TZERO GROUP, INC.

CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

AS OF DECEMBER 31, 2018 AND FOR THE YEAR THEN ENDED
 TZERO GROUP, INC.
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
AS OF DECEMBER 31, 2018 AND FOR THE YEAR THEN ENDED

CONTENTS
Consolidated Balance Sheets (unaudited) ........................................................................................ 1
Consolidated Statements of Operations (unaudited) ........................................................................ 2
Consolidated Statements of Cash Flows (unaudited)....................................................................... 3
Notes to Unaudited Consolidated Financial Statements .................................................................. 4
 tZERO Group, Inc.
Consolidated Balance Sheets (unaudited)
(in thousands)

December 31, December 31,

2018 2017
Assets
Current Assets:
Cash and cash equivalents $ 12,207 $ 1,885
Accounts receivable, net 2,572 2,627
Prepaids and other current assets 268 2,484
Total current assets 15,047 6,996

Fixed assets, net 2,732 1,268

Intangible assets, net 10,669 6,851
Goodwill 19,275 11,915
Equity investments 23,118 25
Other long-term assets, net 8,170 398
Total assets $ 79,011 $ 27,453

Liabilities and Stockholders' Equity

Current liabilities:
Accounts payable and accrued liabilities $ 4,831 $ 3,382
Acquisition notes payable to parent - 29,739
Operating note payable to parent 20,115 19,162
Accrued interest payable to parent 3,448 2,004
Total current liabilities 28,394 54,287

Other long-term liabilities 160 391

Total liabilities 28,554 54,678

Stockholders' equity (deficit):

Preferred equity tokens, $0.10 par value
Authorized shares - 11 and 0
Issued and outstanding shares - 10 and 0 2,623 -
Common stock, $0 par value
Authorized shares - 11 and 10
Issued and Outstanding shares - 10 and 10 - -
Additional paid-in capital 114,554 1,655
Accumulated deficit (69,657) (28,880)
Equity attributable to stockholders of t0.com, Inc. 47,520 (27,225)
Equity attributable to noncontrolling interests 2,937 -
Total equity (deficit) 50,457 (27,225)
Total liabilities and stockholders' equity (deficit) $ 79,011 $ 27,453

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 tZERO Group, Inc.
Consolidated Statements of Operations (unaudited)
(in thousands)

Year ended
December 31,
2018 2017 2016
Revenue, net $ 19,284 $ 16,733 $ 15,181
Cost of sales 13,127 11,647 10,203
Gross profit 6,157 5,086 4,978
Operating expenses:
Sales and marketing 4,346 1,040 529
Technology 8,733 9,016 6,485
General and administrative 33,927 7,046 8,810
Total operating expenses 47,006 17,102 15,824

Operating loss (40,849) (12,016) (10,846)

Interest expense, net (1,571) (1,271) (594)
Other income, net 1,617 3,002 (1)
Loss before taxes (40,803) (10,285) (11,441)

Income tax (benefit) expense (148) 14 16

Consolidated net loss (40,655) (10,299) (11,457)

Less: net loss attributable to noncontrolling interests (122) - -

Net loss attributable to common shares $ (40,777) $ (10,299) $ (11,457)

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 tZERO Group, Inc.
Consolidated Statements of Cash Flows (unaudited)
(in thousands)

Year ended
December 31,
Cash flows from operating activities: 2018 2017 2016
Consolidated net loss $ (40,655) $ (10,299) $ (11,457)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation of fixed assets 1,036 1,100 417
Amortization of intangible assets 3,897 3,903 3,913
Stock-based compensation 4,848 - -
Gain on sale of cryptocurrencies (5,976) - -
Impairment of cryptocurrencies 7,355 - -
Loss on disposal of business and other assets 3,168 - -
Net settlement of commission receivable due from parent (218) - -
Other items (72) 3 -
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable, net 55 90 (98)
Prepaids and other current assets 793 (2,353) (54)
Other long-term assets, net 228 (183) 126
Accounts payable and accrued liabilities 3,031 2,439 (804)
Other long-term liabilities (231) 256 22
Net cash used in operating activities (22,741) (5,044) (7,935)

Cash flows from investing activities:

Investment in equity securities (23,021) - -
Acquisition of businesses, net of cash acquired (11,769) - 1,248
Deposit on purchase of business (8,000) - -
Expenditures for fixed assets (2,497) (95) (2,471)
Purchase of intangible assets (3,495) (79) (82)
Other - - (28)
Net cash used in investing activities (48,782) (174) (1,333)

Cash flows from financing activities:

Proceeds from acquisition notes payable - - 600
Proceeds from operating note payable 2,671 5,111 8,663
Payment on operating note payable (1,500) - -
Proceeds from security token offering, net of offering costs 82,354 905 -
Payments of taxes withheld upon vesting of stock-based compensation (1,680) - -
Net cash provided by financing activities 81,845 6,016 9,263
Net increase (decrease) in cash 10,322 798 (5)
Cash, beginning of period 1,885 1,087 1,092
Cash, end of period $ 12,207 $ 1,885 $ 1,087

Supplemental non-cash disclosures

Payment on working capital loan with asset transfer $ - $ 72 $ -
Acquisition of assets through issuance of noncontrolling interest 1,653 - -
Settlement of intercompany payable and interest through token issuance 30,000 - -

