What changed in this filing

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Item 1A. Risk Factors

2025-02-21 compared with 2024-03-01 · 133 added, 105 removed, 491 unchanged (33% of the section changed)

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• We have a history of losses and we may not be able to achieve or maintain profitability in the future.

• The savings plan we implemented in February 2023 may not result in anticipated savings, could result in total costs and expenses that are greater than expected and could disrupt our business.

• We may not be able to return to historic levels of revenue growth rate or effectively manage growth or new opportunities.

• The savings plan we implemented in February 2023 may not result in anticipated savings.

• We may not return to historic levels of revenue growth rate or effectively manage growth or new opportunities.

• We may not accurately forecast revenue and appropriately plan our expenses.

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• We may require additional capital to support our business growth.

• Public health emergencies or outbreaks of epidemics, pandemics, or contagious diseases such as the COVID-19 pandemic have adversely affected, and could in the future, adversely affect our business and the business of our consignors and buyers.

• The failure of any bank in which we deposit our funds could reduce the amount of cash we have available to pay distributions and make additional investments.

• Public health emergencies or outbreaks of epidemics, pandemics, or contagious diseases have adversely affected, and could in the future, adversely affect our business and the business of our consignors and buyers.

• The failure of any bank in which we deposit our funds could reduce the amount of cash we have available.

Risks Relating to Our Strategy

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

• Our growth strategies may not be successfully implemented, help us achieve profitability or generate sustainable revenue and profit.

• Our growth strategies may not be successful.

Risks Relating to Supply

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• We must successfully gauge and respond to changing preferences among our consignors and buyers.

• We may be unable to replicate our business model for newer categories of consigned goods or different product mixes of consigned goods.

• We rely on consumer discretionary spending, which is adversely affected by economic downturns, including economic recession or depression, and other macroeconomic conditions or trends.

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

• We rely on consumer discretionary spending, which is adversely affected by economic downturns.

• Our industry is highly competitive and we may not be able to compete effectively.

Risks Related to Marketing and Brand Management

• Our success depends on the accuracy and reliability of our authentication process.

• Our success depends on the accuracy and reliability of our authentication processes and methods.

• We may not succeed in promoting and sustaining our brand.

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• Use of social media, emails and text messages may adversely impact our reputation or subject us to fines.

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

• The public disclosure of our ESG (as defined below) metrics and goals may subject us to risks.

Risks Related to Our Merchandising and Fulfillment

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• We may not be able to attract, train and retain specialized personnel and skilled employees.

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

• We may be unable to successfully leverage technology to automate and drive efficiencies in our operations.

• We may be unable to successfully leverage technology, including artificial intelligence and machine learning, to automate and drive efficiencies in our operations.

Risks Related to Data Security, Privacy and Fraud

• We rely on third parties to host our website and mobile app and to process payments.

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

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

• We may incur significant losses from fraud.

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• We are currently, and may be in the future, party to lawsuits and other claims.

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

• Our use and other processing of personal information and other data is subject to laws and obligations.

• Regulation of “cookie” tracking technologies or changes in such technologies could harm our business and operating results.

• We pay or collect sales taxes in all jurisdictions which require such taxes.

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• Our certificate of incorporation designates the Court of Chancery of the State of Delaware located within the State of Delaware as the exclusive forum for substantially all disputes between us and our stockholders.

Risks Related to Our Outstanding Notes

Risks Related to Our Outstanding Notes and Warrants

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

• Transactions relating to our Notes may dilute the ownership interest of our stockholders.

• The conversion of the Notes, if triggered, may adversely affect our financial condition and operating results.

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

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

• The indentures governing our Notes (as defined below) contain restrictions and other provisions that may make it more difficult to execute our strategy or to effectively compete, or that could materially affect our financial position.

• Transactions relating to the Convertible Senior Notes or the Warrants may dilute the ownership interest of our stockholders.

• The conversion of the Convertible Senior Notes or the cash settlement of the Warrants, if triggered, may adversely affect our financial condition and operating results.

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

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

Investing in our common stock involves a high degree of risk.

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The occurrence of any of the following risks or additional risks and uncertainties not presently known to us or that we currently believe to be immaterial could materially and adversely affect our business, financial condition or results of operations.

