fees charged to partners due to unmet contractual service
levels, partially offset by increased advertising revenue and lower returns
activity.

Sales and marketing expenses as a percentage of revenue increased from 9.9% for
the three months ended September 30, 2020 to 11.0% for the three months ended
September 30, 2021, primarily due to increased spending on paid listing
advertisements and keywords to support our customer acquisition strategy,
partially offset by less broadcast media spend and gained leverage in
staff-related expenses.
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Technology expenses totaled $31.2 million for the three months ended
September 30, 2021, a $1.2 million increase compared to the three months ended
September 30, 2020, primarily due to staff-related costs to support strategic
initiatives and increased cloud adoption.

General and administrative expenses decreased $7.6 million for the three months
ended September 30, 2021 compared to the three months ended September 30, 2020,
primarily driven by a reduction in staff-related expenses, including accrued
bonus, consulting expenses, and facilities-related expenses.

Our consolidated cash and cash equivalents balance increased from $495.4 million as of December 31, 2020, to $512.2 million as of September 30, 2021.

Additional commentary related to COVID-19


Overstock has continued to respond to the challenges and opportunities created
by the COVID-19 pandemic. In fiscal year 2020, we saw a substantial
year-over-year increase in our Website traffic, number of new customers, and
customer demand, particularly in our home furniture and furnishings categories.
While many of our key metrics remain positive, some have receded from the
elevated 2020 levels during the third quarter of 2021. Our online-only platform
and partner network with thousands of fulfillment centers have enabled us to
meet the increase in demand. Our three warehouses have remained operational
based on our sustained implementation of sound safety measures, including
staggered shifts and social distancing. These measures are updated based on CDC
guidelines. There remain continued challenges throughout the supply chain in
factory production capacity, inbound freight delays, as well as carrier delivery
constraints and fulfillment performance from some suppliers. We have evaluated
and implemented a phased re-entry plan for our offices; most of our corporate
employees continue to work from home without incident throughout the re-entry
period. We cannot predict how the COVID-19 pandemic, including the spread of
variants thereof, or the vaccination rate will unfold in the coming months,
regionally, nationally and internationally. Nevertheless, the challenges arising
from the pandemic have not adversely affected our liquidity, revenues, or
capacity to service our debt, nor have these conditions required us to reduce
our capital expenditures.


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Results of Operations

Comparisons of Three Months Ended September 30, 2021 to Three Months Ended September 30, 2020, and Nine Months Ended September 30, 2021 to Nine Months Ended September 30, 2020.

Net revenue, cost of goods sold, gross profit and gross margin


The following table reflects our net revenue, cost of goods sold, and gross
profit for the three and nine months ended September 30, 2021 and 2020 (in
thousands):
                                                           Three months ended                       Nine months ended
                                                              September 30,                           September 30,
                                                         2021               2020                2021                 2020
Net revenue                                          $ 689,390$ 717,695$ 2,143,787$ 1,824,249
Cost of goods sold
Product costs and other cost of goods sold             506,234            519,842            1,576,696            1,331,612
Fulfillment and related costs                           26,448             29,140               82,033               71,806
Total cost of goods sold                               532,682            548,982            1,658,729            1,403,418
Gross profit                                         $ 156,708$ 168,713$   485,058$   420,831
Year-over-year percentage growth
Net revenue                                               (3.9) %                                 17.5  %

Gross profit                                              (7.1) %                                 15.3  %
Percent of total net revenue
Cost of goods sold
Product costs and other cost of goods sold                73.4  %            72.4  %              73.5  %              73.0  %
Fulfillment and related costs                              3.8  %             4.1  %               3.8  %               3.9  %
Total cost of goods sold                                  77.3  %            76.5  %              77.4  %              76.9  %
Gross margin                                              22.7  %            23.5  %              22.6  %              23.1  %



The 3.9% decrease in net revenue for the three months ended September 30, 2021,
as compared to the same period in 2020, was primarily due to a 22% decrease in
the number of customer orders, partially offset by a 24% increase in average
order value driven by a continued product mix shift into home furniture
categories. This decreased order activity was largely driven by tapering of the
accelerated customer growth we experienced at the peak of the COVID-19 pandemic
related to restrictions in the third quarter of 2020.

