Table of Contents

 

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

 

 

 

 

x

 

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

 

 

 

 

 

For the quarterly period ended September 30, 2008

 

 

 

Or

 

 

 

o

 

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

 

 

 

 

 

For the transition period from                         to

 

Commission file number: 000-49799

 

OVERSTOCK.COM, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

 

87-0634302

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification Number)

 

6350 South 3000 East

Salt Lake City, Utah 84121

(Address, including zip code, of

Registrant’s principal executive offices)

 

Registrant’s telephone number, including area code: (801) 947-3100

 

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

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer  o

 

Accelerated filer  x

 

 

 

Non-accelerated filer  o

 

Smaller reporting company  o

(Do not check if a smaller reporting company)

 

 

 

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

 

There were 22,745,002 shares of the Registrant’s common stock, par value $0.0001, outstanding on November 4, 2008.

 

 

 



Table of Contents

 

TABLE OF CONTENTS

 

PART I. FINANCIAL INFORMATION

3

 

 

Item 1. Financial Statements (Unaudited)

3

 

 

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

28

 

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

46

 

 

Item 4. Controls and Procedures

47

 

 

PART II. OTHER INFORMATION

48

 

 

Item 1. Legal Proceedings

48

 

 

Item 1A. Risk Factors

48

 

 

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

64

 

 

Item 3. Defaults upon Senior Securities

64

 

 

Item 4. Submission of Matters to a Vote of Security Holders

64

 

 

Item 5. Other Information

64

 

 

Item 6. Exhibits

65

 

 

Signature

66

 

2



Table of Contents

 

PART 1. FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

Overstock.com, Inc.

Consolidated Balance Sheets (unaudited)

(in thousands)

 

 

 

December 31,
2007

 

September 30,
2008

 

 

 

(Restated)

 

 

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

101,394

 

$

43,525

 

Marketable securities

 

46,000

 

26,938

 

Cash, cash equivalents and marketable securities

 

147,394

 

70,463

 

Accounts receivable, net

 

11,208

 

10,081

 

Notes receivable (Note 5)

 

1,506

 

 

Inventories, net

 

25,643

 

17,481

 

Prepaid inventory

 

3,572

 

4,552

 

Prepaid expenses

 

7,572

 

10,935

 

Total current assets

 

196,895

 

113,512

 

Property and equipment, net

 

27,197

 

24,552

 

Goodwill

 

2,784

 

2,784

 

Other long-term assets, net

 

86

 

25

 

Notes receivable (Note 5)

 

4,181

 

4,589

 

Total assets

 

$

231,143

 

$

145,462

 

Liabilities and Stockholders’ Equity (Deficit)

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

70,358

 

$

34,659

 

Accrued liabilities

 

37,155

 

25,631

 

Deferred revenue

 

22,965

 

19,730

 

Capital lease obligations

 

3,796

 

 

Total current liabilities

 

134,274

 

80,020

 

Other long-term liabilities

 

3,034

 

2,642

 

Convertible senior notes

 

75,623

 

66,481

 

Total liabilities

 

212,931

 

149,143

 

Commitments and contingencies (Notes 8 and 9)

 

 

 

 

 

Stockholders’ equity (deficit):

 

 

 

 

 

Preferred stock, $0.0001 par value, 5,000 shares authorized, no shares issued and outstanding as of December 31, 2007 and September 30, 2008

 

 

 

Common stock, $0.0001 par value, 100,000 shares authorized, 25,423 and 25,538 shares issued as of December 31, 2007 and September 30, 2008, respectively

 

2

 

2

 

Additional paid-in capital

 

333,909

 

339,062

 

Accumulated deficit

 

(252,327

)

(265,999

)

Treasury stock, 1,605 and 2,793 shares at cost as of December 31, 2007 and September 30, 2008, respectively

 

(63,278

)

(76,670

)

Accumulated other comprehensive loss

 

(94

)

(76

)

Total stockholders’ equity (deficit)

 

18,212

 

(3,681

)

Total liabilities and stockholders’ equity (deficit)

 

$

231,143

 

$

145,462

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

3



Table of Contents

 

Overstock.com, Inc.

Consolidated Statements of Operations (unaudited)

(in thousands, except per share data)

 

 

 

Three months ended
September 30,

 

Nine months ended
September 30,

 

 

 

2007

 

2008

 

2007

 

2008

 

 

 

(Restated)

 

 

 

(Restated)

 

 

 

Revenue

 

 

 

 

 

 

 

 

 

Direct revenue

 

$

39,270

 

$

34,176

 

$

129,918

 

$

125,771

 

Fulfillment partner revenue

 

120,789

 

152,679

 

341,468

 

452,734

 

 

 

 

 

 

 

 

 

 

 

Total revenue

 

160,059

 

186,855

 

471,386

 

578,505

 

 

 

 

 

 

 

 

 

 

 

Cost of goods sold

 

 

 

 

 

 

 

 

 

Direct(1)

 

33,268

 

30,633

 

111,193

 

110,307

 

Fulfillment partner

 

99,425

 

124,103

 

282,025

 

368,899

 

 

 

 

 

 

 

 

 

 

 

Total cost of goods sold

 

132,693

 

154,736

 

393,218

 

479,206

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

27,366

 

32,119

 

78,168

 

99,299

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Sales and marketing(1)

 

8,835

 

11,934

 

28,081

 

41,197

 

Technology(1)

 

14,576

 

14,119

 

44,786

 

43,946

 

General and administrative(1)

 

9,724

 

10,321

 

30,842

 

30,751

 