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 TZERO GROUP, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
Business and Organization
On December 1, 2014, Medici Inc. (“Medici”) was incorporated in the State of Utah, as a wholly
owned subsidiary of Overstock.com (“Overstock”), to focus on development of commercial applications
of blockchain and financial technology. Pursuant to an agreement dated November 21, 2014, on July 16,
2015, Overstock transferred 24.9% of its shares of Medici to a third-party. On August 26, 2015, the third-
party transferred 5.9% of the shares back to Overstock and redistributed some of its shares to other
individuals or entities. On October 21, 2016, Medici formally changed its name to t0.com, Inc. On February
3, 2017, Overstock transferred its 81.0% ownership of t0.com, Inc. to its wholly owned subsidiary, Medici
Ventures, Inc. (“Medici Ventures”). On October 1, 2018, t0.com, Inc. was incorporated in the State of
Delaware and changed its name to tZERO Group, Inc. (the “Company”). As of December 31, 2018,
Overstock indirectly owns 80.1% of the issued and outstanding common stock of the Company and the
remaining 19.9% of the Company is held by 31 other individual or entity shareholders many of whom are
employees or former employee of the Company.
As used herein, “we,” “our” and similar terms include tZERO Group, Inc. and its subsidiaries,
unless the context indicates otherwise.
We operate two wholly-owned registered broker dealers, SpeedRoute, LLC (“SpeedRoute”) and
PRO Securities, LLC (“PRO Securities”). In the first quarter of 2018, we acquired majority ownership
interests in ES Capital Advisors, LLC, (d/b/a “tZERO Advisors”) and Verify Investor, LLC (“Verify
Investor”) and their financial results have been included in our consolidated financial statements from the
date of acquisition. We subsequently sold our equity interest in ES Capital Advisors, LLC during the fourth
quarter of 2018.
SpeedRoute is an electronic, agency-only Financial Industry Regulatory Authority, Inc. (“FINRA”)
registered broker dealer that provides connectivity for its customers to U.S. equity exchanges as well as off-
exchange sources of liquidity, such as dark pools. All of SpeedRoute’s customers are registered broker
dealers. SpeedRoute does not hold, own, or sell securities.
PRO Securities is a FINRA-registered broker dealer that owns and operates the PRO Securities
alternative trading system (“PRO Securities ATS”), which has filed a Form ATS with the Securities and
Exchange Commission (“SEC”) notifying the SEC of its activities as an alternate trading system, or ATS.
The PRO Securities ATS is not regulated as an exchange, but is a licensed venue for matching buy and sell
orders. The PRO Securities ATS is a closed system available only to its broker dealer subscribers. PRO
Securities does not accept orders from non-broker dealers, nor does it hold, own or sell securities.
Verify Investor is an accredited investor verification company. As of December 31, 2018, we hold
an 81.0% ownership interest in Verify Investor.
Basis of presentation
The accompanying unaudited consolidated financial statements were prepared in conformity with
generally accepted accounting principles (“GAAP”) in the United States. The accompanying unaudited
consolidated financial statements reflect all adjustments, consisting only of normal and recurring
adjustments, which are, in our opinion, necessary for a fair presentation of results for the interim periods
presented. Preparing financial statements requires making estimates and assumptions that affect the
amounts that are reported in the consolidated financial statements and accompanying disclosures. Although
these estimates are based on our best knowledge of current events and actions that we may undertake in the
future, our actual results may differ from our estimates, and such differences may be material. The results
of operations presented herein are not necessarily indicative of our results for any future period. For
purposes of comparability, the presentation of certain immaterial amounts in the prior periods have been
conformed with the current period presentation.

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 TZERO GROUP, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
2. DISCUSSION OF OPERATING RESULTS
Year Ended December 31, 2018
Revenues, net for the year ended December 31, 2018 increased compared to the same period in the
prior year primarily due to on-boarding of new SpeedRoute customers resulting in increased trading
volume. Cost of sales for the year ended December 31, 2018 increased compared to the same period in the
prior year primarily due to higher SpeedRoute trading volume. Gross margin for the year ended December
31, 2018 increased compared to the same period in the prior year primarily due to higher average revenues
per trade.
Sales and marketing expenses increased during the year ended December 31, 2018 compared to the
same period in the prior year primarily due to increased headcount and consulting service costs. Technology
expense decreased during the year ended December 31, 2018 compared to the same period in the prior year
primarily due to reductions of technology licenses and depreciation expense. General and administrative
expenses increased during the year ended December 31, 2018 compared to the same period in the prior year
primarily due to stock compensation expenses (See Note 10 – Stock-Based Awards), impairments caused
by decreases in market value of cryptocurrencies held (See Note 3 – Significant Accounting Policies,
Cryptocurrencies), legal fees, and the disposal of various businesses and assets.
Other income, net decreased during the year ended December 31, 2018 compared to the same
period in the prior year primarily due to a $1.5 million commission earned from Overstock during the year
ended December 31, 2017 for assisting Overstock to raise capital through warrants (See Note 15 – Related
Party and Affiliated Transactions).
3. SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation
The accompanying unaudited consolidated financial statements include our accounts and the
accounts of our wholly-owned subsidiaries and majority-owned subsidiaries. All intercompany account
balances and transactions have been eliminated in consolidation.
Use of estimates
The preparation of financial statements in conformity with GAAP 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. Actual
results could differ materially from these estimates.
Cash equivalents
We classify all highly liquid instruments, including instruments with a remaining maturity of three
months or less at the time of purchase, as cash equivalents. Cash equivalents were $3.1 million and zero at
December 31, 2018 and December 31, 2017, respectively.
Fair Value Measurement
We account for our assets and liabilities using 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 our market assumptions. These
two types of inputs have created the fair-value hierarchy below. This hierarchy requires us to minimize the
use of unobservable inputs and to use observable market data, if available, when determining fair value.
 Level 1—Quoted prices for identical instruments in active markets;

