What changed in this filing

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Item 1A. Risk Factors

2023-03-03 compared with 2022-03-03 · 132 added, 149 removed, 830 unchanged (25% of the section changed)

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• our ability to continue to source and make luxury design products available on our online marketplace;

• the timing and success of new services, features, and offerings we introduce through our e-commerce platform, including our recently launched NFT platform and auction transaction format;

• the timing and success of new services, features, and offerings we introduce through our e-commerce platform, including our recently launched auction transaction format;

• our ability to compete successfully;

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• our ability to hire and retain talented employees and professional contractors at all levels of our business;

• the impact of the ongoing COVID-19 pandemic or other events which may cause significant economic or social disruption;

• economic and market conditions, particularly those affecting the luxury design products industry, such as supply chain or global shipping disruptions.

• the impact of the ongoing COVID-19 pandemic or other events, such as geopolitical crises, which may cause significant economic or social disruption;

• economic and market conditions, particularly those affecting the luxury design products industry, such as fluctuations in inflation and interest rates or supply chain or global shipping disruptions.

Further, we make certain assumptions when planning our expenses based on our expected revenue based in part on historical results.

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Our historical growth may not be indicative of our future growth and our net revenue growth rate may decelerate compared to prior years.

We have experienced net revenue growth in recent periods, with net revenue of $102.7 million, $81.9 million, and $70.6 million during the fiscal years ended December 31, 2021, 2020, and 2019, respectively.

We have experienced fluctuations in our net revenue growth, with net revenue of $96.8 million, $102.7 million, and $81.9 million during the fiscal years ended December 31, 2022, 2021, and 2020, respectively.

You should not rely on our net revenue for any previous quarterly or annual period as any indication of our net revenue or revenue growth in future periods.

As we grow our business, our net revenue growth rates may decelerate compared to prior years for a number of reasons, which may include more challenging comparisons to prior periods as our net revenue grows, slowing demand for our online marketplace, increasing competition, a decrease in the growth of our overall market or market saturation, and our failure to capitalize on growth opportunities.

In addition, notwithstanding the general increase in online transactions, including for luxury purchases, our growth rates are likely to experience increased volatility, and may decelerate, as the COVID-19 pandemic evolves.

The COVID-19 pandemic has impacted, and may continue to impact, our business, key metrics, and results of operations in volatile and unpredictable ways.

The uncertainty around the COVID-19 pandemic in the United States and worldwide will likely continue to adversely impact the national and global economy.

The full extent of the impact of the pandemic on our business, key metrics, and results of operations depends on future developments that are uncertain and unpredictable, including the duration, severity, and spread of the pandemic, its impact on capital and financial markets, and any new information that may emerge concerning the virus or vaccines or other efforts to control the virus.

As a result of the COVID-19 pandemic, we have transitioned to an almost fully remote work environment.

More recently, we have adopted plans for re-opening certain offices, initially on a voluntary basis, and have implemented a flexible work model that we anticipate will have us continue to operate on a significantly remote and geographically (including internationally) dispersed basis for the foreseeable future.

This remote and dispersed work environment could have a negative impact on the execution of our business plans and operations.

For example, if a natural disaster, power outage, connectivity issue, or other event occurs that impacts our employees’ ability to work remotely, it may be difficult or, in certain cases, impossible, for us to continue our business for a substantial period of time.

Further, as the COVID-19 pandemic continues, we may experience disruptions if our employees, our sellers and buyers, or our third-party service providers’ employees become ill and are unable to perform their duties, and our operations, Internet, or mobile networks, or the operations of one or more of our third-party service providers, are impacted.

The increase in remote working may also result in consumer privacy, IT security, and fraud vulnerabilities, which, if exploited, could result in significant recovery costs and harm to our reputation.

Transitioning to a fully or predominantly remote work environment and providing and maintaining the operational infrastructure necessary to support a remote work environment also present significant challenges to maintaining compliance with state requirements such as employee income tax withholding, remittance and reporting, payroll registration, and workers’ compensation insurance.

It may also negatively impact our corporate culture, including employee engagement and productivity, both during the immediate pandemic crisis and beyond.

In addition, we may experience a decline in the supply of luxury design products available through our online marketplace if our sellers face difficulty sourcing products in the event of any extended lockdowns or similar restrictions or measures implemented in response to the COVID-19 pandemic.

Further, any prolonged economic downturn due to the COVID-19 pandemic (or otherwise) may negatively impact demand for luxury design products, including as a result of any significant or extended reduction in disposable incomes across our buyer base.

We have also seen shifts in the acceptance of online transactions, including in the luxury design products sector, as this pandemic has evolved.

Although we believe our business has been positively impacted to some extent by several trends related to the COVID-19 pandemic, including the increased willingness of sellers and buyers to engage in online transactions for luxury purchases, we cannot predict whether these trends will continue if and when the pandemic begins to subside, restrictions ease, and the risk and barriers associated with in-person transactions dissipate.

The COVID-19 pandemic has also led to broader economic consequences, such as supply chain disruptions, that may heighten other risks presented in this Annual Report on Form 10-K.

Public health concerns, such as COVID-19, could also result in social, economic and labor instability in the localities in which we or our vendors, sellers, and buyers reside.

Any of these uncertainties and actions we take to mitigate the effects of the COVID-19 pandemic and uncertainties related to the COVID-19 pandemic could harm our business, financial condition, and results of operations.

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Impact of COVID-19 Pandemic” for additional information about the impact of the COVID-19 pandemic on our business.

As we grow our business, our net revenue growth rates have and may in the future decelerate compared to prior years for a number of reasons, which may include more challenging comparisons to prior periods as our net revenue grows, slowing demand for our online marketplace, increasing competition, a decrease in the growth of our overall market or market saturation, and our failure to capitalize on growth opportunities.

If we fail to generate a sufficient volume of listings of luxury design products on our online marketplace, our ability to grow our business and market share would suffer.

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Our historical seller marketplace services revenue may not be indicative of future revenue.

We are highly selective in the sellers we allow onto our online marketplace and sellers must undergo a thorough vetting process with our vetting specialists before they are allowed to join our online marketplace.

We are highly selective in the sellers we allow onto

our online marketplace and sellers must undergo a thorough vetting process with our vetting specialists before they are allowed to join our online marketplace.

