What changed in this filing

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Item 1A. Risk Factors

2022-02-28 compared with 2021-03-01 · 79 added, 81 removed, 409 unchanged (28% of the section changed)

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Our operations have been, and may continue to be, adversely affected by the COVID-19 pandemic.

We currently have four authentication centers, one in California and three in New Jersey and will be opening one in Arizona in the near future.

In addition, we operate a growing number of retail stores in select locations in the United States.

We currently have four authentication centers, one in Arizona and three in New Jersey.

In addition, we operate a number of retail stores in select locations in the United States.

For consignors, we also provide drop off of consigned goods at any one of our numerous luxury consignment offices (“LCOs”).

In response to the COVID-19 pandemic, state and local governments have imposed significant limitations on business operations.

In response to the COVID-19 pandemic, state and local governments initially imposed significant limitations on business operations.

As of the date of this filing, our authentication centers , retail stores and LCOs are all operating subject to certain restrictions, such as modified operating models and hours and enhanced safety and cleaning protocols.

We have also taken actions to facilitate the continued operation of our business, including implementing social distancing measures, offering virtual consignment appointments to augment our White Glove service, providing curbside pick-up for both our consignors and buyers, and enabling employees to work remotely to the extent possible.

We have also taken actions to facilitate the continued operation of our business, including implementing social distancing measures, offering virtual consignment appointments to augment our concierge service, providing curbside pick-up for both our consignors and buyers, and enabling employees to work remotely to the extent possible.

In addition to these operational challenges, the COVID-19 pandemic also threatens the health of our employees, consignors and buyers.

Our business is critically dependent on our employees who staff our facilities and stores.

It is unclear whether further limitations will be imposed in the near future due to the current resurgence of the COVID-19 virus and any new variants.

It is unclear whether further or new limitations will be imposed in the near future due to the current resurgence of the COVID-19 virus and any new variants.

The nature, scope and duration of the effects of the COVID-19 pandemic on our operations is highly uncertain and could have a material adverse effect on our business and operating results.

The COVID-19 pandemic has impacted, and may continue to impact, our business.

The COVID-19 pandemic and related government-mandated measures, such as business closures and shelter in-place guidelines, have created significant market volatility, uncertainty and economic disruption.

The COVID-19 pandemic and related government-mandated measures, such as business closures and vaccine mandates, have created significant market volatility, uncertainty and economic disruption.

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

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the impact of the pandemic on national and global economic activity;

unprecedented unemployment levels;

disruption of the financial markets, including the possibility of a national or global economic recession or depression;

disruption of the financial and labor markets, including the possibility of a national or global economic recession or depression;

the limitations on operations requiring employees to perform their duties in-person, such as our warehouse operations;

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and weakened consumer demand.

Additionally, under current state and local government orders, employees who are not required to perform their duties in-person, are required to work remotely for an indefinite period of time, which could introduce additional operational risk, such as an increased vulnerability to cyber-attacks, and harm productivity and collaboration.

Additionally, the increased number of employees who work remotely could introduce additional operational risk, such as an increased vulnerability to cyber-attacks, and harm productivity and collaboration.

Our ability to return to normalized operations and the timing of such a return cannot be predicted at this time.

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We may not be able to sustain our revenue growth rate or effectively manage growth or new opportunities.

While we experienced negative revenue growth in 2020, this follows revenue growth in 2018 and 2019.

While we experienced negative revenue growth in 2020, our revenue grew in 2018, 2019 and 2021.

Such recent revenue growth should not be considered indicative of our future performance.

Our online marketplace represents a substantial departure from the traditional resale market for luxury goods.

Our online marketplace represents a

substantial departure from the traditional resale market for luxury goods.

While our business grew rapidly prior to the COVID-19 pandemic, the resale market for luxury goods may not continue to develop in a manner that we expect or that otherwise would be favorable to our business.

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You should consider our business and prospects in light of the risks and difficulties we may encounter.

Aside from the negative impact the COVID-19 pandemic has had and may continue to have on our revenues, as we grow our business, our future revenue growth rates may slow due to a number of factors, including the maturation of our business, increased market adoption against which future growth will be measured, increasing competition or our failure to capitalize on growth opportunities, such as increasing company-owned inventory.

Our rapid growth has placed significant demands on our management and our operational and financial infrastructure.

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We rely on a constant supply of consigned goods to sustain and grow our revenue, making our revenue in any given period difficult to predict.