The 17.5% increase in net revenue for the nine months ended September 30, 2021,
as compared to the same period in 2020, was primarily due to increased retail
product sales resulting from a 24% increase in average order value driven by a
continued product mix shift into home furniture categories, partially offset by
a 5% decrease in customer orders.

We cannot estimate the impact that the ongoing COVID-19 pandemic, the intensity
of additional waves of the pandemic or the subsiding of the pandemic and return
to prior patterns of economic activity will have on our business in the future
due to the unpredictable nature of the ultimate development and duration of the
COVID-19 pandemic.

International net revenues were less than 1% of total net revenues for each of the three and nine months ended September 30, 2021 and 2020.

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Change in estimate of average transit times (days)


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 the COVID-19 pandemic.

The following table shows the effect that hypothetical changes in the estimate
of average shipping transit times would have had on the reported amount of
revenue and income before income taxes for the three months ended September 30,
2021 (in thousands):
                                                                                  Three months ended
                                                                                  September 30, 2021
                                                                                                  Increase (Decrease)
                                                                  Increase (Decrease)             Income Before Income
Change in the Estimate of Average Transit Times (Days)                  Revenue                          Taxes
2                                                              $              (19,896)         $               (3,784)
1                                                              $              (13,802)         $               (2,663)
As reported                                                                  As reported                     As reported
-1                                                             $                7,955          $                1,524
-2                                                             $               14,587          $                2,789



Our overall gross margins fluctuate based on changes in supplier cost and/or
sales price, including competitive pricing; inventory management decisions;
sales coupons and promotions; product mix of sales; and operational and
fulfillment costs. Fulfillment costs include all warehousing costs, including
fixed overhead and variable handling costs (excluding packaging costs), as well
as merchant processing fees associated with customer payments made by credit
cards and other payment methods and other variable fees, and customer service
costs, all of which we include as costs in calculating gross margin. We believe
that some companies in our industry, including some of our competitors, account
for fulfillment costs within operating expenses, and therefore exclude
fulfillment costs from gross margin. As a result, our gross margin may not be
directly comparable to others in our industry.

Fulfillment costs as a percentage of sales may vary due to several factors, such
as our ability to manage costs at our warehouses, significant changes in the
number of units received and fulfilled, the extent to which we use third-party
fulfillment services and warehouses, and our ability to effectively manage
customer service costs and merchant fees. Fulfillment and related costs remained
relatively consistent as a percentage of revenue during the three and nine
months ended September 30, 2021 as compared to the same period in 2020.

Gross margins for the past seven quarterly periods and fiscal year ending 2020
were:
                Q1 2020      Q2 2020      Q3 2020      Q4 2020      FY 2020      Q1 2021      Q2 2021      Q3 2021
Gross margin     21.9  %      23.2  %      23.5  %      22.5  %      22.9  %      23.3  %      22.0  %      22.7  %



Gross profit for the three months ended September 30, 2021 decreased 7.1%
compared to the same period in 2020, due to lower sales and a decrease in gross
margin. Gross margin decreased to 22.7% for the three months ended September 30,
2021, compared to 23.5% for the same period in 2020, primarily due to the
one-time benefits realized in 2020 such as lower promotional discounting
environment and fees charged to partners due to unmet contractual service
levels. The decrease was partially offset by increased advertising revenue and
lower returns activity.

Gross profit for the nine months ended September 30, 2021 increased 15.3%
compared to the same period in 2020, primarily due to sales volume. Gross margin
decreased to 22.6% for the nine months ended September 30, 2021, compared to
23.1% for the same period in 2020, primarily due to one-time benefits realized
in 2020 such as lower promotional discounting environment and fees charged to
partners due to unmet contractual service levels.