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Risks Relating to Our Business and Industry

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We may further discover that, despite the implementation of our workforce reduction, we may require additional capital to continue expanding our business, and we may be unable to obtain such capital on acceptable terms, if at all.

In addition, our real estate reduction plan could harm our brand reputation, constrain our ability generate new supply, and reduce demand in buyers.

In addition, our real estate reduction plan could harm our brand reputation, result in unanticipated charges or disputes, constrain our ability generate new supply, and reduce demand in buyers.

If we decide to open retail locations in the future, we may not be able to secure leases on comparable terms in comparable locations.

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

As we grow our business, our revenue growth rates may continue to decline in future periods due to a number of factors, including our inability to attract and retain consignors, general economic conditions, including a recession, increased market adoption against which future growth will be measured, increasing competition, slowing demand for items on our online marketplace from existing and new customers, changes to our commission structure, take rate or business model, changes in our total product mix, including as a result of our strategic shift to focus on higher value item or our failure to capitalize on growth opportunities.

As we grow our business, our revenue growth rates may continue to decline in future periods due to a number of factors, including our inability to attract and retain consignors, general economic conditions, including a recession, increased market adoption against which future growth will be measured, increasing competition, slowing demand for items on our online marketplace from existing and new customers, changes to our commission structure, take rate or business model, changes in our total product mix, including as a result of our strategic shift to focus on higher value items or our failure to capitalize on growth opportunities.

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

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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.

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.

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We may require additional capital to support business growth.

If such capital is not available to us, our business operating results and financial condition may be harmed.

We may require additional funds to support our growth and respond to business challenges.

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Accordingly, we may need to engage in equity or debt financings to secure additional funds, which may result in significant dilution to existing stockholders or the granting of new equity securities which have rights, preferences and privileges superior to those of holders of our common stock.

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.

Our 2029 Notes (as defined below) contain, and any other debt financing secured by us could also contain, 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.

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Public health emergencies or outbreaks of epidemics, pandemics, or contagious diseases such as the COVID-19 pandemic have adversely affected, and could in the future, adversely affect our business and the business of our consignors and buyers.

An epidemic, pandemic or similar serious public health issue, and the measures undertaken by governmental authorities to address it, could significantly disrupt or prevent us from operating our business in the ordinary course for an extended period, and thereby, and/or along with any associated economic and/or social instability or distress, have a material adverse impact on our results of operations, cash flows and financial condition.

The extent to which an epidemic, pandemic or similar serious public health issue could impact 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 epidemic, pandemic or similar public health issue;

An epidemic, pandemic , or similar serious public health issue (a "public health issue") , and the measures undertaken by governmental authorities to address it, could significantly disrupt or prevent us from operating our business in the ordinary course for an extended period, and thereby, and/or along with any associated economic and/or social instability or distress, have a material adverse impact on our results of operations, cash flows and financial condition.

The extent to which a public health issue could impact 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 public health issue;

government, business and individual actions that have been and continue to be taken in response;

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

In addition, the risks and uncertainties described elsewhere in this “Risk Factors” section may be exacerbated by an epidemic, pandemic or similar serious public health issue.

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In addition, the risks and uncertainties described elsewhere in this “Risk Factors” section may be exacerbated by a public health issue.

The failure of any bank in which we deposit our funds could reduce the amount of cash we have available to pay distributions and make additional investments.

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

We currently operate a limited number of retail stores, including a number of Neighborhood Stores with smaller footprints.

We currently operate a limited number of retail stores.

We believe that retail stores are effective at raising brand awareness with consignors and buyers and generating new supply.

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While we have members 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.

If we choose to do so, we would need to adapt to and would be subject

to new risks relating to various local cultures, languages, standards, laws and regulations and policies.

Our business model we employ may not appeal to consignors and buyers outside of the United States.

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We may not be able to obtain sufficient new and recurring supply of pre-owned luxury goods.

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Our success depends on our ability to generate a consistent supply of luxury goods to sell through our stores and online marketplace.

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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.

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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 fourth quarter holiday season, when we have historically made a substantial portion of our annual sales.