Because our operating expenses are relatively fixed in the short term, any failure to achieve our revenue expectations would have a direct, adverse effect on our financial condition, operating results and the price of our stock.

Because our operating expenses are relatively fixed in the short term, any failure to achieve our revenue expectations would have a direct adverse effect on our business, financial condition, operating results and the price of our stock.

We have experienced seasonal and quarterly variations in our revenue and operating results.

Our business is seasonal and historically we have realized a disproportionate amount of our revenue and earnings for the year in the fourth quarter as a result of the holiday season and seasonal promotions.

Our business is seasonal and historically we have realized a disproportionate amount of our revenue and earnings for the year in the fourth quarter due to the holiday season and seasonal promotions.

We expect this to continue in the future.

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We generally allow buyers to return certain purchases from our website and retail stores under our return policy.

We record a reserve for returns against proceeds to us from the sale of goods on our online marketplace in calculating revenue.

We estimate this reserve based on historical return trends.

We record a reserve for returns against proceeds we receive from the sale of goods on our online marketplace when we calculate revenue.

We estimate this reserve based on historical return trends and our current expectations.

The introduction of new products in the retail market, changes in consumer confidence or other competitive and general economic conditions, and higher than expected returns in connection with fourth quarter holiday buying may cause actual returns to exceed our reserve for returns.

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Any debt financing secured by us could involve restrictive covenants relating to our capital-raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities in the future.

In addition, we may not be able to obtain additional

financing on terms favorable to us, if at all.

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

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

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We may be unable to execute on our retail growth strategy.

While we currently operate a limited number of retail stores, we plan to increase the number of new retail stores, including “neighborhood stores” with smaller square footage.

We currently operate a limited number of retail stores, including a number of “neighborhood stores” with smaller square footage.

We believe that retail stores are critical for our growth expansion of our business, raising brand awareness with consignors and buyers and generating new supply.

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Expansion of our operations internationally will require significant management attention and resources.

While we have members from outside the United States who purchase items from our online marketplace, we have not expanded our physical operations internationally.

While we have buyers from outside the United States who purchase items from our online marketplace, we have not expanded our physical operations internationally.

If we choose to do so, we would need to adapt to various local cultures, languages, standards, laws and regulations and policies.

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As a result, we may be subject to periodic fluctuations in the number, brands and quality of goods sold through our online marketplace on behalf of our consignors.

In addition, a significant number of our new and existing consignors greatly prefer our White Glove consultation method for consigning luxury goods, which involves our sales professionals meeting with our consignors in their homes.

Due to the COVID-19 pandemic, we have modified our White Glove consultation method for consigning luxury goods to operate on a “no contact” basis.

It is unclear what impact this modified “no contact” White Glove consultation method will have on our operations and these new and existing consignors may

not be as willing, or willing at all, to utilize our other methods for consignment.

In addition, a significant number of our new and existing consignors greatly prefer our concierge consultation method for consigning luxury goods, which involves our sales professionals meeting with our consignors in their homes.

Due to the COVID-19 pandemic, we have modified our concierge consultation method for consigning luxury goods to operate on a “no contact” basis.

It is unclear what impact this modified “no contact” concierge consultation method will have on our operations and these new and existing consignors may not be as willing, or willing at all, to utilize our other methods for consignment.

We have also added a buy upfront program in an effort to generate additional supply.

The effectiveness of this program, including its commission structure, is still uncertain.

If we fail to attract new consignors or drive repeat consignments in a cost-effective manner, or fail to convert buyers to consignors, our ability to grow our business would be adversely affected.

If we fail to attract new consignors or drive repeat consignments in a cost-effective manner, or fail to convert buyers to consignors, our ability to grow our business and our operating results would be adversely affected.

We may be unable to attract and retain talented sales professionals.

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Our growth and supply of product offerings depend on our ability to maintain our brand partnerships.

We have established brand partnerships with Gucci, Stella McCartney and Burberry and seek to add additional partnerships in the future.

We have established brand partnerships with brands such as, Gucci, Stella McCartney and Burberry, and seek to add additional partnerships in the future.

We believe that these partnerships are important to increasing our supply and growing our business.

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To establish and maintain these partnerships, brands must trust, among other things, our authentication process and that we provide a level of customer service that matches those generally provided by luxury brands, for both consignors and buyers, online and in-store.