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Operating expenses

Sales and marketing expenses

We use a variety of methods to target our consumer audience, including online
campaigns, such as advertising through text ads, product listing ads, display
ads, native ads, affiliate marketing programs, e-mail, direct mail, video ads,
and social media campaigns. We also do brand advertising through linear and
streaming television.

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.

The following table reflects our sales and marketing expenses for the three and nine months ended September 30, 2021 and 2020 (in thousands):

                                                          Three months ended                    Nine months ended
                                                             September 30,                        September 30,
                                                        2021              2020               2021               2020

Sales and marketing expenses                         $ 75,650$ 71,292$ 234,460$ 186,852

Advertising expense included in sales and marketing expenses

                                             $ 72,356$ 67,322$ 224,223$ 174,910
Year-over-year percentage growth
Sales and marketing expenses                              6.1  %                              25.5  %
Advertising expense included in sales and marketing
expenses                                                  7.5  %                              28.2  %
Percentage of net revenues
Sales and marketing expenses                             11.0  %            9.9  %            10.9  %            10.2  %
Advertising expense included in sales and marketing
expenses                                                 10.5  %            9.4  %            10.5  %             9.6  %



The 110 basis point increase in sales and marketing expenses as a percent of net
revenues for the three months ended September 30, 2021, as compared to the same
period in 2020, was primarily due to increased spending on paid listing
advertisements and keywords to support our customer acquisition strategy,
partially offset by less broadcast media spend and gained leverage in
staff-related expenses.

The 70 basis point increase in sales and marketing expenses as a percent of net
revenues for the nine months ended September 30, 2021, as compared to the same
period in 2020, was primarily due to increased spending on paid listing
advertisements and keywords to support our customer acquisition strategy,
partially offset by less broadcast media spend and gained leverage in
staff-related expenses.

Technology expenses


We seek to deploy our capital resources efficiently in technology, including web
services, customer support solutions, website search, expansion of new and
existing product categories, and in technology to enhance the customer
experience, including using machine learning, 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 initiatives and these expenditures may continue to be material.

The frequency and variety of cyberattacks on our Website, our corporate systems,
our partners, 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.

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The following table reflects our technology expenses for the three and nine months ended September 30, 2021 and 2020 (in thousands):

                                                          Three months ended                   Nine months ended
                                                             September 30,                       September 30,
                                                        2021              2020              2021              2020

Technology expenses                                  $ 31,178$ 29,934$ 92,084$ 86,278
Year-over-year percentage growth
Technology expenses                                       4.2  %                              6.7  %
Technology expenses as a percent of net revenues          4.5  %            4.2  %            4.3  %            4.7  %



The $1.2 million increase in technology expenses for the three months ended September 30, 2021, as compared to the same period in 2020, was primarily due to staff-related costs to support strategic initiatives and increased cloud adoption.

The $5.8 million increase in technology expenses for the nine months ended September 30, 2021, as compared to the same period in 2020, was primarily due to staff-related costs to support strategic initiatives and increased cloud adoption.

General and administrative expenses

The following table reflects our general and administrative expenses for the three and nine months ended September 30, 2021 and 2020 (in thousands):

                                                          Three months ended                   Nine months ended
                                                             September 30,                       September 30,
                                                        2021              2020              2021              2020

General and administrative expenses                  $ 21,031$ 28,625$ 66,562$ 73,347
Year-over-year percentage growth
General and administrative expenses                     (26.5) %                             (9.3) %
General and administrative expenses as a percent of
net revenues                                              3.1  %            4.0  %            3.1  %            4.0  %



The $7.6 million decrease in general and administrative expenses for the three
months ended September 30, 2021, as compared to the same period in 2020, was
primarily driven by a reduction in staff-related expenses, including accrued
bonus, consulting expenses, and facilities-related expenses.

