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Item 1A. Risk Factors

2021-12-09 compared with 2020-12-08 · 100 added, 112 removed, 294 unchanged (42% of the section changed)

Risk Factors.

You should carefully consider the risks described below, together with all of the other information in this Annual Report, including the consolidated financial statements and related notes, before making an investment decision with respect to our common stock.

If any of the following risks occur, our business, financial condition or operating results could suffer.

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Business and Operating Risks

The success of our business depends on our ability to successfully obtain a supply of surplus assets sufficient to attract buyers to our platform and our ability to successfully attract and retain active professional buyers to create demand for surplus assets sufficient to attract sellers.

Our ability to increase our revenue and earn profits depends on whether we can successfully retain existing sellers, attract new sellers, expand the supply of merchandise available for sale on our e-commerce marketplaces and attract and retain active professional buyers to purchase the merchandise.

Our ability to attract enough quantities of suitable merchandise and buyers will depend on various factors, some of which are out of our control.

The success of our business depends on our ability to source a sufficient supply of assets from sellers to attract and retain active professional buyers;

then more buyers attract more sellers in a virtuous cycle of growth.

Our ability to increase our revenue and earn profits depends on whether we can successfully retain existing sellers, attract new sellers, expand the supply of assets available for sale on our e-commerce marketplaces and, at the same time, attract and retain active professional buyers to purchase the assets in the categories we sell.

Our ability to attract enough quantities of suitable assets and buyers with suitable interests in those assets will depend on various factors, some of which are out of our control.

These factors include our ability to:

• offer sellers liquid marketplaces for their surplus and salvage assets;

• offer buyers desirable merchandise;

• develop and implement effective sales and marketing strategies;

• comply with regulatory and corporate seller requirements affecting marketing and disposition of certain categories of merchandise;

• efficiently catalogue, handle, store, ship and track merchandise;

• offer sellers liquid marketplaces for their assets;

• offer buyers desirable assets;

• develop and implement effective seller and buyer marketing strategies;

• comply with regulatory and corporate seller requirements affecting marketing and disposition of certain assets;

• efficiently catalogue, handle, store, ship, and track deliver of assets;

• achieve high levels of seller and buyer satisfaction.

Failure to continue to offer competitive products to the marketplace, to supply products that meet applicable regulatory requirements, or to predict market demands for, or gain market acceptance of, such products, would have a negative impact on our business, results of operations and financial condition.

If we do not respond to rapid technological changes or upgrade our systems, we could fail to grow our business and our revenue could decrease.

To remain competitive, we must continue to enhance and improve the functionality and features of our e-commerce business.

Failure to continue to offer competitive assets to the marketplace, to supply assets that meet applicable regulatory requirements, or to predict market demands for, or gain market acceptance of, such assets, would have a negative impact on our business, results of operations and financial condition.

If we do not respond to rapid technological changes or continuously upgrade our systems, we could fail to grow our business and our revenue could decrease.

To remain competitive, we must continue to enhance and improve the functionality and features of our e-commerce business, particularly those that attract and retain buyers and sellers.

As an e-commerce company, we must continuously improve and upgrade our technology, transaction processing systems and network infrastructure to allow our operations to grow in both size and scope.

Without such improvements, our operations might suffer from unanticipated system disruptions, slow transaction processing, unreliable service levels, or impaired quality or delays in reporting accurate financial information, any of which could negatively affect our reputation and ability to attract and retain sellers and buyers.

We may also face material delays in introducing new services, products and enhancements.

The internet and the e-commerce industry are rapidly changing.

If competitors introduce new products and services using new technologies or if new industry standards and practices emerge, our existing websites and our proprietary technology and systems may become obsolete.

Without such continuous improvements, our operations might suffer from unanticipated system disruptions, slow transaction processing, unreliable service levels, or impaired quality or delays in reporting accurate financial information, any of which could negatively affect our reputation and ability to attract and retain sellers and buyers.

We may also face material delays in introducing new services, assets, and enhancements.

The e-commerce industry is rapidly changing.

If competitors introduce new assets and services using new technologies or if new industry standards and practices emerge, our existing online marketplaces and our proprietary technology and systems may become obsolete.

In addition, the expansion and improvement of our systems and infrastructure may require us to commit substantial financial, operational, and technical resources, with no assurance our business will grow as a result.

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We cannot assure you that these initiatives will be beneficial to the extent, or within the timeframes, expected, or that the estimated efficiency, cost savings and other improvements will be realized as anticipated or at all.

If our initiatives are not implemented successfully and within budget, or if our systems do not perform in a satisfactory manner, it could disrupt or otherwise materially adversely affect our business and

results of operations, as well as divert management resources.

Similarly, if our buyers and sellers fail to accept our new platform or our new unified process for handling transactions across our marketplaces, it could materially adversely affect our business and results of operations.

The information technology and digital marketing improvements that are core to our RISE strategy place a significant strain on our management, operational, financial and other resources.

We continue to decommission non-scalable legacy IT platforms with modular technology including key modules for unified management of sellers and buyers, property handling, transaction processing and finance functions across our entire company.

Our AllSurplus marketplace launched during Q1 of Fiscal Year 2020 and has continued to receive regular capability updates as we leverage customer feedback and data analytics to optimize the user experience.

Our AllSurplus marketplace is designed to provide our buyers access to all the property available in our CAG and GovDeals marketplaces, provides a common account experience for sellers and simplifies our operations.

This program continues to place significant strain on our management, personnel, operations, systems, technical performance and financial resources and internal financial control and reporting function.

We continue to decommission non-scalable legacy IT platform technology with modular technology including key modules for unified management of sellers and buyers, property handling, transaction processing and finance functions across our entire company.

Our AllSurplus marketplace launched during Fiscal Year 2020 and has continued to receive regular capability updates as we leverage customer feedback and data analytics to optimize the user experience.

Our AllSurplus marketplace is designed to provide our buyers with access to all the property available in our CAG and GovDeals marketplaces, provides a common account experience for sellers and simplifies our operations.

We are now expanding our AllSurplus marketplace to include an online, direct-to-consumer channel for returned and overstock inventory from retailers and manufacturers.

This expansion of our AllSurplus marketplace capabilities places significant strain on our management, personnel, operations, systems, technical performance and financial resources and internal financial control and reporting function.

Iterative information technology and digital marketing improvements require management time and resources to educate employees, redesign internal processes and implement new ways of conducting business with our sellers and buyers.

If we do not effectively manage improvements to our marketplaces, including consolidation of our Network International and GoIndustry DoveBid marketplaces onto our AllSurplus marketplace, digital marketing and data driven improvements or the timing, costs, and adoption by sellers and buyers, it could negatively affect our business and our operating results, as well as damage our reputation and our prospects.

In addition, the dedication of resources to the continuous improvement of our new aggregated marketplace initiative limits the resources we have available to devote to other initiatives or growth opportunities, or to invest in the maintenance of our internal systems.

If we do not effectively manage improvements to our marketplaces, including consolidation of our GoIndustry DoveBid marketplace onto our AllSurplus marketplace, digital marketing and data driven improvements or the timing, costs, and adoption by sellers and buyers, it could negatively affect our business and our operating results, as well as damage our reputation and our prospects.

In addition, the dedication of resources to sustain and enhance our existing sites constrains the ability to undertake transformation initiatives focused on growth opportunities.

The continuous improvement of our new aggregated marketplace initiative limits the resources we have available to devote to other initiatives or growth opportunities, or to invest in the maintenance of our internal systems.

We have vendor contracts with Amazon.com, Inc.

in our RSCG segment under which we acquire a significant portion of our purchased inventory, and if our relationship with Amazon is disrupted, we would experience a significant decrease in revenue and income.

We have multiple vendor contracts with Amazon.com, Inc., under which we acquire then resell merchandise.

We have multiple vendor contracts with Amazon.com, Inc., under which we acquire then resell assets.

The property we purchased under these contracts represented approximately 60.7%, 55.1% and 43.6% of cost of goods sold for the years ended September 30, 2021, 2020 and 2019, respectively.

If Amazon stopped selling inventory to us on acceptable terms, we likely could not procure alternative inventory from other vendors in a timely and efficient manner and on acceptable terms, or at all, and would therefore experience a significant decrease in revenue and have difficulty generating income.

If Amazon stopped selling inventory to us on acceptable terms or adversely changed the mix and quantity of the inventory that we purchase from Amazon, we likely could not procure alternative inventory from other vendors in a timely and efficient manner and on acceptable terms, or at all, and would therefore experience a significant decrease in revenue and have difficulty generating income.

If we do not retain our senior management and other highly skilled employees, we may not achieve our business objectives.

Our future success, including our ability to successfully implement recent initiatives, depends substantially on the continued service of our senior management and other key personnel, particularly William P.

Angrick, III, our Chairman and Chief Executive Officer.

We do not have key-person insurance on any of our officers or employees.

Losing any member of our existing senior management team could damage key seller relationships, result in the loss of key information, expertise or know-how, lead to unanticipated recruitment and training costs and make it more difficult to operate our business and achieve our business goals.

Our future success also depends on our ability to continue to attract, retain and motivate highly skilled employees, particularly employees with technology, sales, marketing, operations and administrative technical expertise.

Competition for employees in our industry is intense.

We have experienced occasional difficulty in attracting personnel to support the growth of our business, and we may experience similar difficulties.

If we cannot attract, assimilate and retain employees with the skills we require, we may not grow our business and revenue as expected and we could experience increased turnover, decreased levels of buyer and seller service, low morale, inefficiency or internal control failures.

We rely on attracting, training and retaining highly qualified employees at our RSCG warehouses and a loss of RSCG warehouse employees could adversely impact our business, financial condition and results of operations.

We must attract, train and retain a large and growing number of qualified employees in our RSCG warehouses while controlling related labor costs and maintaining our core values.

Our ability to control labor and benefit costs is subject to numerous internal and external factors, including the continuing impacts of the Pandemic, regulatory changes, prevailing wage rates, and healthcare and other insurance costs.

We compete with other retail and non-retail businesses for these employees and invest significant resources in training and motivating them.

There is no assurance that we will be able to attract or retain highly qualified employees in the future, which could have a material adverse effect on our business, financial condition and results of operations.

We face intense competition.

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They may devote greater financial resources to marketing and promotional campaigns, secure better terms from sellers and vendors, adopt more aggressive pricing or inventory availability policies and devote substantially more resources to technology and infrastructure than we do.

During the COVID-19 pandemic, several of our competitors were driven to upgrade aspects of their core information and marketing technology stacks.

During the course of the Pandemic, several of our competitors were driven to upgrade aspects of their core information and marketing technology stacks.

This heightened focus on e-commerce has increased the competition we face.

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We increasingly may compete in other countries with local competitors that have advantages we do not, such as a greater ability to operate within the local regulatory environment.

In addition, we may face competition from certain of our retail clients.

For example, a retail client may invest in its warehouse operational capacity to handle higher volumes of online returns which may cause such retailer to send us a reduced volume of returned merchandise or a product mix that is lower in value due to the removal of high value returns.

If our strategy to compete against our many competitors is not effective, we may lose market share and our results of operations may be negatively affected.

We may not be able to compete successfully against competitors and our financial condition and results of operations may be adversely impacted and we may not be able to achieve long term earnings growth targets.

If we do not retain our senior management and other highly skilled employees, we may not achieve our business objectives.

Angrick, III, our Chairman and Chief Executive Officer.

We do not have key-person insurance on any of our officers or employees.

Our future success also depends on our ability to continue to attract, retain and motivate highly skilled employees, particularly employees with sales, marketing, operations and technology expertise.

Competition for employees in our industry is intense.

We have experienced occasional difficulty in attracting the personnel to support the growth of our business, and we may experience similar difficulties.

Our operating results depend on our websites, network infrastructure and transaction processing systems, and our software runs on public clouds.

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We use, among others, the following licensed or open-source software:

ADP, Akamai, Amazon Web Services, Google, Heroku, Jenkins, LeaseQuery, Liferay, Microsoft, MuleSoft, MySQL, Oracle and Red Hat Enterprise Linux Software, and we may use additional open-source software.

Akamai, Algonomy, Amazon Web Services, Google, Heroku, HubSpot, Jenkins, LeaseQuery, Liferay, Microsoft, MuleSoft, MySQL, Oracle and Red Hat Enterprise Linux Software, and we may use additional open-source software.

Licenses to third party software may not continue to be available on terms that are acceptable to us, or at all.

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If we must license our proprietary software under the foregoing, our competitors and other third parties could obtain access to our intellectual property, which could harm our business.

Certain aspects of our marketing technology are dependent on third parties over whom we have no control.

Certain aspects of our marketing technology depend on third parties over whom we have no control.

Obtaining organic search engine traffic from Google is a significant traffic driver for our marketplaces.

If Google were to modify the search engine algorithms that control our page rankings, we may experience a significant negative impact on the traffic coming to our marketplaces.

If Google modified the search engine algorithms that control our page rankings, we may experience a significant negative impact on the traffic coming to our marketplaces.

A decrease in traffic would reduce the number of new buyers and sellers on our marketplaces and could harm our business.

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If industry leading software browsers, such as Google Chrome or Apple Safari, disable user analytics tracking or other similar capabilities, our ability to track our promotional campaign performance could be affected, which could in turn prevent us from fully optimizing the marketing spend associated with our promotional campaigns.

We are exposed to risks related to cybersecurity and protection of confidential information.

We retain highly confidential information on behalf of our buyers and sellers in our systems and databases.

Although we maintain security features in our systems designed to protect user information and prevent data loss and other security breaches, such measures cannot provide absolute security and our operations may be susceptible to breaches, including from circumvention of security systems, denial of service attacks or other cyber-attacks, hacking, computer viruses or malware, technical malfunction, employee error, malfeasance, physical breaches, system disruptions or other disruptions.

For example, in 2018, we experienced a data breach incident that involved an employee’s email account and may have resulted in the exposure of personally identifiable information of our employees.

We cannot be certain that the measures and processes taken by us to address this incident will prevent harm to our employees from the incident or prevent all similar events in the future.

Disruptions from cybersecurity events may jeopardize the security of information stored in and transmitted through our systems.

An increasing number of websites, including those owned by several other large Internet and offline companies, have disclosed breaches of their security, some of which have involved sophisticated and highly targeted attacks on portions of their websites or infrastructure.

The techniques used to obtain unauthorized access, disable, or degrade service, or sabotage systems, change frequently, may be difficult to detect for a long time, and often are not recognized until launched against a target.

Certain efforts may be state sponsored and supported by significant financial and technological resources and therefore may be even more difficult to detect.

We may not anticipate these techniques or implement adequate preventive measures.

We currently expend, and may be required to expend significant additional capital and other resources, to protect against such security breaches or to alleviate problems caused by such breaches.

Our insurance coverage may be inadequate to compensate us for any related losses we incur.

These issues are likely to become more difficult as we expand our operations.

Any breach of our security measures, or even a perceived breach of our security measures, could cause us to lose sellers or buyers, suffer material harm to our business, financial condition, operating results and reputation or be subject to regulatory actions, sanctions or other statutory penalties, litigation, or liability for failure to safeguard our sellers’ and buyers’ information.

Further, losing confidential seller or buyer information could also expose us to the risk of liability and costly litigation.

Like many other e-commerce marketplaces, Apple’s recent upgrades to provide greater transparency as to Identifier for Advertisers (IDFA) has with respect to some categories of assets made it harder and more expensive for us to target customers with the interest in purchasing those categories of assets.

We are required to maintain the privacy and security of personal and business information amidst multiplying threat landscapes and in compliance with privacy and data protection regulations globally.

Failure to do so could damage our business, including our reputation with sellers, buyers and employees, cause us to incur substantial additional costs, and become subject to litigation and regulatory action.

Increased security threats and more sophisticated cyber misconduct pose a risk to our e-commerce marketplaces, information technology systems, networks, and services.

We rely upon IT systems and networks, some of which are managed by third parties, in connection with virtually all of our business activities.

Additionally, we collect, store and process information relating to our business, sellers, buyers and employees.

Operating these IT systems and networks, and processing and maintaining this data, in a secure manner, is critical to our business operations and strategy.

Losing confidential seller or buyer information could also expose us to the risk of liability and costly litigation.

In addition, if there is any perception that we cannot protect our users’ confidential information, we may lose the ability to retain existing, and attract new, sellers and buyers, and therefore our revenue could decline.

Shipment of merchandise sold in our marketplaces could be delayed or disrupted by factors beyond our control and we could lose buyers and sellers.

We rely upon third-party carriers such as United Parcel Service, or UPS, for timely delivery of our merchandise shipments.

We are subject to carrier disruptions and increased costs due to factors beyond our control, including labor difficulties, inclement weather, terrorist activity and increased fuel costs.

In addition, we do not have a long-term agreement with UPS or any other third-party carriers, and we cannot be sure that our relationship with UPS will continue on terms favorable to us, if at all.

If our relationship with UPS is terminated or impaired or if UPS cannot deliver merchandise for us, we would have to use alternative carriers for the shipment of products to our buyers.

We may not be able to engage alternative carriers timely or on terms favorable to us.

Potential adverse consequences may include reduced visibility of order status and package tracking;

delays in merchandise receipt and delivery;

increased cost of shipment;

and reduced shipment quality, which may damage merchandise.

Any failure to receive merchandise at our distribution centers or deliver products to our buyers in a timely and accurate manner could lead to seller or buyer dissatisfaction and cause us to lose sellers and buyers.

An interruption in the operations of our buyer and seller support service system or our distribution centers could significantly harm our business and operating results.

Increased remote work due to the Pandemic has also increased the possible attack surfaces.

Threats designed to gain unauthorized access to systems, networks and data, both ours and third parties with whom we work, are increasing in frequency and sophistication.

Cybersecurity attacks may range from random attempts to coordinated and targeted attacks, including sophisticated computer crimes and advanced persistent threats.

Phishing attacks have emerged as particularly prominent, including as vectors for ransomware attacks, which have increased in breadth and frequency for the Company.

While we train our employees as part of our security efforts, that training cannot be completely effective.

These threats pose a risk to the security of our systems and networks and the confidentiality, integrity, and availability of our data.

It is possible that our IT systems and networks, or those managed by third parties such as cloud providers or suppliers that otherwise host confidential information, could have vulnerabilities, which could go unnoticed for a period of time.

While our cybersecurity and compliance efforts seek to mitigate such risks, there can be no guarantee that the actions and controls we and our third-party service providers have implemented and are implementing, will be sufficient to protect our systems, information or other property.

We currently expend, and we may be required to expend significant additional capital and other resources, to protect against such security breaches or to alleviate problems caused by such breaches.

Our insurance coverage may be inadequate to compensate us for any related losses we incur.

An interruption in the operations of our buyer and seller support service system or our warehouse distribution centers could significantly harm our business and operating results.

Our business depends, to a large degree, on the provision of effective support services to our buyers and sellers, and on effective distribution center operations (including leased commercial warehouse distribution space).

These operations could be harmed by several factors, including any material disruption or slowdown at our distribution centers resulting from labor disputes, changes in the terms of our underlying lease agreements, telecommunications failures, power or service outages, human error, terrorist attacks, natural disasters, government mandated business closures and shelter-in-place guidelines designed to contain the spread of epidemic or pandemic disease or other events.

If we fail to accurately predict our ability to sell merchandise in which we take inventory risk and credit risk our margins may decline.

Under our purchase transaction model, we purchase merchandise and assume the risk that the merchandise may sell for less than we paid for it.

If we fail to accurately predict our ability to sell assets in which we take inventory risk and credit risk our margins may decline.

Under our purchase transaction model, we purchase assets and assume the risk that the assets may sell for less than we paid for it.

We assume general and physical inventory and credit risk.

These risks are especially significant because some of the goods we purchase and resell on our websites are impacted by rapid technological change, obsolescence and price erosion, and because we sometimes make large purchases of particular types of inventory or industrial equipment when manufacturing facilities or campuses close.

In addition, we do not typically receive warranties on the merchandise we purchase and, as a result, we must resell or dispose of any returned goods on an as-is basis, which limits the types of buyers willing to purchase our merchandise.

Historically, the amount of disposed goods (which includes returned goods we have not resold) has been less than 2% of the goods we have purchased.

To manage our inventory successfully, we must maintain enough buyer demand to sell merchandise for a reasonable financial return.

We may overpay for the acquired merchandise if we miscalculate buyer demand or the acquired merchandise is not as desirable as we predicted.

If merchandise is not attractive to our buyer base, we may have to take significant losses resulting from lower sale prices, which could reduce our revenue and margins.

In addition, we do not typically receive warranties on the assets we purchase and, as a result, we must resell or dispose of any returned goods on an as-is basis, which limits the types of buyers willing to purchase our assets.

To manage our inventory successfully, we must maintain enough buyer demand to sell assets for a reasonable financial return.

We may overpay for the acquired assets if we miscalculate buyer demand or the acquired assets is not as desirable as we predicted.

If assets are not attractive to our buyer base, we may have to take significant losses resulting from lower sale prices, which could reduce our revenue and margins.

Occasionally, in our capital assets marketplace, we make very significant inventory acquisitions, such as the purchase of semi-conductor and oil and gas equipment and biopharma and metal-working machinery, for later resale on our energy and industrial marketplaces.

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If we obtain financing to fund such acquisitions, such financing will increase our costs, which will decrease any profits we receive from the sale of the acquired assets.

As we grow our business, we may increase the merchandise we purchase directly from sellers, resulting in increased inventory levels and related risks, including increased risk of losses on the sale of the inventory acquired.

As we grow our business, we may increase the assets we purchase directly from sellers, resulting in increased inventory levels and related risks, including increased risk of losses on the sale of the inventory acquired.

Any such increase would require the use of additional working capital and any funds so used would not be available for other purposes.

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• our ability to retain and expand our base of sellers;

• entry into, or the modification, termination or expiration of, material contracts;

• entry into, or the modification, termination or expiration of, contracts;

• the volume, size, timing and completion rate of transactions in our marketplaces, including variability due to the timing of large, project-based activities;

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If we fail to identify, finance and integrate acquisitions, our future operating results may be materially adversely affected.

We have expanded our business in part through acquisitions and may continue to do so in the future.

We have expanded our business in part through acquisitions such as the most recent acquisition of Bid4Assets, Inc.

We may continue to do so.

The success of any future growth strategy involving acquisitions will depend on our ability to identify, and the availability of, suitable acquisition candidates.

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Harm to our reputation can arise from numerous sources, including, among others, employee misconduct, security breaches, compliance failures, litigation or regulatory outcomes or governmental investigations.

Our reputation could also be harmed by the failure or perceived failure of an affiliate, joint-venture, or a vendor or other third party with which we do business, to

comply with laws or regulations.

Our reputation could also be harmed by the failure or perceived failure of an affiliate, joint-venture, or a vendor or other third party with which we do business, to comply with laws or regulations.

In addition, our reputation or prospects may be significantly damaged by adverse publicity or negative information regarding us, whether or not true, that may be posted on social media, non-mainstream news services or other parts of the internet, and this risk can be magnified by the speed and pervasiveness with which information is disseminated through those channels.

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We are required to comply with the laws of the countries or markets in which we operate.

In addition, because our services are accessible worldwide and facilitate the sales of goods and provide services to users worldwide, one or more jurisdictions may claim that we or our users are required to comply with their laws based on the location of our servers, or one or more of our users, or location of the products or service being sold or provided.

It is costly to establish, develop, and maintain international operations and websites, and promote our brand internationally.

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• government regulation of e-commerce and other services, competition, and restrictive governmental actions (such as trade protection measures, including export duties and quotas and custom duties and tariffs), nationalization, and restrictions on foreign ownership;

• restrictions on sales or distribution of certain products or services and uncertainty regarding liability for products and services, including uncertainty because of less Internet-friendly legal systems, local laws, lack of legal precedent, and varying rules, regulations, and practices regarding the enforcement of intellectual property rights;

• restrictions on sales or distribution of certain assets or services and uncertainty regarding liability for assets and services, including uncertainty because of less Internet-friendly legal systems, local laws, lack of legal precedent, and varying rules, regulations, and practices regarding the enforcement of intellectual property rights;

• business licensing or certification requirements, such as for imports, exports, and web services;

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The global COVID-19 pandemic could harm our business and results of operations.

The global spread of COVID-19 and related measures to contain its spread (such as government mandated business closures and shelter in-place guidelines) have created significant volatility, uncertainty and economic disruption.

Although the COVID-19 pandemic and the related measures to contain its spread have not had a material adverse effect on our consolidated results of operations to date, they have adversely affected certain components of our business, particularly revenues during times and in places in which governments ordered business and governmental closures and issued the most restrictive shelter in-place guidelines.

The extent to which the COVID-19 pandemic impacts our business, results of operations, financial condition and liquidity in the future will depend on numerous evolving factors that we cannot predict, including the duration and scope of the pandemic;

any resurgence or “additional waves” of the pandemic;

governmental, business and individuals’ actions that have been and continue to be taken in response to the pandemic;

the availability of government funding programs benefiting our sellers and buyers;

the impact of the pandemic on national and global economic activity, unemployment levels and financial markets, including the possibility of a national or global recession;

the potential for shipping difficulties, including slowed

deliveries from sellers to their customers;

and the ability of consumers to pay for products.

The COVID-19 pandemic has generally resulted in a decrease in consumer spending, which could have an adverse impact on our sellers through reduced consumer demand for their surplus assets, which could in turn negatively impact the demand for and use of our platforms.

Additionally, the COVID-19 pandemic has caused us to require employees to work remotely for an indefinite period of time, which could negatively impact our business and harm productivity and collaboration.

The future impact of COVID-19 and these containment measures cannot be predicted with certainty and may adversely affect our business, results of operations, financial condition and liquidity, perhaps materially.

We cannot assure that we will have access to external financing at times and on terms we consider acceptable, or at all, or that we will not experience other liquidity issues going forward in light of uncertainties regarding the pandemic

Global and regional economic conditions could harm our business.

The global spread of COVID-19 (the “Pandemic”) and related measures to contain its spread (such as government mandated business closures and shelter in-place guidelines experienced in Q2 and Q3 of FY2020) have created significant volatility, uncertainty and economic disruption.

Although the Pandemic and the related measures to contain its spread have not had a material adverse effect on our consolidated results of operations to date, they have adversely affected certain components of our business, particularly revenues during times and in places in which governments ordered business and governmental closures and issued the most restrictive shelter in-place guidelines.

The extent to which the Pandemic impacts our business, results of operations, financial condition and liquidity in the future will depend on numerous evolving factors that we cannot predict, including the severity and duration of future mutations or related variants of the virus in areas in which we operate for which there may not be an effective vaccine.

Global and regional economic conditions.

Our operations and performance depend significantly on global and economic conditions.

Adverse economic conditions and events include, but are not limited to, uncertainties and instability due to the global COVID-19 pandemic.

Adverse economic conditions and events include, but are not limited to, uncertainties and instability due to the Pandemic and its impact on global macroeconomic economic trends.

These conditions could have a material adverse effect on our business by reducing the ability of international buyers and sellers to conduct businesses due to travel restrictions impacting the ability of:

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The laws and regulations related to the internet and e-commerce are evolving.

These laws and regulations relate to issues such as user privacy, freedom of expression, pricing, fraud, quality of products and services, taxation, advertising, intellectual property rights and information security.

Laws governing issues such as property ownership, copyrights and other intellectual property issues, taxation, libel and defamation, obscenity and personal privacy could also affect our business.

These laws and regulations relate to issues such as user privacy, freedom of expression, pricing, fraud, quality of assets and services, taxation, advertising, intellectual property rights and information security.

Laws governing issues such as property ownership, title registration, security interests in assets, copyrights and other intellectual property issues, taxation, libel and defamation, obscenity and personal privacy could also affect our business.

Laws adopted prior to the advent of the internet may not contemplate or address the unique issues of the Internet and related technologies and it is not clear how they will apply.

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Our failure to comply with these federal, state and international laws and regulations could subject us to lawsuits, fines, criminal penalties, statutory damages, adverse publicity and other costs which could decrease our profitability.

Certain categories of merchandise sold on our marketplaces are subject to government restrictions.

We sell merchandise, such as scientific instruments, information technology equipment and aircraft parts, that is subject to export control and economic sanctions laws, among other laws, imposed by the United States and other governments.

Certain categories of assets sold on our marketplaces are subject to government restrictions.

We sell assets, such as scientific instruments, information technology equipment and aircraft parts, that is subject to export control and economic sanctions laws, among other laws, imposed by the United States and other governments.

Such restrictions include the U.S.

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In addition, we could suffer serious harm to our reputation if allegations of impropriety are made against us, whether or not true.

We may be subject to product liability claims if people or property are harmed by the products we sell.

Some products we sell through our e-commerce marketplaces may expose us to product liability claims relating to personal injury, death, or environmental or property damage, and may be the subject of product recalls or other actions.

Our exposure to product liability claims may be increased if, for example, the manufacturers of the relevant products do not have enough protection from such claims.

We may be subject to product liability claims if people or property are harmed by the assets we sell.

Some assets we sell through our e-commerce marketplaces may expose us to product liability claims relating to personal injury, death, or environmental or property damage, and may be the subject of product recalls or other actions.

Our exposure to product liability claims may be increased if, for example, the manufacturers of the relevant assets do not have enough protection from such claims.

Defense of any such actions could be costly and involve significant time and attention of our management and commitment of other resources, may cause us to incur monetary liabilities or penalties, and may require us to change our business in ways adverse to us.

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Unfavorable findings resulting from audit or investigation could subject us to a variety of penalties and sanctions, could negatively impact our future operating results and could force us to adjust previously reported operating results.

Many of our sellers, including large commercial corporations and federal, state and local governments, have the right to audit our performance under our contracts.

Many of our sellers, including large commercial corporations and governmental entities, have the right to audit our performance under our contracts.

Any adverse findings from audits or reviews of our performance could result in a significant adjustment to our previously reported operating results.

The results of an audit could significantly limit the volume and type of merchandise made available to us, resulting in lower GMV, revenue and profitability.

If such a government audit uncovers improper or illegal activities, we could be subject to civil and criminal penalties, administrative sanctions and could suffer serious harm to our reputation.

Government and law enforcement agencies may also investigate our activities under contracts with commercial businesses and federal, state, local and municipal governments.

The results of an audit could significantly limit the volume and type of assets made available to us, resulting in lower GMV, revenue and profitability.

If such an audit uncovers improper or illegal activities, we could be subject to civil and criminal penalties, administrative sanctions and could suffer serious harm to our reputation.

Government and law enforcement agencies may also investigate our activities under contracts with commercial businesses and governmental entities.

If such an investigation alleges that we engaged in improper or illegal activities, we could be subject to civil and criminal penalties and administrative sanctions, including termination of contracts, forfeiture of profits, suspension of payments, fines, and suspension or debarment from doing business with government agencies.

If, as the result of a government audit or investigation, or for any other reason, we are suspended or debarred from contracting with the federal or other governments generally, or any specific agency, if our reputation or relationship with government agencies is impaired, or if any government otherwise ceases doing business with us or significantly decreases the amount of business it does with us, our revenue and profitability could substantially decrease.

If, as the result of a government audit or investigation, or for any other reason, we are suspended or debarred from contracting with governments generally, or any specific agency, if our reputation or relationship with government agencies is impaired, or if any government otherwise ceases doing business with us or significantly decreases the amount of business it does with us, our revenue and profitability could substantially decrease.

Our operations are subject to extensive anti-corruption laws and regulations.

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Despite these protections, a third party could copy or otherwise obtain and use our intellectual property without authorization or independently develop similar intellectual property.

We currently are the registered owners of several Internet domain names, including www.liquidation.com, www.govdeals.com, www.networkintl.com, www.secondipity.com, www.go-dove.com, www.machinio.com, www.machineryhost.com and www.allsurplus.com.

We currently are the registered owners of several Internet domain names, including www.liquidation.com, www.govdeals.com, www.allsurplus.com, www.secondipity.com, www.go-dove.com, www.machinio.com, www.machineryhost.com and www.bid4assets.com.

We pursue the registration of our domain names in the U.S.

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Our competitors may adopt trade names or domain names similar to ours, impeding our ability to promote our marketplaces and possibly leading to buyer or seller confusion.

we could face trade name, trademark or service mark infringement claims brought by owners of other registered or unregistered trademarks or service marks, including trademarks or service marks that may incorporate variations of our marketplace names.

In addition, we could face trade name, trademark or service mark infringement claims brought by owners of other registered or unregistered trademarks or service marks, including trademarks or service marks that may incorporate variations of our marketplace names.

Any claims related to our intellectual property or confusion related to our marketplaces could damage our reputation and negatively affect the growth of our business.

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Compliance with these requirements has resulted in, and is likely to continue to result in, significant costs and the commitment of time and operational resources.

Recently completed initiatives, as well as other changes in our business, including initiatives to invest in information systems or to transition particular functions to third party providers, have and will necessitate modifications to our internal controls.

Recently completed initiatives, as well as other changes in our business (including initiatives to invest in information systems, transition particular functions to third party providers, and acquire new businesses such as Bid4Assets and Machinio) have and will necessitate modifications to our internal controls.

We cannot be certain that our design for internal control over financial reporting, or any changes to be made, will enable management to determine that our internal controls are effective for any period.

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Unresolved Staff Comments.

Not Applicable

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

What changed 10-K

Item 1A. Risk Factors