If we are unable to provide value to our existing partners or unable to add new partners, the growth of our business may be harmed.

If we are unable to provide value to our existing partners or to add new partners, the growth of our business may be harmed.

Risks Relating to Demand

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National retailers and brands set their own retail prices and promotional discounts on new luxury goods, which could adversely affect our value proposition to consignors and buyers.

National retailers and brands set pricing for new luxury goods that they sell and from time offer sales and promotional pricing, particularly during the holiday season, when we have historically made a substantial portion of our annual sales.

National retailers and brands set pricing for new luxury goods that they sell and from time to time offer sales and promotional pricing, particularly during the holiday season, when we have historically made a substantial portion of our annual sales.

Promotional pricing by these parties may lower the value of products consigned with us and our inventory and, in turn, reduce the value proposition for both our consignors and buyers.

We have in the past experienced a reduction in our GMV and AOV due to fluctuations in the price of new luxury goods sold by retailers and brands, and we anticipate similar reductions and fluctuations in the future.

We have in the past experienced a reduction in our GMV and AOV due to fluctuations in the price of new luxury goods sold by retailers and brands, and we could experience similar reductions and fluctuations in the future.

However, the timing and magnitude of such discounting can be difficult to predict and can be brought on by unique factors such as a retailer or brand going out of business and liquidating its inventory, which may happen to a greater extent as a result of the COVID-19 pandemic and weakened consumer demand.

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We are also sourcing an increasing amount of goods directly from brands.

While we attempt to source goods that complement our existing

inventory, we cannot ensure we will do so successfully.

While we attempt to source goods that complement our existing inventory, we cannot ensure we will do so successfully.

To the extent we do not accurately predict and successfully respond to the evolving preferences of our consignors and buyers, our ability to grow our business and our operating results would be adversely affected.

We may be unable to replicate our business model for newer categories of consigned luxury goods.

Our women’s category accounted for approximately 65% of our GMV in 2020.

We intend to deepen our penetration in other high-value categories such as men’s, jewelry and watches, and home and art and continue to explore additional categories of luxury goods.

Our women’s category contributes a significant amount to our GMV.

We intend to deepen our penetration in other high-value categories such as men’s, jewelry and watches, and home and art and continue to explore additional categories

of luxury goods.

If these additional categories of pre-owned luxury goods are not accepted by our existing consignors or buyers, or if such categories do not attract new consignors or buyers, our revenues may fall short of expectations, our brand and reputation could be adversely affected and we may incur expenses that are not offset by revenues.

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Some of the factors that may reduce luxury spending include economic downturns, including economic recession or depression, high levels of unemployment, higher consumer debt levels, reductions in net worth, declines in asset values, including home values, and related market and economic uncertainty.

Many of these factors have occurred, and may continue to become more prevalent, as a result of the COVID-19 pandemic.

Many of these factors have occurred, and may occur in the future, as a result of the COVID-19 pandemic.

Such economic uncertainty and the resulting decrease in the rate of new luxury goods purchases in the primary market may have a corresponding impact on luxury resale, which could manifest in a number of ways, including fewer individuals choosing to consign their goods with us, resulting in a decrease of items available in our online marketplace, fewer individuals choosing to buy pre-owned luxury goods, resulting in lower active buyer growth and order volume, and lower Average Order Volume (“AOV”) due to a combination of lower average selling price per item and/or fewer items per average order, any of which could have an adverse effect on our business and operating results.

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From time to time, we receive counterfeit goods for consignment.

While we continue to invest and innovate heavily in our authentication

processes, and we reject any goods we believe to be counterfeit, we cannot be certain that we will identify every counterfeit item that is consigned to us.

While we continue to invest and innovate heavily in our authentication processes, and we reject any goods we believe to be counterfeit, we cannot be certain that we will identify every counterfeit item that is consigned to us.

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

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The sale of any counterfeit goods may damage our reputation as a trusted online marketplace for authenticated, pre-owned luxury goods which may impact our ability to attract and maintain consignors, buyers and brand partners.

Additionally, we have been and may in the future be subject to negative press or public allegations, including on social media, that our authentication processes are inadequate.

Additionally, we have been and may in the future be subject to negative press or public allegations, including on social media, that our

authentication processes are inadequate.

Any material failure or perceived failure in our authentication operations could cause buyers and consignors to lose confidence in our platform and adversely affect our revenue.