Restructuring

 

 

 

12,283

 

 

 

 

 

 

 

 

 

 

 

 

Total operating expenses

 

33,135

 

36,374

 

115,992

 

115,894

 

 

 

 

 

 

 

 

 

 

 

Operating loss

 

(5,769

)

(4,255

)

(37,824

)

(16,595

)

 

 

 

 

 

 

 

 

 

 

Interest income

 

1,291

 

664

 

3,359

 

2,708

 

Interest expense

 

(1,029

)

(847

)

(3,085

)

(2,636

)

Other income, net

 

(92

)

2,849

 

(92

)

2,851

 

 

 

 

 

 

 

 

 

 

 

Loss from continuing operations

 

(5,599

)

(1,589

)

(37,642

)

(13,672

)

Loss from discontinued operations

 

 

 

(3,924

)

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

(5,599

)

$

(1,589

)

(41,566

)

$

(13,672

)

 

 

 

 

 

 

 

 

 

 

Net loss per common share — basic and diluted:

 

 

 

 

 

 

 

 

 

Loss from continuing operations

 

$

(0.24

)

$

(0.07

)

$

(1.59

)

$

(0.60

)

Loss from discontinued operations

 

$

 

$

 

$

(0.17

)

$

 

Net loss per common share – basic and diluted

 

$

(0.24

)

$

(0.07

)

$

(1.76

)

$

(0.60

)

Weighted average common shares outstanding — basic and diluted

 

23,726

 

22,768

 

23,671

 

22,954

 


(1) Includes stock-based compensation from stock based awards as follows (Note 12):

 

 

 

 

 

 

 

 

 

Cost of goods sold — direct

 

$

117

 

$

44

 

$

338

 

$

143

 

Sales and marketing

 

$

85

 

$

76

 

$

248

 

$

246

 

Technology

 

$

195

 

$

193

 

$

560

 

$

627

 

General and administrative

 

$

1,269

 

$

543

 

$

2,870

 

$

2,707

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

4



Table of Contents

 

Overstock.com, Inc.

Consolidated Statements of Stockholders’ Equity (Deficit)

and Comprehensive Loss (unaudited)

(in thousands)

 

 

 

Common stock

 

Additional
Paid-in

 

Accumulated

 

Treasury stock

 

Accumulated
Other
Comprehensive

 

 

 

 

 

Shares

 

Amount

 

Capital

 

Deficit

 

Shares

 

Amount

 

Loss

 

Total

 

Balance at December 31, 2007 (Restated)

 

25,423

 

$

2

 

$

333,909

 

$

(252,327

)

(1,605

)

$

(63,278

)

$

(94

)

$

18,212

 

Exercise of stock options

 

115

 

 

1,471

 

 

 

 

 

1,471

 

Stock-based compensation to employees and directors

 

 

 

3,242

 

 

 

 

 

3,242

 

Stock-based compensation to consultants in exchange for services

 

 

 

181

 

 

 

 

 

181

 

Stock-based compensation related to performance share plan

 

 

 

300

 

 

 

 

 

300

 

Treasury stock issued for 401(k) matching contribution

 

 

 

(41

)

 

2

 

60

 

 

19

 

Purchase of treasury stock

 

 

 

 

 

(1,190

)

(13,452

)

 

(13,452

)

Comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

(13,672

)

 

 

 

(13,672

)

Net unrealized loss on marketable securities

 

 

 

 

 

 

 

(27

)

(27

)

Cumulative translation adjustment

 

 

 

 

 

 

 

45

 

45

 

Total comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(13,654

)

Balance at September 30, 2008

 

25,538

 

$

2

 

$

339,062

 

$

(265,999

)

(2,793

)

$

(76,670

)

$

(76

)

$

(3,681

)

 

The accompanying notes are an integral part of these consolidated financial statements.

 

5



Table of Contents

 

Overstock.com, Inc.

Consolidated Statements of Cash Flows (unaudited)

(in thousands)

 

 

 

Three months ended

 

Nine months ended

 

Twelve months ended

 

 

 

September 30,

 

September 30,

 

September 30,

 

 

 

2007

 

2008

 

2007

 

2008

 

2007

 

2008

 

 

 

(Restated)

 

 

 

(Restated)

 

 

 

(Restated)

 

 

 

Cash flows from operating activities of continuing operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(5,599

)

$

(1,589

)

$

(41,566

)

$

(13,672

)

$

(90,782

)

$

(20,142

)

Adjustments to reconcile net loss to cash provided by (used in) operating activities of continuing operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from discontinued operations

 

 

 

3,924

 

 

8,191

 

 

Depreciation and amortization

 

7,080

 

5,580

 

22,825

 

17,964

 

34,350

 

24,634

 

Loss on disposition of property and equipment

 

 

 

1

 

 

1

 

 

Stock-based compensation to employees and directors

 

1,176

 

990

 

3,386

 

3,242

 

4,418

 

4,378

 

Stock-based compensation to consultants for services

 

140

 

(134

)

280

 

181

 

272

 

90

 

Stock-based compensation for performance share plan

 

350

 

 

350

 

300

 

350

 

(600

)

Issuance of common stock from treasury for 401(k) matching contribution

 

213

 

 

928

 

19

 

1,036

 

(415

)

Amortization of debt discount and deferred financing fees

 

86

 

85

 

258

 

257

 

258

 

343

 

Asset impairment and depreciation (other non-cash restructuring)

 

 

 

2,169

 

 

2,960

 

 

Restructuring charges

 

 

 

10,114

 

 

14,997

 

 