As a result, we may have difficulty identifying sellers who meet our standards for providing luxury design products and our customer service requirements.

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We have built a trusted online marketplace with a reputation for authentic luxury design products as a result of our extensive vetting process.

Our success depends on our ability to accurately and cost-effectively determine whether an item

offered for listing, such as a piece of jewelry or work of art, is an authentic product.

Our success depends on our ability to accurately and cost-effectively determine whether an item offered for listing, such as a piece of jewelry or work of art, is an authentic product.

Our sellers undergo a comprehensive evaluation by our vetting specialists to ensure the integrity of their business practices.

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From time to time, counterfeit goods have been and may be listed on our online marketplace.

While we have invested heavily in our authentication and seller vetting processes as described above, we cannot be certain that we will accurately authenticate every item that is listed with us.

While we have invested heavily in our seller vetting process as described above, we cannot be certain that we will accurately authenticate every item that is listed with us.

As the sophistication of counterfeiters increases, it may be increasingly difficult to identify counterfeit products.

We refund the cost of a product to a buyer if we determine that the item is not authentic.

In many cases, we refund the cost of a product to a buyer if we determine that the item is not authentic.

The sale of any counterfeit goods may damage our reputation as a trusted online marketplace for authenticated, luxury design products, which may impact our ability to attract and maintain repeat sellers and buyers.

Additionally, we may be subject to allegations that an antique, vintage, or other luxury design product we listed and sold through our online marketplace is not authentic despite our confirmed authentication of such item.

Additionally, we may be subject to allegations that an antique, vintage, or other luxury design product we listed and sold through our online marketplace is not authentic.

Such controversy could negatively impact our reputation and brand and harm our business and results of operations.

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copyright law and the Communications Decency Act, we may benefit from statutory safe harbor provisions that protect us from liability for content posted by our sellers and buyers.

However, trademark and patent laws do not include similar statutory provisions and liability for these forms of intellectual property is often determined by court decisions.

However, trademark and patent laws do not include similar statutory provisions and liability for these forms

of intellectual property is often determined by court decisions.

These safe harbors and court rulings may change unfavorably.

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Despite our vetting process, we may fail to prevent the listing of stolen goods on our online marketplace.

Government regulators and law enforcement officials may allege that our services violate, or aid and abet violations of certain laws,

including laws restricting or prohibiting the transferability and, by extension, the resale, of stolen goods.

Government regulators and law enforcement officials may allege that our services violate, or aid and abet violations of certain laws, including laws restricting or prohibiting the transferability and, by extension, the resale, of stolen goods.

Our form of seller agreement includes a representation that the seller has the necessary right and title to the luxury design products the seller may list, and we include such a rule and requirement in our terms of service prohibiting the listing of stolen or otherwise illegal products.

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Our growth will also depend on the continued and increased acceptance of e-commerce and online shopping by buyers of luxury design products.

Although we have seen increased acceptance of online transactions in the luxury design products sector, including as a result of the COVID-19 pandemic, we cannot predict whether this trend will continue, particularly if and when the COVID-19 pandemic begins to subside, restrictions ease, and the risks and barriers associated with in-person transactions dissipate.

Further, if sellers and buyers elect to transact business through in-person interactions instead of through our online marketplace, our revenue could be negatively impacted and our business could be harmed.

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A perception that our levels of responsiveness and seller and buyer support are inadequate could have similar results.

Further, any disruption in the operations of a substantial number of sellers, such as interruptions in delivery services, disruption due to public health crises such as the COVID-19 pandemic, natural disasters, inclement weather, or political unrest, could also result in negative experiences for a substantial number of buyers.

could also result in negative experiences for a substantial number of buyers.

If buyers do not have a positive experience transacting business on our online marketplace for any reason, or if we or our sellers fail to provide a high level of customer support and responsiveness, it could harm our reputation and our business.

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Further, our competitors could obtain preferential rates or shipping services, causing sellers to pay higher shipping costs or find alternative delivery services.

If the items sold through our online marketplace are not delivered in proper

condition, on a timely basis or at shipping rates that buyers are willing to pay, our reputation and our business could be adversely affected.

If the items sold through our online marketplace are not delivered in proper condition, on a timely basis or at shipping rates that buyers are willing to pay, our reputation and our business could be adversely affected.

We operate in an evolving industry and our past results may not be indicative of future operating performance.

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• manage and improve our business processes in response to changing business needs;

• anticipate and respond to macroeconomic changes generally, including changes in the market for luxury design products;

• anticipate and respond to macroeconomic changes generally, including changes in the market for luxury design products and fluctuating shipping costs;

• effectively scale our operations while maintaining high service quality and seller and buyer satisfaction;

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We also compete with the online offerings of these traditional retail competitors, resale players focused on niche or single categories, as well as technology-enabled online marketplaces that may offer the same or similar goods and services that we offer.

We believe our current primary competitors include Amazon, eBay, Etsy Inc., Restoration Hardware, Inc., Wayfair Inc., Christie’s Inc., and Sotheby’s, Inc.

We believe our current primary competitors include Amazon, eBay, Etsy Inc.,

Restoration Hardware, Inc., Wayfair Inc., Christie’s Inc., and Sotheby’s, Inc.

We believe our ability to compete depends on many factors within and beyond our control, including:

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However, we believe that these figures are reasonable estimates, and we take measures to improve their accuracy, such as eliminating known fictitious or duplicate accounts.

There are, nonetheless, inherent challenges in gathering accurate data across large online and mobile populations.

are, nonetheless, inherent challenges in gathering accurate data across large online and mobile populations.

For example, there may be individuals who have multiple email accounts in violation of our terms of service.

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dollar dampening demand for goods denominated in dollars from buyers outside the United States.

Consumer purchases of luxury design products have

generally declined during periods of economic uncertainty, when disposable income is reduced or when there is a reduction in consumer confidence.

Consumer purchases of luxury design products have generally declined during periods of economic uncertainty, when disposable income is reduced or when there is a reduction in consumer confidence.

Other factors that may negatively influence consumer spending on luxury design products include unemployment levels, higher consumer debt levels, reductions in net worth, declines in asset values, market uncertainty, home foreclosures and reductions in home values, fluctuating interest rates and credit availability, fluctuating fuel and other energy costs, fluctuating commodity prices and general uncertainty regarding the overall future political and economic environment.