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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, higher levels of inflation, reductions in net worth, declines in asset values, including home values, and related market and economic uncertainty, including as a result of geopolitical instability and disruptions in the financial industry.

Many of these factors have occurred, and may occur in the future, as a result of the COVID-19 pandemic and recent macroeconomic uncertainty, rising interest rates, inflationary pressures, credit constraints and geopolitical instability due in part to the conflict between Russia and Ukraine and the Israel-Hamas war.

Many of these factors have occurred, and may occur in the future, as a result of macroeconomic uncertainty, rising interest rates, inflationary pressures, credit constraints and geopolitical instability due in part to the conflict between Russia and Ukraine and the Israel-Hamas war.

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 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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Any of these developments could harm our business, financial condition and operating results.

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Our industry is highly competitive and we may not be able to compete effectively.

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As the market evolves, new competitors may emerge, including traditional retail competitors who expand their offerings to include resale.

Some of our competitors may have greater resources than we do, which may allow them to derive greater revenue and profits from their existing buyer bases, acquire consignors at lower costs, achieve more favorable total product mixes or respond more quickly than we can to new or emerging technologies, such as artificial intelligence and machine learning, and changes in consumer shopping behavior or preferences.

Some of our competitors may have greater resources than we do, which may allow them to derive greater revenue and profits from their existing buyer bases, acquire consignors at lower costs, achieve more favorable total product mixes or respond more quickly than we can to new or emerging technologies, such as artificial intelligence, and changes in consumer shopping behavior or preferences.

These competitors may also adopt more aggressive pricing policies, commission structures or take rates, which may allow them to build larger consignor or buyer bases or generate revenue from their existing buyer bases more effectively than we do.

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Risks Relating to Marketing and Brand Management

Our success depends on the accuracy and reliability of our authentication process.

Our success depends on the accuracy and reliability of our authentication processes and methods.

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

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

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

In addition, when our authentication method does not involve taking physical possession of goods prior to the sale, our ability to identify counterfeits may decrease, and order cancellations may increase.

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Even if our marketing and advertising expenses result in increased sales, the increase might not offset our related expenditures.

We also face the unique challenge of attracting consignors and buyers to our online marketplace who may be unfamiliar with both our brand and our consignment business

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We also face the unique challenge of attracting consignors and buyers to our online marketplace who may be unfamiliar with both our brand and our consignment business model.

If we struggle to attract new consignors and buyers to our luxury resale model, or are unable to maintain our marketing and advertising channels on cost-effective terms or replace or supplement existing marketing and advertising channels with similarly or more effective channels, our marketing and advertising expenses could increase substantially, our consignor and buyer base could be adversely affected, and our business, operating results, financial condition and brand could suffer.

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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.

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

We voluntarily report certain metrics and goals for ESG.

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The perception held by our consignors or buyers, other key stakeholders, or the communities in which we do business may depend, in part, on the metrics and goals we have chosen to aspire to and whether or not we meet our goals on a timely basis, if at all.

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

Our ability to achieve any stated goal, target or objective is subject to numerous factors and conditions, many of which are outside of our control.

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

In addition, we may be required to disclose various ESG metrics, progress against goals and other detailed information under applicable laws and regulations.

For example, the State of California has adopted new climate change disclosure requirements, which mandate public disclosure of certain greenhouse gas emissions data and climate-related financial risk reports.

Our compliance with these and other ESG-related laws, regulations and policies could be costly, and any failure to meet our goals, change in our ESG priorities or strategies, or perception that we fail to act responsibly in the areas in which we report, may negatively affect our reputation and the value of our brand, including by 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.

Our compliance with these and other ESG-related laws, regulations and policies could be costly, and any failure to meet our goals, change in our ESG goals, priorities or strategies, change in or evolution of our methodologies for reporting ESG metrics, adjustment to previously reported information, including to reflect new or evolved methodologies for reporting ESG metrics, or perception that we fail to act responsibly in the areas in which we report, may negatively affect our reputation and the value of our brand, including by 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.

Our methodologies, processes and controls for reporting ESG metrics across our operations are evolving along with multiple disparate standards for identifying, measuring and reporting ESG metrics and such standards may change over time.