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 TZERO GROUP, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 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.
Under GAAP, certain assets and liabilities are required to be recorded at fair value on a recurring
basis. Our assets and liabilities that are adjusted to fair value on a recurring basis includes cash equivalents
of $3.1 million and zero at December 31, 2018 and December 31, 2017, respectively, which is determined
based on Level 1 inputs. Our other financial instruments, including cash, accounts receivable, accounts
payable, accrued liabilities, and notes payables are carried at cost, which approximates their fair value.
Certain assets, including long-lived assets, certain equity securities, goodwill, cryptocurrencies, and other
intangible assets, are measured at fair value on a nonrecurring basis in certain circumstances (e.g., when
there is evidence of impairment); that is, the assets are not measured at fair value on an ongoing basis, but
are subject to fair value adjustments using fair value measurements with unobservable inputs (level 3), apart
from cryptocurrencies which use quoted prices from various digital currency exchanges with active
markets.
Accounts receivable
Accounts receivable consist primarily of trade amounts due from our broker dealer customers under
terms requiring payments up to thirty days from the previous production month. We do not accrue interest
on unpaid receivables. Receipts of accounts receivable are applied to specific invoices identified on the
customer remittance advice or, if unspecified, are applied to earliest unpaid invoices. We maintain an
allowance for doubtful accounts receivable based upon our customers’ financial condition and payment
history, and our historical collection experience and expected collectability of accounts receivable.
Concentration of credit risk
We maintain cash balances with financial institutions in amounts which, at times, are more than
amounts insured by the Federal Deposit Insurance Corporation. Management monitors the soundness of
these institutions and has not experienced any credit losses with them.
We currently derive our revenue primarily from our broker dealer business. During the year ended
December 31, 2018, we earned revenue from three customers totaling 23%, 15%, and 11% of consolidated
net revenues. During the year ended December 31, 2017, we earned revenue from three customers totaling
20%, 18%, and 11% of consolidated net revenues. During the year ended December 31, 2016, we earned
revenue from three customers totaling 22%, 16% and 15% of revenues.
At December 31, 2018, 26% and 19% of accounts receivable was owed from two customers. At
December 31, 2017, 24% and 11% of accounts receivable was owed from two customers.
Cryptocurrencies
We held cryptocurrencies received in conjunction with our security token offering which we carried
at cost less impairment. We held no cryptocurrencies at December 31, 2018 and December 31, 2017,
respectively.
We recognize impairment on these assets caused by decreases in market value, determined by
taking quoted prices from various digital currency exchanges with active markets, whenever events or
changes in circumstances indicate that the carrying amount of an asset may not be recoverable. See Fair
Value Measurement above. Such impairment in the value of our cryptocurrencies is recorded as an
unrealized loss in General and administrative expense in our Consolidated Statements of Operations.
Impairments on cryptocurrencies were $7.4 million for the year ended December 31, 2018. There was no
impairment on cryptocurrencies during the years ended December 31, 2017 and 2016.

6
 TZERO GROUP, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Gains and losses realized upon sale of cryptocurrencies are also recorded in General and
administrative expense in our Consolidated Statements of Operations. Gains (losses) from the sale of
cryptocurrencies received through our security token offering are also presented as an adjustment to
reconcile Consolidated net loss to Net cash used in operating activities in our Consolidated Statements of
Cash flows. Further, the proceeds from the sale of cryptocurrencies received through our security token
offering are presented as a financing activity in our Consolidated Statements of Cash Flows due to its near
immediate conversion into cash and its economic similarity to the receipt of cash proceeds under the
security token offering. Realized gains on sale of cryptocurrencies were $6.0 million for the year ended
December 31, 2018. There were no realized gains or losses on sale of cryptocurrencies during the year
ended December 31, 2017 and 2016.
Fixed assets, net
Fixed assets, which include assets such as our furniture and equipment, technology infrastructure,
internal-use software, and website development, are recorded at cost and depreciated using the straight-line
method over the estimated useful lives of the related assets as follows:
Life
(years)
Furniture and equipment 5-7
Computer hardware 3-4
Computer software 2- 4

Included in fixed assets is the capitalized cost of internal-use software and website development,
including software used to upgrade and enhance our website and processes supporting our business, both
developed internally and acquired externally. We capitalize costs incurred during the application
development stage of internal-use software and amortize these costs over the estimated useful life of two
to three years. Costs incurred related to design or maintenance of internal-use software are expensed as
incurred.
Depreciation expense is classified within the corresponding operating expense categories on the
Consolidated Statements of Operations as follows (in thousands):
Year ended December 30,
2018 2017 2016
Technology $ 1,033 $ 1,091 $ 416
General and administrative 3 9 1
Total depreciation, including internal-use software
and website development $ 1,036 $ 1,100 $ 417

Equity investments under ASC 321

At December 31, 2018, we held minority interests (less than 20%) in certain privately held entities,
accounted for under ASC Topic 321, Investments - Equity Securities (“ASC 321”), which are included in
Equity investments in our Consolidated Balance Sheets. These equity investments lack readily determinable
fair values and therefore the investments are measured at cost minus impairment, if any, plus or minus
changes resulting from observable price changes in orderly transactions for the identical or similar equity
securities of the same issuer. Dividends received are reported in earnings, if and when received. We review
our investments individually for impairment by evaluating if events or circumstances have occurred that
may indicate the fair value of the investment is less than its carrying value. If such events or circumstances
have occurred, we estimate the fair value of the investment and recognize an impairment loss equal to the
difference between the fair value of the investment and its carrying value. In such cases, the estimated fair
value of the investment is determined using unobservable inputs including assumptions by the investee's