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If these additional verticals do not attract new sellers or buyers, our revenue may fall short of expectations, our brand and reputation could suffer, and we may incur expenses that are not offset by revenue.

In addition, our business may suffer if we are unable to attract new and repeat sellers that supply the necessary high-end, appropriately priced, and in-demand luxury design products in these additional verticals, and these verticals may also have a different range of margin profiles than the pieces currently sold through our online marketplace.

may also have a different range of margin profiles than the pieces currently sold through our online marketplace.

Additionally, as we enter new verticals, potential sellers may demand lower commissions than our current verticals, which would adversely affect our take rate and results of operations.

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If any of these were to occur, it could damage our reputation, limit our growth and harm our results of operations.

Our recently launched NFT platform (utilizing Ether, a cryptocurrency generated using the Ethereum protocol) may not be successful and may expose us to legal, regulatory, and other risks.

The COVID-19 pandemic has impacted, and may continue to impact, our business, key metrics, and results of operations in volatile and unpredictable ways.

The uncertainty around the COVID-19 pandemic in the United States and worldwide will likely continue to adversely impact the national and global economy.

As a result of the COVID-19 pandemic, we have transitioned to an almost fully remote work environment.

More recently, we have re-opened our offices, and have implemented a flexible work model that we anticipate will have us continue to operate on a significantly remote and geographically (including internationally) dispersed basis for the foreseeable future.

This remote and dispersed work environment could have a negative impact on the execution of our business plans and operations.

The increase in remote working may also result in consumer privacy, IT security, and fraud vulnerabilities, which, if exploited, could result in significant recovery costs and harm to our reputation.

It may also negatively impact our corporate culture, including employee engagement and productivity, both during the immediate pandemic crisis and beyond.

The COVID-19 pandemic has also led to broader economic consequences, such as global shipping disruptions and changes in consumer behavior associated with the easing of pandemic-related restrictions and perceived risks, that may heighten other risks presented in this Annual Report on Form 10-K.

Public health concerns, such as COVID-19, could also result in social, economic and labor instability in the localities in which we or our vendors, sellers, and buyers reside.

Our NFT platform (utilizing Ether, a cryptocurrency generated using the Ethereum protocol) may expose us to legal, regulatory, and other risks.

Given the nascent and evolving nature of cryptocurrencies, NFTs, and our NFT platform, we may be unable to accurately anticipate or adequately address such risks or the potential impact of such risks.

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NFTs are digital assets recorded on a blockchain ledger for verification of authenticity and ownership of a unique digital asset, such as artwork.

Given the increased scrutiny of digital assets as well as cryptocurrencies

for regulatory and anti-money laundering purposes, it is possible that the United States and other jurisdictions will engage in increased scrutiny and regulation of NFTs and our business.

In January 2023, we determined to cease further investment in the NFT platform;

however, previously-minted NFTs remain available for sale.

Given the increased scrutiny of digital assets as well as cryptocurrencies for regulatory and anti-money laundering purposes, it is possible that the United States and other jurisdictions will engage in increased scrutiny and regulation of NFTs and our business.

While NFTs and cryptocurrencies are similar in that both are based on blockchain technology, unlike cryptocurrency units, which are fungible, NFTs have unique identification codes and represent content on the blockchain.

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As NFTs are a relatively new and emerging type of digital asset, the regulatory, commercial, and legal framework governing NFTs (as well as cryptocurrencies) is likely to evolve both in the United States and internationally and implicates issues regarding a range of matters, including, but not limited to, intellectual property rights, privacy and cybersecurity, fraud, anti-money laundering, sanctions, and currency, commodity, and securities law implications.

For example, NFTs raise various intellectual property law considerations, including adequacy and scope of assignment, licensing, transfer, copyright, and other right of use issues.

The creator of an NFT will often have all rights to the content of the NFT and can determine what rights to assign to a buyer, such as the right to display, modify, or copy the content.

To the extent we are directly or indirectly involved in a dispute between creators and buyers on our NFT platform, it could materially and adversely affect the success of our NFT platform and harm our business and reputation.

NFTs, and our NFT platform, may also be an attractive target for cybersecurity attacks.

For example, a perpetrator could seek to obtain the private key associated with a digital wallet holding an NFT to access and sell the NFT without valid authorization, and the owner of the NFT may have limited recourse due to the nature of blockchain transactions and of cybercrimes generally.

NFT marketplaces, including our NFT platform, may also be vulnerable to attacks where an unauthorized party acquires the necessary credentials to access user accounts.

The safeguards we have implemented or may implement in the future to protect against cybersecurity threats may be insufficient.

If our NFT platform were to experience any cyberattacks, it could negatively impact our reputation and market acceptance of our platform.

NFTs, and our NFT platform (including our facilitation of transactions in Ether, a cryptocurrency generated using the Ethereum protocol), may also be subject to regulations of the Financial Crimes Enforcement Network (“FinCEN”) of the U.S.

Department of Treasury and the Bank Secrecy Act.

Further, the Office of Foreign Assets Controls (“OFAC”) has signaled sanctions could apply to digital transactions and has pursued enforcement actions involving cryptocurrencies and digital asset accounts.

The nature of many NFT transactions also involve circumstances which present higher risks for potential violations, such as anonymity, subjective valuation, use of intermediaries, lack of transparency, and decentralization associated with blockchain technology.

In addition, the Commodity Futures Trading Commission has stated that cryptocurrencies, with which NFTs have some similarities, fall within the definition of “commodities.” If NFTs were deemed to be a commodity, NFT transactions could be subject to prohibitions on deceptive and manipulative trading or restrictions on manner of trading (e.g., on a registered derivatives exchange), depending on how the transaction is conducted.

Moreover, if NFTs were deemed to be a “security,” it could raise federal and state securities law implications, including exemption or registration requirements for marketplaces for NFT transactions, sellers of NFTs, and the NFT transactions themselves, as well as liability issues, such as insider trading or material omissions or misstatements, among others.

NFT transactions may also be subject to laws governing virtual currency or money transmission.

For example, New York has legislation regarding the operation of virtual currency businesses.