Risks Related to Our Merchandising and Fulfillment

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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.

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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 pre-owned luxury goods we sell through our online marketplace.

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 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.

Our capacity needs may grow as our business grows.

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

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While we carry insurance for the consigned luxury goods stored in these authentication centers as well as for business interruption and loss of income, our liabilities and expenses resulting from a catastrophic event could exceed our maximum insurance coverage amounts which could have a material adverse impact on our business and operating results.

For example, in May 2024, we experienced a fire on the roof of one of our leased Secaucus warehouses.

As of December 31, 2024, our discussions with the insurance company remain ongoing and our liabilities and expenses are expected to exceed our maximum insurance coverage amounts.

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

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If our goods are not delivered to buyers in a timely fashion or are damaged or lost during the consignment or the delivery process, our consignors or buyers could become dissatisfied and cease using our services, which would adversely affect our business and operating results.

We may be unable to successfully leverage technology to automate and drive efficiencies in our operations.

We may be unable to successfully leverage technology, including artificial intelligence and machine learning, to automate and drive efficiencies in our operations.

We are building automation, artificial intelligence, machine learning and other capabilities to drive efficiencies in our merchandising and fulfillment operations.

As we continue to add capacity, capabilities and automation, our operations will become increasingly complex and challenging.

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, which may lack efficiency or become obsolete as

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we grow and we also rely on technology from third parties.

As we continue to add capacity, capabilities and automation, our operations will become increasingly complex and challenging and may be subject to additional regulation.

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.

Artificial intelligence technologies create specific risks that require tailored oversight.

Insufficient oversight could lead to liability, financial loss, and reputational harm.

We use artificial intelligence to make initial assessments on authenticity, to identify product characteristics, and to help predict consigner preferences.

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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Any of these risks could cause us to lose our ability to accept online payments, make payments to consignors or conduct other payment transactions, any of which could make our platform less convenient and attractive and adversely affect our ability to attract and retain buyers and consignors.

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

Failure of our data or cyber 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 (including credit card information) and other data relating to individuals, such as our consignors, buyers and employees.

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

We or our vendors, including cloud storage providers, could be the subject to attacks from computer viruses, break-ins phishing attacks, social engineering, ransomware attacks, unauthorized use, attempts to overload services with denial-of-service 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 or our vendors, including cloud storage providers as well as other third parties with whom we do

business, could be subject to attacks from computer viruses, break-ins phishing attacks, social engineering, ransomware attacks, unauthorized use, misconduct or usage errors by our employees, attempts to overload services with denial-of-service 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.

Further, the use of open-source software may also present additional security risks because the public availability of such software may make it easier for hackers and other third parties to compromise our platform.

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These applications may become subject to account takeovers, denials of service, content scraping, or other attacks, which may result in our members' accounts being compromised.

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

We and our vendors, as well as other third parties with whom we do business, have faced these attacks previously and regularly must defend against or respond to such incidents.

Threat actors are increasingly sophisticated and are targeting employees, contractors, service providers and third-parties through various techniques that involve social engineering and/or misrepresentation (such as phishing attempts and similar techniques).

Data breaches and other cybersecurity events have become increasingly commonplace, including as a result of emerging technologies, such as artificial intelligence and machine learning.

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

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.

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, as well as other third parties with whom we do business, may be unable to anticipate these techniques or to implement adequate preventative measures.

fees, remediation costs, regulatory fines or penalties or other additional costs and liabilities, as well as reputational impact, 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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Government regulators and law enforcement officials may allege that our services violate, or aid and abet violations of certain laws, including laws restricting or prohibiting the transferability and, by extension, the resale, of stolen goods.

Our form of consignor agreement

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includes a representation that the consignor has the necessary right and title to the goods they may consign, and we include such a rule and requirement in our terms of service prohibiting the listing of stolen or otherwise illegal products.

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

In addition, we have implemented protective measures to detect such products.

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District Court for the Southern District of New York bringing various trademark and advertising-related claims under the Lanham Act and New York state law analogues.

The final outcome of this litigation,

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including our liability, if any, with respect to Chanel’s claims, is uncertain.