Notes receivable accretion

 

(136

)

(136

)

(136

)

(408

)

(136

)

(544

)

Gain from early extinguishment of debt

 

 

(2,849

)

 

(2,849

)

 

(2,849

)

Changes in operating assets and liabilities, net of effect of discontinued operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable, net

 

(942

)

(104

)

7,755

 

1,127

 

1,537

 

(1,806

)

Inventories, net

 

(6,792

)

(3,445

)

152

 

8,162

 

40,877

 

6,237

 

Prepaid inventory

 

(2,879

)

(1,904

)

(2,762

)

(980

)

(979

)

451

 

Prepaid expenses

 

(1,522

)

(454

)

(2,784

)

(3,363

)

(1,065

)

(678

)

Other long-term assets, net

 

100

 

 

366

 

 

967

 

105

 

Accounts payable

 

4,222

 

3,442

 

(26,199

)

(35,699

)

(10,253

)

2,349

 

Accrued liabilities

 

(444

)

1,109

 

(19,608

)

(11,524

)

(3,084

)

2,176

 

Deferred revenue

 

2,605

 

(533

)

(5,096

)

(3,235

)

2,392

 

1,606

 

Other long-term liabilities

 

(114

)

(333

)

(114

)

(392

)

(114

)

(471

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash provided by (used in) operating activities of continuing operations

 

(2,456

)

(275

)

(45,757

)

(40,870

)

6,193

 

14,864

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities of continuing operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchases marketable securities

 

(7,783

)

(10,186

)

(29,164

)

(35,548

)

(29,164

)

(81,601

)

Sales and maturities of marketable securities

 

8,924

 

13,298

 

12,324

 

54,637

 

12,324

 

71,571

 

Expenditures for property and equipment

 

(316

)

(8,809

)

(2,232

)

(15,258

)

(5,998

)

(15,669

)

Proceeds from the sale of discontinued operations, net of cash transferred

 

 

 

9,892

 

 

9,892

 

 

Collection of note receivable

 

502

 

250

 

5,196

 

1,506

 

5,196

 

1,506

 

Decrease in cash resulting from de-consolidation of variable interest entity

 

 

 

 

 

(102

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash (used in) provided by investing activities of continuing operations

 

1,327

 

(5,447

)

(3,984

)

5,337

 

(7,852

)

(24,193

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities of continuing operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

Payments on capital lease obligations

 

(5

)

 

(5,256

)

(3,796

)

(5,335

)

(3,801

)

Drawdown on line of credit

 

 

1,326

 

1,169

 

7,722

 

9,347

 

8,976

 

Payments on line of credit

 

 

(1,326

)

(1,169

)

(7,722

)

(9,347

)

(8,976

)

Issuance of common stock in offerings, net of issuance costs

 

 

 

 

 

39,406

 

 

Purchase of treasury stock

 

 

(1,452

)

 

(13,452

)

 

(13,452

)

Payments to retire senior convertible senior notes

 

 

(6,550

)

 

(6,550

)

 

(6,550

)

Exercise of stock options

 

261

 

547

 

2,182

 

1,471

 

2,449

 

2,519

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net provided by (used in) financing activities of continuing operations

 

256

 

(7,455

)

(3,074

)

(22,327

)

36,520

 

(21,284

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash

 

(26

)

23

 

(5

)

(9

)

18

 

(7

)

Cash (used in) provided by operating activities from discontinued operations

 

 

 

(204

)

 

1,265

 

 

Cash used in investing activities of discontinued operations

 

 

 

(53

)

 

(276

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

(899

)

(13,154

)

(53,077

)

(57,869

)

35,868

 

(30,620

)

Change in cash and cash equivalents from discontinued operations

 

 

 

257

 

 

(990

)

 

Cash and cash equivalents, beginning of period

 

75,044

 

56,679

 

126,965

 

101,394

 

39,267

 

74,145

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents, end of period

 

$

74,145

 

$

43,525

 

$

74,145

 

$

43,525

 

$

74,145

 

$

43,525

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest paid

 

$

142

 

$

847

 

$

2,378

 

$

3,010

 

$

4,104

 

$

4,514

 

Deemed dividend on redeemable common stock

 

 

 

 

 

33

 

 

Lapse of rescission rights on redeemable common stock

 

 

 

 

 

2,431

 

 

Promissory note received for deconsolidation of variable interest entity

 

 

 

6,000

 

 

6,000

 

 

Promissory notes received as proceeds from sale of discontinued operations

 

 

 

 

 

6,702

 

 

Prior year discretionary 401(k) contribution

 

 

 

408

 

 

408

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

6



Table of Contents

 

Overstock.com, Inc.

Notes to Unaudited Consolidated Financial Statements

 

1.   BASIS OF PRESENTATION

 

The accompanying unaudited consolidated financial statements have been prepared by Overstock.com, Inc. (the “Company”) pursuant to the rules and regulations of the Securities and Exchange Commission regarding interim financial reporting. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements and should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the audited annual consolidated financial statements and related notes thereto included in the Annual Report on Form 10-K/A for the year ended December 31, 2007. The accompanying unaudited consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, which are, in the opinion of management, necessary for a fair statement of results for the interim periods presented. Preparing financial statements requires management to make estimates and assumptions that affect the amounts that are reported in the consolidated financial statements and accompanying disclosures. Although these estimates are based on management’s best knowledge of current events and actions that the Company may undertake in the future, actual results may be different from the estimates. The results of operations for the three and nine months ended September 30, 2008 are not necessarily indicative of the results to be expected for any future period or the full fiscal year.