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 TZERO GROUP, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
management including quantitative information such as lower valuations in recently completed or proposed
financings. These inputs are classified as Level 3. See Fair value of financial instruments above.
On February 16, 2018, we received a stock dividend from one of our investees and we recognized
dividend income of $454,000 in Other income, net in the Consolidated Statement of Operations.
The carrying amount of our investments under ASC 321 was approximately $7.6 million and zero
at December 31, 2018 and December 31, 2017, respectively. We recognized impairment losses of $25,000
during the year ended December 31, 2018. No impairment losses were recognized for the years ended
December 31, 2017 and 2016. Impairment losses on our investments are recorded in Other income
(expense), net on our Consolidated Statements of Operations.
Equity method investments
During 2018, we acquired a 24% minority interests in StockCross Financial Services, Inc.
(“StockCross”), for a purchase price of $5.9 million and acquired a 50% ownership interest in Boston
Security Token Exchange LLC, a joint venture with BOX Digital Markets LLC, for a purchase price of
$10.0 million. We can exercise significant influence, but not control, over the investees through holding
more than a 20% voting interest in the entity. Our interests in these privately-held entities are accounted for
as equity method investments under ASC Topic 323, Investments - Equity Method and Joint Ventures
(“ASC 323”) and included in Equity investments on our Consolidated Balance Sheets. Based on the nature
of our ownership interests and extent of our contributed capital, we have a variable interest in Boston
Security Token Exchange LLC. However, we have insufficient voting rights or other means to influence
the investee such that we do not have power to direct the investee’s activities that most significantly impact
its economic performance. Further, we are not the investee’s primary beneficiary and we therefore do not
consolidate the investee in our financial statements. Our investment, plus off-balance sheet commitments,
and other subordinated financial support related to our variable interest entities totaled $14.7 million and
zero as of December 31, 2018 and 2017, respectively, representing our maximum exposures to loss.
The carrying amount of our equity method investments was approximately $15.5 million and zero
at December 31, 2018 and 2017, respectively. The carrying value of our equity method investments
exceeded the amount of the underlying equity in net assets of the investees and the difference was related
to goodwill. We record our proportionate share of the net income or loss of the investee in Other income
(expense), net in our Consolidated Statements of Operations with corresponding adjustments to the carrying
value of the investment. Our proportionate share of the net losses of our equity method investees for the
year ended December 31, 2018 was $356,000 and recognized in Other income (expense), net in our
Consolidated Statements of Operations.
Goodwill
Goodwill represents the excess of the purchase price paid over the fair value of the net assets
acquired in business combinations. Goodwill is not amortized but is tested for impairment at least annually
or when we deem that a triggering event has occurred. When evaluating whether goodwill is impaired, we
make a qualitative assessment to determine if it is more likely than not that the fair value our reporting unit
is less than its carrying amount. If the qualitative assessment determines that it is more likely than not that
its fair value is less than its carrying amount, we compare the fair value of the reporting unit to which the
goodwill is assigned to its carrying amount. If the carrying amount exceeds its fair value, an impairment
loss is recognized in an amount equal to the excess of the carrying amount over the fair value of the reporting
unit, not to exceed the carrying amount of the goodwill. There were no impairments to goodwill recorded
during the years ended December 31, 2018, 2017 and 2016.
For year ended December 31, 2018, we recognized $7.4 million in goodwill related to a business
acquisition as described in Note 4 – Acquisitions, Goodwill, and Acquired Intangible Assets. The carrying

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 TZERO GROUP, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
amount of our goodwill was approximately $19.3 million and $11.9 million at December 31, 2018 and
2017, respectively.
Intangible assets other than goodwill
We capitalize and amortize intangible assets other than goodwill over their estimated useful lives
unless such lives are indefinite. Intangible assets other than goodwill acquired separately from third-parties
are capitalized at cost while such assets acquired as part of a business combination are capitalized at their
acquisition-date fair value.
Indefinite-lived intangible assets are tested for impairment annually or more frequently when
events or circumstances indicate that the carrying value more likely than not exceeds its fair value. In
addition, we routinely evaluate the remaining useful life of intangible assets not being amortized to
determine whether events or circumstances continue to support an indefinite useful life, including any legal,
regulatory, contractual, competitive, economic, or other factors that may limit their useful lives. Definite
lived intangible assets are amortized using the straight-line method of amortization over their useful lives,
with the exception of certain intangibles (such as acquired technology, customer relationships, and trade
names) which are amortized using an accelerated method of amortization based on cash flows.
These definite lived intangible assets are reviewed for impairment whenever events or changes in
circumstances indicate that their carrying amount may not be recoverable as described below under
Impairment of long-lived assets.
Intangible assets, net consist of the following (in thousands):

December 31, December 31,

2018 2017
Intangible assets subject to amortization (1) $ 23,850 $ 16,137
Less: accumulated amortization of intangible assets (13,181) (9,286)
Total intangible assets, net $ 10,669 $ 6,851
___________________________________________
(1) At December 31, 2018, the weighted average remaining useful life for intangible assets, other, excluding
fully amortized intangible assets, was 6.59 years.
For the year ended December 31, 2018, we recognized a $3.2 million loss included in General and
administrative expense in our Consolidated Statements of Operation, upon the sale of our investment
advisor licenses which were classified as intangible assets.
Amortization of intangible assets other than goodwill is classified within the corresponding
operating expense categories on the Consolidated Statements of Operations as follows (in thousands):

Year ended December 31,

2018 2017
Sales and marketing $ 460 $ 62
Technology 3,425 2,715
General and administrative 12 -
Total Amortization $ 3,897 $ 2,777

Estimated amortization expense for the next five years is: $3.1 million in 2019, $2.6 million in
2020, $2.4 million in 2021, and $1.1 million in 2022, and $1.4 million in 2023 and thereafter.