NFT transactions also raise issues regarding compliance with laws of foreign jurisdictions, many of which present complex compliance issues and may conflict with one another.

Our launch and operation of our NFT platform (including our facilitation of transactions in Ether, a cryptocurrency, in connection therewith) expose us to the foregoing risks, among others, any of which could materially and adversely affect the success of our NFT platform and harm our business, financial condition, results of operations, reputation, and prospects.

As the market for NFTs is relatively nascent, it is difficult to predict how the legal and regulatory framework around NFTs will develop and how such developments will impact our business and our NFT platform.

Further, market acceptance of NFTs is uncertain as buyers may be unfamiliar or uncomfortable with digital assets generally, how to transact in digital assets, or how to assess the value of NFTs.

The launch of our NFT platform also subjects us to risks similar to those associated with any new platform offering, including, but not limited to, our ability to accurately anticipate market demand and acceptance, our ability to successfully launch our new NFT platform offering, creator and buyer acceptance, technical issues with the operation of our new NFT platform, and legal and regulatory risks as discussed above.

We believe these risks may be heightened with respect to our NFT platform, as NFTs are still considered a relatively novel concept.

If we fail to accurately anticipate or manage the risks associated with our NFT platform or with our facilitation of cryptocurrency transactions, or if we directly or indirectly become subject to disputes, liability, or other legal or regulatory issues in connection with our NFT platform or cryptocurrency transactions, our NFT platform may not be successful and our business, financial condition, results of operations, reputation, and prospects could be materially harmed.

See “If we fail to successfully expand the features, services, and offerings on our online marketplace, our ability to grow our business may suffer.”

Our facilitation of transactions in cryptocurrencies such as Ether on our NFT platform exposes us to risks under U.S.

and foreign tax laws.

Although under U.S.

federal tax laws, cryptocurrencies are currently considered property versus currency, we are obligated to report transactions involving cryptocurrencies in U.S.

dollars and must determine their fair market value on each transaction

federal taxing authorities have issued limited guidance on cryptocurrency transactions.

The current guidance treats the use of cryptocurrency to purchase a NFT as a taxable disposition of the cryptocurrency, which subjects the holder to taxable gain that such holder must report for federal and state tax purposes.

Similarly, a seller of a NFT is subject to tax on the sale of the NFT.

Congress is currently proposing legislation that could require us to report such transactions to the IRS.

Our failure to accurately record or report the cryptocurrency and NFT sales transacted through our NFT platform, or held by us, would expose us to adverse tax consequences, penalties, and interest.

Moreover, the IRS, in connection with audits of cryptocurrency exchanges, has successfully sued to obtain account holder transaction and tax information.

The applicability of tax laws in the United States and foreign jurisdictions with respect to cryptocurrency and NFTs will continue to evolve.

This uncertainty increases the risk of non-compliance with tax laws, which in turn could result in adverse tax consequences, penalties, investigations or audits, litigation, account holder lawsuits, or the need to revise or restate our financial statements and associated consequences therewith, among other things.

Any of the foregoing could materially and adversely affect our business, financial condition, results of operations, reputation, and prospects.

If we fail to maintain and promote our brand and reputation, our business, market position, and future growth could suffer.

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As competition for online advertising has increased, the cost for some of these services has also increased.

Our marketing initiatives may become increasingly expensive and generating a return on those initiatives may be difficult.

Our marketing initiatives may become increasingly expensive

and generating a return on those initiatives may be difficult.

Even if we successfully increase revenue as a result of our paid marketing efforts, such increase may not offset the additional marketing expenses we incur.

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For example, in May 2019, we acquired Design Manager, a project management and accounting software company for interior designers.

In June 2022, we sold 100% of our equity interest in Design Manager.

Acquisitions may divert management’s time and focus from operating our business.

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In addition, an acquisition may negatively affect our results of operations and financial condition because it may require us to incur charges or assume substantial debt or other liabilities, may cause adverse tax consequences or unfavorable accounting treatment, may expose us to claims and disputes by third parties, including intellectual property claims and disputes, or may not generate sufficient financial return to offset additional costs and expenses related to the acquisition.

Moreover, we may not benefit from our acquisitions as we expect, or in the time frame we expect.

Moreover, we may not benefit from our acquisitions as we expect, or in the time frame we expect, or we may elect to divest ourselves of prior acquisitions, such as our sale of Design Manager in June 2022.

We also may issue additional equity securities in connection with an acquisition, which could cause dilution to our stockholders.

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We may not succeed in addressing these or other risks, which could harm our business and results of operations.

If we fail to manage our growth effectively, we may be unable to execute our business plan and our business, results of operations, and financial condition could be harmed.

We have experienced rapid growth in our business, such as in the number of sellers and the number of countries in which we have sellers and buyers, and we plan to continue to grow in the future, both in the United States and abroad.

The growth of our business places significant demands on our management team and pressure to expand our operational and financial infrastructure.

If we fail to manage our growth effectively, or if we are unable to execute our business plan and grow our business, our results of operations, and financial condition could be materially and adversely harmed.

We have experienced rapid growth in our business in the past, such as in the number of sellers and the number of countries in which we have sellers and buyers, and we intend to continue to focus on growth, both in the United States and abroad.

The growth of our business, if any, places significant demands on our management team and pressure to expand our operational and financial infrastructure.

As we continue to grow, our operating expenses will increase.

If we do not manage our growth effectively, the increases in our operating expenses could outpace any increases in our revenue and our business could be harmed.

In addition, we have in the past experienced, and may in the future experience, slower growth rates.

For example, our net revenue decreased in the year ended December 31, 2022 as compared to the year ended December 31, 2021.

Although we continue to focus on growth and are evaluating various approaches and alternatives to execute on our business strategies, the outcome of such evaluation or impact of any subsequent actions, if any, is uncertain.

Failure to sustain or increase the growth of our business or to execute our business strategies would likely materially and adversely impact our business, financial condition, and results of operations.

We may require additional capital to support business growth, and we may be unable to obtain additional capital on acceptable terms, if at all, and any additional financing may dilute existing stockholders.

We believe that our existing cash and cash equivalents, together with cash generated from operations, will be enough to meet our anticipated cash needs for at least the next 12 months.

We may require additional capital to grow our business, including the need to develop our online marketplace services, expand across and within product verticals, enhance our operating infrastructure, expand the markets in which we operate, and potentially acquire complementary businesses and

technologies.

Our future capital requirements will depend on many factors, including the emergence of competing online marketplaces and other adverse marketing developments;

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In addition, we may not be able to obtain additional financing on terms favorable to us, if at all.

If we are unable to obtain financing on terms satisfactory to us when we require it, our ability to continue to support our business growth and to respond to business challenges could be significantly limited, and our business and prospects could suffer.

If we are unable

to obtain financing on terms satisfactory to us when we require it, our ability to continue to support our business growth and to respond to business challenges could be significantly limited, and our business and prospects could suffer.

If we fail to attract and retain key personnel on our executive team or to effectively manage leadership succession, our business, financial condition, and results of operations could be adversely impacted.

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Some of our competitors may also be able to develop and grow in international markets more quickly than we will.

Continued expansion in markets outside of the United States will also require significant financial investment.

These investments include marketing to attract and retain new sellers and buyers, developing localized services, forming relationships with third-party service providers, supporting operations in multiple countries, and potentially acquiring companies based outside the United States and integrating those companies with our operations.

We have made substantial investments to expand to markets outside of the United States and continued expansion in markets outside of the United States may require significant additional financial investment.

For example, in the year ended December 31, 2022, we launched localized sites in Germany and France, which may require significant financial investments to maintain.

These investments include marketing to attract and retain new sellers and buyers, developing localized services and web platforms, forming relationships with third-party service providers, supporting operations in multiple countries, and potentially acquiring companies based outside the United States and integrating those companies with our operations.

These expansion efforts may not be successful and as a result, our business, results of operations, financial condition, and brand could suffer.

Doing business in markets outside of the United States also subjects us to increased risks and burdens such as:

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Finally, operating in markets outside of the United States requires significant management attention.

If we invest substantial time and resources to expand our operations outside of the United States and cannot manage these risks effectively, the costs of doing business in those markets may be prohibitive or our expenses may increase disproportionately to the revenue generated in those markets.

If we invest substantial time and resources to expand our operations outside of the United States and cannot manage these risks effectively,

the costs of doing business in those markets may be prohibitive or our expenses may increase disproportionately to the revenue generated in those markets.

We may incur significant losses from fraud, which would harm our results of operations.

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Geopolitical risks, such as those associated with Russia’s recent invasion of Ukraine, could result in increased market volatility and uncertainty, which could negatively impact our business, financial condition, and results of operations.

The uncertain nature, magnitude, and duration of hostilities stemming from Russia’s recent military invasion of Ukraine, including the potential effects of sanctions limitations, retaliatory cyber-attacks on the world economy and markets, and potential shipping delays, have contributed to increased market volatility and uncertainty, which could have an adverse impact on macroeconomic factors that affect our business.

For example, if our shipping carriers are unable to fulfill orders in Russia or Ukraine, as is presently the case, the resultant disruptions to our delivery chain could negatively effect the timely delivery of our other orders, which could adversely affect our business and reputation.

potential shipping delays, have contributed to increased market volatility and uncertainty, which could have an adverse impact on macroeconomic factors that affect our business.

For example, if our shipping carriers are unable to fulfill orders in Russia or Ukraine, as is presently the case, the resultant disruptions to our delivery chain could negatively affect the timely delivery of our other orders, which could adversely affect our business and reputation.

In addition, we rely on our payment processors to understand the destination of our payments to sellers.

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Further, if we or our third-party service providers experience security breaches that result in online marketplace performance or availability problems or the loss or unauthorized disclosure of personal and other sensitive information, people may become unwilling to provide us the information necessary to set up seller and buyer accounts, and we could be subject to third-party lawsuits, regulatory fines, or other action or liability.

Existing sellers and buyers may also decrease their purchases or stop listing new items for sale or close their accounts altogether.

Existing sellers and buyers may also stop listing new items for sale or decrease their purchases or close their accounts altogether.

Further, any reputational damage resulting from breach of our security measures could create distrust of our company by sellers and buyers.

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As laws and regulations evolve to govern the use of these channels, the failure by us, our employees or third parties acting at our direction to comply with applicable laws and regulations in the use of these channels could adversely affect our reputation or subject us to fines or other penalties.

In addition, our employees or third parties acting at our direction may knowingly or inadvertently make use of social media in ways that could lead to the loss or infringement of intellectual property, as well as the public disclosure of proprietary, confidential, or sensitive personal information of our business, employees, consumers, or others.

In addition, our employees or third

parties acting at our direction may knowingly or inadvertently make use of social media in ways that could lead to the loss or infringement of intellectual property, as well as the public disclosure of proprietary, confidential, or sensitive personal information of our business, employees, consumers, or others.

Information concerning us or our sellers and buyers, whether accurate or not, may be posted on social media platforms at any time and may have an adverse impact on our brand, reputation, or business.

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Our efforts to expand the features, services, and offerings on our online marketplace could fail for many reasons, including lack of acceptance by existing or new constituents, our failure to market these features, services, and offerings effectively to new constituents, or negative publicity related to our features, services, and offerings.

Diversifying and expanding our features, services, and offerings involves significant risk, such as encountering software bugs, defects, or errors in connection with the introduction of new or enhanced features of our technology platform.

For example, we recently launched our new NFT platform.

We have no prior experience operating an NFT platform or facilitating cryptocurrency transactions;

our NFT platform may not achieve market acceptance or profitability;

and the technology underlying our NFT platform may not function properly due to errors, security breaches, or issues with third parties with whom we work to make our NFT platform offering available.

In addition, we also intend to introduce additional transaction formats, such as auctions, to provide additional opportunities to optimize price discovery and leverage alternative payment methods.

We may not be able to educate and/or commercialize buyers and sellers about how to use these new purchase formats, which differ from our historical transaction models and may create confusion.

These initiatives may not drive increases in revenue, may require substantial investment and planning, and may bring us more directly into competition with companies that are better established or have greater resources than we do.

It will require additional investment of time and resources in the development and training of our personnel and our sellers and buyers.

For example, we launched 1stDibs Auctions to provide additional opportunities to optimize price discovery and leverage alternative payment methods.

