Overstock.com 2015 Annual Report Download - page 63

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Our effective tax rate for the years ended December 31, 2014 and 2013 was 33.4% and (416.3%), respectively. Our effective tax rate was affected by
recurring items such as research tax credits and non-recurring items such as a valuation allowance release and a non-recurring civil penalty in 2013. It was
also affected to a lesser extent by tax rates in foreign jurisdictions and the relative amount of income we earned in those jurisdictions. The increase in the
2014 effective tax rate relative to the 2013 effective tax rate was primarily due to the release of a valuation allowance for deferred tax assets in the fourth
quarter of 2013, which significantly reduced the 2013 provision and effective tax rate.


Subject to our use of the financing facilities available to us in connection with the construction of our new corporate headquarters as described
below, we believe that the 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. Our failure to generate sufficient revenues or profits or to obtain additional financing or raise additional capital
could have a material adverse effect on our operations and on our ability to achieve our intended business objectives. Any projections of future cash needs
and cash flows are subject to substantial uncertainty.
As we have previously announced, we are building a new corporate headquarters in Salt Lake City, Utah. We currently estimate the total cost of the
headquarters, including the cost of the land and related equipment and furniture, at approximately $99 million. We had incurred costs of approximately
$55.7 million toward the project as of December 31, 2015. In 2014, we entered into a credit facility which provides for an approximately 27-month
construction loan of $45.8 million (which is designed to subsequently convert into an approximately 6.75-year term loan following completion of the
construction of the headquarters), and a three-year $10 million revolving loan. In October 2015, we received our first loan draw under the construction loan.
At December 31, 2015 our outstanding liability on the construction loan was approximately $9.5 million. For additional information, see 
 below.
In November 2015, we entered into a Master Lease Agreement ("MLA") with U.S. Bank pursuant to which we may finance certain assets or sell
certain assets to U.S. Bank and simultaneously lease them back. The agreement also allows us to finance software licenses (inclusive of the assets, referred to
collectively as the "Leased Assets"). The MLA allows for leases and financing of up to $20 million. In November 2015 we entered into a Schedule to the
MLA whereby we sold and leased back or financed Leased Assets for a period of 60 months for proceeds of $5.7 million. The weighted average effective
interest rate of our leases under the Master Lease Agreement was 3.62% at December 31, 2015. For additional information, see 
 below.
Our majority owned subsidiary Medici is working to demonstrate the viability of its fintech and crypto software that it has developed. In June 2015,
we issued a $500,000 privately-placed digital "cryptobond" to our Chief Executive Officer, Dr. Patrick Byrne, in exchange for cash. During July 2015, we
issued an additional privately-placed digital cryptobond to an unaffiliated purchaser for $5.0 million in cash and concurrently made a $5.0 million loan to
the purchaser. At December 31, 2015 we have repaid the $5.5 million in digital cryptobond debt and offset that repayment with the proceeds of the $5.0
million loan to the unaffiliated purchaser. These transactions are described in further detail in the section below.
In 2015, we reduced levels of certain inventory items in part to improve our liquidity. Inventories decreased by approximately $6.2 million during
2015.
Our principal sources of liquidity are cash flows generated from operations, and our existing cash and cash equivalents. At December 31, 2015, we
had cash and cash equivalents of $170.3 million.
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