 

2.  ACCOUNTING POLICIES

 

Principles of consolidation

 

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. The consolidated financial statements include the accounts of the Company’s OTravel subsidiary through April 25, 2007 (see Note 5—“Sale of Discontinued Operations”).  All significant intercompany account balances and transactions have been eliminated in consolidation.

 

Use of estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent liabilities in the consolidated financial statements and accompanying notes. Estimates are used for, but not limited to, valuation of investments, receivables valuation, revenue recognition, sales returns, incentive discount offers, inventory valuation, depreciable lives of fixed assets, internally-developed software, valuation of acquired intangibles, income taxes, stock-based compensation, and contingencies. Actual results could differ materially from those estimates.

 

Revenue recognition

 

The Company derives revenue related to merchandise sales primarily from two sources: direct revenue and fulfillment partner revenue. Fulfillment partner revenue also includes listing fees and commissions collected from products being listed and sold through the Auctions section of its Website, advertisement and lead generation revenue derived from its Cars listing site, and advertising revenue generated by its Real Estate site. The Company has organized its operations into two principal segments based on these primary sources of revenue (see Note 13 — “Business Segments”).

 

Revenue is recognized when the following revenue recognition criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or the service has been provided; (3) the selling price or fee revenue earned is fixed or determinable; and (4) collection of the resulting receivable is reasonably assured.

 

Revenue related to merchandise sales is recognized upon delivery to the Company’s customers. As the Company ships high volumes of packages through multiple carriers, it is not practical for the Company to track the actual delivery date of each shipment. Therefore, the Company uses estimates to determine which shipments are delivered and therefore recognized as revenue at the end of  each period. The delivery date estimates are based on average shipping transit times, which are calculated using the following factors: (i) the shipping carrier (as carriers differ in transit times); (ii) the fulfillment source (either the Company’s warehouses or those of its fulfillment partners); (iii) the delivery destination; and (iv) actual transit time experience, which shows that delivery date is typically one to eight business days from the date of shipment.

 

The Company evaluates the criteria outlined in EITF Issue No. 99-19, Reporting Revenue Gross as a Principal Versus Net as an Agent, in determining whether it is appropriate to record the gross amount of product sales and related costs or the net amount earned as commissions. When the Company is the primary obligor in a transaction, is subject to inventory risk, is subject to credit risk, has latitude in establishing prices and selecting suppliers, or has several but not all of these indicators, revenue is recorded gross. If the Company is not the primary obligor in the transaction and amounts earned are determined using a fixed percentage, revenue is recorded on a net basis. Currently, the majority of both direct revenue and fulfillment partner revenue is recorded on a gross basis, as the Company is the primary obligor.

 

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The Company periodically provides incentive offers to its customers to encourage purchases. Such offers include current discount offers, such as percentage discounts off current purchases, and other similar offers. Current discount offers, when accepted by its customers, are treated as a reduction to the sales price of the related transaction.

 

Direct revenue

 

Direct revenue consists of sales of merchandise to both individual consumers and businesses that are fulfilled directly from the Company’s leased warehouses.  Direct sales occur primarily through the Company’s Website, but may also occur through other offline channels.

 

Fulfillment partner revenue

 

Fulfillment partner revenue consists of merchandise sold through the Company’s Website and shipped by third parties directly to consumers and other businesses from warehouses maintained by the fulfillment partners, as well as revenue from the Auctions, Cars and Real Estate sections of its Website.

 

The auctions site allows sellers to list items for sale, buyers to bid on items of interest, and users to browse through listed items online. With limited exceptions, the Company is not considered the seller of the items sold on the auctions site and has no control over the pricing of those items. Therefore, for these sales, only the listing fees for items listed and commissions for items sold are recorded as revenue during the period items are listed or items are sold. Auctions revenues were insignificant during the three and nine months ended September 30, 2007 and 2008, and are included in the fulfillment partner segment, as they are not large enough to separate out as a segment.

 

The cars listing service allows dealers to list vehicles for sale and allows buyers to review vehicle descriptions, post offers to purchase, and provides the means for purchasers to contact sellers for further information and negotiations on the purchase of an advertised vehicle. Revenue from its cars listing business is included in the fulfillment partner segment, as it is not significant enough to separate out as its own segment.

 

The real estate listing service allows customers to search active listings across the country. Listing categories include foreclosures, live and on-line auctions, for sale by owner listings, broker/agent listings and numerous aggregated classified ad listings.  Advertising revenue from the real estate business is included in the fulfillment partner segment, as it is not significant enough to separate out as its own segment.

 

The Company began selling products through its Website to customers outside the United States in late August 2008. The initial launch included Canada, the U.K., Germany and 31 other European countries. The Company does not have operations outside United States, and is utilizing a U.S. based third party to provide logistics and fulfillment for all international orders.    Revenue generated from the international business is included in either direct or fulfillment partner revenue, depending on whether the product that is ordered is shipped from our warehouses or from a fulfillment partner.

 

Deferred revenue

 

Payment is generally required by credit card at the point of sale. Amounts owed or received prior to delivery of products or services provided are recorded as deferred revenue. Amounts received in advance for Club O membership fees are recorded as deferred revenue and recognized ratably over the membership period. In addition, the Company sells gift cards and records related deferred revenue at the time of the sale.  Revenue from a gift card is recognized when a customer redeems it. If a gift card is not redeemed, the Company recognizes revenue when the likelihood of its redemption becomes remote.