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 TZERO GROUP, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Impairment of long-lived assets
We review property and equipment and other long-lived assets, including intangible assets other
than goodwill, for impairment whenever events or changes in circumstances indicate that the carrying
amount of an asset group may not be recoverable. See the Cryptocurrencies section above for our
impairment policy over cryptocurrencies. Recoverability is measured by comparison of the assets’ carrying
amount to future undiscounted net cash flows the asset group is expected to generate. Cash flow forecasts
are based on trends of historical performance and management’s estimate of future performance, giving
consideration to existing and anticipated competitive and economic conditions. If such asset group is
considered to be impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds their fair values. There were no impairments to long-lived assets
recorded during the years ended December 31, 2018, 2017, and 2016.
Common stock
Each share of common stock has the right to one vote. The holders of common stock are also
entitled to receive dividends declared by the board of directors out of funds legally available. No dividends
have been declared or paid on our common stock since inception through December 31, 2018.
Preferred Equity Tokens
On December 18, 2017, tZERO launched an offering (the “security token offering”) of the
right to acquire tZERO Preferred Equity Tokens (the “tZERO Security Token”) through a Simple
Agreement for Future Equity (“SAFE”). The security token offering closed on August 6, 2018 and on
October 12, 2018, tZERO issued the tZERO Security Tokens in settlement of the SAFEs. tZERO Security
Token holders have the right to, prior to distributing earnings to common stockholders, a noncumulative
dividend equal to 10% of our consolidated Adjusted Gross Revenue (as defined by the security token
offering documents) for the most recently completed fiscal quarter, if declared by our Board of Directors,
to be paid out of funds lawfully available on a quarterly basis. tZERO Security Token holders are not
entitled to participate in any dividends paid to the holders of our common stock, have no rights to vote, and
have no rights to the undistributed earnings and are not entitled to any utility functionality as part of the
tZERO Security Tokens. Any remaining undistributed earnings or losses of the Company for a period shall
be allocated to the tZERO Security Token holders based on the contractual participation rights of the
security to share in those earnings as if all the earnings for the period had been distributed. In the event of
any liquidation, dissolution or winding up of the Company, the tZERO Security Token holders will be
entitled to the limited preferential liquidation rights equal to USD $0.10 per token to the extent funds are
available. At December 31, 2018, cumulative proceeds since December 18, 2017, net of withdrawals, from
the security token offering totaling $104.8 million have been classified as Stockholders’ equity within our
Consolidated Balance Sheets. Withdrawals during the security token offering period were $22.0 million.
As of December 31, 2018, we incurred $21.5 million of offering costs associated with the security token
offering that are classified as a reduction in proceeds within Additional paid-in capital of our Consolidated
Balance Sheets.
Noncontrolling interests
During the first quarter of 2018, we purchased 65.8% of ES Capital Advisors, LLC (“ES Capital”),
a registered investment advisor under the Investment Advisers Act of 1940, which was accounted for as an
asset acquisition. We operated the ES Capital business under the name tZERO Advisors and offered
automated investment advisory services. We subsequently sold our equity interest in ES Capital during the
fourth quarter of 2018. We also purchased 81.0% of Verify Investor, LLC, an accredited investor
verification company. This transaction is described further in Note 4 – Acquisitions, Goodwill, and
Acquired Intangible Assets. The financial position and results of operations for these entities are included
in our consolidated financial statements. Intercompany transactions have been eliminated and the amounts

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 TZERO GROUP, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
of contributions and gains or losses that are attributable to the noncontrolling interests are disclosed in our
consolidated financial statements.
Revenue Recognition
We currently derive our revenue primarily from our broker dealer business. Securities transactions
routed through SpeedRoute (and the related commission revenue and expense) are recorded on the trade
date and on a gross basis. We treat cash consideration paid to our customers in the form of rebates as a
reduction of gross revenue. These rebates totaled $500,000, $1.2 million, and $1.4 million during the years
ended December 31, 2018, 2017, and 2016, respectively.
Stock-based compensation
We measure compensation expense for all outstanding unvested share-based awards at fair value
on the date of grant and recognize compensation expense over the service period for awards at the greater
of a straight-line basis or on an accelerated schedule when vesting of the share-based awards exceeds a
straight-line basis. When an award is forfeited prior to the vesting date, we recognize an adjustment for the
previously recognized expense in the period of the forfeiture. See Note 10 – Stock-Based Awards.
Income taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and
liabilities are recognized for the future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their respective tax bases and operating
loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date. We recognize the effect of income tax positions
only if those positions are more likely than not of being sustained. Recognized income tax positions are
measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or
measurement are reflected in the period in which the change in judgment occurs.
Through December 31, 2017, we filed consolidated federal and combined state income tax returns
with Overstock. On October 12, 2018, we issued the tZERO Security Tokens which caused Overstock’s
indirect ownership in us to fall below the threshold needed to file consolidated federal tax returns. For
periods after October 12, 2018, we will file federal tax returns separate from the Overstock consolidated
group. There is currently no tax sharing agreement in place to govern the distribution of cash payments and
receipts between the group members. Our tax provision (benefit) is allocated by applying the requirements
of ASC 740 as if each group member were filing a separate tax return. Our stand-alone financial statements
include a valuation allowance because of insufficient taxable income on a hypothetical separate return basis.
Each quarter we assess the recoverability of our deferred tax assets under ASC 740. We assess the
available positive and negative evidence to estimate whether we will generate sufficient future taxable
income to use our existing deferred tax assets. We have limited carryback ability and do not have significant
taxable temporary differences to recover our existing deferred tax assets, therefore we must rely on future
taxable income, including tax planning strategies, to support their realizability. We have established a
valuation allowance for our deferred tax assets not supported by carryback ability or taxable temporary
differences, primarily due to uncertainty regarding our future taxable income. We have considered, among
other things, the cumulative loss incurred over the three-year period ended December 31, 2018 as a
significant piece of objective negative evidence. We intend to continue maintaining a valuation allowance
on our net deferred tax assets until there is sufficient evidence to support the reversal of all or some portion
of these allowances. The amount of the deferred tax asset considered realizable could be adjusted if
objective negative evidence in the form of cumulative losses is no longer present and additional weight may

