BUSINESS COMBINATIONS

Bitsy, Inc.

Through a series of transactions in 2018, Medici Ventures acquired a 33% equity interest in Bitsy, Inc. ("Bitsy"), a U.S.-based startup company that plans to build a regulatory-compliant bridge between the U.S. Dollar and cryptocurrencies and offer our customers the ability to purchase cryptocurrencies. Bitsy was founded by Steve Hopkins, Medici Ventures' former chief operating officer and general counsel, and current president of tZERO, who held a significant equity interest in Bitsy. On December 21, 2018, tZERO entered into a stock purchase agreement with the owners of Bitsy to acquire the remaining 67% equity interest in Bitsy for $8.0 million with effective control of Bitsy transferring to tZERO effective January 1, 2019. tZERO plans to integrate the software and technology of Bitsy to offer customers a digital wallet service intended to create a bridge between traditional fiat currencies and cryptocurrencies.

In connection with the December 2018 stock purchase agreement, Medici Ventures transferred its 33% equity interest in Bitsy to tZERO for a $4.0 million convertible promissory note due December 31, 2020 and an assignment of certain intellectual property to Medici Ventures.

We estimated the fair value of the acquired assets based on Level 3 inputs, which were unobservable (see Note 2—Accounting Policies, Fair value of financial instruments). These inputs included our estimate of future revenues, operating margins, discount rates, and assumptions about the relative competitive environment. Determination and allocation of the purchase price to net tangible and intangible assets is based upon preliminary estimates pending our receipt of a completed valuation report and other information. These preliminary estimates and assumptions could change significantly during the measurement period as we finalize the valuations of the intangible assets acquired and related tax impact. Any change could result in variances between our future financial results and the amounts recognized in the financial information presented below, including variances in fair values recorded, as well as expenses associated with these items.

The preliminary fair values of the assets acquired and liabilities assumed at the acquisition date are as follows (in thousands):



Purchase Price	Fair Value
Cash paid, net of cash acquired	$	3,115
Fair value of equity interest in Bitsy held before business combination	3,707
Less: Fair value of Overstock.com common stock held by Bitsy at acquisition date	(643		)
Less: Settlement of receivable due from tZERO at acquisition date	(10		)
Total transaction consideration, net of cash acquired	$	6,169

Allocation
Prepaids and other current assets	$	71
Property and equipment	16
Intangible assets and other	6,743
Other liabilities assumed	(661		)
Total net assets, net of cash acquired	$	6,169

Acquired intangible assets primarily include technology, patents, and license. The acquired assets, liabilities, and associated operating results of Bitsy were consolidated into our financial statements at the acquisition date. Pro forma results of operations have not been presented because the effects of this acquisition were not material to our consolidated results of operations.

Mac Warehouse, LLC

On June 25, 2018, we acquired 100% of the total equity interests of Mac Warehouse, LLC, an electronics retailer of refurbished Apple products, to complement our retail business. As of December 31, 2018, our determination and allocation of the purchase price to net tangible and intangible assets was based upon preliminary estimates. As of March 31, 2019, we received the final valuation information and completed our determination and allocation of the purchase price and recognized adjustments to the provisional values as of March 31, 2019 which decreased the recognized Intangibles assets by $2.8 million, increased Accrued liabilities by $527,000, decreased Deferred tax liabilities by $837,000 and resulted in a corresponding increase to Goodwill of $2.5 million. Additionally, the change to the provisional amount resulted in a decrease in amortization expense and accumulated depreciation of $1.4 million, of which $981,000 relates to the year ended December 31, 2018, and a $459,000 increase in Other Income related to the Accrued Liabilities that were expensed in 2018. We estimated the fair value of the acquired assets and liabilities based on Level 3 inputs, which were unobservable (see Note 2—Accounting Policies, Fair value of financial instruments). These inputs included our estimate of future revenues, operating margins, discount rates, royalty rates, and assumptions about the relative competitive environment.

The fair values of the assets acquired and liabilities assumed at the acquisition date are as follows (in thousands):



Purchase Price	Fair Value
Cash paid, net of cash acquired	$	1,143
Allocation
Accounts receivable, net	$	399
Inventories, net	1,033
Prepaids and other current assets	29
Property and equipment	154
Intangible assets	653
Goodwill	3,376
Accounts payable and accrued liabilities	(1,432		)
Long-term debt, net	(3,069		)
Total net assets, net of cash acquired	$	1,143