 

Internal-Use Software and Website Development

 

The Company includes in fixed assets the capitalized cost of internal-use software and website development, including software used to upgrade and enhance its Website and processes supporting the Company’s business. As required by Statement of Position (“SOP”) 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use, the Company capitalizes costs incurred during the application development stage of internal-use software and amortizes these costs over the estimated useful life of two to three years. The Company expenses costs incurred related to design or maintenance of internal-use software as incurred.

 

During the three months ended September 30, 2007 and 2008, the Company capitalized $209,000 and $5.1 million, respectively, of costs associated with internal-use software and website development, which are partially offset by amortization of previously capitalized amounts of $3.2 million and $2.9 million for those respective periods.  For the nine months ended September 30, 2007 and 2008, the Company capitalized $1.7 million and $7.7 million of costs associated with internal-use software and website development, which are partially offset by amortization of previously capitalized amounts of $10.3 million and $9.1 million, respectively.

 

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Table of Contents

 

Advertising expense

 

The Company recognizes advertising expenses in accordance with SOP 93-7, Reporting on Advertising Costs. As such, the Company expenses the costs of producing advertisements at the time production occurs or the first time the advertising takes place and expenses the cost of communicating advertising in the period during which the advertising space or airtime is used. Internet advertising expenses are recognized as incurred based on the terms of the individual agreements, which are generally: (i) a commission for traffic driven to the Website that generates a sale, and (ii) based on the number of clicks on keywords or links to the Company’s Website generated during a given period. Advertising expense included in sales and marketing expenses totaled $7.8 million and $10.6 million during the three months ended September 30, 2007 and 2008, respectively.  For the nine months ended September 30, 2007 and 2008, advertising expenses totaled $25.5 million and $37.6 million, respectively.

 

Restructuring

 

Restructuring expenses are primarily comprised of lease termination costs and the costs incurred for returning leased facilities back to their original condition in anticipation of subleasing current office space. Statement of Financial Accounting Standard (“SFAS”) No. 146, Accounting for Costs Associated with Exit or Disposal Activities (“SFAS No. 146”), requires that when an entity ceases using a property that is leased under an operating lease before the end of its term contract, the termination costs should be recognized and measured at fair value when the entity ceases using the facility. Key assumptions in determining the restructuring expenses include the terms that may be negotiated to exit certain contractual obligations (see Note 4—“Restructuring Expense”).

 

Fair Value of Financial Instruments

 

In September 2006, the Financial Accounting Standards Board (“FASB”), issued SFAS No. 157, Fair Value Measurements (“SFAS No.157”), which defines fair value, establishes guidelines for measuring fair value and expands disclosures regarding fair value measurements. SFAS No. 157 does not require any new fair value measurements but rather eliminates inconsistencies in guidance found in various prior accounting pronouncements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. In February 2008, the FASB issued FASB Staff Position, (“FSP”), FAS No. 157-2, Effective Date of FASB Statement No. 157 (“FSP FAS No. 157-2”), which delayed the effective date of SFAS No. 157 to fiscal years beginning after November 15, 2008 and interim periods within those fiscal years for all non-financial assets and non-financial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). The Company adopted SFAS No. 157 for fiscal 2008, except as it applies to those non-financial assets and non-financial liabilities as described in FSP FAS No. 157-2, and it did not have a material impact on its consolidated financial position, results of operations or cash flows.

 

On a quarterly basis, the Company measures at fair value certain financial assets, including cash equivalents and available-for-sale securities.   SFAS No. 157 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. These two types of inputs have created the following fair-value hierarchy:

 

·

 

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.

 

This hierarchy requires the Company to minimize the use of unobservable inputs and to use observable market data, if available, when determining fair value. The fair value of these financial assets was determined using the following levels of inputs as of September 30, 2008 (in thousands):

 

 

 

Fair Value Measurements as of September 30, 2008:

 

 

 

Total

 

Level 1

 

Level 2

 

Level 3

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents — Money market mutual funds

 

$

19,776

 

$

19,776

 

$

 

$

 

Available-for-sale securities

 

26,938

 

26,938

 

 

 

Total assets

 

$

46,714

 

$

46,714

 

$

 

$

 

 

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Table of Contents

 

Earnings (loss) per share

 

In accordance with SFAS No. 128, Earnings per share, basic earnings (loss) per share is computed by dividing net income (loss) attributable to common shares by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share is computed by dividing net income (loss) for the period by the weighted average number of common and potential common shares outstanding during the period. Potential common shares, composed of incremental common shares issuable upon the exercise of stock options, restricted stock units, convertible senior notes and shares under the Performance Share Plan, are included in the calculation of diluted net earnings (loss) per share to the extent such shares are dilutive.

 

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

 

 

Three months ended September 30,

 

Nine months ended September 30,

 

 

 

2007

 

2008

 

2007

 

2008

 

 

 

(Restated)

 

 

 

(Restated)

 

 

 

Loss from continuing operations

 

$

(5,599

)

$

(1,589

)

$

(37,642

)

$

(13,672

)

Loss from discontinued operations

 

 

 

(3,924

)

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(5,599

)

$

(1,589

)

$

(41,566

)

$

(13,672

)

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding—basic

 

23,726

 

22,768

 

23,671

 

22,954

 

Effective of dilutive securities:

 

 

 

 

 

 

 

 

 

Stock options

 

 

 

 

 

Restricted stock units

 

 

 

 

 

Convertible senior notes

 

 

 

 

 

Shares under the Performance Share Plan

 

 

 

 

 

Weighted average common shares outstanding—diluted

 

23,726

 

22,768

 