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 TZERO GROUP, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
be given to subjective evidence such as long-term projections for growth. We will continue to monitor the
need for a valuation allowance against our remaining deferred tax assets on a quarterly basis.
Tax laws and regulations themselves are subject to change as a result of changes in fiscal policy,
changes in legislation, the evolution of regulations, and court rulings. On December 22, 2017, the President
signed into law Public Law No. 115-97, commonly referred to as the Tax Cuts and Jobs Act (“TCJA”),
following its passage by the United States Congress. The TCJA will make significant changes to U.S.
federal income tax laws. Among many other changes for tax years beginning in 2018, the new law lowers
the corporate tax rate from 35% to 21%, eliminates net operating loss carrybacks and allows indefinite
carryforwards, and transitions U.S international taxation from a worldwide tax system to a territorial
system. Due to our large operating losses since inception and the valuation allowance on our net deferred
tax assets, we do not expect the change in the tax law to have a material impact to our tax provision in
future periods. In the year ended December 31, 2018, we adjusted our valuation allowance by
approximately $163,000 due to indefinite lived net operating losses we generated that can offset existing
indefinite lived deferred tax liabilities.
Loss contingencies
In the normal course of business, we may become involved in legal proceedings and other potential
loss contingencies. We accrue a liability for such matters when it is probable that a loss has been incurred
and the amount can be reasonably estimated. When only a range of probable loss can be estimated, the most
probable amount in the range is accrued. If no amount within this range is a better estimate than any other
amount within the range, the minimum amount in the range is accrued. We expense legal fees as incurred
(See Note 9 – Commitments and Contingencies).
4. ACQUISITIONS, GOODWILL, AND ACQUIRED INTANGIBLE ASSETS
Verify Investor, LLC
On February 12, 2018 (“acquisition date”), we acquired 1,351,367 voting units, or 81.0% of the
total equity interests of Verify Investor for a total purchase price of $12.0 million in cash. We estimated the
fair value of the acquired assets based on Level 3 inputs, which were unobservable (See Note 3 –
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 $ 11,769

Allocation
Intangibles $ 7,400
Goodwill 7,360
Other assets acquired 3
Other liabilities assumed (179)
Total net assets, net of cash acquired 14,584
Less: noncontrolling interest (2,815)
Total net assets attributable to tZERO, net of cash quired $ 11,769

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 TZERO GROUP, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The following table details the identifiable intangible assets acquired at their fair value and
estimated useful lives as of December 31, 2018 (in thousands):

Weighted Average
Intangible Assets Fair Value Useful Life (years)
Technology and developed software $ 6,300 10.00
Trade names 700 10.00
Customer relationships 400 0.50
Total acquired intangible assets as of the acquisition date 7,400
Less: accumulated amortization of acquired intangible assets (1,105)
Total acquired intangible assets, net $ 6,295

The expense for amortizing intangible assets acquired in connection with this acquisition was $1.1
million for the year ended December 31, 2018.
Acquired intangible assets primarily include technology, trade name, and customer relationships.
As described above, we determined the fair value of these assets using an income approach method to
determine the present value of expected future cash flows for each identifiable intangible asset. This method
was based on discount rates which incorporate a risk premium to take into account the risks inherent in
those expected cash flows. The expected cash flows were estimated based on the company’s historical
operating results.
The acquired assets, liabilities, and associated operating results were consolidated into our financial
statements at the acquisition date.
5. ACCOUNTS RECEIVABLE, NET
Accounts receivable, net consist of the following (in thousands):
December 31, December 31,
2018 2017
Accounts receivable $ 2,593 $ 2,678
Less: allowance for doubtful accounts (21) (51)
Accounts receivable, net $ 2,572 $ 2,627

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 TZERO GROUP, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
6. PREPAIDS AND OTHER CURRENT ASSETS
Prepaids and other current assets consist of the following (in thousands):
Prepaids and Other Current Assets
December 31, December 31,
2018 2017
Other current assets $ 50 $ -
Prepaid other 218 2,484
Total prepaids and other current assets $ 268 $ 2,484

7. FIXED ASSETS, NET

Fixed assets, net consist of the following (in thousands):
December 31, December 31,
2018 2017
Computer hardware and software, including internal-use $ 5,257 $ 2,762
software and website development
Furniture and equipment 31 26
5,288 2,788
Less: accumulated depreciation (2,556) (1,520)
Total fixed assets, net $ 2,732 $ 1,268

Depreciation of fixed assets totaled $1.0 million, $1.1 million, and $417,000 for the years ended
December 31, 2018, 2017, and 2016, respectively.
Upon sale or retirement of assets, cost and related accumulated depreciation and amortization are
removed from the Consolidated Balance Sheets and the resulting gain or loss, if any, is reflected in the
Consolidated Statements of Operations.
8. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities consist of the following (in thousands):
December 31, December 31,
2018 2017
Accounts payable accruals $ 2,415 $ 2,528
Other accrued expenses 1,100 369
Accrued compensation and other related costs 1,116 376
Accrued legal contingencies 175 75
Accrued taxes 25 33
Total accounts payable and accrued liabilities $ 4,831 $ 3,382

