Business Context and Reporting Period
This Form 8-K is filed by Overstock.com, Inc. on December 21, 2018. The report details a material definitive agreement involving the company's subsidiaries, Medici Ventures, Inc. (MVI) and tZERO Group, Inc. (tZERO), regarding the acquisition of Bitsy, Inc. The filing clarifies that the registrant is Overstock.com, Inc., despite the metadata reference to Bed Bath & Beyond, Inc.
Key Financial Metrics and Transaction Details
The filing outlines a Stock Purchase Agreement for the acquisition of Bitsy, Inc. by tZERO. Key financial terms include:
- Cash Consideration: $8,000,000 to be paid to individual sellers for 67% of Bitsy's outstanding common stock.
- Debt Instrument: A convertible promissory note in the principal amount of $4,000,000 issued by tZERO to MVI in exchange for MVI's 33% stake in Bitsy.
- Note Terms: The note is payable on demand after December 31, 2020. It converts automatically upon a "Qualifying Financing" (raising at least $2,000,000 in net proceeds) at a 20% discount to the new share price.
- Liquidity: Bitsy's current cash balance is approximately $5.5 million.
The filing does not provide consolidated revenue, profit, or margin data for Overstock.com, Inc. for the reporting period.
Material Changes and Agreements
The primary material change is the restructuring of ownership for Bitsy, Inc., a Utah corporation partially owned by MVI. Key changes include:
- Ownership Transfer: tZERO will acquire 100% of Bitsy's common stock from MVI and individual sellers.
- Termination of Agreements: Existing shareholders' agreements and stock purchase agreements related to Bitsy will terminate upon closing.
- Intellectual Property: An assignment of certain intellectual property to MVI is part of the exchange for MVI's stake.
- Personnel Changes: Steven Hopkins will resign as General Counsel and COO of MVI to become Chief Revenue Officer of tZERO.
Outlook, Risks, and Contingencies
Closing Timeline: The transactions are expected to close on or before January 1, 2019.
Related Party Transactions: The filing discloses relationships between Bitsy and The Beckstrand and Associates Employees Credit Union (BACU), an entity controlled by Richard N. Beckstrand (father-in-law of Steven Hopkins). A Digital Asset Management Agreement exists between Bitsy and BACU, terminable with 30 days' notice.
Contingencies: The conversion of the $4,000,000 promissory note is contingent upon tZERO securing a Qualifying Financing or a change in control. If neither occurs by the maturity date, tZERO has the option to convert the debt into common stock based on an independent third-party valuation.
Investor Verification Checklist
- Verify the closing of the Stock Purchase Agreement by January 1, 2019.
- Monitor tZERO's capital raising activities to determine if the $4,000,000 note converts into equity or remains as debt.
- Review the status of the Digital Asset Management Agreement between Bitsy and BACU for potential termination.
- Confirm the execution of the Secondment Agreement regarding MVI personnel working on Bitsy software.
- Check subsequent filings for the impact of this transaction on Overstock.com's consolidated financial statements.