The final outcome of this litigation, including our liability, if any, with respect to Chanel’s claims, is uncertain.

An unfavorable outcome in this or similar litigation could adversely affect our business and could lead to other similar lawsuits.

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Numerous state, federal and international laws, rules and regulations govern privacy, data protection and the collection, use and protection of personal information and other types of data we collect, use, disclose and otherwise process.

These laws, rules and regulations are constantly evolving, and we expect that there will continue to be new proposed laws, regulations and industry standards concerning privacy, data protection and information security in the United States, the EU and other jurisdictions.

For example, California enacted legislation that came into effect January 2020, the California Consumer Privacy Act (the “CCPA”), that requires covered companies to provide disclosures to California consumers and afford such consumers qualified privacy rights, such as rights of access, deletion and to opt-out of the sales of their personal information.

For example, the California Consumer Privacy Act (the “CCPA”), that requires covered companies to provide disclosures to California consumers and afford such consumers qualified privacy rights, such as rights of access, deletion and to opt-out of the sales and "sharing" of their personal information, which relates to "cross context behavioral advertising" or more commonly known as targeted advertising.

The CCPA was amended by the California Privacy Rights Act (the “CPRA”), which went into effect on January 1, 2023.

The CCPA, as amended, removes the exclusion of employment data from its auspices, adds new consumer privacy rights (such as the right to correct inaccurate personal information, or the right to opt out of the “sharing” of personal information for the purposes of cross-context behavioral advertising), expands business’s obligations to secure contractual obligations from service providers and third parties, and expands business’s obligations with respect to opt-out preference signals.

The new California Privacy Protection Agency completed its first round of rule making but has left many new requirements, such as data privacy and security risk assessments and the right to opt out of certain data profiling activities, for its second round of rule making, which began in March 2023.

It remains unclear how these new amendments will be interpreted or when the second round of rule making activity will conclude.

preference signals.

The new California Privacy Protection Agency completed its first round of rulemaking but has left many new requirements, such as data privacy and security risk assessments and the right to opt out of certain data profiling activities, for its second round of rulemaking, which began in March 2023 and has yet to be finalized.

It remains unclear how these new amendments will be interpreted or when the second round of rulemaking activity will conclude.

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, several other U.S.

states, including Virginia, Connecticut, Colorado, Utah, Iowa, Indiana, Montana, Oregon, Tennessee and Texas have passed similar consumer data privacy laws that also extend privacy rights to individuals, including the rights to opt out of targeted advertising.

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

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requirements.

Recent litigation in the EU has driven significant changes in enforcement and interpretation, and w e cannot yet fully determine the impact these or future laws, rules and regulations may have on our business or operations.

Given the increased regulatory focus on the use of data for advertising, we may be subject to new and unexpected regulations, including proposals for regulation of artificial intelligence or other automated decision making processes.

states, including Virginia, Connecticut, Colorado, Utah, Delaware, Iowa, Indiana, Kentucky, Maryland, Montana, Minnesota, Nebraska, New Hampshire, New Jersey, Oregon, Rhode Island, Tennessee and Texas have passed similar consumer data privacy laws that impose general data minimization obligations on covered businesses and also extend privacy rights to individuals, including the rights to opt out of targeted advertising and respect automated opt-out preference signals.

Many of these state laws also require covered businesses to provide

consumers with the ability to opt-out of certain profiling or automated decision-making processes

Additionally, the European Commission imposes stringent EU data protection requirements across all EU Member States through the General Data Protection Regulation (“GDPR”).

The GDPR has been transposed into national law by the UK (“UK GDPR”) and has been incorporated into the European Economic Area (“EEA”) Agreement.

The GDPR and UK GDPR, as well as other statutes and regulations related to privacy and data protection, increase our compliance obligations and may affect our collection, processing, retention and transfer of certain personal data, reporting of certain security breaches, and expose us to increased penalties for non-compliance.

Increased regulatory scrutiny could lead to substantial costs, require significant changes to our existing systems, limit the effectiveness of our marketing activities, and subject us to additional liabilities.

Further, r ecent litigation in the EEA and the UK has driven significant changes in enforcement and interpretation, and w e cannot yet fully determine the impact these or future laws, rules and regulations may have on our business or operations.

Given the increased legislative and regulatory enforcement focus on the use of data for advertising and artificial intelligence, we may be subject to new and unexpected regulatory interpretations and rulemaking efforts, including proposals for regulation of artificial intelligence or other automated decision-making processes.

Future laws, regulations, standards and other obligations could, for example, impair our ability to collect or use information that we utilize to create targeted marketing and advertising and offer certain bespoke product features and other capabilities to drive efficiencies in our merchandising operations, thereby impairing our ability to maintain and attract new consignors and buyers, which could have a material adverse effect on our business and operating results.

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We may be unable to make such changes and modifications in a commercially reasonable manner or at all, and our ability to develop new products and features could be limited.

If the use of “cookie” tracking technologies is further restricted, regulated, or blocked, or if changes in technology cause cookies to become less reliable or acceptable as a means of tracking consumer behavior, the amount or accuracy of internet user information we collect would decrease, which could harm our business and operating results.

Cookies are small data files that are sent by websites and stored locally on an internet user’s computer or mobile device.

We, and third parties who work on our behalf, collect data via cookies that is used to track the behavior of visitors to our websites, to provide a more personal and interactive experience, and to increase the effectiveness of our marketing.

However, internet users can easily disable, delete, and block cookies directly through browser settings or through other software, browser extensions, or hardware platforms that physically block cookies from being created and stored.

Privacy regulations restrict how we deploy our cookies and this could potentially (a) increase the number of internet users that choose to proactively disable cookies on their systems or (b) cause our business partners, service providers, or vendors to no longer maintain their cookie processes.

We may have to develop alternative systems to determine our clients’ behavior, customize their online experience, or efficiently market to them if clients block cookies or regulations introduce additional barriers to collecting cookie data.

We pay or collect sales taxes in all jurisdictions which require such taxes.

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Such recalls or voluntary removal of goods can result in, among other things, lost sales, diverted resources, potential harm to our reputation and increased customer service costs and legal expenses, which could have a material adverse effect on our operating results.

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

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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.

If such tax or other laws, rules or regulations are amended, or if new unfavorable laws, rules or regulations are enacted, the results could increase our tax payments or other obligations, prospectively or retrospectively, subject us to interest and penalties, decrease the demand for our services if we pass on such costs to our buyers or consignors, result in increased costs to update or expand our technical or administrative infrastructure or effectively limit the scope of our business activities if we decided not to conduct business in particular jurisdictions.

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 or may change interpretation of 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.

If such tax or other laws, rules or regulations are amended or interpretations are changed, or if new unfavorable laws, rules or regulations are enacted, the results could increase our tax payments or other obligations, prospectively or retrospectively, subject us to interest and penalties, decrease the demand for our services if we pass on such costs to our buyers or consignors, result in increased costs to update or expand our technical or administrative infrastructure or effectively limit the scope of our business activities if we

decided not to conduct business in particular jurisdictions.

As a result, these changes may have a material adverse effect on our business, results of operations, financial condition and prospects.

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The market price of our common stock may be volatile or may decline steeply or suddenly regardless of our operating performance and we may not be able to meet investor or analyst expectations.

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If you purchase shares of our common stock, you may not be able to resell those shares at or above the price you paid.

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No assurances can be made that declines in the market price of our common stock will not occur in the future in connection with such activity.

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Delaware law and provisions in our certificate of incorporation and bylaws could make a merger, tender offer or proxy contest difficult, thereby depressing the trading price of our common stock.

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If a court were to find the exclusive-forum provision to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving the dispute in other jurisdictions, which could harm our results of operations.

Risks Related to Our Outstanding Notes

Risks Related to Our Outstanding Notes and Warrants

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, and in March 2021, we issued $287.5 million in aggregate principal amount of 1.00% Convertible Senior Notes due 2028, each issuance in an offering exempt from registration.

As of the date hereof, the principal amount of our 3.00% convertible senior notes due 2025 (the “2025 Notes”) is $26.7 million, the principal amount of our 1.00% convertible senior notes due 2028 (the “2028 Notes”) is $97.7 million, the principal amount of our 4.25%/8.75% PIK/cash senior secured notes due 2029 (the “2029 Notes”) is $134.5 million and the principal amount of our 4.00% convertible senior notes due 2031 (the “2031 Notes” and, together with the 2025 Notes and the 2028 Notes, the “Convertible Senior Notes”) is $146.7 million (together with the 2029 Notes and the Convertible Senior Notes, the “Notes”).

Additionally, the Company issued warrants to acquire an aggregate of up to 7,894,737 shares of our common stock (subject to adjustment in accordance with the terms of the Warrants).

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

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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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These alternatives may be insufficient to overcome macroeconomic conditions that may affect us.

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We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations.

Transactions relating to our Notes may dilute the ownership interest of our stockholders.

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.

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.

In addition, the existence of the Notes may encourage short selling by market participants because the conversion of the Notes could be used to satisfy short positions.

The conversion of the Notes, if triggered, may adversely affect our financial condition and operating results.

In the event the conditional conversion feature of the Notes is triggered, holders of the Notes will be entitled to convert their Notes at any time during specified periods at their option.

If one or more holders elect to convert their Notes, unless we elect to satisfy our conversion obligation by delivering shares of our common stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligation in cash, which could adversely affect our liquidity.

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 materially affects our reported financial results.

Prior to the adoption of ASU 2020-06, under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 470-20, Debt with Conversion and Other Options, we 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, we adopted ASU 2020-06 as of January 1, 2022, under which we now account for the Notes as a single liability measured at their amortized cost.

The indentures governing our Notes contain restrictions and other provisions regarding events of default that may make it more difficult to execute our strategy or to effectively compete, or that could materially affect our financial position.

Subject to certain exceptions and qualifications, the indenture governing our 2029 Notes (the “2029 Notes Indenture”) restricts our ability to, among other things, (i) grant or incur liens securing indebtedness;

(ii) incur, assume or guarantee additional indebtedness;

(iii) enter into transactions with affiliates;

(iv) sell or otherwise dispose of assets, including capital stock of subsidiaries;

(v) in the case of the Company and any future guarantor (if any), consolidate, amalgamate or merge with or into, or sell all or substantially all of its assets to, another person;

(vi) make certain restricted payments or other investments;

and (vii) pay dividends or make other distributions (including loans and other advances).

In addition, the 2029 Notes Indenture contains a covenant that provides that the Company may not permit liquidity (calculated as the sum of (a) unused commitments then available to be drawn under any revolving credit facility, delayed draw term loan facility or qualified securitization financing permitted thereunder (after giving effect to any borrowing base or similar limitations), plus (b) the amount of unrestricted cash and cash equivalents held by the Company and its subsidiaries (if any)) to be less than $25 million as of the last day of any month.

These restrictions, and others set forth in the 2029 Notes Indenture, may make it difficult to successfully execute our business strategy or effectively compete with companies that are not similarly restricted.

The indentures governing our Convertible Senior Notes and our 2029 Notes Indenture also set forth certain events of default after which our Notes may be declared immediately due and payable and set forth certain types of bankruptcy or insolvency events of default involving the Company or its subsidiaries.

Such acceleration of our debt could have a material adverse effect on our liquidity if we are unable to negotiate mutually acceptable terms with the holders of the Notes or if alternate funding is not available to us.

Furthermore, if we are unable to repay the Notes upon an acceleration or otherwise, we could be forced into bankruptcy or liquidation.

Transactions relating to our Convertible Senior Notes or the Warrants may dilute the ownership interest of our stockholders.

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

If the Convertible Senior Notes or Warrants become convertible or exercisable under the terms of the applicable indenture or warrant agency agreement, and if holders subsequently elect to convert or exercise the Convertible Senior Notes or Warrants, 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 of the Convertible Senior Notes or exercise of the Warrants could adversely affect prevailing market prices for our common stock.

In addition, the existence of the Convertible Senior Notes and Warrants may encourage short selling by market participants because the conversion of the Convertible Senior Notes or Warrants could be used to satisfy short positions.

The conversion of the Convertible Senior Notes or the cash conversion of the Warrants, if triggered, may adversely affect our financial condition and operating results.

In the event the conditional conversion feature of the Convertible Senior Notes is triggered, holders of the Convertible Senior Notes will be entitled to convert their Convertible Senior Notes at any time during specified periods at their option.

If one or more holders elect to convert their Convertible Senior Notes, unless we elect to satisfy our conversion obligation by delivering shares of our common stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligation in cash, which could adversely affect our liquidity.

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

Further, in the event of a fundamental change, which could occur outside the Company’s control, the Warrants may be required to be settled in cash instead of delivering shares, which could result in a material reduction in our net working capital.

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

We account for our outstanding Warrants as liabilities at fair value on our balance sheet.

The Warrants are subject to remeasurement at each balance sheet date and any change in fair value is recognized as a component of earnings in each period for which our earnings are reported.

We will continue to adjust the liability for changes in fair value until the earlier of exercise or expiration of the Warrants.

The volatility introduced by changes in fair value on earnings may have an adverse effect on our quarterly and annual financial results.

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

Prior to the adoption of ASU 2020-06, under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 470-20, Debt with Conversion and Other Options, we accounted for the liability and equity components of the Convertible Senior Notes separately because the Convertible Senior 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 Convertible Senior Notes.

However, we adopted ASU 2020-06 as of January 1, 2022, under which we now account for the Convertible Senior Notes as a single liability measured at their amortized cost.

Upon adoption, we recorded a cumulative effect adjustment of $13.4 million as a reduction to accumulated deficit and a reduction to additional paid in capital of $112.1 million related to amounts attributable to the value of the conversion options that had previously been recorded in equity.

Additionally, we recorded an increase to the Notes balance by an aggregate amount of $98.6 million as a result of the reversal of the separation of the convertible debt between debt and equity.

Additionally, we recorded an increase to the Convertible Senior Notes balance by an aggregate amount of $98.6 million as a result of the reversal of the separation of the convertible debt between debt and equity.

As a result of the adoption of ASU 2020-06, we also derecognized $27.5 million of deferred tax liabilities and recognized $0.2 million of deferred tax assets, resulting in a $27.7 million increase to the net deferred tax assets and a corresponding increase of $27.7 million in the offsetting valuation allowance.

The adoption of this standard also significantly decreased the amount of non-cash interest expense to be recognized in periods beginning on or after January 1, 2022 as a result of eliminating the discount associated with the equity component.

In addition, following adoption, we are required to 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 can adversely affect 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.

In connection with the pricing of the Notes, we entered into privately negotiated capped call transactions with certain counterparties.

The capped call transactions cover the number of shares of our common stock initially underlying the Notes.

The capped call transactions are expected to offset the potential dilution to our common stock upon any conversion of the Notes.

In addition, following adoption, we are required to calculate diluted earnings per share using the “if converted” method, which assumes that all of the Convertible Senior Notes were converted solely into shares of common stock at the beginning of the reporting period, unless the result would be anti-dilutive, which can adversely affect our diluted earnings per share.

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

The capped call transactions may affect the value of the 2025 Notes, the 2028 Notes and our common stock.

In connection with the pricing of the 2025 Notes and the 2028 Notes , we entered into privately negotiated capped call transactions with certain counterparties.

The capped call transactions cover the number of shares of our common stock initially underlying the 2025 Notes and the 2028 Notes .

The capped call transactions are expected to offset the potential dilution to our common stock upon any conversion of the 2025 Notes and the 2028 Notes .

In connection with establishing their initial hedges of the capped call transactions, the counterparties or their respective affiliates entered into various derivative transactions with respect to our common stock.

The counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various

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derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions prior to the maturity of the Notes (and are likely to do so on each exercise date of the capped call transactions), or following any termination of any portion of the capped call transactions in connection with any repurchase, redemption or early conversions of the Notes or otherwise.

The counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions prior to the maturity of the 2025 Notes and the 2028 Notes (and are likely to do so on each exercise date of the capped call transactions), or following any termination of any portion of the capped call transactions in connection with any repurchase, redemption or early conversions of the 2025 Notes and the 2028 Notes or otherwise.

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

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