We may not be able to educate and/or commercialize buyers and sellers about how to use this new purchase format, which differs from our historical transaction models and may create confusion.

Our new initiatives may not drive increases in revenue, may require substantial investment and planning, and may bring us more directly into competition with companies that are better established or have greater resources than we do.

They may require additional investment of time and resources in the development and training of our personnel and our sellers and buyers.

Further, our efforts to diversify and expand our features, services, and offerings involve significant technological risk, such as encountering software bugs, defects, or errors in connection with the introduction of new or enhanced features of our technology platform.

If we are unable to cost-effectively expand our features, services, and offerings, then our growth prospects and competitive position may be harmed.

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Any disruption in their services, or any failure of our providers to handle the demands of our online marketplace could significantly harm our business and damage our reputation.

integrations to assure its compatibility with the systems of other third parties following any of their changes to their systems.

Third-party providers also have systems that are constantly evolving, it is difficult to predict the challenges that we may encounter in developing our platform for use in conjunction with such third-party systems, and we may not be able to modify our integrations to assure its compatibility with the systems of other third parties following any of their changes to their systems.

Further, if we experience failures in our technology infrastructure or do not expand our technology infrastructure successfully, then our ability to attract and retain sellers and buyers and our growth prospects and our business would suffer.

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As a result, we could face discriminatory or anti-competitive practices that could impede both our and sellers’ growth prospects, increase our costs and harm our business.

Climate change may have an adverse impact on our business.

Risks related to rapid climate change may have an increasingly adverse impact on our business, our sellers’ businesses, and our buyers in the longer term.

Any of our primary locations and the locations of our buyers and sellers may be vulnerable to the adverse effects of climate change.

For example, our New York headquarters has experienced, and is projected to continue to experience, climate-related events at an increasing frequency, including floods, severe storms, and heat waves.

Furthermore, it is more difficult to mitigate the impact of these events on our employees in light of our flexible work model, which has allowed for a remote and dispersed work environment.

Changing market dynamics, global policy developments, and the increasing frequency and impact of extreme weather events on critical infrastructure in the U.S.

and elsewhere have the potential to disrupt our business and the transactions consummated between our sellers and buyers, which could have a material adverse effect on our financial condition and results of operations.

Risks Related to Regulatory Matters and Litigation

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economic sanction laws.

In relation to certain compliance issues, we have submitted to OFAC an initial notification of voluntary self-disclosure concerning potential violations.

In relation to

certain compliance issues, we have submitted to OFAC an initial notification of voluntary self-disclosure concerning potential violations.

If we fail to comply with these laws and regulations or are found to be in violation of U.S.

sanctions or export control laws, including by facilitating unlawful transactions, we and certain of our employees could be subject to civil or criminal penalties, including the possible loss of export privileges and fines.

We may also be adversely affected through

penalties, reputational harm, loss of access to certain markets, or otherwise.

We may also be adversely affected through penalties, reputational harm, loss of access to certain markets, or otherwise.

Actions to remediate past potential violations may include internal reviews, voluntary self-disclosures, or other measures.

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We primarily rely on copyright and trade secret laws to protect our proprietary technologies, and processes, including the algorithms we use throughout our business.

Others may independently

develop the same or similar technologies and processes, or may improperly acquire and use information about our technologies and processes, which may allow them to provide a service similar to ours, which could harm our competitive position.

Others may independently develop the same or similar technologies and processes, or may improperly acquire and use information about our technologies and processes, which may allow them to provide a service similar to ours, which could harm our competitive position.

Our principal trademark assets include the registered trademark “1stDibs” and our logos and taglines.

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courts and there is a risk that the licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to operate our online marketplace.

If we were to combine or connect our proprietary source code or software with open source software in a certain manner, we could, under certain of the open source licenses, be required to publicly release the source code of our software or to make our software available under

open source licenses.

To avoid the public release of the affected portions of our source code in the event of our inappropriate use of open source software, we could be required to expend substantial time and resources to re-engineer some or all of our software.

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We cannot predict if investors will find our common stock less attractive if we choose to rely on any of the exemptions afforded to emerging growth companies.

If some investors find our common stock less attractive because we rely on any of these exemptions, there may be a less active trading market for our common stock and the market price of our common stock may be more volatile.

We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) in which the fifth anniversary of the completion of our IPO, (b) in which we have total annual gross revenue of at least $1.07 billion or (c) in which we become a large accelerated filer, which means that we have been public for at least 12 months, have filed at least one annual report and the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last day of

our then-most recently completed second fiscal quarter, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.

If some investors find our common stock less attractive because we rely on any of

these exemptions, there may be a less active trading market for our common stock and the market price of our common stock may be more volatile.

We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) in which the fifth anniversary of the completion of our IPO, (b) in which we have total annual gross revenue of at least $1.235 billion or (c) in which we become a large accelerated filer, which means that we have been public for at least 12 months, have filed at least one annual report and the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last day of our then-most recently completed second fiscal quarter, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.

We may not be able to manage our transition effectively or efficiently to a public company.

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Section 404 compliance may divert internal resources and will take a significant amount of time and effort to complete.

We may not be able to successfully complete the procedures and certification and attestation requirements of Section 404 by the time we will be required to do so.

We may not be able to successfully complete the procedures and certification and attestation requirements of Section 404 by the time we will

be required to do so.

Implementing these changes may take a significant amount of time and may require specific compliance training of our personnel.

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We may not be able to effectively and timely implement necessary control changes and employee training to ensure continued compliance with the Sarbanes-Oxley Act and other regulatory and reporting requirements.

If we fail to successfully complete the procedures and certification and attestation requirements of

Section 404, or if in the future our Chief Executive Officer, Chief Financial Officer or independent registered public accounting firm determines that our internal controls over financial reporting are not effective as defined under Section 404, we could be subject to investigations or sanctions by Nasdaq, the SEC, FINRA or other regulatory authorities.

If we fail to successfully complete the procedures and certification and attestation requirements of Section 404, or if in the future our Chief Executive Officer, Chief Financial Officer or independent registered public accounting firm determines that our internal controls over financial reporting are not effective as defined under Section 404, we could be subject to investigations or sanctions by Nasdaq, the SEC, FINRA or other regulatory authorities.

Furthermore, investor perceptions of the company may suffer, and this could cause a decline in the market price of our shares of common stock.

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While we believe that we collect and remit sales taxes in every state that requires sales taxes to be collected, including states where we do not have a physical presence, the adoption of new laws by, or a successful assertion by the taxing authorities of, one or more state or local governments requiring us to collect taxes where we presently do not do so, or to collect more taxes in a jurisdiction in which we currently do collect some taxes, could result in substantial tax liabilities, including taxes on past sales, as well as penalties and interest.

The imposition by state governments and taxing authorities of sales tax collection obligations on out-of-state ecommerce businesses could also create additional administrative burdens for us, put us at a competitive disadvantage if they do not impose similar obligations on our competitors, and decrease our future sales, which could harm our business and results of operations.

The imposition by state governments and taxing authorities of sales tax collection obligations on out-of-state e-commerce businesses could also create additional administrative burdens for us, put us at a competitive disadvantage if they do not impose similar obligations on our competitors, and decrease our future sales, which could harm our business and results of operations.

Our business and our sellers may be subject to sales tax, value-added tax (“VAT”), provincial taxes, goods and services tax, and other taxes.

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If such obligations were imposed, the additional costs associated with tax collection, remittance, and audit requirements could make selling through our online marketplace less attractive and more costly for sellers, which could harm our business.

Our facilitation of transactions in cryptocurrencies such as Ether on our NFT platform exposes us to risks under U.S.

and foreign tax laws.

Although under U.S.

federal tax laws, cryptocurrencies are currently considered property versus currency, we are obligated to report transactions involving cryptocurrencies in U.S.

dollars and must determine their fair market value on each transaction date.

federal taxing authorities have issued limited guidance on cryptocurrency transactions.

Similarly, a seller of a NFT is subject to tax on the sale of the NFT.

Congress is currently proposing legislation that could require us to report such transactions to the IRS.

Our failure to accurately record or report the cryptocurrency and NFT sales transacted through our NFT platform, or held by us, would expose us to adverse tax consequences, penalties, and interest.

Moreover, the IRS, in connection with audits of cryptocurrency exchanges, has successfully sued to obtain account holder transaction and tax information.

The applicability of tax laws in the United States and foreign jurisdictions with respect to cryptocurrency and NFTs will continue to evolve.

Any of the foregoing could materially and adversely affect our business, financial condition, results of operations, reputation, and prospects.

Application of existing tax laws, rules or regulations are subject to interpretation by taxing authorities.

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This focus has contributed to an increase in audit activity and stricter enforcement by taxing authorities.

As such, additional taxes or other assessments may be in excess of our

current tax reserves or may require us to modify our business practices to reduce our exposure to additional taxes going forward, any of which may have a material adverse effect on our business, results of operations, financial condition, and prospects.

As such, additional taxes or other assessments may be in excess of our current tax reserves or may require us to modify our business practices to reduce our exposure to additional taxes going forward, any of which may have a material adverse effect on our business, results of operations, financial condition, and prospects.

We may experience fluctuations in our tax obligations and effective tax rate.

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Amendments to existing tax laws, rules, or regulations or enactment of new unfavorable tax laws, rules, or regulations could have an adverse effect on our business and results of operations.

Many of the underlying laws, rules, and regulations imposing taxes and other obligations were established before the growth of the Internet and ecommerce.

Many of the underlying laws, rules, and regulations imposing taxes and other obligations were established before the growth of the Internet and e-commerce.

federal, state, and local taxing authorities are currently reviewing the appropriate treatment of companies engaged in Internet commerce and considering changes to existing tax or other laws that could levy sales, income, consumption, use, or other taxes relating to our activities, and/or impose obligations on us to collect such taxes.

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federal income tax rules, including the reduction of the generally applicable corporate tax rate from 35% to 21%, the limitation of the tax deduction for net interest expense to 30% of adjusted taxable income (except for certain small businesses), the limitation of the deduction for net operating losses from taxable years beginning after December 31, 2017 to 80% of current year taxable income and the elimination of net operating loss carrybacks generated in taxable years ending after December 31, 2017 (though any such net operating losses may be carried forward indefinitely), and the modification or repeal of many business deductions and credits.

Additionally, the Coronavirus Aid, Relief, and Economic Security Act, which, among other things, suspends the 80% limitation on the deduction for net operating losses in taxable years beginning before January 1, 2021, permits a five-year carryback of net operating losses arising in taxable years beginning after December 31, 2017 and before January 1, 2021, and generally caps the limitation on the deduction for net interest expense at 50% of adjusted taxable income for taxable years beginning in 2019 and 2020.

Additionally, the Coronavirus Aid, Relief, and Economic Security Act, which, among other things, suspends the 80% limitation

on the deduction for net operating losses in taxable years beginning before January 1, 2021, permits a five-year carryback of net operating losses arising in taxable years beginning after December 31, 2017 and before January 1, 2021, and generally caps the limitation on the deduction for net interest expense at 50% of adjusted taxable income for taxable years beginning in 2019 and 2020.

It cannot be predicted whether, when, in what form, or with what effective dates, tax laws, regulations and rulings may be enacted, promulgated or issued, which could result in an increase in our or our stockholders’ tax liability or require changes in the manner in which we operate in order to minimize or mitigate any adverse effects of changes in tax law.

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No additional ownership changes have occurred through the date of the most recent study.

In addition, the Company has started a formal study to update the August 18, 2021 study through December 31, 2021, which has not been completed as of the date of filing this Annual Report on Form 10-K.

In addition, we have started a formal study to update the August 18, 2021 study, which has not been completed as of the date of filing this Annual Report on Form 10-K.

It is possible that we may experience an ownership change as a result of this study.

In the event that we experience an ownership change within the meaning of Sections 382 and 383 of the Code as a result of the December 31, 2021 study or any future transactions in our stock, then we may be limited in our ability to use our NOL carryforwards to offset our future taxable income, if any.

In the event that we experience an ownership change within the meaning of Sections 382 and 383 of the Code as a result of the study or any future transactions in our stock, then we may be limited in our ability to use our NOL carryforwards to offset our future taxable income, if any.

Our reported results of operations may be adversely affected by changes in generally accepted accounting principles.