23,671

 

22,954

 

Net loss per common share—basic and diluted:

 

 

 

 

 

 

 

 

 

Loss from continuing operations

 

$

(0.24

)

$

(0.07

)

$

(1.59

)

$

(0.60

)

Loss from discontinued operations

 

$

 

$

 

$

(0.17

)

$

 

Net loss per common share—basic and diluted

 

$

(0.24

)

$

(0.07

)

$

(1.76

)

$

(0.60

)

 

The stock options, restricted stock units, convertible senior notes outstanding and shares under the Performance Share Plan were not included in the computation of diluted earnings (loss) per share because to do so would have been antidilutive. The number of stock options outstanding at September 30, 2007 and 2008 was 1,176,000 and 986,000, respectively.  In the first nine months of 2008, the Compensation Committee of the Board of Directors approved grants of approximately 12,000 stock options and 486,000 restricted stock units to officers and employees of the Company.  As of September 30, 2008, there were 455,000 restricted stock units outstanding (see Note 12 – “Stock Based Awards”).  As of September 30, 2008, the Company had $67.5 million of convertible senior notes outstanding, which could potentially convert into 885,000 shares of common stock in the aggregate.

 

Recent accounting pronouncements

 

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS No. 159”). Under SFAS No. 159, companies may elect to measure certain financial instruments and certain other items at fair value. The standard requires that unrealized gains and losses on items for which the fair value option has been elected be reported in earnings. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. The Company adopted SFAS No. 159 for fiscal 2008; however, it did not elect to apply the fair value option to any financial instruments or other items upon adoption of SFAS No. 159 during the nine months ended September 30, 2008. Therefore, the adoption of SFAS No. 159 did not impact the Company’s consolidated financial position, results of operations or cash flows.

 

In December 2007, the FASB issued SFAS No. 141 (R), Business Combinations (“SFAS No. 141 (R)”), and SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements (“SFAS No. 160”). SFAS No. 141 (R) requires an acquirer to measure the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquired entity at their fair values on the acquisition date, with goodwill being the excess value over the net identifiable assets acquired. SFAS No. 160 clarifies that a noncontrolling interest in a subsidiary should be reported as equity in the consolidated financial statements. The calculation of earnings per share will continue to be based on income amounts attributable to the parent. SFAS No. 141 (R) and SFAS No. 160 are effective for financial statements issued for fiscal years beginning after December 15, 2008. Early adoption is prohibited.  The Company does not expect the adoption of SFAS No. 141 (R) or SFAS No. 160 to impact its financial position and results of operations or cash flows.

 

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Table of Contents

 

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities — an amendment of FASB Statement No. 133 (“SFAS No. 161”).  SFAS No. 161 requires enhanced disclosures about a company’s derivative and hedging activities, in particular: 1) how and why derivative instruments are utilized; 2) how derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations; and 3) how derivative instruments and related hedged items affect a company’s financial position, financial performance and cash flows. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early adoption encouraged. The Company has no derivative instruments.  Therefore, the Company does not expect the adoption of SFAS No. 161 to impact its financial position and results of operations or cash flows.

 

In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles (“SFAS No. 162”). The current GAAP hierarchy was established by the American Institute of Certified Public Accountants, and faced criticism because it was directed to auditors rather than entities. The issuance of this statement corrects this and makes some other hierarchy changes. This statement is effective 60 days following the Securities and Exchange Commission’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles.  The adoption of SFAS No. 162 did not result in a change to the Company’s consolidated financial statements.

 

In May 2008, the FASB issued FASB Staff Position (“FSP”) APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement) (“FSP APB 14-1”), which clarifies the accounting for convertible debt instruments that may be settled in cash upon conversion, including partial cash settlement. FSP APB 14-1 specifies that an issuer of such instruments should separately account for the liability and equity components of the instruments in a manner that reflect the issuer’s non-convertible debt borrowing rate when interest costs are recognized in subsequent periods. The Company anticipates that the adoption of FSP APB 14-1 will not have a material impact on its consolidated financial statements.

 

3.   RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS

 

Overstock.com, Inc. (the “Company”) is restating its consolidated financial statements for the quarter ended September 30, 2007 to correct errors related to the accounting for customer refunds and credits and the accounting for gift cards issued to customers.

 

The Company’s decision to restate the aforementioned financial statements was made as a result of management’s identification of errors related to the accounting for customer refunds and credits. On October 20, 2008,  management, including the CEO (principal executive officer) and Senior Vice President, Finance (principal financial officer), concluded, and the Board of Directors agreed with management’s conclusions that certain refunds and credits issued to customers were not completely and accurately recorded in the consolidated financial statements.

 

Management subsequently determined, and the Board of Directors adopted management’s conclusion, that a portion of the error previously believed to be related to the accounting for customer refunds and credits was actually related to the accounting for gift cards issued to customers and that gift cards issued to customers were not completely and accurately recorded in the consolidated financial statements.

 

These errors impacted accounts receivable and deferred revenue in the consolidated balance sheet as well as revenue and returns expense (a component of revenue), in the consolidated statement of operations.  As a result, revenue, net of returns expense, was misstated in the consolidated statement of operations for the three and nine months ended September 30, 2007 and accounts receivable and deferred revenue were misstated in the consolidated balance sheet as of December 31, 2007.  The amounts of these errors were determined to be material to the consolidated financial statements.