The $6.8 million decrease in general and administrative expenses for the nine
months ended September 30, 2021, as compared to the same period in 2020, was
primarily driven by reduction in staff-related expenses, including accrued bonus
and reduced discretionary consulting spend, partially offset by a beneficial
$8.6 million reversal of a legal settlement accrual in 2020 and a $2.5 million
legal settlement realized in 2020.

Income taxes


Our income tax provision for interim periods is determined using an estimate of
our annual effective tax rate adjusted for discrete items, if any, for relevant
interim periods. We update our estimate of the annual effective tax rate each
quarter and make cumulative adjustments if our estimated annual effective tax
rate changes.

Our quarterly tax provision and our quarterly estimate of our annual effective
tax rate are subject to significant variations due to several factors including:
variability in predicting our pre-tax and taxable income as well as the mix of
jurisdictions to which those items relate, relative changes in expenses or
losses for which tax benefits are limited or not recognized, how we do business,
fluctuations in our stock price, economic outlook, political climate, and other
conditions such as the COVID-19 pandemic. In addition, changes in laws,
regulations, and administrative practices will impact our rate. Our effective
tax rate can be volatile based on the amount of pre-tax income. For example, the
impact of discrete items on our effective tax rate is greater when pre-tax
income is lower.

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Our provision (benefit) for income tax for the three months ended September 30,
2021 and 2020 was $(1.8) million and $753,000, respectively. Our provision
(benefit) for income tax for the nine months ended September 30, 2021 and 2020
was $(47.3) million and $1.8 million, respectively. The tax benefit increased
during the three and nine months ended September 30, 2021 primarily due to the
valuation allowance release for certain federal and state deferred tax assets.
The effective tax rate for the nine months ended September 30, 2021 and 2020 was
(51.7)% and 2.4%, respectively. Our high effective tax rate for the nine months
ended September 30, 2021 is primarily attributable to the valuation allowance
release for certain federal and state deferred tax assets.

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. In our assessment
for the period ended June 30, 2021, we concluded it is more likely than not that
our deferred tax assets related to United States federal income and all states
with the exception of Utah will be realizable; therefore, we released
approximately $47.0 million of our valuation allowance. When a change in
valuation allowance is recognized during an interim period, a portion of the
valuation allowance to be reversed must be allocated to the remaining interim
periods. As customary with an interim release, driven by changes in estimated
reversals for the remainder of the year, we released an additional $4.4 million
of valuation allowance during the period ended September 30, 2021. We still
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.

We are subject to taxation in the United States and multiple state and foreign
jurisdictions. 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.

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 in light of the most recent
developments driven by the COVID-19 pandemic. 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.

Current sources of liquidity

Our principal sources of liquidity are existing cash and cash equivalents and accounts receivables, net. At September 30, 2021, we had cash and cash equivalents of $512.2 million and accounts receivables, net of $25.2 million.


At September 30, 2021, we had $150.0 million available under our "at the market"
sales program which permits us to conduct "at the market" sales of our common
stock under the Sales Agreement.

Cash flow information is as follows (in thousands):

                                  Nine months ended
                                    September 30,
                                 2021           2020
Cash provided by (used in):
Operating activities          $ 100,084$ 221,824
Investing activities            (52,061)       (12,169)
Financing activities            (10,042)       234,103



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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. As a result of increased online shopping migration
from the COVID-19 pandemic, we saw our retail revenue accelerate beginning in
the second half of March 2020, as customers turned to online shopping, which
caused our cash, cash equivalents and accounts receivable balances to increase
compared to balances prior to the pandemic. Due to uncertainty surrounding the
COVID-19 pandemic, we are unable to predict the duration of such favorable
conditions and their sustained impact on cash flows. We continue to monitor,
evaluate, and manage our operating plans, forecasts, and liquidity in light of
the most recent developments driven by the COVID-19 pandemic.

The $100.1 million of net cash provided by continuing operating activities
during the nine months ended September 30, 2021 was primarily due to income from
continuing operations adjusted for non-cash items of $114.2 million offset by
cash used in changes in operating assets and liabilities of $14.2 million.

The $221.8 million of net cash provided by continuing operating activities during the nine months ended September 30, 2020 was primarily due to income from continuing operations adjusted for non-cash items of $98.2 million and cash provided by changes in operating assets and liabilities of $123.6 million.

Investing activities


For the nine months ended September 30, 2021, investing activities resulted in a
net cash outflow of $52.1 million, primarily due to $41.1 million of
contributions for capital calls relating to our limited partnership interest in
the Medici Ventures Fund and $9.7 million of expenditures for property and
equipment.

For the nine months ended September 30, 2020, investing activities resulted in a net cash outflow of $12.2 million, primarily due to $12.0 million of expenditures for property and equipment.

Financing activities


For the nine months ended September 30, 2021, financing activities resulted in a
net cash outflow of $10.0 million primarily due to $7.9 million for payment of
taxes withheld upon vesting of restricted stock.

For the nine months ended September 30, 2020, financing activities resulted in a
net cash inflow of $234.1 million primarily due to $47.5 million in proceeds
from long-term debt and $195.5 million in net proceeds primarily from our common
stock offering executed during August 2020.

Contractual Obligations and Commitments


The following table summarizes our contractual obligations as of September 30,
2021 and the effect such obligations and commitments are expected to have on our
liquidity and cash flow in future periods (in thousands):
                                                                         Less than             1-3               3-5            More than 5
Contractual Obligations                                  Total             1 year             years             years              years

Operating leases (1)                                  $ 15,819$   5,977$  8,142$  1,555$      145
Loan agreements (2)                                     55,910              5,264             7,987             2,968              39,691

Total contractual cash obligations                    $ 71,729          $  

11,241 $ 16,129$ 4,523$ 39,836

__________________________________________

(1)   - Represents the future minimum lease payments under non-cancellable
operating leases. For information regarding our operating lease obligations,
see Note 7-Leases, in the Notes to Unaudited Consolidated Financial
Statements included in Item 1, Part I, Financial Statements (Unaudited) of this
Quarterly Report on Form 10-Q.
(2)   - Represents future interest and principal payments on the financing
agreements with Loan Core Capital Funding Corporation LLC. For information
regarding our financing agreements, see Note 6-Borrowings, in the Notes to
Unaudited Consolidated Financial Statements included in Item 1, Part I,
Financial Statements (Unaudited) of this Quarterly Report on Form 10-Q.
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Tax contingencies

We are involved in various tax matters, the outcomes of which are uncertain. As
of September 30, 2021, accrued tax contingencies were $2.8 million. 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.

Off-Balance Sheet Arrangements


We do not have any off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures, or capital resources that would be material to investors.

Critical Accounting Policies and Estimates


The preparation of our financial statements requires that we make estimates and
judgments. We base these on historical experience and on other assumptions that
we believe to be reasonable. There have been no material changes to our critical
accounting policies and estimates as compared to the critical accounting
policies and estimates described in Note 2-Accounting Policies, included in
Part II, Item 8, Financial Statements and Supplementary Data, of our Annual
Report on Form 10-K for the year ended December 31, 2020, except for the
additions of our critical accounting policy regarding our assessment of control
under the VIE model for the retained noncontrolling interests resulting from the
deconsolidation of our Medici subsidiaries, which is discussed in Note 2-Summary
of Significant Accounting Policies, Basis of Presentation, and our critical
accounting policy and estimates for the initial valuation of our retained
noncontrolling interests in deconsolidated former subsidiaries, which is
discussed in Note 2-Summary of Significant Accounting Policies, Initial
valuation of retained noncontrolling interest in former subsidiaries.

Government Regulation


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 retail 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
retail business is subject to general business regulations and laws, as well as
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 efforts to expand our retail business outside of the U.S. expose 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.

                                       37
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