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Information concerning us or our consignors and brands, whether accurate or not, may be posted on social media platforms at any time.

The harm may be immediate without affording us an opportunity for redress or correction and could have a material adverse effect

on our reputation, business, operating results, financial condition and prospects.

The harm may be immediate without affording us an opportunity for redress or correction and could have a material adverse effect on our reputation, business, operating results, financial condition and prospects.

The public disclosure of our Environmental, Social and Governance ("ESG") metrics may subject us to risks.

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Also, by electing to set goals and publicly disclose our ESG metrics, we may face increased scrutiny related to environmental, social, and governance activities.

Any failure to meet our goals or to act responsibly in the areas in which we report, may negatively affect our reputation and the value of our brand, including impacting employee engagement and retention, the willingness of our consignors and buyers and our partners and vendors to do business with us, or investors’ willingness to purchase or hold shares of our common stock, any of which could adversely affect our business, financial performance, and growth.

Any failure to meet our goals or to act responsibly in the areas in which we report, may negatively affect our

reputation and the value of our brand, including impacting employee engagement and retention, the willingness of our consignors and buyers and our partners and vendors to do business with us, or investors’ willingness to purchase or hold shares of our common stock, any of which could adversely affect our business, financial performance, and growth.

Risks Related to Our Merchandising and Fulfillment

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Prior to the COVID-19 pandemic, we had rapidly increased our operations employee headcount to support the growth of our business.

However, due to the impacts of the COVID-19 pandemic on our operations, we have recently implemented a number of measures to realign our cost structure and preserve liquidity, which included the reduction of our overall headcount and furloughing of employees.

Prior to the COVID-19 pandemic, the market for employees had been increasingly competitive and was highly dependent on geographic location.

The market for employees is increasingly competitive and highly dependent on geographic location.

Some of our employees have specific knowledge and skills that would make it more difficult to hire replacement personnel capable of effectively performing the same tasks without substantial training.

We also provide specific training to our employees in each of our business functions in order to provide our consignors and buyers with a consistent luxury experience.

If we need to increase our headcount after the COVID-19 pandemic has subsided, and we fail to successfully locate, hire, train and retain personnel in the future, our operations would be negatively impacted, which would have an adverse effect on our business, financial condition and operating results.

We have recently faced labor shortages exacerbated by the effects of COVID-19, and we may continue to experience such shortages in the future.

Our hiring challenges negatively impacted the time for processing and launching products on our website, and negatively impacted our GMV results, and similar challenges could negatively impact our business in the future.

If we fail to successfully locate, hire, train and retain personnel in the future, our operations would be negatively impacted, which would have an adverse effect on our business, financial condition and operating results.

We may not be able to identify and lease authentication centers in suitable geographic regions.

We lease facilities to store and accommodate the logistics infrastructure required to merchandise and ship the pre-owned luxury goods we sell through our online marketplace.

Our ability to successfully grow our business also depends on the availability and cost of leasing additional authentication centers that meet our criteria for a geographic location with access to a large, qualified talent pool as well as square footage, cost and other factors.

We currently have four authentication centers-one in California and three in New Jersey and are in the process of opening a new facility in Arizona .

Our ability to successfully grow our business depends on the availability and cost of leasing additional authentication centers that meet our criteria for a geographic location with access to a large, qualified talent pool as well as square footage, cost and other factors.

We currently have four authentication centers - one in Arizona and three in New Jersey.

Optimal space is becoming increasingly scarce, and where it is available, the lease terms offered by landlords are increasingly competitive.

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We may experience damage or destruction to our authentication centers or retail stores in which we store all of the consigned luxury goods we offer through our online marketplace.

We store the majority of the luxury goods we offer through our online marketplace in our authentication centers in California and New Jersey, with a smaller portion of luxury goods offered for sale in our retail stores.

We store the majority of the luxury goods we offer through our online marketplace in our authentication centers in Arizona and New Jersey, with a smaller portion of luxury goods offered for sale in our retail stores.

Any large scale damage to or catastrophic loss of goods stored in such authentication centers or retail stores, due to natural disasters, especially as catastrophic weather events become more frequent due to climate change, or man-made causes such as arson or theft would result in liability to our consignors for the expected commission liability for the lost items, reduction in the value of our inventory and a significant disruption to our business.