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Our stock price may be volatile and may decline, resulting in a loss of some or all of your investment.

For example, our common stock has traded both above and below our IPO price.

For example, our common stock has traded both above and below our initial public offering (“IPO”) price.

The trading price and volume of our common stock could fluctuate significantly in response to numerous factors, many of which are beyond our control, including:

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• speculation about our results of operations;

• the financial projections we may provide to the public, any changes in these projections, or our failure to meet these projections;

• the financial projections we may provide to the public, if any, any changes in these projections, or our failure to meet these projections;

• failure of securities analysts to initiate or maintain coverage of us, changes in financial estimates or ratings by any securities analysts who follow us, or our failure to meet these estimates or the expectations of investors;

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• disruptions in our online marketplace due to hardware, software or network problems, security breaches, or other issues;

• the strength of the global economy or the economy in the jurisdictions in which we operate, and market conditions in our industry and those affecting our sellers and buyers;

• global economic conditions or economic conditions in the jurisdictions in which we operate, and market conditions in our industry and those affecting our sellers and buyers;

• trading activity by our principal stockholders and other market participants;

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Such a stock price decline could occur even when we have met any previously publicly stated net revenue or earnings forecasts that we may provide.

Sales of a substantial number of shares of our common stock in the public market, such as when our lock-up restrictions are released, or the perception that sales might occur, could cause the price of our common stock to decline.

Sales of a substantial number of shares of our common stock in the public market, such as the perception that sales might occur, could cause the price of our common stock to decline.

The market price of our common stock could decline as a result of substantial sales of our common stock, particularly sales by our directors, executive officers, and significant stockholders, a large number of shares of our common stock becoming available for sale, or the perception in the market that such sales could occur.

All of the shares of common stock sold in our IPO are freely transferable without restriction or additional registration under the Securities Act of 1933, as amended (the “Securities Act”).

All of our executive officers, directors, and director nominees and the holders of substantially all of our equity were subject to lock-up agreements that restricted the equityholders’ ability to transfer shares of our common stock, subject to certain exceptions, during the period ending 180 days following the date of the prospectus relating to our IPO (the “Restricted Period”), provided, that the Restricted Period would terminate upon the opening of trading on the third trading day immediately following our public release of earnings for the second quarter following the most recent period for which financial statements are included in such prospectus.

The lock-up agreements expired on November 15, 2021.

As these resale restrictions have lapsed, the market price of our common stock could decline if the holders of those shares sell them or are perceived by the market as intending to sell them.

In addition, we have registered all of the shares underlying outstanding options and any shares underlying other equity incentives we may grant in the future for public resale under the Securities Act.

We have registered all of the shares underlying outstanding options and any shares underlying other equity incentives we may grant in the future for public resale under the Securities Act.

Accordingly, these shares will be able to be freely sold in the public market upon issuance to the extent permitted by any applicable vesting requirements.

Sales of stock by these equityholders or the perception that such sales could occur could adversely affect the trading price of our common stock.

Holders of 14,309,085 shares of our common stock as of December 31, 2021 have registration rights.

Registration of these shares under the Securities Act would result in the shares becoming freely tradable without restriction under the Securities Act, except for shares held by our affiliates as defined in Rule 144 under the Securities Act, which are subject to the limitations of Rule 144.

Sales of stock by these equity holders or the perception that such sales could occur could adversely affect the trading price of our common stock.

In addition, the registration of shares with existing registration rights would result in the shares becoming freely tradable without restriction under the Securities Act, except for shares held by our affiliates as defined in Rule 144 under the Securities Act, which are subject to the limitations of Rule 144.

Sales of securities by any of these stockholders or the perception that such sales could occur could adversely affect the trading price of our common stock.

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We also expect to issue common stock to our employees, directors, and other service providers pursuant to our equity incentive plans.

Additionally, as part of our business strategy, we may acquire or make investments in complementary companies, products or technologies and issue equity securities to pay for any such acquisition or investment.

Additionally, as

part of our business strategy, we may acquire or make investments in complementary companies, products or technologies and issue equity securities to pay for any such acquisition or investment.

Any such issuances could be dilutive to investors and could cause the price of our common stock to decline.

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Projections are based upon a number of assumptions and estimates that, while presented with numerical specificity, are inherently subject to significant business, economic, and competitive uncertainties and contingencies, many of which are beyond our control.

The principal reason that we expect to release guidance is to provide a basis for our management to discuss our business outlook with analysts and investors.

With or without our guidance, analysts, and other investors may publish expectations regarding our business,

financial condition, and results of operations.

The principal reason that we may release guidance is to provide a basis for our management to discuss our business outlook with analysts and investors.

With or without our guidance, analysts, and other investors may publish expectations regarding our business, financial condition, and results of operations.

We do not accept any responsibility for any projections or reports published by any such third parties.

Guidance is necessarily speculative in nature, and it can be expected that some or all of the assumptions of the guidance furnished by us will not materialize or will vary significantly from actual results.

If our actual performance does not meet or exceed our guidance or investor expectations, the trading price of our common stock is likely to decline.

Any change in previously released guidance or in our practice of releasing guidance could materially and adversely affect the trading price of our common stock.

Further, if our actual performance does not meet or exceed our guidance or investor expectations, the trading price of our common stock is likely to decline.

If securities analysts or industry analysts do not publish reports about our business, downgrade our common stock, or publish negative research or reports, our stock price and trading volume could decline.

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Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder.

As a result, the enforceability of this provision is uncertain, and a court may determine that such provision will not apply to suits brought to enforce any duty or

liability created by the Securities Act or any other claim for which the federal and state courts have concurrent jurisdiction.

As a result, the enforceability of this provision is uncertain, and a court may determine that such provision will not apply to suits brought to enforce any duty or liability created by the Securities Act or any other claim for which the federal and state courts have concurrent jurisdiction.

Further, compliance with the federal securities laws and the rules and regulations thereunder cannot be waived by investors in our common stock.

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Unresolved Staff Comments

Our corporate headquarters are located in New York, New York, where we currently lease approximately 42,000 square feet under a lease agreement that expires on December 31, 2029.

We believe that our facilities are suitable to meet our current needs and that, if we require additional space, we will be able to obtain additional facilities.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors