What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-03-03 compared with 2022-03-03 · 310 added, 354 removed, 673 unchanged (50% of the section changed)

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generally accepted accounting principles.

Adoption of Accounting Standard Update (ASU) No.

2016-02, Leases (Topic 842)

As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for leases effective January 1, 2022 due to the adoption of Accounting Standards Update (ASU) No.

2016-02, Leases (Topic 842).

Basis for Opinion

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Cash and cash equivalents $ 153,209 $ 168,226

Restricted cash, current 1,500 —

Accounts receivable, net of allowance for doubtful accounts of $ 113 and $ 29 at December 31, 2022 and 2021, respectively

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Total current assets 162,463 175,887

Restricted cash, non-current 3,334 3,333

Property and equipment, net 3,685 4,459

Operating lease right-of-use assets 21,990 —

Goodwill 4,075 7,202

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Total assets $ 195,796 $ 192,254

Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)

Liabilities and Stockholders’ Equity

Current liabilities:

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Accrued expenses 10,761 13,745

Operating lease liabilities, current 2,770 —

Other current liabilities 2,429 3,512

Total current liabilities 26,050 32,211

Operating lease liabilities, non-current 21,678 —

Other liabilities 46 2,605

Total liabilities 47,774 34,816

Commitments and contingencies (Note 19)

Redeemable convertible preferred stock (Series A, B, C, C-1, and D), $ 0.01 par value;

zero and 57,771,864 shares authorized as of December 31, 2021 and 2020, respectively;

zero and 19,243,795 shares issued and outstanding as of December 31, 2021 and 2020, respectively;

and aggregate liquidation preference of zero and $ 301,300 as of December 31, 2021 and 2020, respectively

Stockholders’ equity (deficit):

Stockholders’ equity:

Preferred stock, $ 0.01 par value;

10,000,000 and zero shares authorized as of December 31, 2021 and 2020, respectively;

10,000,000 shares authorized as of December 31, 2022 and 2021;

zero shares issued and outstanding as of December 31, 2022 and 2021

Common stock, $ 0.01 par value;

400,000,000 and 105,767,092 shares authorized as of December 31, 2021 and 2020, respectively;

400,000,000 shares authorized as of December 31, 2022 and 2021;

39,260,193 and 38,000,086 shares issued as of December 31, 2022 and 2021, respectively;

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Accumulated other comprehensive loss ( 356 ) ( 229 )

Total stockholders’ equity (deficit) 157,438 ( 243,946 )

Total liabilities, redeemable convertible preferred stock and stockholders’ equity (deficit) $ 192,254 $ 81,342

Total stockholders’ equity 148,022 157,438

Total liabilities and stockholders’ equity $ 195,796 $ 192,254

See accompanying notes to the consolidated financial statements

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Provision for transaction losses 5,933 5,191 3,820

Gain on sale of Design Manager ( 9,684 ) — —

Total operating expenses 93,056 93,008 69,421

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Net loss before income taxes ( 22,501 ) ( 20,942 ) ( 12,517 )

(Provision for) benefit from income taxes ( 21 ) ( 11 ) 409

Provision for income taxes ( 37 ) ( 21 ) ( 11 )

Net loss ( 22,538 ) ( 20,963 ) ( 12,528 )

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Foreign currency translation adjustment, net of tax of $ 0 for the years ended December 31, 2022, 2021, and 2020

( 127 ) ( 27 ) 43

Comprehensive loss $ ( 22,665 ) $ ( 20,990 ) $ ( 12,485 )

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Redeemable Convertible

Preferred Stock

Common Stock Additional

Accumulated Other

Preferred Stock Common Stock Additional

Capital Accumulated

Deficit Accumulated Other

Comprehensive

Stockholders’ Equity

Stockholders’ Equity (Deficit)

Shares Amount Shares Amount

Balances as of January 1, 2019

13,935,666 $ 193,823 10,604,511 $ 106 $ — $ ( 178,583 ) $ ( 273 ) $ ( 178,750 )

Impact of adoption of ASC 606 — — — — — 882 — 882

Issuance of Series D redeemable convertible preferred stock, net of issuance costs of $ 3,934

5,308,129 75,863 — — — — — —

Balances as of December 31, 2019 19,243,795 $ 283,430 10,864,622 $ 109 $ — $ ( 219,086 ) $ ( 245 ) $ ( 219,222 )

Accretion of redeemable convertible preferred stock to redemption value — 15,095 — ( 2,851 ) ( 12,244 ) — ( 15,095 )

Issuance of common stock as acquisition consideration — — 173,477 2 789 — — 791

Exercise of stock options — — 511,426 5 2,005 — — 2,010

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Balances as of December 31, 2020 19,243,795 $ 298,525 11,376,048 $ 114 $ — $ ( 243,858 ) $ ( 202 ) $ ( 243,946 )

Conversion of redeemable convertible preferred stock to common stock in connection with initial public offering ( 19,243,795 ) $ ( 305,586 ) 19,243,795 192 305,394 — — 305,586

Issuance of common stock in connection with initial public offering, net of issuance costs of $ 14,762

— — 6,612,500 66 117,422 — — 117,488

Accretion of redeemable convertible preferred stock to redemption value — 7,061 — — ( 3,400 ) ( 3,661 ) — ( 7,061 )

Exercise of stock options — — 511,426 5 2,005 — — 2,010

Issuance of common stock for acquisition of Design Manager — — 45,152 1 766 — — 767

Issuance of common stock for exercise of stock options — — 677,569 7 2,722 — — 2,729

Issuance of common stock for cashless exercise of warrants — — 35,665 — — — — —

Vested restricted stock units converted to common shares — — 800 — — — — —

Stock-based compensation — — — — 2,865 — — 2,865

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(Amounts in thousands, except share amounts)

Redeemable Convertible

Preferred Stock Common Stock Additional

Common Stock Additional

Capital Accumulated

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Stockholders’ Equity

Shares Amount Shares Amount

Shares Amount

Balances as of December 31, 2021

37,991,529 $ 380 $ 425,769 $ ( 268,482 ) $ ( 229 ) $ 157,438

Conversion of redeemable convertible preferred stock to common stock in connection with initial public offering ( 19,243,795 ) ( 305,586 ) 19,243,795 192 305,394 — — 305,586

Issuance of common stock in connection with initial public offering, net of issuance costs of $ 14,762

— — 6,612,500 66 117,422 — — 117,488

Accretion of redeemable convertible preferred stock to redemption value — 7,061 — — ( 3,400 ) ( 3,661 ) — ( 7,061 )

Issuance of common stock for acquisition of Design Manager — — 45,152 1 766 — — 767

Issuance of common stock for exercise of stock options 509,694 5 2,030 — — 2,035

Issuance of common stock for cashless exercise of warrants — — 35,665 — — — — —

Vested restricted stock units converted to common shares 758,970 8 ( 8 ) — — —

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Change in fair value of deferred acquisition consideration — 427 134

Provision for transaction losses and eCommerce returns 428 630 1,047

Provision for transaction losses, returns and refunds 781 701 810

Amortization of costs to obtain revenue contracts 310 447 487

Amortization of debt issuance costs — — 334

Amortization of operating lease right-of-use assets 2,541 — —

Deferred rent — ( 194 ) ( 2,837 )

Deferred income taxes — — ( 424 )

Gain on sale of Design Manager ( 9,684 ) — —

Other, net 195 21 ( 11 )

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Accounts receivable ( 497 ) 52 ( 652 )

Prepaid and other current assets ( 1,145 ) 359 ( 2,993 )

Prepaid expenses and other current assets 31 ( 1,418 ) 179

Receivables from payment processors ( 323 ) 910 553

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Payables due to sellers ( 3,041 ) 5,732 1,592

Operating lease liabilities ( 2,735 ) — —

Other current liabilities and other liabilities ( 1,057 ) ( 977 ) ( 95 )

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Purchases of property and equipment ( 93 ) ( 129 ) ( 44 )

Acquisition of Design Manager, net of cash acquired — — ( 2,308 )

Proceeds from sale of Design Manager 14,611 — —

Other, net ( 6 ) ( 30 ) —

Net cash (used in) provided by investing activities ( 2,269 ) 1,286 ( 8,410 )

Net cash provided by (used in) investing activities 12,641 ( 2,269 ) 1,286

Cash flows from financing activities:

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Proceeds from exercise of stock options 2,035 2,729 2,010

Proceeds from the issuance of Series D redeemable convertible preferred stock, net of issuance costs — — 75,863

Payment of deferred acquisition consideration — ( 640 ) —

Repayment of long-term debt — — ( 15,000 )

Payment of deferred offering costs — ( 5,032 ) ( 448 )

Debt refinancing costs — — ( 250 )

Net cash provided by financing activities 2,035 120,050 1,562

Effect of exchange rate changes on cash, cash equivalents, and restricted cash ( 278 ) ( 16 ) ( 14 )

Net increase (decrease) in cash, cash equivalents, and restricted cash 113,364 ( 609 ) 34,194

Net (decrease) increase in cash, cash equivalents, and restricted cash ( 13,516 ) 113,364 ( 609 )

Cash, cash equivalents, and restricted cash at beginning of the period 171,559 58,195 58,804

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Change in deferred offering costs included in accounts payable and accrued expenses — ( 872 ) —

Issuance of common stock as acquisition consideration 767 — 791

Deferred acquisition consideration — — 846

Impact of adoption of ASC 606 — — ( 882 )

Issuance of common stock for Design Manager acquisition — 767 —

See accompanying notes to the consolidated financial statements

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1stdibs.com, Inc.

(“1stDibs” or the “Company”) is one of the world’s leading online marketplaces for connecting design lovers with many of the best sellers and makers of vintage, antique, and contemporary furniture, home décor, jewelry, watches, art, and fashion.

The Company’s thoroughly vetted seller base, in-depth editorial content, and custom-built technology platform create trust in the Company’s brand and facilitate high-consideration purchases of luxury design products online.

(“1stDibs” or the “Company”) is one of the world’s leading online marketplaces for connecting design lovers with many of the best sellers and makers of vintage & antique furniture, contemporary furniture, home décor, jewelry, watches, art, and fashion.

The Company’s thoroughly vetted seller base, in-depth marketing content, and custom-built technology platform create trust in the Company’s brand and facilitate high-consideration purchases of luxury design products online.

By disrupting the way these items are bought and sold, 1stDibs is both expanding access to, and growing the market for, luxury design products.

The Company was incorporated in the state of Delaware on March 10, 2000 and is headquartered in New York, NY with additional offices in Pennsylvania and the United Kingdom.

The Company was incorporated in the state of Delaware on March 10, 2000 and is headquartered in New York, NY.

Basis of Presentation

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(“Design Manager”).

The Company sold its equity interest in Design Manager on June 29, 2022, therefore, the consolidated statements of operations include activity relating to Design Manager through the sale date.

The consolidated balance sheet as of December 31, 2022 no longer includes the assets, liabilities, and equity amounts associated with Design Manager.

See Note 3 “Acquisitions & Disposals” for further details.

All intercompany accounts and transactions have been eliminated in consolidation.

Certain immaterial amounts in the financial statements of the prior years have been reclassified to conform to the current year presentation for comparative purposes.

Summary of Significant Accounting Policies

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Upon the closing of the IPO, all shares of the Company’s outstanding redeemable convertible preferred stock automatically converted into 19,243,795 shares of common stock.

Prior to the IPO, deferred offering costs, which consist of direct incremental legal, accounting, and other third-party fees relating to the IPO, were capitalized in other current assets on the consolidated balance sheets.

Prior to the IPO, deferred offering costs, which consisted of direct incremental legal, accounting, and other third-party fees relating to the IPO, were capitalized in other current assets in the consolidated balance sheets.

Upon completion of the IPO, the $ 5.5 million of deferred offering costs were reclassified into additional paid-in capital and accounted for as a reduction of the IPO proceeds in the consolidated balance sheets.

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The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period.

Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, revenue recognition, provision for transaction losses, accounting for business combinations, determination of useful lives of property and equipment, valuation and useful lives of intangible assets, impairment assessment of goodwill, capitalization of internal-use software and determination of useful lives, valuation of common stock, stock option valuations, income taxes, and the recognition and disclosure of contingent liabilities.

The Company evaluates its estimates and assumptions on an ongoing basis.

Actual results could differ from those estimates and such differences may be material to the consolidated financial statements.

1STDIBS.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

intangible assets, impairment assessment of goodwill, capitalization of internal-use software and determination of useful lives, stock option valuations, the incremental borrowing rate associated with lease liabilities, income taxes, and the recognition and disclosure of contingent liabilities.

The Company evaluates its estimates and assumptions on an ongoing basis.

Actual results could differ from those estimates and such differences may be material to the consolidated financial statements.

Foreign Currency and Currency Translation

The functional currency for the Company’s wholly owned foreign subsidiary, 1stdibs.com, Ltd., is the British pound.

Assets and liabilities of 1stdibs.com, Ltd.

are translated into United States dollars at the exchange rate in effect on the balance sheet date.

The Company has determined that the functional currency for its foreign operation is the currency of the primary cash flow of the operation, which is generally the local currency in which the operation is located.

All assets and liabilities are translated into U.S.

dollars using exchange rates in effect at the balance sheet date.

Income and expenses are translated at the average exchange rate in effect during the period.

Unrealized translation gains and losses are recorded as a translation adjustment, which is included in the consolidated statements of redeemable convertible preferred stock and stockholders’ equity (deficit) as a component of accumulated other comprehensive loss.

Adjustments that arise from exchange rate changes on transactions denominated in a currency other than the local currency are included in foreign exchange gain in total other income, net in the consolidated statements of operations.

Adjustments that arise from exchange rate changes on transactions denominated in a currency other than the local currency are included in foreign exchange gain (loss) in total other, net in the consolidated statements of operations.

Segment Information

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The Company’s chief executive officer, who is the chief operating decision maker, reviews financial information on a consolidated basis for purposes of evaluating financial performance and allocating resources.

The Company’s single reportable and operating segment contains two reporting units:

1stDibs, which consists of the Company’s online marketplace that enables commerce between sellers and buyers;

and Design Manager, which is the Company’s separate online platform that is used to sell a software solution to interior designers.

The Company’s single reportable and operating segment contains one reporting unit, which consists of the Company’s online marketplace that enables commerce between sellers and buyers.

Business Combinations

The Company has made acquisitions in the past and may continue to make acquisitions in the future.

In determining whether an acquisition should be accounted for as a business combination or asset acquisition, the Company first determines whether or not substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets.

If this is the case, the single identifiable asset or the group of similar assets is not deemed to be a business and is instead deemed to be an asset.

If this is not the case, the Company then further evaluates whether the single identifiable asset or group of similar identifiable assets and activities includes, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs.

If so, the Company concludes that the single identifiable asset or group of similar identifiable assets and activities is a business.

The Company made one acquisition during the year ended December 31, 2019, which was considered a business acquisition.

The Company accounts for business combinations using the acquisition method of accounting.

Application of this method of accounting requires that (i) identifiable assets acquired (including identifiable intangible assets) and liabilities assumed generally be measured and recognized at fair value as of the acquisition date, and (ii) the excess of the purchase price over the net fair value of identifiable assets acquired and liabilities assumed be recognized as goodwill, which is not amortized for accounting purposes but is subject to testing for impairment at least annually.

Transaction costs related to business combinations are expensed as incurred.

Long-lived assets, primarily consisting of goodwill and other intangible assets, represent the largest components of the Company’s acquisitions.

The intangible assets that the Company has acquired include customer relationships, developed and acquired technology, trade names and associated trademarks.

The intangible assets are valued using an income approach based on projected cash flows or a replacement cost approach.

The estimated fair values of these intangible assets reflect various assumptions including discount rates, revenue growth rates, operating margins, terminal values, useful lives, and other prospective financial information.

Determining the fair values of the assets and liabilities acquired is judgmental in nature and can involve the use of significant estimates and assumptions.

The judgments made in determining the estimated fair values assigned to the assets acquired, as well as the estimated life of the assets, can materially impact net income in periods subsequent to the acquisition through depreciation and amortization, and in certain instances through impairment charges, if the asset becomes impaired in the future.

When the Company makes an acquisition, it also acquires other assets and assumes liabilities.

These other assets and liabilities typically include but are not limited to, accounts receivable, accounts payable, and other working capital items.

Because of their short-term nature, the fair values of these other assets and liabilities generally approximate the book values on the acquired entities’ balance sheets.

During the measurement period, which extends no later than one year from the acquisition date, the Company may record certain adjustments to the carrying value of the assets acquired and liabilities assumed with the corresponding offset to goodwill.

After the measurement period, all adjustments are recorded in the consolidated statements of operations and consolidated statements of comprehensive loss as operating gains or losses.

1STDIBS.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company measures the tangible and intangible identifiable assets acquired, liabilities assumed, any non-controlling interest in the acquiree, and contingent consideration at fair value as of the acquisition date.

Any excess purchase price over the fair value of net assets acquired is recorded as goodwill.

Measurement period adjustments, if any, to the preliminary estimated fair value of the intangibles assets as of the acquisition date are recorded in goodwill.

The results of businesses acquired in a business combination are included in the Company’s consolidated financial statements from the date of acquisition.

Acquisition-related expenses represent expenses incurred by the Company to effect a business combination, including expenses such as finder’s fees and advisory, legal, accounting, valuation, and other professional or consulting fees, and are not included as a component of consideration transferred, but are accounted for as an expense in the period in which the costs are incurred or the services are rendered.

Concentrations of Credit Risk

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The Company has not experienced any credit losses related to its cash and cash equivalents balance.

As of December 31, 2021 and 2020, the Company had no single customer that represented more than 10% of the Company’s net revenue.

The Company’s concentration of credit risk with respect to revenue is limited due to its diverse and geographically dispersed customer base.

As of December 31, 2022 and 2021, the Company had no single customer that represented more than 10% of its net revenue.

Cash, Cash Equivalents, and Restricted Cash

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Cash and cash equivalents $ 153,209 $ 168,226 $ 54,862

Restricted cash 3,333 3,333 3,334

Restricted cash, current 1,500 — —

Restricted cash, non-current 3,334 3,333 3,333

Total cash, cash equivalents and restricted cash $ 158,043 $ 171,559 $ 58,195

The Company considers all short-term, highly liquid investments purchased with an original maturity of three months or less at the date of purchase to be cash equivalents.

The Company’s restricted cash relates to a Letter of Credit for its office lease in New York, New York and is included in other assets in the Company’s consolidated balance sheets.

The Company’s restricted cash relates to a $ 3.3 million letter of credit for its

1STDIBS.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

office lease in New York, New York, as well as $ 1.5 million which is held in a joint escrow account for 12 months from the date of the sale of Design Manager.

The carrying value of the restricted cash approximates fair value.

Debt Issuance Costs

Debt issuance costs associated with the Company’s long-term debt agreements are recorded as a reduction of the carrying value of the long-term debt on the Company’s consolidated balance sheets and are amortized to interest expense over the term of the respective debt agreement using the effective interest method.

During February 2019, the Company repaid all amounts associated with its long-term debt and amortized all remaining debt issuance costs upon repayment of its long-term debt (See Note 13).

Deferred Offering Costs

The Company capitalizes certain legal, accounting, and other third-party fees that are directly related to the Company’s in-process equity financings, including the Company’s IPO, until such financings are consummated.

After consummation of the equity financing, these costs are recorded as a reduction of the proceeds received as a result of the offering.

Should a planned equity financing be abandoned, terminated or significantly delayed, the deferred offering costs are immediately written off to operating expenses in the Company’s consolidated statements of operations and consolidated statements of comprehensive loss.

As of December 31, 2021, there were no deferred offering costs included in the Company’s consolidated balance sheets.

As of December 31, 2020, the Company had deferred offering costs of $ 1.3 million, which are included in other current assets in the Company’s consolidated balance sheets.

Accounts Receivable, net

The Company’s accounts receivable are customer obligations that are unconditional and are recorded at the amounts billed to customers.

Accounts receivable are presented net of an estimated allowance for doubtful accounts for amounts that may not be collectible on the Company’s consolidated balance sheets.

The Company’s accounts receivable are recorded at amounts billed to sellers, generally for subscription revenue, and are presented net of an estimated allowance for doubtful accounts on the Company’s consolidated balance sheets.

The Company’s accounts receivable do not bear interest and do not require collateral or other security to support related receivables.

The Company establishes an allowance for doubtful accounts as losses are estimated to have occurred through a provision for bad debt.

Losses are charged against the allowance when management believes the un-collectability of a receivable is confirmed.

Subsequent recoveries, if any, are credited to the allowance.

The allowance for doubtful accounts is evaluated on a regular basis by management and is based on past collection history and management’s evaluation of accounts receivable.

The allowance for doubtful accounts are estimated based on a number of factors, including age of the receivable, historical losses, and management’s assessment of the financial condition of sellers.

The evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available.

Losses are charged against the allowance when management believes the un-collectability of a receivable is confirmed and subsequent recoveries, if any, are credited to the allowance.

Account balances are written off after all means of collection are exhausted and the potential for non-recovery is determined to be probable.

Adjustments to the allowance for doubtful accounts are recorded as a component of provision for transaction losses in the consolidated statements of operations.

1STDIBS.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Receivables from Payment Processors and Payables Due to Sellers

Receivables from payment processors represent amounts received from buyers via third-party payment processors, including credit card, PayPal, ApplePay, and ACH payments, which will be deposited by the payment processors to 1stDibs’ bank accounts for payment to sellers and shipping carriers.

Receivables from payment processors represent amounts received from buyers via third-party payment processors which will be deposited by the payment processors to 1stDibs’ bank accounts for payment to sellers and shipping carriers.

The Company also collects sales tax from buyers on behalf of sellers in certain jurisdictions as a marketplace facilitator and remits these collected taxes directly to the tax authorities.

The portion of the cash and related receivable remaining after deducting the Company’s commission and processing fees represents the total payables due to third parties, which consists of payables due to sellers, payables due to shipping carriers in instances where 1stDibs’ shipping services are elected by sellers, and payables due to tax authorities.

The Company establishes an allowance for seller refunds for amounts that sellers owe the Company after a return is processed.

The allowance for seller refunds was $ 0.3 million and $ 0.2 million at December 31, 2022 and 2021, respectively and included in other current assets on the Company’s consolidated balance sheets.

Property and Equipment, net

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The Company also capitalizes costs related to specific upgrades and enhancements when it is probable the expenditures will result in additional functionality.

Once the project is available for general release, capitalization ceases, and the asset can begin being amortized.

Once the project is available for general release, capitalization ceases, and asset amortization begins.

Capitalized costs associated with internal-use software are amortized on a straight-line basis over their estimated useful life, which is generally three years , and are included in cost of revenue in the consolidated statements of operations.

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Costs of repairs and maintenance are expensed as incurred.

When events occur or changes in circumstances require, the Company assesses the likelihood of recovering the cost of tangible long-lived assets based on its expectations of future profitability, undiscounted cash flows, and management’s plans with respect to operations to determine if the asset is impaired and subject to write-off.

Measurement of any impairment loss is

1STDIBS.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

based on the excess of the carrying value of the asset over the fair value.

For the years ended December 31, 2022, 2021 and 2020, there were no impairment losses recorded.

Goodwill represents the excess of cost over the fair value of the net tangible and identifiable intangible assets acquired in a business combination.

Goodwill is not amortized but is tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset may be impaired.

The Company’s goodwill impairment test is performed at the reporting unit level, based on the Company having two reporting units, 1stDibs and Design Manager.

The Company’s goodwill impairment analysis first assesses qualitative factors to determine whether events or circumstances exist that would lead the Company to conclude it is more likely than not that the fair value of the reporting unit is below its carrying amount.

Such qualitative factors include industry and market considerations, economic conditions, entity-specific financial performance, and other events such as changes in management, strategy, and primary customer base.

If the Company determines that it is more likely than not that the fair value of the reporting unit is below the carrying amount, a quantitative goodwill assessment is required.

In the quantitative evaluation, the fair value of the reporting unit is determined and compared to the carrying value.

If the fair value is greater than the carrying value, then the goodwill is deemed not to be impaired and no further action is required.

If the fair value is less than the carrying value, goodwill is considered impaired and a charge is reported as impairment of goodwill in the consolidated statements of operations.

Based on the Company’s assessment, there were no impairment losses recorded during the years ended December 31, 2021, 2020 and 2019.

The Company’s goodwill is evaluated at the entity level as it is determined there is one reporting unit, 1stDibs.

Prior to the sale of Design Manager in June 2022, the Company’s goodwill was evaluated at the reporting unit level, based on the Company having two reporting units, 1stDibs and Design Manager.

The Company performs its annual goodwill impairment test as of October 1st or more frequently if events or changes in circumstances indicate that the goodwill may be impaired.

The Company has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of the reporting unit is less than its carrying amount.

If the Company determines it is not more likely than not that the fair value of the reporting unit is less than its carrying amount, then additional impairment testing is not required.

However, if the Company concludes otherwise, then it is required to perform a quantitative assessment for impairment.

The quantitative assessment involves comparing the estimated fair value of the reporting unit with its respective book value, including goodwill.

If the estimated fair value exceeds book value, goodwill is not impaired.

If the book value of the reporting unit exceeds the fair value, an impairment loss is recognized in an amount equal to the excess, not to exceed the total amount of goodwill allocated to that reporting unit.

Based on the Company’s assessments, there were no impairment losses recorded during the years ended December 31, 2022, 2021 and 2020.

Intangible Assets

The Company’s intangible assets include customer relationships, trade names and associated trademarks, acquired and developed technology, and other intangibles such as patents and non-compete agreements obtained through business acquisitions.

Intangible assets acquired in a business combination are recognized at fair value using generally accepted

1STDIBS.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

valuation methods deemed appropriate for the type of intangible asset acquired, and reported net of accumulated amortization, separately from goodwill.

Intangible assets are amortized over their estimated useful lives.

Intangible assets are amortized on a straight-line basis as presented below:

The Company’s intangible assets included customer relationships, trade names and associated trademarks, acquired and developed technology, and other intangibles such as patents and non-compete agreements obtained through business acquisitions.

Intangible assets acquired in a business combination are recognized at fair value using generally accepted valuation methods deemed appropriate for the type of intangible asset acquired, and reported net of accumulated amortization, separately from goodwill.

Intangible assets are amortized on a straight-line basis over their estimated useful lives as presented below:

Asset Estimated Useful Life

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Other 3 years

Impairment of Long-Lived Assets

The Company reviews the carrying value of its long-lived assets for impairment whenever events and circumstances indicate the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition.

In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of assets.

The factors considered by management in performing this assessment include current operating results, trends and prospects and the effects of obsolescence, demand, competition, and other economic factors.

When events or changes in circumstances indicate the carrying amount may not be recoverable, the Company reviews the assets for impairment.

The Company measures recoverability by comparing the carrying amounts to the future undiscounted cash flows that the assets or asset groups are expected to generate.

If the carrying value of the assets are not recoverable, the impairment recognized is measured as the amount by which the carrying value of the asset exceeds its fair value.

For the years ended December 31, 2022, 2021 and 2020, there were no impairment losses recorded.

During the year ended December 31, 2022, substantially all of the intangible assets, net were included in the sale of Design Manager;

therefore, as of December 31, 2022, there are no intangible assets, net subject to amortization on the Company’s consolidated balance sheet.

Effective January 1, 2022, the Company adopted ASU 2016-02, utilizing the modified retrospective adoption approach.

The Company enters into contracts in the normal course of business and assesses whether any such contracts contain a lease.

The Company determines if an arrangement is a lease at inception if it conveys the right to control the identified asset for a period of time in exchange for consideration.

The Company classifies leases as operating or financing in nature, and records the associated right-of-use asset and lease liability on its consolidated balance sheet.

The lease liability represents the present value

1STDIBS.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

of future lease payments, net of lease incentives, discounted using an incremental borrowing rate, which is a management estimate based on the information available at the commencement date of a lease arrangement.

Lease expense is recognized as a single lease cost on a straight-line basis over the lease term.

The lease term consists of non-cancelable periods and may include options, including those to extend or terminate, if it is reasonably certain they will be exercised.

The Company accounts for lease and non-lease components related to operating leases as a single lease component.

The Company has elected that costs associated with leases having an initial term of 12 months or less ("short-term leases") are recognized in the consolidated statement of operations on a straight-line basis over the lease term and are not recorded on the balance sheet.

Variable lease expense is recognized as incurred and consists primarily of real estate taxes, utilities, and other office space related expenses.

Prior to adoption, during the fiscal years ended December 31, 2021 and prior, the Company accounted for leases under ASC 840, whereby rent expense associated with operating leases was recognized on a straight-line basis over the lease term.

Contingencies

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If the reasonable estimate of the loss is a range and no amount within the range is a better estimate, the minimum amount of the range is recorded as a liability on the Company’s consolidated balance sheets.

The Company does not accrue for contingent losses that, in its judgement, are considered to be reasonably possible, but not probable;

however, it discloses the range of reasonably possible losses.

The Company does not accrue for contingent losses that, in its judgment, are considered to be reasonably possible, but not probable.

Fair Value of Financial Instruments

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• Level 3—Unobservable inputs that are supported by little or no market activity that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies, and similar techniques.

The carrying values of cash and cash equivalents, accounts receivable, net, prepaid expenses, receivables from payment processors, accounts payable, payables due to sellers, accrued expenses, and other current liabilities approximate their fair values due to the short-term nature of these assets and liabilities.

As of December 31, 2020, the Company’s deferred acquisition consideration in connection with its Design Manager acquisition (see Note 3) was carried at fair value, determined according to Level 3 inputs in the fair value hierarchy described above.

The fair value of the deferred acquisition consideration was determined by considering as an input the fair value per share of the Company’s common stock which was determined through a third-party valuation.

As of December 31, 2021, the shares of common stock were issued and no deferred acquisition consideration remained on the Company’s consolidated balance sheet.

The carrying values of cash and cash equivalents, restricted cash, accounts receivable, net, prepaid expenses, receivables from payment processors, accounts payable, payables due to sellers, accrued expenses, and other current liabilities approximate their fair values due to the short-term nature of these assets and liabilities.

There were no transfers between Level 1, Level 2 or Level 3 during the years ended December 31, 2022 and 2021.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Income taxes are computed using the asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company’s consolidated financial statements.

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These provisions provide a comprehensive model for the recognition, measurement, and disclosure in the financial statements of uncertain income tax positions that a company has taken or expects to take on a tax return.

Under these provisions, a company can recognize the benefit of an income tax position only if it is more likely than not (greater than 50%) that the tax position will be sustained upon tax examination, based solely on the technical merits of the tax position.

Under these provisions, a company can recognize the benefit of an income tax position only if it is more

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

likely than not (greater than 50%) that the tax position will be sustained upon tax examination, based solely on the technical merits of the tax position.

Otherwise, no benefit can be recognized.

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Basic net loss per share attributable to common stockholders is computed by dividing the net loss attributable to common stockholders by the weighted average number of common shares outstanding for the period without consideration of potentially dilutive common stock.

Diluted net loss attributable to common stockholders is computed by adjusting net loss attributable to common stockholders to reallocate undistributed earnings based on the potential impact of dilutive securities.

Diluted net loss per share attributable to common stockholders is computed by dividing the diluted net loss attributable to common stockholders by the weighted average number of common shares outstanding for the period, including potential dilutive common shares.

For purpose of this calculation, outstanding stock options, redeemable convertible preferred stock, and warrants to purchase shares of common stock, are considered potential dilutive common shares.

For periods in which the Company reports net losses, diluted net loss per common share attributable to common stockholders is the same as basic net loss per common share attributable to common stockholders because potentially dilutive shares of common stock are not assumed to have been issued since their effect is anti-dilutive.

Revenue Recognition

The Company generates revenue primarily from the Company’s seller marketplace services as well as other optional services sold to sellers including advertisements, and software services sold to interior designers.

The Company’s net revenue consists principally of seller marketplace services, advertisements, and prior to the sale of Design Manager, software services.

Seller marketplace services primarily consist of marketplace transactions, subscriptions, and listing fees.

Revenue is recognized as the Company transfers control of promised goods or services to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.

The Company evaluates whether it is appropriate to recognize revenue on a gross or net basis based upon its evaluation of whether the Company obtains control of the specified goods or services by considering if it is primarily responsible for fulfillment of the promise, has inventory risk, has the latitude in establishing pricing and selecting suppliers, among other factors.

Seller Marketplace Services (Subscriptions, Listings and Marketplace Transactions)

The Company sells subscriptions to access the 1stDibs online marketplace, which allow sellers to promote and list items to be sold to buyers and execute successful purchase transactions with buyers.

Through the subscription the sellers receive the

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

benefit of marketplace activities, including listing items for sale, completing sales transactions, and payments processing, which represents a single stand-ready performance obligation.

The Company has determined that its customers are sellers on its online marketplace since sellers pay for the use of the platform to sell their inventory.

The Company offers sellers annual subscriptions that are payable on a monthly basis.

If during the annual subscription period a seller ceases to make its monthly payment, the Company is no longer obligated to provide the subscribed services and the seller can be terminated at the Company’s sole discretion.

The Company earns listing fees from sellers who are subscribed to its online marketplace on a per item basis as directed by the seller to promote certain items at the seller’s discretion.

The Company does not have any remaining performance obligations associated with contracts with terms greater than one year.

Seller Marketplace Services (Marketplace Transactions, Subscriptions, and Listings)

The Company charges sellers commission and processing fees for successful purchases through its online marketplace.

For the items purchased through the 1stDibs online marketplace, the Company collects the gross merchandise value from the buyer, but the Company recognizes the associated revenue on a net basis, which equates to the commission and processing fees earned in exchange for the seller marketplace services.

The commission fees range from 5 % to 50 % and processing fees are 3 %, net of expected refunds.

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The Company records discounts provided to the end buyer, to whom the Company has no performance obligation, such as promotional discounts, in sales and marketing expense since the discounts are not related directly to the Company’s revenue source but rather used as a marketing tool, and the seller is not made aware of the discounts provided to the end buyer.

For the items purchased through the 1stDibs marketplace, the Company collects the gross merchandise value from the buyer, but the Company recognizes the associated revenue on a net basis, which equates to the commission and processing fees earned in exchange for the seller marketplace services.

The commission and processing fees are recognized net of estimated refunds when the corresponding transaction is confirmed by the buyer and seller.

The Company does not take title to inventory sold or assume risk of loss at any point in time during the transaction and is authorized to collect consideration from the buyer and remit net consideration to the seller to facilitate the processing of the confirmed purchase transaction.

The subscription fee is recognized monthly, the commission and processing fees are recognized net of estimated refunds when the corresponding transaction is confirmed by the buyer and seller, and listing fees are recognized ratably over time when the listing is publicly posted.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In January 2022, the Company launched new seller pricing tiers which allow sellers to choose the plan that best fits their business and includes choices of a higher monthly subscription fee and lower commission rates, as well as a subscription-free tier with higher commission rates.

Depending on the tier chosen, sellers may pay annual subscription fees to access our online marketplace.

The Company sells subscriptions to access the 1stDibs online marketplace, which allow sellers to promote and list items to be sold to buyers and execute successful purchase transactions with buyers for lower commission rates.

Through the subscription, the sellers receive the benefit of marketplace activities for lower commission rates, including listing items for sale, completing sales transactions, and payments processing, which represents a single stand-ready performance obligation.

The Company has determined that its customers are sellers on its online marketplace since sellers pay for the use of the platform to sell their inventory.

The Company offers sellers annual subscriptions that are payable on a monthly basis and the subscription fee is recognized monthly.

The Company earns listing fees from sellers who are subscribed to its online marketplace on a per item basis as directed by the seller to promote certain items at the seller’s discretion.

Listing fees are recognized ratably over time when the listing is publicly posted.

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Software Services

Through the Company’s subsidiary, Design Manager, the Company offers subscriptions to access software typically used by interior designers.

Subscriptions do not provide customers with the right to take possession of the software supporting the applications and, as a result, are accounted for as service contracts.

The Company offers both monthly and annual subscriptions.

For software services, the Company offers subscriptions to customers that are tailored to design firms as an end-to-end business solution for project management and accounting and enters into agreements with the customers through their acceptance of online terms of service, which specifies the terms of services and fees, prior to the customers receiving access to the software platform.

Through the Company’s former subsidiary, Design Manager, the Company offered subscriptions to access software typically used by interior designers.

Subscriptions did not provide customers with the right to take possession of the software supporting the applications and, as a result, were accounted for as service contracts.

The Company offered both monthly and annual subscriptions.

For software services, the Company offered subscriptions to customers that were tailored to design firms as an end-to-end business solution for project management and accounting and entered into agreements with the customers through their acceptance of online terms of service, which specified the terms of services and fees, prior to the customers receiving access to the software platform.

On June 29, 2022, the Company sold Design Manager and no revenue related to software services has been recognized since the sale date.

Contract Costs

The Company capitalizes commission costs that are incremental and directly related to the acquisition of seller agreements.

Commissions are earned by the Company’s sales force when the seller’s listings are publicly visible and available for purchase on the 1stDibs marketplace.

Commissions are earned by the Company’s sales force when the seller’s listings are publicly visible and available for purchase on the 1stDibs online marketplace.

Commission costs are capitalized when earned and are amortized as expense over an estimated seller relationship period of three years .

The Company determined the estimated seller relationship period by taking into consideration the contractual term of the seller agreements, the seller’s lifetime expected value, and the fact that no additional commission is paid for renewed seller agreements.

As of December 31, 2021 and 2020, the Company recorded $ 0.5 million and $ 0.6 million, respectively, of costs to obtain revenue contracts in the Company’s consolidated balance sheets.

As of December 31, 2022, the Company recorded, $ 0.5 million of costs to obtain revenue contracts of which $ 0.3 million was included in other current assets, and $ 0.2 million was included in other assets.

As of December 31, 2021, the Company recorded $ 0.5 million of costs to obtain revenue contracts of which $ 0.3 million was included in other current assets, and $ 0.2 million was included in other assets.

Amortization of costs to obtain revenue contracts totaled $ 0.3 million, $ 0.4 million, and $ 0.5 million for the years ended December 31, 2022, 2021, and 2020, respectively, and are included in sales and marketing in the Company’s consolidated statements of operations.

The Company periodically reviews the costs to obtain revenue contracts to determine whether events or changes in circumstances have occurred that could impact the period of benefit of these costs to obtain revenue contracts.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Contract Balances from Contracts with Customers

A contract liability is an obligation to transfer goods or services for which consideration has been received or is due to a customer.

Contract liabilities consist of deferred revenue that is unearned related to Design Manager software subscription fees charged to the Company’s customers, and to a lesser extent, setup fees charged to new sellers at the inception of service and advertising fees charged to advertisers for which advertisements have not been delivered.

Deferred revenue for setup fees is recognized as revenue over the expected life of the seller relationship.

Contract liabilities consist of deferred revenue that is unearned related to setup fees charged to new sellers at the inception of service and advertising fees charged to advertisers for which advertisements have not been delivered.

Prior to the sale of Design Manager deferred revenue also included software subscription fees.

Deferred revenue for setup fees is recognized as revenue over the expected life of the seller relationship, which the Company determined to be three years .

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Deferred revenue for software and advertising fees is recognized as revenue in the periods in which services are provided.

As of December 31, 2022 and 2021, deferred revenue was $ 0.2 million and $ 0.9 million, respectively.

The current portion of deferred revenue was $ 0.1 million and $ 0.8 million as of December 31, 2022 and 2021, respectively, and are included in other current liabilities in the Company’s consolidated balance sheets.

The non-current portion of deferred revenue was $ 0.1 million as of both December 31, 2021 and 2020, and are included in other liabilities in the Company’s consolidated balance sheets (see Note 4).

The non-current portion of deferred revenue was less than $ 0.1 million and $ 0.1 million as of December 31, 2022 and 2021, and are included in other liabilities in the Company’s consolidated balance sheets, respectively.

Cost of Revenue

Cost of revenue includes payment processor fees, hosting expenses, and resold software usage and services.

Cost of revenue also includes expenses associated with payroll, employee benefits, stock-based compensation, consulting costs, amortization of internal-use software, and other headcount-related expenses associated with operations personnel supporting revenue-related operations.

A portion of rent, related facilities and maintenance costs, and depreciation of property and equipment related to a gallery space used by the Company is also allocated to cost of revenue.

A Surrender Agreement for the gallery lease was entered into in December 2019.

In certain transactions where 1stDibs shipping services are elected by sellers, the Company facilitates shipping of items purchased from the seller to the buyer.

The difference between the amount collected for shipping and the amount charged by the shipping carrier is included in cost of revenue in the consolidated statements of operations.

No resold software usage and services expense has been recognized after the sale of Design Manager.

Cost of revenue also includes expenses associated with payroll, employee benefits, stock-based compensation, other headcount-related expenses associated with personnel supporting revenue-related operations, amortization of internal-use software, and consulting costs.

In certain transactions where 1stDibs shipping and logistics services are elected by sellers, the Company enables shipping of items purchased from the seller to the buyer.

Any difference between the amount collected for shipping and the amount charged by the shipping carrier is included in cost of revenue in the consolidated statements of operations.

Sales and Marketing

Sales and marketing expenses include advertising expense, payroll, employee benefits, stock-based compensation, consulting costs, rent and related facilities and maintenance costs related to a gallery space used by the Company, depreciation of property and equipment related to the gallery, promotional discounts offered to new and existing buyers, incentives offered to select buyers who reach a certain purchase amount threshold, and other headcount-related expenses associated with sales and marketing personnel.

Advertising expenses consist primarily of costs incurred promoting and marketing the Company’s services, such as costs associated with acquiring new users through performance-based marketing, print advertising, email, and events.

Sales and marketing expenses include payroll, employee benefits, stock-based compensation, other headcount-related expenses associated with sales and marketing personnel, advertising expense, consulting costs, and promotional discounts offered to new and existing buyers.

Advertising expenses consist primarily of costs incurred promoting and marketing the Company’s online marketplace, such as costs associated with acquiring new users through performance-based marketing, social media, email, and events.

Promotional discounts and incentives represent incentives solely to end buyers and, therefore, are not considered payments made to the Company’s customers.

Buyers are not customers because access to the 1stDibs marketplace is free for buyers and the Company has no performance obligations with respect to buyers.

Buyers are not customers because access to the 1stDibs online marketplace is free for buyers and the Company has no performance obligations with respect to buyers.

The Company expenses all advertising expenses as incurred.

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Expenses that meet the criteria for capitalization as internal-use software are capitalized to property and equipment, net on the consolidated balance sheets and amortized over their useful life.

This amortization expense is included in cost of revenue in the consolidated statements of operations.

This amortization expense related to internal-use software is included in cost of revenue in the consolidated statements of operations.

General and Administrative

General and administrative expenses include payroll, employee benefits, stock-based compensation, rent and related facilities and maintenance costs, other headcount-related expenses associated with finance, facility and human resources related personnel, depreciation and amortization of property and equipment, business liability insurance, and legal, accounting, and professional fees.

General and administrative expenses include payroll, employee benefits, stock-based compensation, other headcount-related expenses associated with finance, legal, facility and human resources related personnel, lease expense, business liability insurance, accounting, professional fees, and depreciation and amortization of property and equipment.

The Company expenses all general and administrative expenses as incurred.

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The provision for transaction losses also includes bad debt expense associated with the Company’s accounts receivable.

Restructuring Charges

In September 2022, the Company announced and implemented a restructuring plan to reduce operational costs and realign investment priorities involving the reduction of approximately 10 % of the Company’s workforce.

As a result of the reduction, the Company incurred approximately $ 0.7 million in non-recurring restructuring charges, consisting primarily of employee severance and benefits costs.

As of December 31, 2022, the restructuring plan was completed and no additional significant

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

amounts are expected to be recognized.

The following table displays a rollforward of the charges to the accrued balance as of December 31, 2022.

(in thousands) Restructuring Charges

Balance, December 31, 2021 $ —

Restructuring charges 660

Cash payments ( 596 )

Balance, December 31, 2022 $ 64

The expense is included within the respective financial statement line items on the consolidated statement of operations as shown in the table below for the year ended December 31, 2022.

(in thousands) Year Ended December 31, 2022

Cost of revenue $ 58

Sales and marketing 333

Technology development 201

General and administrative 68

Stock-Based Compensation

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The fair value of restricted stock units are estimated on the date of grant based on the fair value of the Company’s common stock.

The fair value of common stock underlying options has historically been determined by the Company’s board of directors, with input from management, and considering third-party valuations of the Company’s common stock.

Because there had been no public market for the Company’s common stock, the board of directors has determined its fair value at the time of grant of the option by considering a number of objective and subjective factors, including financing investment rounds, operating and financial performance, the lack of liquidity of share capital, and general and industry specific economic outlook, among other factors.

Subsequent to the Company’s IPO, the fair value of the underlying common stock is the Company’s closing stock price as reported on the Nasdaq.

The Company classifies stock-based compensation expense in its consolidated statements of operations in the same manner in which the award recipient’s payroll costs are classified or in which the award recipient’s service payments are classified.

Classification and Accretion of Redeemable Convertible Preferred Shares

The Company has classified the redeemable convertible preferred stock outside of stockholders’ equity (deficit) in temporary equity in the Company’s consolidated balance sheets due to the shares containing certain redemption features that are not solely within the control of the Company.

The carrying values of the redeemable convertible preferred shares are accreted to their redemption values from the date of issuance through the earliest date of redemption using the effective interest method.

Increases to the carrying value of the redeemable convertible preferred stock are charged to additional paid-in capital or accumulated deficit.

Recent Accounting Pronouncements

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Recently Adopted Accounting Pronouncements

In August 2018, the FASB issued Accounting Standards Update (“ASU”) 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40).

The update is associated with customer accounting for implementation costs incurred in a cloud computing arrangement that is a service contract.

The amendments align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.

The guidance is effective for fiscal years and interim periods beginning after December 15, 2019 for public business entities, and for fiscal years beginning after December 15, 2020, and interim periods within annual periods beginning after December 15, 2021, for all other entities.

The Company adopted this standard on January 1, 2021.

The adoption of this standard did not have a material effect on the Company’s consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Recently Issued Accounting Pronouncements Not Yet Adopted

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) .

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Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the consolidated statements of operations.

An entity may adopt the guidance either (1) retrospectively to each prior reporting period presented in the financial statements with a cumulative-effect adjustment recognized at the beginning of the earliest comparative period presented or (2) retrospectively at the beginning of the period of adoption through a cumulative-effect adjustment.

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may adopt the guidance either (1) retrospectively to each prior reporting period presented in the financial statements with a cumulative-effect adjustment recognized at the beginning of the earliest comparative period presented or (2) retrospectively at the beginning of the period of adoption through a cumulative-effect adjustment.

The guidance is effective for fiscal years and interim periods beginning after December 15, 2018 for public business entities, and for fiscal years beginning after December 15, 2021, and interim periods within annual periods beginning after December 15, 2022, for all other entities.

The Company plans to adopt this standard on January 1, 2022, utilizing the modified retrospective approach.

Under this adoption method, all prior periods will continue to be reported under previous lease accounting guidance and the new standard will be applied to all existing leases as of the adoption date.

The Company plans to elect the package of practical expedients to not reassess prior conclusions related to contracts containing leases, lease classification, and initial direct costs.

The Company has completed its process of identifying the population of leases impacted by the adoption and is in the process of completing its analysis of applying the new guidance to these leases.

It is also evaluating the appropriate incremental borrowing rates to discount its future minimum lease payments in calculating the right-of-use assets and lease liabilities.

The Company expects the adoption of this standard will result in the recognition of material right-of-use assets and lease liabilities, primarily related to its office facilities, which are disclosed in Note 19 "Commitments and Contingencies".

The Company does not expect the adoption to have a material impact on its consolidated statements of operations.

The Company adopted this standard on January 1, 2022, which resulted in the Company recording $ 24.5 million of operating lease right-of-use assets, and $ 2.7 million and $ 24.4 million of operating lease liabilities, classified as current and non-current, respectively, on its balance sheet.

The adoption did not have a material effect on the statement of operations.

The Company utilized the modified retrospective adoption approach, whereby all prior periods continue to be reported under previous lease accounting guidance.

The Company elected the package of practical expedients to not reassess prior conclusions related to lease identification, classification and initial direct costs, and did not elect the hindsight practical expedient which would have permitted the use of hindsight in determining the lease term and assessing impairment.

See Note 9, "Leases" for further discussion on the Company's accounting for leases under ASC 842.

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes, eliminates certain exceptions with ASC 740, and clarifies certain aspects of the current guidance to promote consistency among reporting entities.

This guidance is effective for fiscal years and interim periods beginning after December 15, 2020 for public business entities and for fiscal years beginning after December 15, 2021 for all other entities, with early adoption permitted.

The Company plans to adopt this standard on January 1, 2022 and does not expect the adoption to have a material impact on the Company's consolidated financial statements.

The below acquisition qualifies as a business combination, and the Company has recorded all assets acquired and liabilities assumed at their acquisition-date fair values.

The excess of the purchase price in the acquisition over the fair value of the tangible and identifiable intangible assets acquired less the liabilities assumed has been recorded as goodwill.

The goodwill arising from the acquisition consists largely of the synergies and economies of scale expected from combining the operations of the businesses.

There were no transaction expenses associated with business acquisitions for the years ended December 31, 2021 and 2020, and $ 0.8 million for the year ended December 31, 2019, which are included in general and administrative expenses in the Company’s consolidated statements of operations.

The Company adopted this standard on January 1, 2022, which did not have a material impact on the Company's consolidated financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13 , Financial Instruments-Credit Losses (Topic 326).

The amendments in ASU 2016-13 require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts.

ASU 2016-13, as subsequently amended for various technical issues, is effective for emerging growth companies for fiscal years beginning after December 15, 2022 and for interim periods within those fiscal years.

The Company plans to adopt this standard on January 1, 2023 and, based on the Company’s current mix of financial assets, does not expect the adoption to have a material impact on the Company's consolidated financial statements.

Acquisitions & Disposals

Design Manager

On May 2, 2019, the Company acquired 100 % of the outstanding equity of Franklin Potter Associates, Inc.

and its subsidiary, doing business as Design Manager, a privately-held company that sells subscriptions to a software solution to interior designers to assist with project management, purchasing, and accounting for a total purchase consideration of $ 4.2 million, subject to customary purchase price adjustments.

The acquisition was intended to further enhance the Company’s offerings to interior designers, as both the 1stDibs and Design Manager platforms offer tools that are integral to their businesses.

The acquisition qualified as a business combination, and the Company recorded all assets acquired and liabilities assumed at their acquisition-date fair values.

The excess of the purchase price in the acquisition over the fair value of the tangible and identifiable intangible assets acquired less the liabilities assumed was recorded as goodwill.

The results of Design Manager have been included in the consolidated financial statements since the date of acquisition.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The total purchase consideration as of the acquisition date was as follows (in thousands):

Cash paid at closing $ 2,513

Shares issued at closing 791

Cash to be paid at secondary anniversary of closing 640

Shares to be issued at secondary anniversary of closing 206

Total purchase consideration $ 4,150

The cash to be paid and the shares to be issued at the second anniversary after the closing date represent deferred acquisition consideration that secured the sellers’ indemnity obligations for general representations and warranties of the sellers.

To the Company’s knowledge, the representations and warranties were accurate as of the acquisition date and no event or condition has occurred that would result in a claim against the deferred acquisition consideration.

Prior to the second anniversary of closing, the deferred acquisition consideration included in the purchase price was recorded in other current liabilities in the Company’s consolidated balance sheets.

The Company recorded the shares to be issued on the second anniversary of closing at fair value of $ 0.2 million at the time of the acquisition.

The shares to be issued were subsequently remeasured to fair value at each reporting date with changes in fair value recognized as a general and administrative expense in the Company’s consolidated statements of operations.

Changes in the fair value of the deferred acquisition consideration were $ 0.4 million and $ 0.1 million during the years ended December 31, 2021 and 2020, respectively.

The 45,152 shares of common stock were issued in May 2021, upon the second anniversary after the closing date, with a final fair value of $ 0.8 million.

Additionally, a cash payment of $ 0.6 million was made in May 2021.

As of December 31, 2021, no deferred acquisition consideration remained on the Company’s consolidated balance sheet.

and its subsidiary, doing business as Design Manager, for a total purchase consideration of $ 4.2 million.

As a result, Design Manager became a wholly-owned subsidiary of the Company.

On June 29, 2022, the Company sold 100 % of its equity interest in Design Manager for a purchase price of $ 14.8 million.

The Company received net cash proceeds of $ 14.6 million, of which $ 1.5 million will be held in a joint escrow account for 12 months from the date of the sale and is recorded as restricted cash, current in the Company’s consolidated balance sheet.

Additionally, a net gain on the sale of $ 9.7 million was recognized during the year ended December 31, 2022, and is included in loss from operations on the consolidated statement of operations.

Revenue Recognition

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The Company generates revenue from seller marketplace services and other services.

Seller marketplace services primarily consist of subscription, listing, and marketplace transaction fees.

Other services primarily consist of advertising revenues generated from displaying ads on the Company’s online marketplace and offering subscriptions to access software typically used by interior designers.

Seller marketplace services primarily consist of marketplace transaction, subscription, and listing fees.

Other services primarily consist of advertising revenues generated from displaying ads on the Company’s online marketplace and software services revenue related to Design Manager, typically used by interior designers.

Design Manager was sold on June 29, 2022;

therefore, no related net revenue for software services was recognized after the sale date.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Contract Balances from Contracts with Customers

The following table provides a rollforward of the deferred revenue amounts as follows (in thousands):

Balance as of January 1, 2020

Revenue recognized ( 926 )

Balance as of December 31, 2020

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Balance as of December 31, 2021

Billings 1,502

Net revenue recognized ( 1,661 )

Reduction resulting from the sale of Design Manager ( 602 )

Balance as of December 31, 2022

The amount of revenue recognized during the year ended December 31, 2022 that was included in the deferred revenue balance at January 1, 2022 was $ 0.6 million.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company does not disclose the value of remaining performance obligations for (i) contracts with an original contract term of one year or less, and (ii) variable consideration allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied distinct service that forms part of a single performance obligation.

The Company does not have any remaining performance obligations associated with contracts with terms greater than one year.

Accounts Receivable, net

Accounts receivable, net was $ 1.0 million and $ 0.7 million at December 31, 2022 and 2021, respectively.

The Company recorded an allowance for doubtful accounts of less than $0.1 million and $0.1 million as of December 31, 2021 and 2020, respectively.

The Company recorded an allowance for doubtful accounts of $ 0.1 million and less than $ 0.1 million as of December 31, 2022 and 2021, respectively.

Changes in the allowance for doubtful accounts for the periods presented were as follows (in thousands):

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Balance as of December 31, 2022

Other Current Assets

As of December 31, 2021 and 2020, other current assets consisted of the following:

(in thousands) 2021 2020

Costs to obtain revenue contracts $ 246 $ 363

Deferred offering costs — 1,320

Other current assets 621 1,982

Total other current assets $ 867 $ 3,665

Property and Equipment, net

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Balance as of December 31, 2021

Reduction resulting from the sale of Design Manager ( 3,036 )

Foreign currency translation adjustment ( 91 )

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Intangible Assets, net

Intangible assets subject to amortization consisted of the following as of December 31, 2021 and 2020:

On June 29, 2022, the Company sold 100 % of its equity interest in Design Manager, including the majority of the Company’s intangible assets.

See Note 3, “Acquisitions & Disposals” for further discussion of the sale.

As a result of the sale, the Company's had a remaining gross carrying amount of $ 6.7 million and accumulated amortization of $ 6.7 million relating to intangible assets subject to amortization as of December 31, 2022, as well as an immaterial amount of intangible assets classified as indefinite-lived that were not subject to amortization.

Intangible assets consisted of the following as of December 31, 2021:

December 31, 2021

(in thousands) Weighted

(in thousands) Weighted Average Remaining Amortization Period (in years)

Customer relationships 12.3 $ 1,230 $ 219 $ 1,011

4 unchanged sentences

Total intangible assets 2.4 $ 8,408 $ 7,244 $ 1,164

December 31, 2020

(in thousands) Weighted

Customer relationships 13.3 $ 1,230 $ 137 $ 1,093

Acquired and developed technology 0.1 6,400 6,266 134

Trade names and associated trademarks 1.8 705 580 125

Other — 64 64 —

Total intangible assets 2.6 $ 8,399 $ 7,047 $ 1,352

As of December 31, 2021, the Company had an immaterial amount of intangible assets classified as indefinite-lived that were not subject to amortization.

Total amortization expense for intangible assets was $ 0.1 million, $ 0.2 million, and $ 0.2 million for the years ended December 31, 2022, 2021, and 2020, respectively.

1STDIBS.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2021 the estimated annual amortization expense for each of the next five years and thereafter is expected to be as follows (in thousands):

Year Ending December 31, Estimated

Thereafter 636

Total $ 1,155

As of December 31, 2021 and 2020, other assets consisted of the following:

(in thousands) 2021 2020

Restricted cash $ 3,333 $ 3,333

Other 209 240

Total other assets $ 3,542 $ 3,573

Accrued Expenses

2 unchanged sentences

Shipping $ 3,597 $ 6,669

Payroll 2,174 2,297

Salaries & benefits 1,862 2,174

Sales & use tax payable 1,378 1,721

1 unchanged sentence

Payment processor fees 970 1,052

Allowance for eCommerce returns 415 406

Allowance for e-commerce returns 438 415

Other 1,189 587

Total accrued expenses $ 10,761 $ 13,745

1STDIBS.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company’s operating lease arrangements are principally for office space in its New York City headquarters.

As of December 31, 2022, the Company had $ 22.0 million of operating lease right-of-use assets, $ 2.8 million and $ 21.7 million of current and non-current operating lease liabilities, respectively, and no finance leases on its consolidated balance sheet.

These operating lease arrangements included in the measurement of lease liabilities had a weighted-average remaining lease term of 7.0 years, a weighted-average discount rate of 5.9 %, and do not reflect options to extend or terminate, as management does not consider the exercise of these options to be reasonably certain.

During the year ended December 31, 2022, the Company paid $ 4.2 million, for amounts included in the measurement of lease liabilities.

The Company did not enter into any new lease arrangements during the year ended December 31, 2022.

During the year ended December 31, 2022, the Company recognized $ 5.2 million of lease expense.

During the year ended December 31, 2021, rent expense, including associated common area maintenance charges, was $ 4.1 million.

(in thousands) 2022

Operating lease expense $ 3,988

Short-term lease expense 111

Variable lease expense 1,058

Total lease expense $ 5,157

As of December 31, 2022, the total remaining operating lease payments included in the measurement of lease liabilities was as follows (in thousands):

Fiscal Year Ending December 31, Operating Lease Payments

Thereafter 8,583

Total operating lease payments 29,652

imputed interest ( 5,204 )

Total lease liabilities $ 24,448

Other Current Liabilities

1 unchanged sentence

(in thousands) 2022 2021

Deferred rent $ 194 $ 194

Sales and use tax contingencies 1,863 1,922

Buyer deposits 318 595

Deferred acquisition consideration — 980

Deferred revenue 140 801

Other 108 $ 194

Total other current liabilities $ 2,429 $ 3,512

7 unchanged sentences

Total other liabilities $ 46 $ 2,605

Credit Agreement

On November 28, 2016, the Company entered into a Loan and Security Agreement with Ally Bank (the “Lender”), which provided a $ 15.0 million term loan (the “Term Loan”) and a $ 10.0 million revolving credit line (the “Revolver” and together with the Term Loan, the “Credit Agreement”), with the Term Loan having a maturity date of November 28, 2019 and the Revolver having a maturity date of November 28, 2018.

On November 28, 2018, the Company entered into an amendment (“Amended Credit Agreement”) with the Lender with the Term Loan having an amended maturity date of November 28, 2020 and the Revolver having an amended maturity date of November 28, 2019.

In connection with entering into the Amended Credit Agreement, the payment of the deferred issuance costs of $ 0.1 million associated with the Credit Agreement was extended to November 28, 2020.

On February 27, 2019, the Company terminated the Amended Credit Agreement and repaid all amounts due under the Amended Credit Agreement of $ 15.3 million, including outstanding principal of $ 15.0 million and $ 0.3 million of accrued and unpaid fees and interest.

The Company recognized aggregate interest expense of $ 0.5 million under the Amended Credit Agreement, including cash paid for interest associated with the Amended Credit Agreement of $ 0.2 million and amortization of all remaining debt issuance costs upon repayment of the Amended Credit Agreement of $ 0.3 million, during the year ended December 31, 2019.

Redeemable Convertible Preferred Stock

Upon the closing of the IPO, all shares of the Company’s outstanding redeemable convertible preferred stock automatically converted into 19,243,795 shares of common stock.

As of December 31, 2020, redeemable convertible preferred stock consisted of the following:

December 31, 2020

(in thousands, except share amounts) Preferred

Issuable Upon

Series A preferred stock 21,662,000 7,220,666 $ 94,604 $ 94,623 7,220,666

Series B preferred stock 10,996,181 3,665,390 62,931 62,935 3,665,390

Series C preferred stock 3,182,158 1,060,719 21,137 21,137 1,060,719

Series C-1 preferred stock 5,966,682 1,988,891 35,089 35,098 1,988,891

Series D preferred stock 15,964,843 5,308,129 84,764 87,507 5,308,129

57,771,864 19,243,795 $ 298,525 $ 301,300 19,243,795

In January 2021, the Company’s preferred stockholders executed an Agreement and Waiver of Preferred Stockholders, which waived redemption rights for their preferred stock in connection with a non-qualified IPO event during the effective period.

A non-qualified IPO is an IPO that does not result in:

(i) aggregate gross proceeds to the Company of at least $ 50.0 million and (ii) a price per share paid by the public of an amount greater than or equal to $ 24.93 , as appropriately adjusted for stock splits, stock combinations, and stock dividends.

The waiver was effective from the date the Company filed with or confidentially submitted to the United States Securities and Exchange Commission a registration statement on Form S-1 relating to a contemplated IPO, through June 30, 2022, or the earliest to occur of one of several termination events as defined therein, including the Company’s completion of an IPO.

1STDIBS.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2022 and 2021, the Company had reserved shares of common stock for issuance in connection with the following:

Conversion of outstanding shares of redeemable convertible preferred stock — 19,243,795

Options to purchase common stock 4,034,287 3,949,943

Restricted stock units 2,807,981 309,530

Common stock warrants to purchase common stock — 44,222

Shares to be issued to former Design Manager stockholders on second anniversary of closing — 45,152

Shares available for future grant under the 2021 Plan 3,151,824 5,103,772

Shares available for future grant under the 2021 Plan 5,103,772 —

Shares available for future grant under the ESPP 1,179,902 800,000

4 unchanged sentences

As of December 31, 2022 and 2021, no shares of preferred stock were issued or outstanding.

As of December 31, 2021 and 2020, the Company had authorized 400,000,000 and 105,767,092 shares, respectively, of voting common stock, $ 0.01 par value per share.

As of December 31, 2022 and 2021, the Company had authorized 400,000,000 shares of voting common stock, $ 0.01 par value per share.

Each holder of the Company's common stock is entitled to one vote for each share on all matters to be voted upon by the stockholders and there are no cumulative rights.

2 unchanged sentences

The rights, preferences, and privileges of the holders of the Company's common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred stock which the Company may designate and issue in the future.

Common Stock Warrants

In June 2021, before the closing of the Company’s IPO, the 44,222 common stock warrants were exercised in a cashless exercise for a net amount of 35,665 common shares.

Stock-based compensation

1 unchanged sentence

The Company adopted the 2011 Stock Option and Grant Plan (the “2011 Plan”) on September 2, 2011 and amended and restated the plan on December 14, 2011.

The 2011 Plan provided for the Company to grant incentive stock options or nonqualified stock options, restricted stock awards, and other stock-based awards to its employees, directors, officers, outside advisors, and non-employee consultants.

The 2011 Plan provided for the Company to grant incentive stock options (“ISOs”) or nonqualified stock options (“NSOs”), restricted stock awards, and other stock-based awards to its employees, directors, officers, outside advisors, and non-employee consultants.

At the time of grant, the options issued to new employees pursuant to the 2011 Plan expire ten years from the date of grant and generally vest over four years , with 25 % vesting on the first anniversary and the balance vesting ratably over the remaining 36 months.

1 unchanged sentence

The 2011 Plan is administered by the Company’s board of directors or, at the discretion of the Company’s board of directors, by a committee thereof.

The exercise prices, vesting, and other restrictions are determined at the discretion of the Company’s board of directors, or its committee if so delegated.

In February 2021, the Company’s board of directors approved

The exercise prices, vesting, and other restrictions are determined at the discretion of the

1STDIBS.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

an increase of 2,333,333 shares of common stock to be available for future issuance under the 2011 Option Plan, which was approved by the stockholders in March 2021.

Company’s board of directors, or its committee if so delegated.

In February 2021, the Company’s board of directors approved an increase of 2,333,333 shares of common stock to be available for future issuance under the 2011 Option Plan, which was approved by the stockholders in March 2021.

Following the completion of the Company’s IPO, no additional awards and no shares of the Company’s common stock remain available for future issuance under the 2011 Plan.

2 unchanged sentences

In May 2021, the Company's board of directors adopted, and its stockholders approved, the 2021 Stock Incentive Plan (the “2021 Plan”), which became effective upon the SEC declaring the Company’s IPO registration statement effective.

The 2021 Plan provides for the grant of incentive stock options (“ISOs”), nonstatutory stock options (“NSOs”), restricted share awards, stock unit awards, stock appreciation rights, cash-based awards, and performance-based stock awards, or collectively, stock awards.

The 2021 Plan provides for the grant of ISOs, NSOs, restricted share awards, stock unit awards (“RSUs”), stock appreciation rights, cash-based awards, and performance-based stock awards, or collectively, stock awards.

ISOs may be granted only to the Company’s employees, including officers, and the employees of its parent or subsidiaries.

All other stock awards may be granted to the Company’s employees, officers, non-employee directors, and consultants and the employees and consultants of its parent, subsidiaries, and affiliates.

Vesting shall occur, in full or in installments, upon satisfaction of the conditions specified in the Restricted Share Award Agreement.

The requisite service period for RSUs to vest is generally over four years from the grant date, with 25 % vesting on the first anniversary and the balance vesting ratably on a quarterly basis over the remaining vesting period.

Additional RSUs, generally granted to current employees, vest ratably on a quarterly basis over the four years beginning on the three month anniversary from the grant date.

The aggregate number of shares of the Company’s common stock that may be issued pursuant to stock awards under the 2021 Plan will not exceed the sum of (x) 4,333,333 shares (as adjusted for stock splits, stock dividends, combinations, and the like), plus (y) the sum of (1) the number of reserved shares not issued or subject to outstanding awards under the 2011 Plan on the effective date of the 2021 Plan and (2) the number of shares subject to outstanding stock awards granted under the 2011 Plan and that, following the effective date of the 2021 Plan, (A) are subsequently forfeited or terminated for any reason before being exercised or settled, (B) are not issued because such stock award is settled in cash, (C) are subject to vesting restrictions and are subsequently forfeited, (D) are withheld or reacquired to satisfy the applicable exercise, strike, or purchase price, or (E) are withheld or reacquired to satisfy a tax withholding obligation, plus (z) an annual increase on the first day of each fiscal year, for a period of not more than 10 years, beginning on January 1, 2022 and ending on, and including, January 1, 2031, in an amount equal to the lesser of (i) 5 % of the outstanding shares on the last day of the immediately preceding fiscal year or (ii) such lesser amount that the Compensation Committee determines for purposes of the annual increase for that fiscal year.

8 unchanged sentences

Expected dividend yield — — —

1STDIBS.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stock Options

8 unchanged sentences

Exercised ( 509,694 ) 3.98

Cancelled 96,376 7.07

Cancelled/Forfeited ( 445,962 ) 7.54

Outstanding as of December 31, 2022

4 unchanged sentences

4,034,287 $ 6.90 6.9 $ 1,625

1STDIBS.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock for all stock options that had exercise prices lower than the fair value of the Company’s common stock.

4 unchanged sentences

These options will vest over four years , with approximately 21 % vesting on January 1, 2022, and the balance vesting ratably over the remaining 38 months.

During the year ended December 31, 2021, $ 0.7 million of stock-based compensation expense was recognized for options having a performance condition.

During each of the years ended December 31, 2022 and 2021, $ 0.7 million of stock-based compensation expense was recognized for options having a performance condition.

Restricted Stock Units

3 unchanged sentences

Outstanding as of December 31, 2021

309,530 $ 15.30

Granted 3,729,585 7.51

Vested ( 758,970 ) 8.79

Cancelled 1,685 16.28

Cancelled/Forfeited ( 472,164 ) 8.55

Outstanding as of December 31, 2022

2,807,981 $ 7.85

The estimated weighted-average grant date fair value of restricted stock units granted was $ 15.32 per share for the year ended December 31, 2021.

The total grant date fair value of restricted stock units vested was less than $ 0.1 million for the year ended December 31, 2021.

The estimated weighted-average grant date fair value of restricted stock units granted was $ 7.51 and $ 15.32 per share for the years ended December 31, 2022 and 2021, respectively.

The total grant date fair value of restricted stock units vested was $ 6.7 million and less than $ 0.1 million for the years ended December 31, 2022 and 2021, respectively.

Employee Stock Purchase Plan

2 unchanged sentences

The number of shares of the Company's common stock that will be available for issuance under the ESPP also includes an annual increase on the first day of each fiscal year, for a period of not more than 10 years, beginning on January 1, 2022, equal to the least of:

(i) 1 % of the outstanding shares of the Company’s common stock on such date, (ii) 400,000 shares (as adjusted for stock splits, stock dividends, combinations, and the like) or (iii) a lesser amount determined by the Compensation Committee or the Company’s board of directors.

(i) 1 % of the outstanding shares of the Company’s common stock on such date, (ii) 400,000 shares

1STDIBS.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(as adjusted for stock splits, stock dividends, combinations, and the like) or (iii) a lesser amount determined by the Compensation Committee or the Company’s board of directors.

During regularly scheduled “offerings” under the ESPP, participants may purchase the Company’s common stock through payroll deductions, up to a maximum of 15 % of their eligible compensation, or such lower limit as may be determined by the Compensation Committee from time to time.

3 unchanged sentences

The fair market value of the Company’s common stock for this purpose will generally be the closing price on Nasdaq (or such other exchange as the Company’s common stock may be traded at the relevant time) for the date in question, or if such date is not a trading day, for the last trading day before the date in question.

As of December 31, 2021, no shares of common stock were purchased under the ESPP.

1STDIBS.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2022, an initial offering period has not commenced, and for the year ended December 31, 2022, no shares of common stock were purchased under the ESPP.

Stock-Based Compensation

8 unchanged sentences

As of December 31, 2022, total unrecognized compensation expense related to unvested stock-based awards was $ 28.6 million, which is expected to be recognized over a weighted-average period of 2.9 years.

Net loss before income taxes for the years ended December 31, 2021, 2020, and 2019 was as follows:

Net (loss) income before income taxes for the years ended December 31, 2022, 2021, and 2020 was as follows:

Year Ended December 31,

3 unchanged sentences

Total $ ( 22,501 ) $ ( 20,942 ) $ ( 12,517 )

For the years ended December 31, 2021, 2020, and 2019, the provision for (benefit from) income taxes consisted of the following:

1STDIBS.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022, 2021, and 2020, the provision for income taxes consisted of the following:

Year Ended December 31,

4 unchanged sentences

Total current expense 37 21 11

Deferred tax benefit

Federal — — —

State — — ( 60 )

Foreign — — —

Total deferred tax benefit — — ( 424 )

Total provision for (benefit from) income taxes $ 21 $ 11 $ ( 409 )

1STDIBS.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Total deferred expense — — —

Total provision for income taxes $ 37 $ 21 $ 11

The reconciliation of the U.S.

8 unchanged sentences

Research credits 0.1 1.0 1.1

Sale of Design Manager ( 2.2 ) — —

Stock-based compensation ( 0.3 ) 0.4 ( 0.9 )

Change in the valuation allowance ( 23.5 ) ( 27.2 ) ( 30.2 )

1 unchanged sentence

Income tax benefit (provision), net ( 0.2 )% ( 0.1 )% ( 0.1 )%

1STDIBS.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements.

7 unchanged sentences

Intangible assets and goodwill 1,293 1,496

Capitalized research and development expense 4,750 —

Operating lease liabilities 6,204 —

Other 3,180 3,297

5 unchanged sentences

Capitalized internal-use software ( 754 ) ( 815 )

Right-of-use assets ( 5,580 ) —

Other ( 137 ) ( 231 )

5 unchanged sentences

Accordingly, the Company has applied a valuation allowance against its net deferred tax assets.

The net change in the total valuation allowance for the years ended December 31, 2021 and 2020 was an increase of approximately $ 5.7 million and $ 3.8 million, respectively, primarily as a result of the generation of additional net operating losses.

1STDIBS.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The net change in the total valuation allowance for the years ended December 31, 2022 and 2021 was an increase of approximately $ 5.2 million and $ 5.7 million, respectively.

The activity in the Company’s deferred tax asset valuation allowance for the years ended December 31, 2022 and 2021, was as follows:

8 unchanged sentences

In response to the market volatility and instability resulting from the COVID-19 pandemic, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was signed into law on March 27, 2020.

The CARES Act lifts certain deduction limitations originally imposed by the Tax Cuts and Jobs Act (“TCJA”) that was enacted in the U.S.

The CARES Act lifts certain deduction limitations originally imposed by the TCJA that was enacted in the U.S.

in December 2017.

2 unchanged sentences

therefore, $ 60.1 million of federal NOLs generated after 2017 may be carried forward indefinitely.

As it pertains to the approximately $ 33.4 million of state NOLs generated after 2017, not all states have conformed to the Act;

As it pertains to the

1STDIBS.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

approximately $ 37.6 million of state NOLs generated after 2017, not all states have conformed to the Act;

therefore, the NOL expiration will vary based on the state.

3 unchanged sentences

An ownership change is defined as a cumulative change of 50% or more in the ownership positions of certain stockholders during a rolling three-year period.

The Company has completed a formal study through August 18, 2021 to determine if any ownership changes within the meaning of IRC Section 382 and 383 have occurred.

As a result of the study, it was determined the Company experienced an ownership change on July 28, 2015;

however, the limitation from the ownership change will not result in any of the NOLs or tax credits expiring unutilized.

The Company is in the process of completing a formal study to determine if any ownership changes within the meaning of IRC Section 382 and 383 have occurred.

Based on the analysis to date, any limitation from any ownership change will not result in any of the NOLs or tax credits expiring unutilized.

The Tax Cuts and Jobs Act of 2017 (“TCJA”) requires taxpayers to capitalize and amortize research and development costs pursuant to IRC Section 174.

This requirement was effective for the Company beginning on January 1, 2022.

The Company assesses foreign investment levels periodically to determine if all or a portion of the Company’s investments in its foreign subsidiary are indefinitely invested.

8 unchanged sentences

The Company’s policy is to record interest and penalties related to income taxes as part of its income tax provision.

1STDIBS.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2021 and 2020, the Company had not accrued interest or penalties related to uncertain tax positions.

As of December 31, 2022 and 2021, the Company had not accrued interest or penalties related to uncertain tax positions.

A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:

12 unchanged sentences

The Company’s income tax returns for December 31, 2015 through December 31, 2022 for their foreign subsidiary remain subject to examination by tax authorities in the United Kingdom.

During the second quarter of the year ended December 31, 2021, the Finance Act 2021 (the “Act”) was enacted in the United Kingdom.

During the year ended December 31, 2021, the Finance Act 2021 (the “Act”) was enacted in the United Kingdom.

The Act increases the corporate income tax rate from 19% to 25% effective April 1, 2023 and enhances the first-year capital allowance on qualifying new plant and machinery assets effective April 1, 2021.

The effects on the Company’s existing deferred tax balances have been recorded and is offset by the valuation allowance maintained against the Company’s U.K.

The effects on the Company’s existing deferred tax

1STDIBS.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

balances have been recorded and is offset by the valuation allowance maintained against the Company’s U.K.

net deferred tax assets.

8 unchanged sentences

Net loss per share attributable to common stockholders—basic and diluted $ ( 0.59 ) $ ( 1.08 ) $ ( 2.50 )

1STDIBS.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company’s potentially dilutive securities, which include outstanding stock options, redeemable convertible preferred stock, and warrants to purchase shares of common stock have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share.

The Company’s potentially dilutive securities, which include outstanding stock options and restricted stock units, and in prior years redeemable convertible preferred stock, and warrants to purchase shares of common stock, have been excluded from the computation of diluted net loss per share from each period as including them would have had an anti-dilutive effect.

Therefore, the weighted average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same.

The Company excluded the following potential common shares, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect:

The Company excluded the following potential common shares for each period presented:

Year Ended December 31,

4 unchanged sentences

Redeemable convertible preferred stock (as converted to common stock) — — 19,243,795

4,259,473 22,458,338 22,741,341

Total 6,842,268 4,259,473 22,458,338

Commitments and Contingencies

Lease Commitments

The Company leases office space for its headquarters in New York, New York under a non-cancellable operating lease expiring in 2029.

This operating lease was signed in 2013, lease commencement started in 2014, and rent commencement started in 2015.

The Company also leases offices in Pennsylvania and the United Kingdom.

The leases require, among other things, the payment of minimum annual rentals and a portion of the real estate taxes and insurance, maintenance and other operating expenses related to the properties.

The Company recognizes rent expense on a straight-line basis over the lease period.

In 2018, the Company signed a non-cancellable operating lease for space to establish a 1stDibs gallery in New York, New York.

The lease and rent commencement both started during 2018, and the lease was scheduled to expire in 2022.

In December 2019, the Company entered into a Surrender Agreement with the landlord to terminate the lease early in March 2020.

As consideration for the early termination of this lease, the Company received a payment of $ 1.3 million in December 2019, and a second payment of $ 1.2 million to be paid after the surrender of the premises back to the landlord.

The Company received the second payment in March 2020.

The $ 2.5 million lease incentive was accounted for as a reduction in rent expense over the remaining lease term.

The Company recognizes rent expense on a straight-line basis over the respective lease period and has recorded deferred rent for rent expense incurred but not yet paid.

Rent expense, including associated common area maintenance charges, was $ 4.1 million, $ 1.5 million, and $ 5.2 million for the years ended December 31, 2021, 2020, and 2019, respectively.

As of December 31, 2021, future minimum lease payments under noncancelable operating leases are as follows (in thousands):

Year Ending December 31,

Contractual Obligations

The Company has $ 32.9 million of non-cancelable contractual commitments as of December 31, 2022, primarily related to it operating lease agreement for its corporate headquarters in New York, NY, as well as other software and support services.

For those agreements with variable terms, the Company does not estimate what the total obligation may be beyond any minimum obligations.

The following table represents the Company’s commitments under its purchase obligations as of December 31, 2022 (in thousands):

Fiscal Year Ending December 31, Lease Obligations

Other Obligations

Total Obligations

2023 $ 4,079 $ 1,437 $ 5,516

2024 4,114 1,291 5,405

2025 4,292 506 4,798

2026 4,292 33 4,325

2027 4,292 — 4,292

Thereafter 8,583 — 8,583

Total $ 29,652 $ 3,267 $ 32,919

1STDIBS.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Legal Proceedings

1 unchanged sentence

When the Company becomes aware of a claim or potential claim, the likelihood of any loss or exposure is assessed.

If it is probable that a loss will result and the amount of the loss can be reasonably estimated, the Company records a

1STDIBS.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

liability for the loss.

If it is probable that a loss will result and the amount of the loss can be reasonably estimated, the Company records a liability for the loss.

The liability recorded includes probable and estimable legal costs incurred to date and future legal costs to the point in the legal matter where the Company believes a conclusion to the matter will be reached.

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The Company began collecting sales tax in relevant jurisdictions in 2019.

The Company recognized liabilities for contingencies related to state sales and use tax deemed probable and estimable totaling $ 1.9 million and $ 2.1 million as of December 31, 2021 and 2020, respectively, which are included in other current liabilities in the Company’s consolidated balance sheets.

The Company recognized liabilities for contingencies related to state sales and use tax deemed probable and estimable totaling $ 1.9 million as of each December 31, 2022 and 2021, which are included in other current liabilities in the Company’s consolidated balance sheets.

401(K) Savings Plans

5 unchanged sentences

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 8. Financial Statements and Supplementary Data