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 TZERO GROUP, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
9. COMMITMENTS AND CONTINGENCIES
Summary of future minimum lease payments for all operating leases
Minimum future payments under all operating leases as of December 31, 2018, are as follows (in
thousands):
Payments due by period:
2019 $ 1,421
2020 1,138
2021 1,085
2022 1,075
2023 1,077
Thereafter 7,657
$ 13,453

Rental expense for operating leases totaled $799,000, $492,000, and $417,000 for the years ended
December 31, 2018, 2017, and 2016, respectively.
Loss contingencies
In the normal course of business, we may become involved in legal proceedings and other potential
loss contingencies. We accrue a liability for such matters when it is probable that a loss has been incurred
and the amount can be reasonably estimated. When only a range of probable loss can be estimated, the most
probable amount in the range is accrued. If no amount within this range is a better estimate than any other
amount within the range, the minimum amount in the range is accrued. The nature of the loss contingencies
relating to claims that have been asserted against us are described below.
In February 2018, the Division of Enforcement of the SEC informed us that it is conducting an
investigation and requested that we voluntarily provide certain information and documents related to the
tZERO security token offering in connection with its investigation. In December of 2018, we received a
follow-up request from the SEC relating to its investigation. We are cooperating fully with the SEC in
connection with its investigation.
Our broker-dealer subsidiaries are, and any broker-dealer subsidiaries that we acquire or form in
the future will be, subject to extensive regulatory requirements under federal and state laws and regulations
and self-regulatory organization (“SRO”) rules. Each of SpeedRoute and PRO Securities is registered with
the SEC as a broker-dealer under the Exchange Act and in the states in which it conducts securities business
and is a member of FINRA and other SROs (as applicable). In addition, PRO Securities owns and operates
the PRO Securities ATS, which is registered with the SEC as an alternative trading system. Each of
SpeedRoute and PRO Securities is subject to regulation, examination, investigation and disciplinary action
by the SEC, FINRA and state securities regulators, as well as other governmental authorities and SROs
with which it is registered or licensed or of which it is a member. Moreover, as a result of our projects
seeking to apply distributed ledger technologies to the capital markets, our subsidiaries have been, and
remain involved in, ongoing oral and written communications with regulatory authorities. As previously
disclosed, our broker-dealer subsidiaries are currently undergoing various examinations, inquiries and/or
investigations undertaken by various regulatory authorities; as appropriate or required, we will provide
further information regarding such matters. Any failure by our broker-dealer subsidiaries to satisfy their
regulatory authorities that they are in compliance with all applicable rules and regulations could have a
material adverse effect on us.
We establish liabilities when a particular contingency is probable and estimable. At December 31,
2018, we have accrued $175,000, which is included in accrued liabilities in our Consolidated Balance
sheets. It is reasonably possible that the actual losses may exceed our accrued liabilities.

15
 TZERO GROUP, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
10. STOCK-BASED AWARDS
Stock based-awards
The tZERO.com 2017 Equity Incentive Plan provides for grant of options to employees and
directors of and consultants to acquire up to 5% of the authorized shares of our common stock. In January
2018, we granted 2.0 million restricted stock awards (post-stock split) with a cumulative grant date fair
value of $4.0 million under the equity incentive plan, all of which vested on January 23, 2018. Accordingly,
there is no expense to be recognized in future periods related to these awards. During the year ended
December 31, 2018, we granted awards to acquire 5.6 million shares (post-stock split) of our common stock
with a cumulative grant date fair value of $4.6 million which will be expensed on a straight-line basis over
the vesting period of two to three years. No awards were issued during the year ended December 31, 2017.
Cumulative stock-based compensation expense was $4.8 million for the year ended December 31, 2018
and was reflected in the General and administrative expenses in the Consolidated Statement of Operations.
11. OTHER INCOME, NET
Other income, net consists of the following (in thousands):

Year ended December 31,

2018 2017 2016
Commission income from Overstock $ 1,517 $ 3,000 $ -
Other 100 2 (1)
Total other income, net $ 1,617 $ 3,002 $ (1)

See Note 15 – Related Party and Affiliated Transactions for more information about the
commission earned from Overstock.
12. INCOME TAXES
The provision (benefit) for income taxes consists of the following (in thousands):
Year ended December 31,
2018 2017 2016
Current $ 15 $ 14 $ 16
Deferred (163) - -
Total provision (benefit) for income taxes $ (148) $ 14 $ 16

The provision (benefit) for income taxes for periods shown differ from the amounts computed by
applying the U.S. federal income tax rate of 21% for the year ended December 31, 2018 and 35% for the
year ended December 31, 2017 to income (loss) before income taxes primarily due to the effect of a
valuation allowance on the company’s deferred tax assets net of deferred tax liabilities. We recorded current
tax expense in each period for certain state and foreign taxes. There are no tax-related balances due to or
from affiliates as of any balance sheet date presented.
Each quarter we assess the recoverability of our deferred tax assets under ASC 740. We assess the
available positive and negative evidence to estimate whether we will generate sufficient future taxable
income to use our existing deferred tax assets. We have limited carryback ability and do not have significant
taxable temporary differences to recover our existing deferred tax assets, therefore we must rely on future
taxable income, including tax planning strategies, to support their realizability. We have established a
valuation allowance for our deferred tax assets not supported by carryback ability or taxable temporary
differences, primarily due to uncertainty regarding our future taxable income. We have considered, among
other things, the cumulative loss incurred over the three-year period ended December 31, 2018 as a

16
 TZERO GROUP, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
significant piece of objective negative evidence. We intend to continue maintaining a valuation allowance
on our net deferred tax assets until there is sufficient evidence to support the reversal of all or some portion
of these allowances. The amount of the deferred tax asset considered realizable could be adjusted if
objective negative evidence in the form of cumulative losses is no longer present and additional weight may
be given to subjective evidence such as long-term projections for growth. We will continue to monitor the
need for a valuation allowance against our remaining deferred tax assets on a quarterly basis.
13. BROKER DEALERS
SpeedRoute and Pro Securities are subject to the SEC’s Uniform Net Capital Rule (SEC Rule 15c3-
1), which requires the maintenance of minimum net capital and requires that the ratio of aggregate
indebtedness to net capital, both as defined, shall not exceed 15 to 1 and that equity capital may not be
withdrawn or cash dividends paid if the resulting net capital ratio would exceed 10 to 1. At December 31,
2018, SpeedRoute had net capital of $1,251,579, which was $1,152,854 in excess of its required net capital
of $98,725 and SpeedRoute's net capital ratio was 1.2 to 1. At December 31, 2018, Pro Securities had net
capital of $13,958 which was $8,958 in excess of its required net capital of $5,000 and Pro Securities net
capital ratio was 2 to 1.
SpeedRoute and Pro Securities did not have any securities owned or securities sold, not yet
purchased at December 31, 2018 and December 31, 2017, respectively.
14. BORROWINGS
Acquisition Notes Payable to Parent
In connection with the acquisitions of t0 Technologies, Inc. (formerly known as Cirrus
Technologies, Inc.), SpeedRoute, and PRO Securities, we entered into two demand notes dated August 26,
2015 and January 28, 2016 with Overstock, which holds an indirect 81% interest in the Company as of
December 31, 2018 through its wholly-owned subsidiary Medici Ventures. We have borrowed $29.1
million under the August 26, 2015 note and $600,000 under the January 28, 2016 note. The notes bear
interest that approximates the Federal Funds Rate. On October 12, 2018, we issued $30.0 million of tZERO
Security Tokens to Overstock in settlement of these notes and a portion of the accumulated interest on these
notes.
The aggregate principal for the acquisition notes payable was zero and $29.7 million as of
December 31, 2018 and December 31, 2017, respectively.
Operating Note Payable to Parent
Overstock provides additional services or funding to and for our benefit; however, any such
additional services or funding are at the sole discretion of Overstock, which has no obligation to provide
any additional services or funding. All additional services, funding, intellectual development work, and
other costs and expenses incurred by Overstock, or advanced to us, in the furtherance of our business is
deemed a loan by Overstock to the us. Such amounts bear interest at 7.0% annually and, unless otherwise
agreed by Overstock, must be repaid by us in monthly payments due on the 15th day of each month in an
amount equal to 50% of our net revenues (gross revenues minus operating costs) for the preceding calendar
month. Our results have not yet allowed for any of these monthly repayments to date. We may prepay any
amount of any such loans at any time without penalty. We may repay some or all of this note and
accumulated interest from the proceeds of our security token offering.
The aggregate principal for the operating note payable was $20.1 million and $19.2 million as of
December 31, 2018 and December 31, 2017, respectively.

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 TZERO GROUP, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
15. RELATED PARTY AND AFFILIATED TRANSACTIONS
In October 2016, we entered into an agreement to provide Overstock with access to the Existing
tZERO Software Platform in exchange for a $20,000 per month subscription fee, which is included in
Revenues, net in the Consolidated Statements of Operations.
Overstock, which holds an indirect majority interest in us, provides additional services or funding
to and for our benefit; however, any such additional services or funding are at the sole discretion of
Overstock, which has no obligation to provide any additional services or funding. All additional services,
funding, intellectual development work, and other costs and expenses incurred by Overstock, or advanced
to us, in the furtherance of our business is deemed a loan by Overstock to us. See Note 14 – Borrowings,
Operating Note Payable to Parent for additional information.
Effective January 1, 2019, we acquired 100% of the equity interest in Bitsy, Inc. (“Bitsy”) by
purchasing the 67% equity interest in Bitsy held by Steve Hopkins, Medici Ventures’ former chief operating
officer and general counsel, and current president of tZERO, and affiliates for $8.0 million in cash, and
purchasing the remaining 33% of the Bitsy common stock from Medici Ventures for a $4.0 million
convertible promissory note due December 31, 2020 and an assignment of certain intellectual property to
Medici Ventures. In September 2018, Bitsy announced that it had begun a limited beta launch of a digital
wallet service intended to create a bridge between traditional fiat currencies and cryptocurrencies. As we
paid the $8.0 million purchase price prior to the effective date of the transaction, the payment is included
in Other long-term assets in our Consolidated Balance Sheets as a deposit on purchase of a business as of
December 31, 2018. Our purchase accounting has not yet been finalized for the transaction, as we are still
finalizing our valuation of assets acquired and liabilities assumed.
16. GOING CONCERN
We have generated limited revenue and have accumulated losses since inception. As such, our
continuation as a going concern is currently dependent upon the continued financial support from
Overstock, which it has provided, but is under no obligation to continue.
17. SUBSEQUENT EVENTS
On January 18, 2019, we sold our entire equity interest in one of our equity method investments
which had a carrying value of $5.8 million for $5.9 million.
We have evaluated the impact of all subsequent events through March 28, 2019, the date these
financial statements were available to be issued and determined that all subsequent events have been
appropriately recognized and disclosed in the accompanying financial statements.

18