In addition, while we take measures to avoid damage, conduct inspections of consigned goods and inspect returned products, we cannot control items while they are out of our possession or prevent all damage while in our authentication centers.

For example, we have in the past and may in the future experience contamination, such as mold, bacteria, viruses, insects and other pests, in the goods shipped to us by our consignors, which may cause contamination of the goods

stored in our authentication centers or while shipping to buyers.

We may incur additional expenses and our reputation could be harmed if buyers and potential buyers believe that the luxury goods we offer on behalf of our consignors is not of high-quality or may be damaged or contain contaminants.

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Shipping is a critical part of our business and any changes in our shipping arrangements, interruptions in shipping or damage to products in transit could adversely affect our operating results.

We currently rely on a single vendor to meet our shipping needs.

If we are not able to maintain acceptable pricing and other terms or if they experience performance problems or other difficulties, including as a result of the COVID-19 pandemic, it could negatively impact our operating results and our consignors’ and buyers’ experience.

If we partner with multiple vendors or switch vendors in response, we may experience a disruption in shipping, which may negatively impact our reputation with consignors and buyers.

Our business depends on shipping vendors to meet our shipping needs.

If we are not able to maintain acceptable pricing and other terms or if our vendors experience performance problems or other difficulties, including as a result of the COVID-19 pandemic, it could negatively impact our operating results and our consignors’ and buyers’ experience.

partner with additional vendors or switch vendors in response, we may experience a disruption in shipping, which may negatively impact our reputation with consignors and buyers.

We face particular challenges in shipping internationally, including delays in shipments and customer service issues relating to the imposition of duties, which can be substantial for luxury items.

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While we expect these technologies to improve productivity in many of our merchandising operations, including pricing, copywriting, authentication, photography and photo retouching, any flaws or failures of such technologies could cause interruptions in and delays to our operations which may harm our business.

We have created our own purpose-built technology to operate our business, but we also rely on technology from third parties.

We have created our own purpose-built technology to operate our business, which may lack efficiency or become obsolete as we grow and we also rely on technology from third parties.

If these technologies do not perform in accordance with our expectations, third parties change the terms and conditions that govern their relationships with us, or if competition increases for the technology and services provided by third parties, our business may be harmed.

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Failure of our data security could cause us to incur unexpected expenses or compromise our data assets.

In the ordinary course of our business, we collect, process and store certain personal information and other data relating to individuals, such as our consignors, buyers and employees.

In the ordinary course of our business, we collect, process and store certain personal information (including credit card information) and other data relating to individuals, such as our consignors, buyers and employees.

We also maintain other information, such as our trade secrets and confidential business information, that is sensitive and that we seek to protect.

We rely substantially on commercially available systems, software, tools and monitoring to provide security for our processing, transmission and storage of personal information and other confidential information.

We or our vendors could be the subject of hacking, social engineering, phishing attacks or other attacks, which may allow hackers or other unauthorized parties to gain access to personal information or other data, including payment card data or confidential business information.

We or our vendors could be the subject of hacking, social engineering, phishing attacks or other attacks, which may allow hackers or other unauthorized parties, including our employees, to gain access to personal information or other data, including payment card data or confidential business information.

We and our vendors have faced these attacks previously and regularly must defend against or respond to such incidents.

We expect to incur ongoing costs associated with the detection and prevention of security breaches and other security-related incidents.

Any actual or perceived compromise of our systems or data security measures or those of third parties with whom we do business, or any failure to prevent or mitigate the loss of personal or other confidential information and delays in detecting or providing notice of any such compromise or loss could disrupt our operations, damage our reputation, cause some participants to decrease or stop their use of our online marketplace and subject us to litigation, government action, increased transaction fees, remediation costs, regulatory fines or penalties or other additional costs and liabilities that could adversely affect our business, financial condition and operating results.

The techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not identified until they are launched against a target, and we and our vendors may be unable to anticipate these techniques or to implement adequate preventative measures.

their use of our online marketplace and subject us to litigation, government action, increased transaction fees, remediation costs, regulatory fines or penalties or other additional costs and liabilities that could adversely affect our business, financial condition and operating results.

While we carry insurance related to potential data breaches, the insurance we do carry may not be adequate to cover all possible losses that our business could suffer.

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Our success depends in part on our ability to attract and retain key personnel on our executive team.

Senior employees have left our company in the past and others may in the future.

Senior employees have left our company in the past and others may leave in the future.

We often cannot anticipate such departures and may not be able to promptly replace key leadership personnel.

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We rely on a combination of intellectual property rights, contractual protections and other practices to protect our brand, proprietary information, technologies and processes.

We primarily rely on copyright and trade secret laws

to protect our proprietary technologies and processes, including the algorithms we use throughout our business.

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

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

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The development of alternative practices could require significant effort and expense or may not be feasible.

Our business, financial condition or operating results could be adversely

affected as a result of an unfavorable resolution of the disputes and litigation referred to above.

Our business, financial condition or operating results could be adversely affected as a result of an unfavorable resolution of the disputes and litigation referred to above.

Our use and other processing of personal information and other data is subject to laws and obligations relating to privacy and data protection.

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The CCPA may require us to modify our data processing practices and policies and to incur substantial costs and expenses in an effort to comply.

Similarly, the European Commission adopted a General Data Protection Regulation that became fully effective on May 25, 2018, imposing stringent EU data protection requirements.

Similarly, the European

Commission adopted a General Data Protection Regulation that became fully effective on May 25, 2018, imposing stringent EU data protection requirements.

We cannot yet fully determine the impact these or future laws, rules and regulations may have on our business or operations.

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states and municipalities, including the States of California, New York and Florida, have regulations regarding the handling and sale of secondhand goods, and licensing requirements for secondhand dealers.

Such government regulations could require us to change the way we conduct business, or our buyers to

conduct their purchases in ways that increase costs, such as prohibiting or otherwise restricting the sale or shipment of certain items in some locations.

Such government regulations could require us to change the way we conduct business, or our buyers to conduct their purchases in ways that increase costs, such as prohibiting or otherwise restricting the sale or shipment of certain items in some locations.

To the extent we fail to comply with requirements for secondhand dealers, we may experience unanticipated permanent or temporary shutdowns of our facilities which may negatively affect our ability to increase the supply of our goods, result in negative publicity and subject us to penalties and fines.

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The application of the income and tax laws is subject to interpretation.

Although we believe our tax methodologies are compliant, a taxing authority’s final determination in the event of a tax audit could materially differ from our past or current methods for determining and complying with our tax obligations, including the calculation of our tax provisions and accruals, in which case we may be subject to additional tax liabilities, possibly including interest and penalties.

and accruals, in which case we may be subject to additional tax liabilities, possibly including interest and penalties.

Furthermore, taxing authorities have become more aggressive in their interpretation and enforcement of such laws, rules and regulations over time, as governments are increasingly focused on ways to increase revenues, which may be intensified as a result of the COVID-19 pandemic and resulting economic strain.

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

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

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

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

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It is difficult to predict the impact of future changes to accounting principles or our accounting policies, any of which could negatively affect our reported results of operations.

If our internal control over financial reporting or our disclosure controls and procedures are not effective,

we may not be able to accurately report our financial results, prevent fraud or file our periodic reports in a timely manner, which may cause investors to lose confidence in our reported financial information .

If our internal control over financial reporting or our disclosure controls and procedures are not effective, we may not be able to accurately report our financial results, prevent fraud or file our periodic reports in a timely manner, which may cause investors to lose confidence in our reported financial information.

We recently became a “large accelerated filer” under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which requires us to comply with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”).

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• other events or factors, including those resulting from war or incidents of terrorism, or responses to these events or threats to public health, such as the current COVID-19 pandemic.

In addition, price and volume fluctuations in the stock markets have affected and continue to affect many online marketplace and other technology companies ’ stock prices.

In addition, price and volume fluctuations in the stock markets have affected and may continue to affect many online marketplace and other technology companies’ stock prices.

Stock prices often fluctuate in ways unrelated or disproportionate to the companies’ operating performance.

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We have incurred a significant amount of debt and may incur additional indebtedness in the future.

In June 2020, we issued $172.5 million in aggregate principal amount of 3.00% Convertible Senior Notes due 2025 (the “Notes”) in an offering exempt from registration.

In June 2020, we issued $172.5 million in aggregate principal amount of 3.00% Convertible Senior Notes due 2025 (the "2025 Notes"), and in March 2021, we issued $287.5 million in aggregate principal amount of 1.00% Convertible Senior Notes due 2028 (the "2028 Notes" and, together with the 2025 Notes, the "Notes"), each issuance in an offering exempt from registration.

We may be required to use a substantial portion of our cash flows from operations to pay interest and principal on our indebtedness.

Such payments will reduce the funds available to use for working capital, capital expenditures and other corporate purposes and limit our ability to obtain additional financing, which may in turn limit our ability to implement our business strategy, heighten our vulnerability to downturns in our business, the industry, or in the general economy, limit our flexibility in planning

for, or reacting to, changes in our business and the industry and prevent us from taking advantages of business opportunities as they arise.

If we are unable to generate such cash flow to service our debt, we may be required to adopt one or more alternatives, such as selling assets, incurring additional debt, restructuring debt or issuing additional equity on terms that may be onerous or highly dilutive.

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The conversion of some or all of our outstanding Notes would dilute the ownership interests of existing stockholders to the extent we deliver shares upon conversion of any such Notes.

If the Notes become convertible under the terms of the indenture, and if holders subsequently elect to convert the Notes, we could be required to deliver to them a significant number of shares of our common stock.

If the Notes become convertible under the

terms of the indenture, and if holders subsequently elect to convert the Notes, we could be required to deliver to them a significant number of shares of our common stock.

Any sales or anticipated sales in the public market of the common stock issuable upon conversion could adversely affect prevailing market prices for our common stock.

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In addition, even if holders of the Notes do not elect to convert their Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the Notes as a current rather than long-term liability, which could result in a material reduction in our net working capital.

The accounting method for the Notes could have a material effect on our reported financial results.

Under Accounting Standards Codification 470-20, Debt with Conversion and Other Options (“ASC 470-20”), an entity must separately account for the liability and equity components of the convertible debt instruments (such as the Notes) that may be settled entirely or partially in cash upon conversion in a manner that reflects the issuer’s economic interest cost.

The effect of ASC 470-20 on the accounting for the Notes is that interest will include both the amortization of the debt discount and the instrument’s nonconvertible coupon interest rate.

As a result, we will report larger net losses (or lower net income) in our financial results, which could adversely affect our reported or future financial results, the trading price of our common stock and the trading price of the Notes.

In addition, under certain circumstances, convertible debt instruments (such as the Notes) that may be settled entirely or partly in cash have been accounted for by utilizing the treasury stock method, the effect of which is that the shares issuable upon conversion of the Notes are not included in the calculation of diluted earnings per shares except to the extent that the conversion of such Notes exceeds their principal amount.

However, in August 2020, the Financial Accounting Standards Board published an accounting standards update, which amends these accounting standards to eliminate the treasury stock method for convertible note instruments and instead require application of the “if-converted” method.

Under that method, diluted earnings per share will generally be calculated assuming that all of the notes were converted solely into shares of common stock at the beginning of the reporting period, unless the result would be anti-dilutive, which could adversely affect our diluted earnings per share.

These amendments will be effective for public companies for fiscal years beginning after December 15, 2021.

The accounting method for the Notes materially affects our reported financial results.

Under Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 470-20, Debt with Conversion and Other Options, we have historically accounted for the liability and equity components of the Notes separately because the Notes may be settled entirely or partially in cash upon conversion in a manner that reflects our economic interest cost.

This bifurcation resulted in a debt discount for Notes.

See "Note 2—Summary of Significant Accounting Policies— Convertible Senior Notes." We used the effective interest method to amortize the debt discount to interest expense over the amortization period, which is the expected life of the Notes.

However, ASC 470-20 has been amended for fiscal years beginning after December 15, 2021, such that we will account for the Notes as a single liability measured at their amortized cost beginning January 1, 2022, unless we determine that the conversion feature is a derivative that must be bifurcated from the host contract or that the substantial premium model in ASC 470-20 applies.

As a result of this amendment, we expect a decrease to our accumulated deficit as of January 1, 2022 related to the interest expense from the amortization of the debt discount .

In addition, we calculate diluted earnings per share using the "if converted" method, which assumes that all of the Notes were converted solely into shares of common stock at the beginning of the reporting period, unless the result would be anti-dilutive, which adversely affects our diluted earnings per share.

Future amendments to the accounting treatment for the Notes, could adversely affect our financial results, the trading price of our common stock and the trading price of the Notes.

The capped call transactions may affect the value of the Notes and our common stock.

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This activity could also cause or avoid an increase or a decrease in the market price of our common stock.

Unresolve d Staff Comments.

Unresolved Staff Comments.

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What changed 10-K

Item 1A. Risk Factors