 

The effect of these error corrections on the Consolidated Results of Operations for the quarter ended September 30, 2007 is to increase the net loss by $634,000 (including decreasing $286,000 of direct revenue and $769,000 of fulfillment partner revenue and $75,000 of direct cost of goods sold and $346,000 of fulfillment partner cost of goods sold). The effect of these error corrections on the Consolidated Results of Operations for the nine months ended September 30, 2007 is to increase the net loss by $1.5 million (including decreasing $419,000 of direct revenue and $547,000 of fulfillment partner revenue and increasing $114,000 of direct cost of goods sold and $445,000 of fulfillment partner cost of goods sold).

 

In addition, from the Company’s inception through the third quarter of 2007, the Company had recorded revenue based on product ship date.  In the fourth quarter of 2007, the Company determined that it should not record revenue until product delivery date because risk of loss transfers to the customer upon delivery and acceptance.  In the fourth quarter of 2007, the Company performed a detailed analysis of this error and determined that the impact of this error on any prior annual or interim period was not material and the impact of recording the cumulative effect of the error in the fourth quarter of 2007 was immaterial to the full year.  Therefore, the Company recorded the cumulative effect of the error in the fourth quarter of 2007. However, as the Company is now restating its previously issued consolidated financial statements to correct accounting errors related to customer refunds and credits and gift cards issued to customers, it has reversed the cumulative effect of the correction of the error in the fourth quarter of 2007 and restated all prior periods to reflect revenue recognition based on the product’s estimated delivery date in its consolidated financial statements for

 

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Table of Contents

 

the years ended December 31, 2007, 2006, 2005, 2004 and 2003 (see Note 2 –“Accounting Policies”).  The Company also recorded other miscellaneous adjustments as part of this restatement that were previously identified but determined to be immaterial.

 

The effect of this error correction relating to product delivery date on the Consolidated Results of Operations for the quarter ended September 30, 2007 is to increase the net loss by $261,000 (including recognizing $110,000 direct revenue and deferring $926,000 of fulfillment partner revenue and recognizing a corresponding $183,000 of direct cost of goods sold and $738,000 of fulfillment partner cost of goods sold).  The effect of this error correction on the Consolidated Results of Operations for the nine months ended September 30, 2007 is to increase the net loss by $186,000 (including recognizing $1.6 million of direct revenue and $1.9 million of fulfillment partner revenue and recognizing a corresponding $2.3 million of direct cost of goods sold and $1.4 million of fulfillment partner cost of goods sold).  There was no effect of this error correction on the Consolidated Results of Operations for the three or nine months ended September 30, 2008 as this error was corrected by the Company during the fourth quarter of 2007.

 

The consolidated statements of operations for the three and nine months ended September 30, 2007, the consolidated balance sheet as of December 31, 2007 and statements of cash flows for the three, nine and twelve months ended September 30, 2007 have been restated as follows:

 

Consolidated Statements of Operations

(in thousands, except per share data)

 

 

 

Quarter Ended September 30, 2007

 

 

 

As Previously
Reported

 

Adjustments

 

As Restated

 

 

 

 

 

 

 

 

 

Revenue

 

 

 

 

 

 

 

Direct

 

$

39,446

 

(176

)

$

39,270

 

Fulfillment partner

 

122,484

 

(1,695

)

120,789

 

 

 

 

 

 

 

 

 

Total revenue

 

161,930

 

(1,821

)

160,059

 

 

 

 

 

 

 

 

 

Cost of goods sold

 

 

 

 

 

 

 

Direct

 

33,160

 

108

 

33,268

 

Fulfillment partner

 

100,509

 

(1,084

)

99,425

 

 

 

 

 

 

 

 

 

Total cost of goods sold

 

133,669

 

(976

)

132,693

 

 

 

 

 

 

 

 

 

Gross profit

 

28,261

 

(895

 

27,366

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

Sales and marketing

 

8,835

 

 

8,835

 

Technology

 

14,576

 

 

14,576

 

General and administrative

 

9,724

 

 

9,724

 

Restructuring

 

 

 

 

 

 

 

 

 

 

 

 

Total operating expenses

 

33,135

 

 

33,135

 

 

 

 

 

 

 

 

 

Operating loss

 

(4,874

)

(895

)

(5,769

)

 

 

 

 

 

 

 

 

Interest income

 

1,291

 

 

1,291

 

Interest expense

 

(1,029

)

 

(1,029

)

Other income, net

 

(92

)

 

(92

)

 

 

 

 

 

 

 

 

Loss from continuing operations

 

(4,704

)

(895

)

(5,599

)

Loss from discontinued operations

 

 

 

 

Net loss

 

(4,704

)

(895

)

(5,599

)

Deemed dividend related to redeemable common shares

 

 

 

 

 

 

 

 

 

 

 

 

Net loss attributable to common shares

 

$

(4,704

)

$

(895

)

$

(5,599

)

 

 

 

 

 

 

 

 

Net loss per common share — basic and diluted

 

 

 

 

 

 

 

Loss from continuing operations

 

$

(0.20

)

$

(0.04

)

$

(0.24

)

Loss from discontinued operations

 

$

 

$

 

$

 

Net loss per common share – basic and diluted

 

$

(0.20

)

$

(0.04

)

$

(0.24

)

Weighted average common shares outstanding — basic and diluted

 

23,726

 

 

 

23,726

 

 

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Table of Contents

 

Consolidated Statements of Operations

(in thousands, except per share data)

 

 

 

Nine Months Ended September 30, 2007

 

 

 

As Previously
Reported

 

Adjustments

 

As Restated

 

 

 

 

 

 

 

 

 

Revenue

 

 

 

 

 

 

 

Direct

 

$

128,725

 

174

 

$

129,918

 

Fulfillment partner

 

240,102

 

1,889

 

341,468

 

 

 

 

 

 

 

 

 

Total revenue

 

468,827

 

2,063

 

471,386

 

 

 

 

 

 

 

 

 

Cost of goods sold

 

 

 

 

 

 

 

Direct

 

108,801

 

608

 

111,193

 

Fulfillment partner

 

280,147

 

3,166

 

282,025

 

 

 

 

 

 

 

 

 

Total cost of goods sold

 

388,948

 

3,774

 

393,218

 

 

 

 

 

 

 

 

 

Gross profit

 

79,879

 

(1,711

)

78,168

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

Sales and marketing

 

28,081

 

 

28,081

 

Technology

 

44,786

 

 

44,786

 

General and administrative

 

30,842

 

 

30,842

 

Restructuring

 

12,283

 

 

12,283

 

 

 

 

 

 

 

 

 

Total operating expenses

 

115,992

 

 

115,992

 

 

 

 

 

 

 

 

 

Operating loss

 

(36,113

)

(1,711

)

(37,824

)

 

 

 

 

 

 

 

 

Interest income

 

3,359

 

 

3,359

 

Interest expense

 

(3,085

)

 

(3,085

)

Other income, net

 

(92

)

 

(92

)

 

 

 

 

 

 

 

 

Loss from continuing operations

 

(35,931

)

(1,711

)

(37,642

)

Loss from discontinued operations

 

(3,924

)

 

(3,924

)

Net loss

 

(39,855

)

(1,711

)

(41,566

)

Deemed dividend related to redeemable common shares

 

 

 

 

 

 

 

 

 

 

 

 

Net loss attributable to common shares

 

$

(39,855

)

$

(1,711

)

$

(41,566

)

 

 

 

 

 

 

 

 

Net loss per common share — basic and diluted

 

 

 

 

 

 

 

Loss from continuing operations

 

$

(1.52

$

(0.07

)

$

(1.59

)

Loss from discontinued operations

 

$

(0.17

)

$

 

$

(0.17

)

Net loss per common share – basic and diluted

 

$

(1.69

)

$

(0.07

$

(1.76

)

Weighted average common shares outstanding — basic and diluted

 

23,671

 

 

 

23,671

 

 

13



Table of Contents

 

Consolidated Balance Sheets

(in thousands)

 

 

 

As of December 31, 2007

 

 

 

As Previously
Reported

 

Adjustments

 

As Restated

 

Assets

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

101,394

 

$

 

$

101,394

 

Marketable securities

 

46,000

 

 

46,000

 

Cash, cash equivalents and marketable securities

 

147,394

 

 

147,394

 

Accounts receivable, net

 

12,304

 

(1,096

)

11,208

 

Note receivable

 

1,506

 

 

1,506

 

Inventories, net

 

25,933

 

(290

)

25,643

 

Prepaid inventory

 

3,572

 

 

3,572

 

Prepaid expenses

 

7,572

 

 

7,572

 

 

 

 

 

 

 

 

 

Total current assets

 

198,281

 

(1,386

)

196,895

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

27,197

 

 

27,197

 

Goodwill

 

2,784

 

 

2,784

 

Other long-term assets, net

 

86

 

 

86

 

Notes receivable

 

4,181

 

 

4,181

 

 

 

 

 

 

 

 

 

Total assets

 

232,529

 

$

(1,386

)

$

231,143

 

 

 

 

 

 

 

 

 

Liabilities, Redeemable Securities and Stockholders’ Equity

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

 

$

70,648

 

$

(290

)

$

70,358

 

Accrued liabilities

 

35,241

 

1,914

 

37,155

 

Deferred revenue

 

17,357

 

5,608

 

22,965

 

Capital lease obligations, current

 

3,796

 

 

3,796

 

 

 

 

 

 

 

 

 

Total current liabilities

 

127,042

 

7,232

 

134,274

 

 

 

 

 

 

 

 

 

Other long-term liabilities

 

3,034

 

 

3,034

 

Convertible senior notes

 

75,623

 

 

75,623

 

 

 

 

 

 

 

 

 

Total liabilities

 

205,699

 

7,232

 

212,931

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

Preferred stock, $0.0001 par value, 5,000 shares authorized, no shares issued and outstanding as of  December 31, 2007

 

 

 

 

Common stock, $0.0001 par value, 100,000 shares authorized, 25,423 shares issued as of December 31, 2007

 

2

 

 

2

 

Additional paid-in capital

 

333,909

 

 

333,909

 

Accumulated deficit

 

(243,709

)

(8,618

)

(252,327

)

Treasury stock, 1,605 shares at cost as of December 31, 2004

 

(63,278

)

 

(63,278

)

Accumulated other comprehensive loss

 

(94

)

 

(94

)

 

 

 

 

 

 

 

 

Total stockholders’ equity

 

26,830

 

(8,618

)

18,212

 

 

 

 

 

 

 

 

 

Total liabilities, redeemable securities and stockholders’ equity

 

$

232,529

 

$

(1,386

)

$

231,143

 

 

14



Table of Contents

 

Overstock.com, Inc.

Consolidated Statements of Cash Flows (unaudited)

(in thousands)

 

 

 

Three months ended September 30, 2007

 

 

 

As Reported

 

Adjustments

 

As Restated

 

 

 

 

 

 

 

 

 

Cash flows from operating activities of continuing operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(4,704

)

$

(895

)

$

(5,599

)

Adjustments to reconcile net loss to cash provided by (used in) operating activities of continuing operations: