What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2025-02-21 compared with 2024-03-01 · 359 added, 266 removed, 996 unchanged (39% of the section changed)

1 unchanged sentence

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer (“CEO”) and interim Chief Financial Officer, who acts as our principal financial officer (“Interim CFO”), evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2023.

Based on this evaluation, our CEO and Interim CFO concluded that, as of December 31, 2023, our disclosure controls and procedures were effective at the reasonable assurance level in ensuring that (a) the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms, and (b) such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Our management, with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2024.

Based on this evaluation, our CEO and CFO concluded that, as of December 31, 2024, our disclosure controls and procedures were effective at the reasonable assurance level in ensuring that (a) the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms, and (b) such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Management’s Annual Report on Internal Control Over Financial Reporting

Management, including our CEO and Interim CFO, who acts as our principal financial officer, is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.

Management, including our CEO and CFO, is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.

Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our financial statements for external purposes in accordance with U.S.

Under the supervisi on and with the participation of our management, including our CEO and Interim CFO, we have conducted an evaluation of the effectiveness of our internal control over financial reporting based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Under the supervisi on and with the participation of our management, including our CEO and CFO, we have conducted an evaluation of the effectiveness of our internal control over financial reporting based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Based on evaluatio n under these criteria, management determined that our internal control over financial reporting was effective as of December 31, 2024 .

2 unchanged sentences

There was no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the year ended December 31, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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Inherent Limitations on Effectiveness of Controls

Our management, including our Chief Executive Officer and our Interim Chief Financial Officer, believes that our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives and are effective at the reasonable assurance level.

Our management, including our Chief Executive Officer and our Chief Financial Officer, believes that our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives and are effective at the reasonable assurance level.

However, our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud.

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Rule 10b5-1 Trading Plans

On November 27, 2023 , James Miller , a member of the Company’s Board of Directors , adopted a new trading plan for the sale of securities that is intended to satisfy the affirmative defense conditions of Rule 10b5-1 of the Securities Exchange Act of 1934, as amended (the “Miller Plan”).

The Miller Plan provides for the sale of up to a maximum of 74,586 shares of the Company’s common stock that he has received or will receive following the vesting of restricted stock units.

The first possible trade date under the Miller Plan is March 5, 2024, and the end date of the Miller Plan is November 27, 2024, subject to certain conditions.

During the fiscal quarter ended December 31, 2024, none of our directors or officers adopted or terminated a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement," as those terms are defined in Regulation S-K, Item 408.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Not applicable.

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Directors, Executive Officers and Corporate Governance.

Information required by this Item is incorporated herein by reference to our fiscal year 2024 proxy statement to be filed with the SEC within 120 days of the fiscal year ended December 31, 2023 (the “Proxy Statement”).

Information required by this Item is incorporated herein by reference to our proxy statement for our 2025 annual meeting of stockholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 2024 (the “Proxy Statement”).

Executive Compensation.

7 unchanged sentences

The information required by this Item is incorporated herein by reference to our Proxy Statement.

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Exhibits, Financial Statement Schedules.

2 unchanged sentences

Form 10-K Summary

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Exhibit Index

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8-K 001-38953 4.1 March 8, 2021

4.7 Indenture, dated as of February 10, 2025, by and between The RealReal, Inc.

8-K 001-38953 4.1 February 10, 2025

4.8 Form of 4.00% Convertible Senior Note due 2031 (included as Exhibit A to Exhibit 4.1)

8-K 001-38953 4.2 February 10, 2025

10.1+ The RealReal, Inc.

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S-1 333-231891 10.6 May 31, 2019

10.6# Fourth Amendment to Loan and Security Agreement dated as of December 28, 2015 by and between The RealReal, Inc.

and Pacific Western Bank.

S-1 333-231891 10.7 May 31, 2019

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Incorporated by Reference

1 unchanged sentence

Exhibit Filing Date Filed

10.6# Fourth Amendment to Loan and Security Agreement dated as of December 28, 2015 by and between The RealReal, Inc.

and Pacific Western Bank.

S-1 333-231891 10.7 May 31, 2019

10.7# Fifth Amendment to Loan and Security Agreement dated as of July 18, 2016 by and between The RealReal, Inc.

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S-1 333-231891 10.19 May 31, 2019

Incorporated by Reference

Description Form File No.

Exhibit Filing Date Filed

10.18# Lease Agreement dated as of September 14, 2018 by and between The RealReal, Inc.

4 unchanged sentences

S-1 333-231891 10.21 June 17, 2019

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Incorporated by Reference

Description Form File No.

Exhibit Filing Date Filed

10.20+ The RealReal, Inc.

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10-K 001-38953 10.25 March 11, 2020

T he RealReal , Inc.

The RealReal, Inc.

2019 Equity Incentive Plan for Non-Employee Director Deferred Restricted Stock Unit Award Agreement and Deferral Election Form

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10-Q 001-38953 10.1 May 10, 2021

T ransition and Separation Agreement by and between The RealReal, Inc.

Transition and Separation Agreement by and between The RealReal, Inc.

and Robert Julian dated September 28, 2023.

001-38953 10.1 September 29, 2023

10.31+ C onsulting Services Agreement by and between The RealReal, Inc.

10.31+ Consulting Services Agreement by and between The RealReal, Inc.

and Robert Julian dated September 28, 2023

8-K 001-38953 10.20 September 29, 2023

Incorporated by Reference

Description Form File No.

Exhibit Filing Date Filed

The RealReal, Inc.

4 unchanged sentences

10-Q 001-38953 10.1 August 9, 2022

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Incorporated by Reference

Description Form File No.

Exhibit Filing Date Filed

Offer Letter dated January 24, 2023 between the Company and John E.

3 unchanged sentences

10.35 February 28, 2023

F orm of Stand -Alone Performance -Based Restr icted Stock Unit Award Agreement, by and between the C o mpany and John Koryl.

Form of Stand-Alone Performance-Based Restricted Stock Unit Award Agreement, by and between the Company and John Koryl.

99.1 March 3, 2023

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99.2 March 3, 2023

Form of Stand-Alone Restricted Stock Unit Award Agreement, by and between the Company a nd Luke Friang.

Form of Stand-Alone Restricted Stock Unit Award Agreement, by and between the Company and Luke Friang.

99.3 March 3, 2023

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and the Noteholder, as defined therein, dated February 29, 2024.

10.41 March 1, 2024

10.42 Indenture by and between The RealReal, Inc., the Guarantors party thereto and Glas Trust Company LLC dated February 29, 2024.

10.42 March 1, 2024

10.43 Warrant Agency Agreement by and between The RealReal, Inc., Computershare, In., and Computershare Trust Company, N.A.

dated February 29, 2024.

10.43 March 1, 2024

10.44 Security Agreement among The RealReal, Inc., the Pledgors and GLAS Trust Company LLC, as Notes Collateral Agent,

10.5 May 7, 2024

Promotion to President and Chief Executive Officer, dated October 28, 2024, by and between The RealReal, Inc.

and Rati Sahi Levesque .

10.1 November 4, 2024

Amended and Restated Severance and Change-in-Control Agreement, dated October 28, 2024, by and between The RealReal, Inc.

and Rati Sahi Levesque.

10.2 November 4, 2024

Separation Agreement, dated October 28, 2024, by and between The RealReal, Inc.

10.3 November 4, 2024

Incorporated by Reference

Description Form File No.

Exhibit Filing Date Filed

Form of Severance and Change in Control Agreement approved by the Company’s board of directors on October 29, 2024.

10.4 November 4, 2024

Exchange Agreement, dated as of February 10, 2025, by and among The RealReal, Inc.

and the Noteholder Parties

10.1 February 10, 2025

19 The RealReal, Inc.

Insider Trading Policy .

23.1 Consent of KPMG LLP, Independent Registered Public Accounting Firm

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Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

97 T he RealReal, Inc.

97 The RealReal, Inc.

Clawback Policy .

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Incorporated by Reference

Description Form File No.

Exhibit Filing Date Filed

March 1, 2024

101.INS XBRL Instance Document X

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The Company agrees to furnish supplementally a copy of any omitted schedule or exhibit to the SEC upon request.

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Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized .

The RealReal, Inc.

March 1, 2024 By:

/s/ Todd Suko

Interim Chief Financial Officer, Chief Legal

Officer and Secretary

February 21, 2025 By:

/s/ Ajay Madan Gopal

Ajay Madan Gopal

Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.

Name Title Date

/s/ John Koryl

Chief Executive Officer and Director March 1, 2024

John Koryl (Principal Executive Officer)

/s/ Todd Suko

Interim Chief Financial Officer, Chief Legal

Officer and Secretary

March 1, 2024

/s/ Rati Sahi Levesque

Chief Executive Officer and Director February 21, 2025

Rati Sahi Levesque

(Principal Executive Officer)

/s/ Ajay Madan Gopal

Chief Financial Officer

February 21, 2025

Ajay Madan Gopal

(Principal Financial Officer)

Senior Vice President, Chief Accounting Officer March 1, 2024

Senior Vice President, Chief Accounting Officer February 21, 2025

Steve Lo (Principal Accounting Officer)

/s/ Chip Baird

Director March 1, 2024

/s/ Caretha Coleman Director March 1, 2024

Director February 21, 2025

/s/ Caretha Coleman Director February 21, 2025

Caretha Coleman

/s/ Karen Katz Director March 1, 2024

/s/ Rob Krolik Director March 1, 2024

/s/ Niki Leondakis Director March 1, 2024

/s/ Karen Katz Director February 21, 2025

/s/ Rob Krolik Director February 21, 2025

/s/ Niki Leondakis Director February 21, 2025

Niki Leondakis

/s/ Carol Melton

Director March 1, 2024

/s/ James Miller Director March 1, 2024

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Director February 21, 2025

/s/ James Miller Director February 21, 2025

INDEX TO FINANCIAL STATEMENTS

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Statements of Operations for the Years ended December 31, 202 4 , 202 3 , and 20 2 2

Statements of Comprehensive Loss for the Years ended December 31, 202 3 , 202 2 , and 202 1

Statements of Stockholders’ Equity (Deficit) for the Years ended December 31, 202 4 , 202 3 , and 20 2 2

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Notes to Financial Statements

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Report of Independent Registered Public Accounting Firm

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We have audited the accompanying balance sheets of The RealReal, Inc.

(the Company) as of December 31, 2023 and 2022, the related statements of operations, comprehensive loss, stockholders’ equity (deficit), and cash flows for each of the years in the three-year period ended December 31, 2023, and the related notes (collectively, the financial statements).

(the Company) as of December 31, 2024 and 2023, the related statements of operations, stockholders’ equity (deficit), and cash flows for each of the years in the three-year period ended December 31, 2024, and the related notes (collectively, the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2024, in conformity with U.S.

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 1, 2024 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 21, 2025 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

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(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of a critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which they relate.

The communication of a critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Sufficiency of the audit evidence over the IT elements of revenue recognition

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IT professionals with specialized skills and knowledge were required to understand and assess the Company’s internally developed IT systems used in the revenue recognition process.

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The following are the primary procedures we performed to address this critical audit matter.

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• evaluating the design and testing the operating effectiveness of certain internal controls related to the IT applications used in the revenue recognition process.

This included general IT controls, IT application controls, data configurations, and interface controls over the transfer of relevant data between systems.

This included IT controls, IT application controls, data configurations, and interface controls over the transfer of relevant data between systems.

We performed a software-assisted data analysis to test the relationships among certain revenue transactions.

3 unchanged sentences

San Francisco, California

March 1, 2024

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February 21, 2025

Report of Independent Registered Public Accounting Firm

4 unchanged sentences

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the balance sheets of the Company as of December 31, 2023 and 2022, the related statements of operations, comprehensive loss, stockholders’ equity (deficit), and cash flows for each of the years in the three-year period ended December 31, 2023, and the related notes (collectively, the financial statements), and our report dated March 1, 2024 expressed an unqualified opinion on those financial statements.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the balance sheets of the Company as of December 31, 2024 and 2023, the related statements of operations, stockholders’ equity (deficit), and cash flows for each of the years in the three-year period ended December 31, 2024, and the related notes (collectively, the financial statements), and our report dated February 21, 2025 expressed an unqualified opinion on those financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Annual Report on Internal Control Over Financial Reporting.

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Report of Independent Registered Public Accounting Firm.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

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San Francisco, California

March 1, 2024

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February 21, 2025

THE REALREAL, INC.

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22,835 20,094

Convertible senior notes, net, current portion

Other accrued and current liabilities

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Convertible senior notes, net 276,807 452,421

Non-convertible notes, net

Warrant liability

Other noncurrent liabilities 6,144 4,083

15 unchanged sentences

The accompanying notes are an integral part of these financial statements.

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THE REALREAL, INC.

18 unchanged sentences

Restructuring 196 43,462 896

Legal settlements 1,340 456 13,389

Total operating expenses 504,016 542,571 537,854

Loss from operations ( 56,495 ) ( 166,293 ) ( 189,163 )

Change in fair value of warrant liability

( 68,167 ) — —

Gain on extinguishment of debt

Interest income 7,943 8,805 3,191

10 unchanged sentences

The accompanying notes are an integral part of these financial statements.

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THE REALREAL, INC.

Statements of Comprehensive Loss

(In thousands)

Year Ended December 31,

2023 2022 2021

Net loss $ ( 168,472 ) $ ( 196,445 ) $ ( 236,107 )

Other comprehensive loss, net of tax:

Unrealized loss on investments

Comprehensive loss $ ( 168,472 ) $ ( 196,445 ) $ ( 236,118 )

The accompanying notes are an integral part of these financial statements.

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THE REALREAL, INC.

Statements of Stockholders’ Equity (Deficit)

2 unchanged sentences

Capital Accumulated

Comprehensive

Income (Loss) Accumulated

Deficit Total

2 unchanged sentences

Balance as of December 31, 2021 92,960,066 $ 1 $ 841,255 $ ( 768,128 ) $ 73,128

Purchase of capped calls — — ( 33,666 ) — — ( 33,666 )

Equity component of convertible senior notes, net of issuance costs of $ 3,131

— — 93,031 — — 93,031

Cumulative effect adjustment due to adoption of ASU 2020-06 — — ( 112,052 ) 13,420 ( 98,632 )

Issuance of common stock upon exercise of options 1,929,265 — 2,906 — 2,906

2 unchanged sentences

Stock-based compensation expense — — 47,767 — 47,767

Other comprehensive loss — — — ( 11 ) — ( 11 )

Net loss — — — ( 196,445 ) ( 196,445 )

Balance as of December 31, 2022 99,088,172 $ 1 $ 781,060 $ ( 951,153 ) $ ( 170,092 )

Cumulative effect adjustment due to adoption of ASU 2020-06

— — ( 112,052 ) — 13,420 ( 98,632 )

Issuance of common stock upon exercise of options 8,511 — 19 — 19

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Balance as of December 31, 2023 104,670,500 $ 1 $ 816,325 $ ( 1,119,625 ) $ ( 303,299 )

Settlement of capped calls

— — 396 — 396

Issuance of common stock upon exercise of options 136,658 — 376 — 376

5 unchanged sentences

The accompanying notes are an integral part of these financial statements.

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THE REALREAL, INC.

5 unchanged sentences

Net loss $ ( 134,202 ) $ ( 168,472 ) $ ( 196,445 )

Adjustments to reconcile net loss to cash used in operating activities:

Adjustments to reconcile net loss to cash provided by (used in) operating activities:

Depreciation and amortization 33,100 31,695 27,669

2 unchanged sentences

Bad debt expense 2,498 1,962 1,680

Accrued interest on convertible notes — — 950

Loss on disposal of property and equipment and impairment of capitalized proprietary software 223 702 546

Non-cash interest expense

Issuance costs allocated to liability classified warrants

Accretion of debt discounts and issuance costs 2,127 2,573 2,368

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2,590 9,783 4,077

Gain on lease termination ( 738 ) — —

Gain on debt extinguishment

( 4,177 ) — —

Change in fair value of warrant liability

Loss related to warehouse fire, net

Other adjustments ( 165 ) ( 515 ) 702

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Other noncurrent liabilities 382 ( 172 ) 301

Net cash used in operating activities ( 61,268 ) ( 91,557 ) ( 142,151 )

Net cash provided by (used in) operating activities

26,846 ( 61,268 ) ( 91,557 )

Cash flow from investing activities:

Proceeds from maturities of short-term investments — — 4,000

Insurance proceeds related to warehouse fire

Capitalized proprietary software development costs ( 11,800 ) ( 12,951 ) ( 14,061 )

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Cash flow from financing activities:

Proceeds from issuance of 2028 convertible notes, net of issuance costs — — 278,234

Purchase of capped calls in conjunction with the issuance of the 2028 convertible senior notes — — ( 33,666 )

Proceeds from exercise of stock options

19 2,906 6,009

Proceeds from issuance of stock in connection with the Employee Stock Purchase Program 1,413 886 1,400

Taxes paid related to restricted stock vesting ( 1,646 ) ( 679 ) ( 205 )

Net cash provided by financing activities 226 4,101 252,913

Cash received from settlement of capped calls in conjunction with the 2024 Note Exchange

Issuance costs paid related to the 2024 Note Exchange

( 5,298 ) — —

Net cash (used in) provided by financing activities

( 4,759 ) 226 4,101

Net increase (decrease) in cash, cash equivalents, and restricted cash

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Supplemental disclosures of non-cash investing and financing activities

Purchases of property and equipment included in accounts payable and other accrued and current liabilities 1,757 13,860 1,922

Purchases of capitalized proprietary software development costs included in accounts payable and other accrued and current liabilities 1,122 1,590 1,647

Property and equipment additions not yet paid in cash

1,818 1,757 13,860

Capitalized proprietary software development costs not yet paid in cash

654 1,122 1,590

Stock-based compensation capitalized to proprietary software development costs 504 777 1,629

Liability classified warrants issued in connection with the 2024 Note Exchange

Net decrease in principal amount of debt due to the 2024 Note Exchange

( 17,232 ) — —

Tax withholding liability for restricted stock — 11 11

The accompanying notes are an integral part of these financial statements.

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THE REALREAL, INC.

7 unchanged sentences

The accompanying financial statements have been prepared in accordance with U.S.

generally accepted accounting principles (“GAAP”) and, in the opinion of management, reflect all adjustments necessary to state fairly the Company’s financial position, results of operations, comprehensive loss, stockholders’ equity (deficit), and cash flows for the periods presented.

generally accepted accounting principles (“GAAP”) and, in the opinion of management, reflect all adjustments necessary to state fairly the Company’s financial position, results of operations, stockholders’ equity (deficit), and cash flows for the periods presented.

For the years ended 2024, 2023, and 2022, comprehensive loss is equal to net loss as the Company has no other comprehensive income (loss) item in the periods presented.

The Company’s functional and reporting currency is the U.S.

The Company has made a presentation change to reclassify provision for inventory write-downs and shrinkage from inventory, net within operating cash flows in the statements of cash flows.

Additionally, the Company has made a presentation change to the Company's statements of operations to reclassify its restructuring expenses from marketing, operations and technology, and sales, general and administrative operating expenses.

The Company has made a presentation change to the Company's statements of operations to reclassify its legal settlements expense to selling, general, and administrative expenses.

Additionally, the Company has made a presentation change to reclassify loss on disposal of property and equipment, impairment of capitalized proprietary software, and gain on lease termination to other adjustments within operating cash flows in the statements of cash flows.

Changes to reclassify amounts in the prior periods have been made to conform to the current period presentation.

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

Significant items subject to such estimates and assumptions include those related to revenue recognition, including the returns reserve, standalone selling price related to consignment revenue transactions, valuation of inventory, software development costs, stock-based compensation, incremental borrowing rates related to lease liability, valuation of deferred taxes, and other contingencies.

Significant items subject to such estimates and assumptions include those related to revenue recognition, including the returns reserve, standalone selling price related to consignment revenue transactions, valuation of inventory, software development costs, stock-based compensation, fair value of warrant liability, initial fair value of non-convertible notes issued as part of the 2024 Note Exchange (see Note 6 — Non-convertible Notes, Net), incremental borrowing rates related to lease liability, valuation of deferred taxes, and other contingencies.

The Company evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors and adjusts those estimates and assumptions when facts and circumstances dictate.

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For periods in which the Company reports net losses, diluted net loss per common share attributable to common stockholders is the same as basic net loss per common share attributable to common stockholders, because potentially dilutive common shares and assumed conversion of the convertible senior notes are not assumed to have been issued within the calculation, if their effect is anti-dilutive.

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The Company has one operating segment and one reportable segment as its chief operating decision maker, who is its Chief Executive Officer, reviews financial information on a consolidated basis for purposes of allocating resources and evaluating financial performance.

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The Company charges a fee to buyers

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for this service and has elected to treat shipping and handling activities performed as a separate performance obligation.

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Cost of Revenue

Cost of consignment revenue consist of credit card fees, packaging, customer service personnel-related costs, website hosting services, and consignor inventory adjustments relating to lost or damaged products.

Cost of consignment revenue consists of credit card fees, packaging, customer service personnel-related costs, website hosting services, and consignor inventory adjustments relating to lost or damaged products.

Cost of direct revenue consists of the cost of goods sold, credit card fees, packaging, customer service personnel-related costs, website hosting services, and inventory adjustments.

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Selling, general and

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administrative expense also includes allocated facility and overhead costs and professional services, including accounting and legal advisors.

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Restricted cash consists of cash deposited with a financial institution as collateral for the Company’s letters of credit for its facility leases and the Company’s credit cards.

The Company had $ 14.9 million and $ 0 in restricted cash as of December 31, 2023 and 2022, respectively.

The Company had $ 14.9 million in restricted cash as of December 31, 2024 and 2023.

The following table provides a reconciliation of cash, cash equivalents and restricted cash for the year ended December 31, 2024 that sum to the total of the same amounts shown in the statements of cash flows (in thousands):

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After the inventory value is reduced, adjustments are not made to increase it from the estimated net realizable value.

Additionally, inventory is recorded net of an allowance for shrinkage which represents the risk of physical loss of inventory.

Provisions for inventory shrinkage are estimated based on historical

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experience and are adjusted based upon physical inventory counts.

Provisions to write down inventory to net realizable value and provisions for inventory shrinkage were $ 9.8 million and $ 4.1 million during the year end December 31, 2023 and 2022, respectively.

Additionally, inventory is recorded net of an allowance for shrinkage

which represents the risk of physical loss of inventory.

Provisions for inventory shrinkage are estimated based on historical experience and are adjusted based upon physical inventory counts.

Provisions to write down inventory to net realizable value and provisions for inventory shrinkage were $ 2.6 million and $ 9.8 million during the year ended December 31, 2024 and 2023, respectively.

Return reserves, which reduce revenue and cost of sales, are estimated using historical experience.

Liabilities for return allowances are included in other accrued and current liabilities on the balance sheets and were $ 22.2 million as of December 31, 2023 and 2022.

Liabilities for return allowances are included in other accrued and current liabilities on the balance sheets and were $ 22.4 million and $ 22.2 million as of December 31, 2024 and 2023.

Included in inventory on the Company’s balance sheets are assets totaling $ 4.8 million and $ 5.2 million as of December 31, 2024 and 2023, respectively, for the rights to recover products from customers associated with its liabilities for return reserves.

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The Company does not include optional renewal terms or early termination provisions unless the Company is reasonably certain such options would be

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exercised at the inception of the lease.

9 unchanged sentences

The Company uses the effective interest method to amortize the debt discount to interest expense over the amortization period which is the expected life of the debt.

Following the adoption of ASU 2020-06, there is no bifurcation of the liability and equity components of the 3.00 % Convertible Senior Notes due 2025 (the “2025 Notes”) and the 1.00 % Convertible Senior Notes due 2028 (the “2028 Notes” and, together with the 2025 Notes, the “Notes”), and the entire principal of the Notes are accounted for as long-term debt.

The Company initially recognizes incurred debt, net of any discounts, premiums and issuance costs related to the debt offering.

All debt issuance costs are presented as a direct deduction from the related principal debt amounts on the balance sheet.

Debt obligations due within 12 months are classified as current liabilities.

Debt discounts, premiums and issuance costs are amortized to interest expense over the estimated life of the related debt using the effective interest method.

When multiple instruments are issued in the same transaction, the Company allocates any issuance costs to the instruments on the same basis as the allocation of proceeds.

Issuance costs allocated to instruments measured at fair value are expensed in the period incurred.

Capped Call Transactions

In June 2020 and March 2021, in connection with the issuance of its convertible senior notes, the Company entered into Capped Call Transactions (see Note 7).

In June 2020 and March 2021, in connection with the issuance of its convertible senior notes, the Company entered into capped call transactions (see Note 7 - Convertible Senior Notes, Net).

The capped call transactions are expected generally to reduce the potential dilution to the holders of the Company’s common stock upon any conversion of the convertible senior notes and/or offset any cash payments the Company is required to make in excess of the principal amount of converted convertible senior notes, with such reduction and/or offset subject to a cap based on the cap price.

The capped calls are classified in stockholders’ equity as a reduction to additional paid-in capital and are not subsequently remeasured as long as the conditions for equity classification continue to be met.

The Capped Calls (as defined below) are classified in stockholders’ equity as a reduction to additional paid-in capital and are not subsequently remeasured as long as the conditions for equity classification continue to be met.

The Company monitors the conditions for equity classification, which continue to be met as of December 31, 2024.

13 unchanged sentences

Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.

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Concentrations of Credit Risks

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash and cash equivalents, restricted cash and accounts receivable.

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash, cash equivalents, restricted cash and accounts receivable.

At times, such amount may exceed federally-insured limits.

The Company is monitoring ongoing events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions or other companies in the financial services industry or the financial services industry generally.

The Company is closely monitoring ongoing events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions or other companies in the financial services industry or the financial services industry generally.

The Company reduces credit risk by placing its cash, cash equivalents, restricted cash and investments with major financial institutions with high credit ratings within the United States.

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As of December 31, 2024 and December 31, 2023, there were no customers that represented 10% or more of the Company’s accounts receivable balance and there were no customers that individually exceeded 10% of the Company’s total revenue for each of the years ended December 31, 2024, 2023, and 2022.

Recently Adopted Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07, Improvements to Reportable Segment Disclosures requires disclosures about significant segment expenses that are regularly provided to the chief operating decision maker.

This standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

The Company adopted the standard during the year ended December 31, 2024 and applied it retrospectively to the periods presented.

The adoption of this standard did not have a material impact on the Company's financial statements.

Recently Issued Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07, Improvements to Reportable Segment Disclosures.

This new guidance is designed to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses that are regularly provided to the chief operating decision maker.

Additionally, public entities with a single reportable segment must provide all the disclosures required by ASU 2023-07, as well as all existing segment disclosures in accordance with Accounting Standards Codification 280.

ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024 on a retrospective basis.

Early adoption is permitted.

The Company expects the adoption of the standard to result in additional segment footnote disclosures.

The Company does not expect the adoption of this guidance to have a material impact on our financial statements.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures.

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The Company is currently assessing the impact that adopting this new accounting standard will have on its financial statements.

In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses, which requires companies to disclose in the notes to the financial statements the disaggregation of certain expense categories included within the income statement expense captions.

The standard is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027 on a prospective basis with optional retrospective application.

Early adoption is permitted.

The Company is currently assessing the impact that adopting this new accounting standard will have on its financial statements.

In November 2024, the FASB issued ASU 2024-04, Debt with Conversion and Other Options.

This new guidance is designed to clarify requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion.

This standard is effective for fiscal years beginning after December 15, 2025 and for interim periods within fiscal years beginning after December 15, 2026.

Early adoption is permitted.

The Company is currently assessing the impact that adopting this new accounting standard will have on its financial statements.

Cash and Cash Equivalents

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Total cash and cash equivalents $ 175,709 $ — $ — $ 175,709

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Fair Value Measurement

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Assets and Liabilities Measured at Fair Value on a Recurring Basis

As of December 31, 2023 and December 31, 2022, the Company’s cash equivalents solely consisted of money market funds, which amounted to $ 124.8 million and $ 18.1 million, respectively.

Money market funds are measured at net asset value per share.

Fair Value Measurements of Other Financial Instruments

The following table presents the carrying amounts and estimated fair values of the financial instruments that are not recorded at fair value on the balance sheets (in millions):

The following table sets forth the Company's financial instruments on the balance sheet that were measured at fair value on a recurring basis for the period indicated by level within the fair value hierarchy (in thousands):

December 31, 2024

Net Carrying Amount Estimated Fair Value

Financial assets:

Money market funds

$ 147,342 $ — $ — $ 147,342

Financial liabilities:

$ — $ — $ 78,584 $ 78,584

As of December 31, 2023, the Company held $ 124.8 million in money market funds.

Such amounts are considered Level 1 and the Company held no other assets or liabilities that are measured at fair value on a recurring basis.

Fair Value Measurements of Other Financial Instruments

The following table presents the carrying amounts and estimated fair values of the financial instruments that are not recorded at fair value on the balance sheets (in thousands):

December 31, 2024 December 31, 2023

Net Carrying Amount Estimated Fair Value Net Carrying Amount

Estimated Fair Value

2025 Convertible senior notes $ 26,653 $ 26,493 $ 170,564 $ 128,219

2028 Convertible senior notes $ 276,807 $ 216,291 $ 281,857 $ 99,978

The principal amounts of the 2025 Notes and the 2028 Notes are $ 172.5 million and $ 287.5 million, respectively.

The difference between the principal amounts of the convertible senior notes and their respective net carrying amounts are the unamortized debt issuance costs.

As of December 31, 2023, the fair value of the 2025 Notes and 2028 Notes, which differs from their carrying value is determined based on the quoted bid prices of the Notes in an over-the counter market using the latest trading information of the reporting period.

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2029 Non-convertible notes

$ 134,470 $ 140,889 $ — $ —

The principal amounts of the 2025 Notes, the 2028 Notes and the 2029 Notes are $ 26.7 million, $ 281.0 million, and $ 137.9 million, respectively.

The difference between the principal amounts of such notes and their respective net carrying amounts are the unamortized debt issuance costs and debt premiums.

As of December 31, 2024, the fair value of the 2025 Notes, the 2028 Notes and the 2029 Notes, which differs from their carrying value, is determined based on the quoted bid prices of such notes in an over-the counter market using the latest trading information of the reporting period.

Fair Value Measurement of Warrants

In connection with the 2024 Note Exchange (defined in Note 6 – Non-convertible Notes, Net), the Company issued warrants (the "Warrants") to acquire an aggregate of up to 7,894,737 shares (subject to adjustment in accordance with the terms of the Warrants) of the Company’s common stock to the holders of the Exchanged Notes at an exercise price of $ 1.71 , subject to certain cashless exercise provisions and adjustment in accordance with the terms of the Warrants.

The Warrants are exercisable from the date of issuance until they expire on March 1, 2029.

The Warrants are accounted for as liabilities under ASC 480 since the warrants may be required to be settled in cash in case of a fundamental change, which could occur outside of the Company’s control.

Changes in fair value are recognized within change in fair value of warrant liability on the Company’s statements of operations.

Issuance costs allocated to the Warrants are included in selling, general and administrative on the Company’s statements of operations.

The aggregate fair value of the Warrants upon issuance and as of December 31, 2024 was $ 10.4 million and $ 78.6 million, respectively, determined using a Black-Scholes Model with the following inputs:

On issuance December 31, 2024

Stock price $ 1.77 $ 10.93

Exercise price $ 1.71 $ 1.71

Expected life in years

Expected volatility

94.84 % 96.75 %

Expected dividends

Discount rate

4.26 % 4.38 %

The following table presents the activity related to the Warrants during the year ended December 31, 2024.

December 31, 2024

Opening balance

Issuance of warrants 10,417

Change in fair value 68,167

Balance as of December 31, 2024

Balance Sheet Components

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The impairment charges are included in restructuring in the statements of operations.

The Company did not record impairment of leasehold improvements or disposal of fixed assets related to the savings plan during the year ended December 31, 2024.

Other Accrued and Current Liabilities

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Accrued compensation 24,749 20,086

Accrued legal 614 484

Accrued sales tax and other taxes 9,727 8,118

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Deferred revenue 2,441 2,214

Accrued property and equipment 1,066 11,417

Other 8,929 5,583

Other accrued and current liabilities $ 98,466 $ 82,685

Revolving Credit Agreement

In April 2021, the Company entered into a loan and security agreement ("Revolving Credit Agreement") with a lender, to provide a revolving line of credit of up to $ 50 million.

Advances on the line of credit bear interest payable monthly at a variable annual rate equal to the greater of the prime rate plus 0.50 % or 4.25 %.

The credit facility was set to expire in April 2023.

In April 2023 the Company signed an amendment with the lender to extend the credit facility through June 2023.

As of June 30, 2023, $ 0 had been drawn on the Revolving Credit Agreement, and the credit facility has expired and was not renewed.

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Non-convertible Notes, Net

2024 Note Exchange

On February 29, 2024 (the “Closing Date”), the Company entered into exchange agreements with certain holders (the “Exchange Holders”) of its 2025 Notes and 2028 Notes to exchange (i) $ 145.8 million in aggregate principal amount of the 2025 Notes and (ii) $ 6.5 million in aggregate principal amount of the 2028 Notes (together, the “Exchanged Notes”) for $ 135.0 million in aggregate principal amount of the Company’s 4.25 %/ 8.75 % PIK/Cash Senior Secured Notes due 2029 (the “2029 Notes”), pursuant to an indenture (the “2024 Note Exchange”).

The 2029 Notes bear interest at a rate of 13.00 % per annum, consisting of cash interest at a rate of 8.75 % per annum payable semi-annually in arrears and payment in-kind (“PIK”) interest at a rate of 4.25 % per annum payable semi-annually .

During the year ended December 31, 2024, $ 2.9 million was added to the principal amounts outstanding due to accrued PIK interest.

The 2029 Notes will mature on the earlier of (a) March 1, 2029 and (b) any date, if any, on or after December 1, 2027 on which (a) the aggregate principal amount of the 2028 Notes then outstanding is greater than $ 20 million and (b) the difference between (i) the amount of unrestricted cash and cash equivalents held by the Company and its subsidiaries (if any) as of such date of determination and (ii) the aggregate principal amount of 2028 Notes outstanding as of such date of determination is less than $ 75 million.

In connection with the 2024 Note Exchange, the Company issued the Warrants (see Note 4 – Fair Value Measurement for further details on the terms of the Warrants).

As a result of the 2024 Note Exchange, the Company’s principal debt balance decreased $ 17.2 million.

As the terms of the 2029 Notes were deemed to have substantially different terms from the Exchanged Notes, the 2024 Note Exchange was accounted for as an extinguishment of the Exchanged Notes.

In connection with debt extinguishment accounting, the Company recorded a gain of $ 4.2 million as the difference between the carrying amount of the Exchanged Notes and the fair value of the 2029 Notes.

Included in the recorded gain are unamortized debt discounts and issuance costs related to the Exchanged Notes and the fair value of the Warrants as they represent fees paid to the Exchange Holders as part of the 2024 Note Exchange.

The Company allocated issuance costs to the Warrants and the 2029 Notes based on relative fair value.

The Company allocated $ 0.4 million of issuance costs to the Warrants with the balance being allocated to the 2029 Notes.

Issuance costs related to the 2029 Notes are being amortized to interest expense through the expected maturity of the 2029 Notes at an effective interest rate of 13.35 %.

The indenture governing the 2029 Notes contains certain covenants, which include (i) a covenant by the Company not to 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, (ii) limitations on the Company’s and certain of its future subsidiaries’ (if any) ability to, among other things, (a) grant or incur liens securing indebtedness, (b) incur assume or guarantee additional indebtedness, (c) enter into transactions with affiliates, (d) sell or

otherwise dispose of assets, including capital stock of subsidiaries, (e) make certain restricted payments or other investments, or (f) pay dividends or make other distributions (including loans and other advances and (iii) limitations, in the case of the Company and any future guarantor (if any), to consolidate, amalgamate or merge with or into, or sell all or substantially all of its assets to, another person.

As of December 31, 2024 the Company was in compliance with all covenants.

The indenture governing the 2029 Notes sets forth certain events of default after which the 2029 Notes may be declared immediately due and payable and sets forth certain types of bankruptcy or insolvency events of default involving the Company or its subsidiaries.

The 2029 Notes are guaranteed by certain of the Company’s future wholly-owned domestic subsidiaries (if any) on a senior secured basis.

The 2029 Notes and the guarantees (if any), together with any future indebtedness secured on a pari passu basis with the 2029 Notes and the guarantees (if any), are secured by a first priority lien on substantially all of the assets of the Company and the guarantors (if any), subject to certain exceptions.

On or after March 1, 2025, the Company may redeem the 2029 Notes at its option, in whole at any time or in part from time to time, at the following redemption prices (expressed as percentages of principal amount) plus accrued and unpaid interest, to, but excluding, the applicable redemption date (subject to the right of holders of record of the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the following periods:

March 1, 2025 to (but excluding) March 1, 2026 - 113.0 %;

March 1, 2026 to (but excluding) October 1, 2026 - 106.5 %;

and October 1, 2026 and thereafter - 100.0 %.

In addition, prior to March 1, 2025, the Company may redeem the 2029 Notes at its option, in whole at any time or in part from time to time, at a redemption price equal to 100 % of the principal amount of the 2029 Notes redeemed plus the applicable premium as of, and accrued and unpaid interest to, but excluding, the applicable redemption date (subject to the right of holders of record of the relevant record date to receive interest due on the relevant interest payment date).

Notwithstanding the foregoing, at any time and from time to time on or prior to March 1, 2025, the Company may redeem in the aggregate up to 40 % of the original aggregate principal amount of the 2029 Notes (calculated after giving effect to the issuance of any PIK payments) with the net proceeds of one or more equity offerings to the extent the net cash proceeds thereof are contributed to the common equity capital of the Company or are used to purchase capital stock (other than disqualified stock) of the Company, at a redemption price of 113.0 %, plus accrued and unpaid interest, to, but excluding, the applicable redemption date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date), provided at least 60 % of the original aggregate principal amount of the 2029 Notes (calculated after giving effect to any PIK payments) remains outstanding after each such redemption.

A schedule of the Company's future maturities for the 2029 Notes with interest components included in principal, is as follows (in thousands):

Fiscal Year 2029 Notes

2025 through 2028

Total expected payments at maturity

Less unamortized debt issuance costs and debt premium, net

Less amounts related to PIK interest

Net carrying amount

Convertible Senior Notes, Net

In June 2020, the Company issued an aggregate principal of $ 172.5 million of its 2025 Notes, pursuant to an indenture between the Company and U.S.

Bank National Association, as trustee, in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”).

The 2025 Notes include $ 22.5 million in aggregate principal amount of the 2025 Notes sold to the initial purchasers resulting from the exercise in full of their option to purchase additional Notes.

In June 2020, the Company issued an aggregate principal of $ 172.5 million of its 2025 Notes, pursuant to an indenture, in a private offering to qualified institutional buyers.

The 2025 Notes will mature on June 15, 2025, unless earlier redeemed or repurchased by the Company or converted.

The Company received net proceeds from the 2025 Notes offering of approximately $ 165.8 million, after deducting the initial purchasers’ discount and commission and offering expenses.

The Company used approximately $ 22.5 million of the net proceeds from the 2025 Notes offering to fund the net cost of entering into the capped call transactions described below.

In February 2024, certain of the 2025 Notes were extinguished in connection with the 2024 Note Exchange (see Note 6 — Non-convertible Notes, Net).

At issuance, the Company received net proceeds from the 2025 Notes offering of approximately $ 165.8 million, after deducting the initial purchasers’ discount and commission and offering expenses.

The Company used approximately $ 22.5 million of the net proceeds from the 2025 Notes offering to fund the net cost of entering into the capped call

transactions described below.

The Company intends to use the remainder of the net proceeds for general corporate purposes.

In March 2021, the Company issued an aggregate principal of $ 287.5 million of its 2028 Notes, pursuant to an indenture between the Company and U.S.

Bank National Association, as trustee, in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act.

The 2028 Notes include $ 37.5 million in aggregate principal amount of the 2028 Notes sold to the initial purchasers resulting from the exercise in full of their option to purchase additional Notes.

In March 2021, the Company issued an aggregate principal of $ 287.5 million of its 2028 Notes, pursuant to an indenture, in a private offering to qualified institutional buyers.

The 2028 Notes will mature on March 1, 2028, unless earlier redeemed or repurchased by the Company or converted.

The Company received net proceeds from the 2028 Notes offering of approximately $ 278.1 million, after deducting the initial purchasers’ discount and commission and offering expenses.

In February 2024, certain of the 2028 Notes were extinguished in connection with the 2024 Note Exchange (see Note 6 — Non-convertible Notes, Net).

At issuance, the Company received net proceeds from the 2028 Notes offering of approximately $ 278.1 million, after deducting the initial purchasers’ discount and commission and offering expenses.

The Company used approximately $ 33.7 million of the net proceeds from the 2028 Notes offering to fund the net cost of entering into the capped call transactions described below.

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The conversion rate is subject to adjustment upon the occurrence of certain specified events but will not be adjusted for accrued and unpaid interest.

In addition, upon the occurrence of a corporate event, the Company will, in certain circumstances, increase the conversion rate by a number of additional shares for a holder that elects to convert its Notes in connection with such corporate event.

The 2025 Notes will be redeemable, in whole or in part, at the Company’s option at any time, and from time to time, on or after June 20, 2023, and the 2028 Notes will be redeemable, in whole or in part, at the Company's option at any time, and from time to time, on or after March 5, 2025, in each case if the last reported sale price per share of the Company’s common stock exceeds 130 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which the Company provides notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately before the date the Company sends the related redemption notice.

In addition, calling any Note for redemption will constitute a make-whole fundamental change with respect to that Note, in which case the conversion rate applicable to the conversion of that Note will be increased in certain circumstances if it is converted after it is called for redemption.

Prior to March 15, 2025, in the case of the 2025 Notes, and December 1, 2027, in the case of the 2028 Notes, the applicable Notes will be convertible only under the following circumstances:

Prior to March 15, 2025, in the case of the 2025 Notes, and December 1, 2027, in the case of the 2028 Notes, the applicable Convertible Senior Notes will be convertible only under the following circumstances:

• During any calendar quarter (and only during such calendar quarter), if, the last reported sale price per share of the Company’s common stock exceeds 130 % of the applicable conversion price on each applicable trading day for at least 20 trading days (whether or not consecutive) in the period of the 30 consecutive trading day period ending on, and including, the last trading day of the immediately preceding calendar quarter;

• During the five business day period after any five consecutive trading day period in which, for each day of that period, the trading price per $1,000 principal amount of Notes for such trading day was less

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than 98 % of the product of the last reported sale price of the Company’s common stock and the applicable conversion rate on such trading day;

• During the five business day period after any five consecutive trading day period in which, for each day of that period, the trading price per $1,000 principal amount of 2025 Notes and 2028 Notes for such trading day was less than 98 % of the product of the last reported sale price of the Company’s common stock and the applicable conversion rate on such trading day;

• Upon the occurrence of specified corporate transactions;

• If the Company calls any notes for redemption.

On and after March 15, 2025, in the case of the 2025 Notes, and December 1, 2027, in the case of the 2028 Notes, until the close of business on the scheduled trading day immediately preceding the maturity date, holders may convert all or a portion of their Notes, in multiples of $1,000 principal amount, at any time, regardless of the foregoing circumstances.

Upon conversion, the Notes will be settled, at the Company’s election, in cash, shares of the Company’s common stock, or a combination of cash and shares of the Company’s common stock.

It is the Company’s current intent to settle conversions of the 2025 Notes and the 2028 Notes through combination settlement, which involves repayment of the principal portion in cash and any excess of the conversion value over the principal amount in shares of its common stock.

• If the Company calls any 2025 Notes and 2028 Notes for redemption.

On and after March 15, 2025, in the case of the 2025 Notes, and December 1, 2027, in the case of the 2028 Notes, until the close of business on the scheduled trading day immediately preceding the maturity date, holders may convert all or a portion of their 2025 Notes and 2028 Notes, in multiples of $1,000 principal amount, at any time, regardless of the foregoing circumstances.

Upon conversion, the 2025 Notes and 2028 Notes will be settled, at the Company’s election, in cash, shares of the Company’s common stock, or a combination of cash and shares of the Company’s common stock.

It is the Company’s current intent to settle conversions of the 2025 Notes and the 2028 Notes through combination settlement,

which involves repayment of the principal portion in cash and any excess of the conversion value over the principal amount in shares of its common stock.

The conditions allowing holders of either the 2025 Notes or the 2028 Notes to convert were not met as of December 31, 2024 .

The Notes are unsecured and unsubordinated obligations of the Company and will rank senior in right of payment to any of future indebtedness of the Company that is expressly subordinated in right of payment to the Notes;

The 2025 Notes and 2028 Notes are unsecured and unsubordinated obligations of the Company and will rank senior in right of payment to any of future indebtedness of the Company that is expressly subordinated in right of payment to the 2025 Notes and 2028 Notes;

rank equal in right of payment to any existing and future unsecured indebtedness of the Company that is not so subordinated;

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and be structurally subordinated to all existing and future indebtedness and other liabilities and obligations incurred by future subsidiaries of the Company.

If bankruptcy, insolvency, or reorganization occurs with respect to the Company (and not solely with respect to a significant subsidiary of the Company), then the principal amount of, and all accrued and unpaid interest on, all of the Notes then outstanding will immediately become due and payable without any further action or notice by any person.

If bankruptcy, insolvency, or reorganization occurs with respect to the Company (and not solely with respect to a significant subsidiary of the Company), then the principal amount of, and all accrued and unpaid interest on, all of the 2025 Notes and 2028 Notes then outstanding will immediately become due and payable without any further action or notice by any person.

If an event of default (other than bankruptcy, insolvency, or reorganization with respect to the Company and not solely with respect to a significant subsidiary of the Company) occurs and is continuing, then, with the exception of certain reporting events of default, the trustee, by notice to the Company, or noteholders of at least 25 % of the aggregate principal amount of 2025 Notes or 2028 Notes, as applicable, then outstanding, by notice to us and the trustee, may declare the principal amount of, and all accrued and unpaid interest on, all of the 2025 Notes or 2028 Notes, as applicable, the outstanding to become due and payable immediately.

Prior to the adoption of ASU 2020-06 on January 1, 2022 and in accounting for the issuance of the 2025 Notes and the 2028 Notes, the Company separately accounted for the liability and equity components of the Notes.

The debt discount was recorded to equity and was amortized to the debt liability over the life of the Notes using the effective interest method.

The equity component was not remeasured as long as it continued to meet the conditions for equity classification.

In connection with the issuance of the 2025 and 2028 Notes, the Company incurred approximately $ 6.7 million and $ 9.4 million of debt issuance costs, respectively, which primarily consisted of initial purchasers’ discounts and legal and other professional fees.

Prior to the adoption of ASU 2020-06 on January 1, 2022, the Company allocated these costs to the liability and equity components based on the allocation of the proceeds.

The portion of these costs allocated to the equity component was recorded as a reduction to additional paid-in capital.

The portion of these costs initially allocated to the liability component was recorded as a reduction in the carrying value of the debt on the balance sheets and was amortized to interest expense using the effective interest method over the expected life of the Notes.

On January 1, 2022, the Company adopted ASU 2020-06 based on a modified retrospective transition method.

Upon adoption, the Company recorded a cumulative effect 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.

Under such transition, prior period information for both the 2025 and 2028 Notes has not been retrospectively adjusted.

In accounting for the 2025 Notes after the adoption of ASU 2020-06, the 2025 Notes are accounted for as a single liability, and the carrying amount of the Notes is $ 170.6 million as of December 31, 2023, with principal of $ 172.5 million, net of unamortized issuance costs of $ 1.9 million.

The 2025 Notes were classified as long term liabilities as of December 31, 2023.

The carrying amount of the 2025 Notes is $ 26.7 million as of December 31, 2024, with principal of $ 26.7 million, net of unamortized issuance costs of $ 0.1 million.

The 2025 Notes were classified as short-term liabilities as of December 31, 2024.

The issuance costs related to the 2025 Notes are being amortized to interest expense over the expected life of the 2025 Notes or approximately its five-year term at an effective interest rate of 3.74 %.

In accounting for the 2028 Notes after the adoption of ASU 2020-06, the 2028 Notes are accounted for as a single liability, and the carrying amount of the Notes is $ 281.9 million as of December 31, 2023, with principal of $ 287.5 million, net of unamortized issuance costs of

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$ 5.6 million.

The carrying amount of the 2028 Notes is $ 276.8 million as of December 31, 2024, with principal of $ 281.0 million, net of unamortized issuance costs of $ 4.2 million.

The 2028 Notes were classified as long term liabilities as of December 31, 2024.

The issuance costs related to the 2028 Notes are being amortized to interest expense over the expected life of the 2028 Notes or approximately its seven-year term at an effective interest rate of 1.45 %.

The following tables present the outstanding principal amount, unamortized debt issuance costs, and net carrying amount of the 2025 Notes and the 2028 Notes as of the dates indicated (in thousands):

December 31, 2023 December 31, 2022

Principal $ 172,500 $ 172,500

Unamortized debt issuance costs ( 1,936 ) ( 3,204 )

Net carrying amount $ 170,564 $ 169,296

December 31, 2023 December 31, 2022

$ 287,500 $ 287,500

Unamortized debt issuance costs

( 5,643 ) ( 6,948 )

Net carrying amount

$ 281,857 $ 280,552

The following tables set forth the amounts recorded in interest expense related to the 2025 Notes as of the dates indicated (in thousands):

The following table sets forth the amounts recorded in interest expense related to the 2025 Notes as of the dates indicated (in thousands):

Year Ended December 31,

1 unchanged sentence

Contractual interest expense $ 1,531 $ 5,175 $ 5,175

Amortization of debt discount — — 3,594

Amortization of debt issuance costs 383 1,268 1,080

1 unchanged sentence

$ 1,914 $ 6,443 $ 6,255

The following tables set forth the amounts recorded in interest expense related to the 2028 Notes as of the dates indicated (in thousands):

The following table sets forth the amounts recorded in interest expense related to the 2028 Notes as of the dates indicated (in thousands):

Year Ended December 31,

1 unchanged sentence

Contractual interest expense $ 2,821 $ 2,875 $ 2,875

Amortization of debt discount — — 8,759

Amortization of debt issuance costs 1,308 1,305 1,288

1 unchanged sentence

$ 4,129 $ 4,180 $ 4,163

Future minimum payments under the 2025 Notes and the 2028 Notes as of December 31, 2023, are as follows (in thousands):

A schedule of the Company's future maturities for the 2025 and 2028 Notes, is as follows (in thousands):

Fiscal Year 2025 Notes

2024 5,175 2,875

2025 175,088 2,875

Total future payments

Total principal payments

26,749 281,019

Less amounts representing interest

Less unamortized debt issuance costs

( 96 ) ( 4,212 )

Total principal amount

Net carrying amount

$ 26,653 $ 276,807

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Capped Call Transactions with Respect to the 2025 Notes and 2028 Notes

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The Company paid an aggregate amount of approximately $ 22.5 million to the Counterparties in connection with the 2025 capped call transactions (the “2025 Capped Calls”) and $ 33.7 million to the Counterparties in connection with the 2028 capped call transactions and (the “2028 Capped Calls” and, together with the 2025 Capped Calls, the “Capped Calls”).

The 2025 Capped Calls and 2028 Capped Calls cover approximately 9,705,454 shares and 9,040,869 shares of the Company’s common stock at a strike price that corresponds to the initial conversion price of the 2025 Notes and the 2028 Notes, respectively.

The 2025 Capped Calls and 2028 Capped Calls initially covered approximately 9,705,454 shares and 9,040,869 shares of the Company’s common stock at a strike price that corresponds to the initial conversion price of the 2025 Notes and the 2028 Notes, respectively.

The 2025 Capped Calls and the 2028 Capped Calls are subject to anti-dilution adjustments that are intended to be substantially identical to those in the 2025 Notes and the 2028 Notes, as applicable, and are exercisable upon conversion of the 2025 Notes or the 2028 Notes, as applicable.

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The cap price of the 2028 Capped Call is initially $ 48.00 per share, which represents a premium of 100.0 % over the closing price of the Company’s common stock of $ 24.00 per share on March 3, 2021, and is subject to certain adjustments under the terms of the capped call transactions.

The Company expects to receive from the Counterparties a number of shares of the Company’s common stock or, at the Company’s election (subject to certain conditions), cash, with an aggregate market value (or, in the case of cash settlement, in an amount) approximately equal to the product of such excess times the number of shares of the Company’s common stock relating to the 2025 Capped Call and 2028 Capped Call being exercised.

These Capped Call instruments meet the conditions outlined in ASC 815-40 to be classified in stockholders’ equity, are not accounted for as derivatives, and are not subsequently remeasured as long as the conditions for equity classification continue to be met.

The Company recorded a reduction to additional paid-in capital of approximately $ 22.5 million and $ 33.7 million related to the premium payments for the 2025 Capped Call and 2028 Capped Call transactions.

In connection with the 2024 Note Exchange, the Company received $ 0.4 million in cash in connection with settling certain Capped Calls.

After giving effect to such settlements, the 2025 Capped Calls and 2028 Capped Calls outstanding cover approximately 1,504,992 and 8,837,095 shares of the Company's common stock, respectively.

As the Capped Calls were equity classified, the proceeds from settlement of these Capped Calls were recorded to additional paid in capital.

The Company had reserved shares of common stock for issuance, on an as-converted basis, as follows:

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Shares available for issuance under 2019 ESPP 4,135,266 3,654,915

Warrants to purchase common stock

32,743,585 25,124,423

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Subject to the terms and conditions of the 2019 Plan, the initial number of shares authorized for grants under the 2019 Plan is 8,000,000 .

These available shares increase annually by

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an amount equal to the lesser of 8,000,000 shares, 5 % of the number of shares of the Company’s common stock outstanding on the immediately preceding December 31, or the number of shares determined by the Company’s board of directors.

The Company’s board of directors approved an increase of shares available for grant under the 2019 Plan by 4,465,083 shares on May 5, 2021, by 4,648,003 shares on February 23, 2022, and by 4,954,409 shares on February 13, 2023.

These available shares increase annually by an amount equal to the lesser of 8,000,000 shares, 5 % of the number of shares of the Company’s common stock outstanding on the immediately preceding December 31, or the number of shares determined by the Company’s board of directors.

Activity under the Company’s stock option plan is set forth below:

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There were no stock options granted in 2024 and in 2023.

There was no aggregate intrinsic value of options exercised for the year ended December 31, 2023.

The aggregate intrinsic value of options exercised for the years ended December 31, 2022 and 2021 was $ 5.3 million and $ 20.5 million, respectively.

The aggregate intrinsic value of options exercised for the years ended December 31, 2024, 2023 and 2022 was $ 0.3 million, zero and $ 5.3 million, respectively.

The aggregate intrinsic value of options exercised is the difference between the fair value of the underlying common stock on the date of exercise and the exercise price for in-the-money stock options.

In February 2022, the Company granted PSUs with financial performance targets to certain employees of the Company.

The number of units issued will depend on the achievement of financial metrics relative to the approved performance targets, and can range from 0 % to 150 % of the target amount.

The number of shares of the Company's common stock issued upon settlement will depend on the achievement of financial metrics relative to the approved performance targets, and can range from 0 % to 150 % of the target amount.

The PSUs are subject to continuous service with the Company and will vest after approximately three years .

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In March 2023, the Company granted PSUs under the 2019 Plan subject to the achievement of both market and service conditions to certain employees of the Company .

The number of units vested will depend on the achievement of approved market conditions and continuous service with the Company.

The number of shares of the Company's common stock issued upon settlement will depend on the achievement of approved market conditions and continuous service with the Company.

The PSUs are eligible to vest in three tranches over a five-year performance period.

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The compensation expense will be recognized regardless of whether the market condition is ever satisfied, provided the requisite service period is satisfied.

In March and October 2024, the Company granted PSUs with financial performance targets to certain employees of the Company.

The PSUs are subject to continuous service with the Company and will vest after approximately three years from the grant date.

The PSUs are measured using the fair value at the date of grant.

The compensation expense associated with PSUs is recognized based on the estimated number of shares that the Company expects will vest and may be adjusted based on interim estimates of performance against the performance condition.

Inducement Grants

In March 2023, the Company granted stock-based awards outside of the 2019 Plan to the Company’s new Chief Executive Officer and the Chief Technology and Product Officer.

The Company granted stock-based awards outside of the 2019 Plan to the certain executives.

These awards were granted as inducements material to their commencement of employment and entry into offer letters with the Company, in accordance with Nasdaq Listing Rule 5635(c)(4).

The inducement pool consisted of a total of 3,075,000 shares of the Company's common stock, which includes (a) 1,500,000 shares of PSUs granted to the Chief Executive Officer that are eligible to vest based on market and service conditions in four tranches over a five-year performance period and (b) 1,575,000 shares of RSUs ( 1,250,000 RSUs to the Chief Executive Officer and 325,000 RSUs to the Chief Technology and Product Officer) generally subject to the same terms and conditions as grants that are made under the 2019 Plan.

As of December 31, 2023, the unrecognized expense for the PSUs is $ 1.3 million and the unrecognized expense for RSUs is $ 2.0 million.

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The inducement pool consisted of a total of 5,625,000 shares of the Company's common stock, which includes (a) 2,050,000 shares of PSUs that are eligible to vest based on market and service conditions in four tranches over a five-year performance period and (b) 3,575,000 shares of RSUs generally subject to the same terms and conditions as grants that are made under the 2019 Plan.

The unvested PSUs and RSUs held by the Company's former Chief Executive Officer John Koryl were forfeited upon his separation from the Company on October 28, 2024.

The activity in the inducement pool is included in the summary of RSU activity table below.

A summary of RSU activity for the year ended December 31, 2024 is as follows:

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Unvested December 31, 2024 14,305,562 $ 3.48 $ 156,360

Included in the table above for the year ended December 31, 2023 are approximately 1,998,000 PSUs granted and no PSUs forfeited.

The weighted average grant date fair value per share of the PSUs granted in the year ended December 31, 2023 was $ 1.63 .

Included in the table above for the year ended December 31, 2024 are 2,535,000 PSUs granted, 98,000 PSUs vested, and 1,979,678 PSUs forfeited.

The weighted average grant date fair value per share of the PSUs granted, vested and forfeited in the year ended December 31, 2024 was $ 3.31 , $ 1.63 and $ 2.53 , respectively.

The total fair value as of the respective vesting dates of RSUs that vested during the year ended December 31, 2024 was $ 21.7 million .

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In connection with the Company’s initial public offering, the Company adopted the Employee Stock Purchase Plan (the “ESPP”).

The Employee Stock Purchase Plan permits employees to purchase shares of common stock during six-month offering periods at a purchase price equal to the lesser of (1) 85 % of the fair market value of a share of common stock on the first business day of such offering period and (2) 85 % of the fair market value of a share of common stock on the last business day of such offering period.

the last business day of such offering period.

The initial number of shares of common stock that could be issued under the employee stock purchase plan was 1,750,000 shares.

These available shares increase by an amount equal to the lesser of 1,750,000 shares, 1 % of the number of shares of common stock outstanding on the immediately preceding December 31, or the number of shares determined by the Company’s board of directors.

The Company's board of directors approved an increase in the shares available for grant under the ESPP by 893,016 shares on May 5, 2021, by 929,601 shares on February 23, 2022, and by 990,882 shares on February 13, 2023.

The Company's board of directors approved an increase in the shares available for grant under the ESPP by 893,016 shares on May 5, 2021, by 929,601 shares on February 23, 2022, by 990,882 shares on February 13, 2023, and by 1,046,705 shares on February 20, 2024.

During the years ended December 31, 2024, 2023 and 2022, employees purchased 566,354 , 865,676 , and 610,877 shares, respectively, at an average price of $ 2.49 , $ 1.02 and $ 2.29 , respectively.

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Volatility —Because the Company was privately held and did not have an active trading market for its common stock for a sufficient period of time, the expected volatility was estimated based on the average volatility for comparable publicly-traded companies, over a period equal to the expected term of the stock option grants.

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Risk-free Rate —The risk-free rate assumption is based on the U.S.

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The Company leases its corporate offices, retail spaces and authentication centers under various noncancelable operating leases with terms ranging from one year to fifteen years .

The Company recorded operating lease costs of $ 22.8 million and $ 29.0 million for the years ended December 31, 2023 and 2022, respectively.

The Company incurred $ 5.2 million and $ 5.6 million of variable lease costs for the years ended December 31, 2023 and 2022, respectively, which is comprised primarily of the Company’s proportionate share of operating expenses, property taxes and insurance.

The Company recorded operating lease costs of $ 20.9 million, $ 22.8 million and $ 29.0 million for the years ended December 31, 2024, 2023 and 2022, respectively.

The Company incurred $ 5.5 million, $ 5.2 million and $ 5.6 million of variable lease costs for the years ended December 31, 2024, 2023 and 2022, respectively, which is comprised primarily of the Company’s proportionate share of operating expenses, property taxes and insurance.

Due to the office and store closures in the year ended December 31, 2023, the Company reviewed its right-of-use assets for impairment.

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As a result, the Company recorded $ 31.1 million related to the impairment of certain office and store right-of-use assets during the year ended December 31, 2023.

No impairment charges were recorded during the year ended December 31, 2024.

The impairment charges are included in restructuring in the statements of operations.

During the year ended December 31, 2023, the Company entered into agreements to amend certain of its operating leases.

The lease for the Company's corporate headquarters in San Francisco, CA was amended to remove one floor of leased space, and the lease for the Company's offices in New York, NY, was amended to remove two floors of leased space.

Additionally, the Company terminated the operating leases for retail locations in Austin, TX, Atlanta, GA, and

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The Company treated the lease termination amendments as lease modifications for accounting purposes as of the applicable effective dates of such terminations which resulted in a decrease of $ 7.7 million to the related lease liabilities, and a decrease of $ 1.4 million to the related right-of-use assets for the year ended December 31, 2023.

The Company recorded a net gain on the lease terminations of $ 0.7 million during the year ended December 31, 2023.

The net gain on lease terminations is included in restructuring in the statement of operations.

The net gain on lease terminations is included in restructuring in the statements of operations.

Maturities of operating lease liabilities by fiscal year for the Company’s operating leases are as follows (in thousands):

Fiscal Year Amount

2025 $ 28,761

Thereafter 8,822

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Supplemental cash flow information related to the Company’s operating leases are as follows (in thousands):

Year Ended Year ended December 31,

Year ended December 31,

2024 2023 2022

Operating cash flows used for operating leases $ 27,939 $ 34,118 $ 27,097

Operating lease assets obtained in exchange for operating lease liabilities $ 6,272 $ 2,245 $ 46,614

Operating lease assets obtained in exchange for operating lease liabilities (including remeasurement of right-of-use assets and lease liabilities due to lease modifications)

$ 4,558 $ 6,272 $ 2,245

The weighted average remaining lease term and discount rate for the Company’s operating leases are as follows:

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Restructuring

In February 2023, the Company announced a savings plan to reduce its real estate presence and operating expenses through closure of certain retail and office locations (referred to as the “Real Estate Reduction Plan”) and workforce reduction.

During the year ended December 31, 2023, the Company closed two flagship stores (San Francisco, California and Chicago, Illinois), two neighborhood stores (Atlanta, Georgia and Austin, Texas), and two luxury consignment offices (Miami, Florida and Washington, D.C.), including any co-located logistics hubs, and reduced its office spaces in San Francisco, California.

In February 2023, the Company announced a savings plan to reduce its real estate presence and operating expenses through closure of certain retail and office locations and workforce reduction.

For the year ended December 31, 2023, the Company recognized $ 43.5 million in restructuring which consisted of right-of-use asset impairment charge of $ 31.1 million, leasehold improvements impairment charge of $ 8.6 million, employee severance of $ 3.0 million, and other related charges of $ 1.5 million, partially offset by a $ 0.7 million gain on lease terminations.

The restructuring related charges were recorded on a separate line item in the Company's statement of operations.

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The Company recorded an immaterial amount of restructuring for the year ended December 31, 2024.

The restructuring related charges were recorded on a separate line item in the Company's statements of operations.

Commitments and Contingencies

Fire at Secaucus, New Jersey Authentication Center

In May 2024, the Company experienced a fire at one of its authentication centers in Secaucus, New Jersey.

The damage was primarily limited to fixed assets, leasehold improvements, supplies, and consigned and owned inventories.

The Company maintains property, cargo, general liability and business interruption insurance coverage.

As of December 31, 2024, discussions with the insurance company are still ongoing.

Based on the provisions of the Company’s insurance policies, the Company recorded insurance recoveries for fire related costs for which recovery was deemed probable.

T he Company recorded losses related to the fire, net of insurance recoveries, of $ 0.7 million for the year ended December 31, 2024 within Operations and Technology on the statements of operations.

As of December 31, 2024, the Company recorded $ 2.5 million of insurance receivables within prepaid and other current assets on the balance sheet.

The Company has received $ 3.9 million in payments from insurers towards its claims to cover immediate impacts of the fire.

$ 3.4 million of the payments are included within net cash flows from operating activities and $ 0.5 million of the payments are included within net cash flows from investing activities in the statements of cash flows due to the nature of the advance insurance payments.

Noncancelable Purchase Commitments

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However, on July 19, 2023, the Court ordered a stay of the case at the parties’ request to enable the parties to attempt mediation again.

The parties are working to schedule mediation in the first half of 2024.

The parties have continued to engage in settlement discussions facilitated by a mediator.

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 the Company’s business and could lead to other similar lawsuits.

The Company is not able to predict or reasonably estimate the ultimate outcome or possible losses relating to this claim.

The Company is not able to predict or reasonably estimate the ultimate outcome or loss or range of possible losses relating to this claim.

Beginning on September 10, 2019, purported shareholder class action complaints were filed against the Company, its officers and directors and the underwriters of its IPO in the San Mateo Superior Court, Marin County Superior Court, and the United States District Court for the Northern District of California.

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On July 28, 2022, the court entered an order finally approving the settlement and dismissing the case.

The financial terms of the stipulation of settlement provide that the Company will pay $ 11.0 million within thirty ( 30 ) days of the later of preliminary approval of the settlement or plaintiff’s counsel providing

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payment instructions.

The Company paid the settlement amount on March 29, 2022 with available resources and recorded approximately $ 11.0 million for the year ended December 31, 2021 under our Operating expenses as a Legal settlement.

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The claims are for alleged violations of Sections 11 and 15 of the Securities Act.

On February 23, 2024, plaintiff filed a motion for class certification, which has been set for hearing on May 28, 2024.

On February 23, 2024, plaintiff filed a motion for class certification, which has been set for hearing on February 25, 2025.

While the Company intends to defend vigorously against this litigation, there can be no assurance that the Company will be successful in its defense.

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Tax credits ( 169 ) ( 531 ) ( 563 )

Convertible Notes — — 16,782

Warrant liability fair value adjustment

Adoption of ASU 2020-06 — — ( 28,045 )

Provision to return adjustments

( 1,927 ) 9,259 —

Valuation allowance

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Provision for income taxes $ 276 $ 283 $ 172

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The Company’s deferred tax assets and liabilities (in thousands):

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Capitalized research and development (1)

18,679 13,835

Accruals and reserves

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Net deferred tax assets $ — $ —

(1) Under the Tax Cuts and Jobs Act of 2017, research and development costs are no longer fully deductible and are required to be capitalized and amortized for U.S.

(1) Under the Tax Cuts and Jobs Act of 2017, research and development costs are no longer fully deductible when incurred and are required to be capitalized and amortized for U.S.

tax purposes effective January 1, 2022.

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will not be realized;

accordingly, a valuation allowance has been established against our U.S.

accordingly, a valuation allowance has been established against the Company's U.S.

deferred tax assets.

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However, $ 704.2 million of the federal net operating losses will not expire.

As of December 31, 2023 and 2022, the Company has a credit carryforward of $ 4.3 million and $ 2.0 million for federal tax purposes, respectively, and $ 1.0 million and $ 1.0 million for state tax purposes, respectively.

As of December 31, 2024 and 2023, the Company has a credit carryforward of $ 4.7 million and $ 4.3 million for federal tax purposes, respectively, and $ 1.0 million for state tax purposes.

If not utilized, these credits will expire beginning in 2041 for federal tax purposes and do not expire for state tax purposes.

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In the normal course of business, the Company is subject to examination by federal, state and local, jurisdictions, where applicable.

As of December 31, 2023 and 2022, all years generally remain open to examination.

Additionally, net operating loss

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carryforwards are subject to examination by the Internal Revenue Service and the California Franchise Tax Board for up to three and four years, respectively, after utilization.

December 31, 2024 and 2023, all years generally remain open to examination.

Additionally, net operating loss carryforwards are subject to examination by the Internal Revenue Service and the California Franchise Tax Board for up to three and four years, respectively, after utilization.

Uncertain Income Tax Positions

1 unchanged sentence

Unrecognized tax benefits beginning balance

$ 2,678 $ 1,525

Increases related to current year tax positions

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The unrecognized tax benefits relate to federal and state research and development credits.

The Company's policy is to include interest and penalties as a component to the statement of operations, however there were no associated interest and penalties during the years ended December 31, 2023 and 2022.

The Company's policy is to include interest and penalties as a component to the statements of operations, however there were no associated interest and penalties during the years ended December 31, 2024 and 2023.

The Company estimates that there will be no material changes in its uncertain tax positions in the next 12 months.

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Estimated shares issuable under the Employee Stock Purchase Plan 248,523 367,074 695,782

Assumed conversion of the Convertible Senior Notes 18,746,323 18,746,323 18,746,323

Assumed conversion of the 2025 Notes and 2028 Notes

10,342,056 18,746,323 18,746,323

The Convertible Senior Notes issued in June 2020 and in March 2021 are convertible, based on the applicable conversion rate, into cash, shares of the Company’s common stock or a combination thereof, at the Company’s election.

Warrants to purchase common stock

7,894,737 — —

33,708,248 32,928,249 32,565,902

The 2025 Notes and 2028 Notes issued in June 2020 and in March 2021, respectively, are convertible, based on the applicable conversion rate, into cash, shares of the Company’s common stock or a combination thereof, at the Company’s election.

The impact of the assumed conversion to diluted net loss per share is computed on an as-converted basis.

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Retirement Plan

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The Company’s contributions to the 401(k) plan were $ 1.4 million, $ 0.8 million, and $ 1.6 million for the years ended December 31, 2024, 2023, and 2022, respectively.

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Segment Information

The Company has one reportable segment as its chief operating decision maker (the "CODM"), who is its Chief Executive Officer, reviews financial information on a consolidated basis.

The Company generates revenue from the sale of pre-owned luxury goods through its online marketplace and retail stores.

Revenue is comprised of consignment revenue, direct revenue, and shipping services revenue.

The Company does not have intra-entity sales or transfers.

The chief operating decision maker assesses performance and allocates resources based on net loss, as reported on the statements of operations.

Net loss is used to monitor budget versus actual results.

The CODM does not evaluate operating segments using asset or liability information.

The following table presents selected financial information with respect to the Company's single operating segment (in thousands):

Year Ended December 31,

2024 2023 2022

Total revenue $ 600,484 $ 549,304 $ 603,493

Cost of consignment revenue 53,801 58,120 56,963

Cost of direct revenue 55,809 74,343 141,661

Cost of shipping services revenue 43,353 40,563 56,178

Total cost of revenue 152,963 173,026 254,802

Gross Profit 447,521 376,278 348,691

283,002 274,229 297,676

Software and purchased services

108,866 104,454 103,695

Occupancy expense 37,295 37,718 44,911

Depreciation and amortization (1)

32,764 31,695 27,669

Stock-based compensation 29,082 34,273 46,138

Administration and other segment expenses (2)

12,811 16,740 16,869

Restructuring (3)

196 43,462 896

Total operating expenses 504,016 542,571 537,854

Change in fair value of warrant liability ( 68,167 ) — —

Gain on extinguishment of debt 4,177 — —

Interest income 7,943 8,805 3,191

Interest expense ( 21,384 ) ( 10,701 ) ( 10,472 )

Other income (expense), net — — 171

Provision for income taxes

Net loss attributable to common stockholders $ ( 134,202 ) $ ( 168,472 ) $ ( 196,445 )

(1) Expenses reported in operating expenses, excludes depreciation and amortization recorded in cost of revenue.

(2) Administration and other segment expenses include insurance, supplies, and taxes.

(3) Restructuring expenses for the year ended December 31, 2024 and 2022 consist of employee severance charges.

For the year ended December 31, 2023 it consists of impairment of right-of-use assets and property and equipment, employee severance charges, gain on lease terminations, and other charges.

Subsequent Events

On February 29, 2024, the Company entered into an exchange agreement with certain holders of its Notes to exchange (i) $ 145,751,000 in aggregate principal amount of the 2025 Notes and (ii) $ 6,480,000 in aggregate principal amount of the 2028 Notes (together, the “Exchanged Notes”) for $ 135,000,000 in aggregate principal amount of new senior notes due 2029 (“2029 Notes”), pursuant to an indenture.

The exchange was consummated on February 29, 2024.

The 2029 Notes bear cash interest (“Cash Interest”) at a rate of 8.75 % per annum payable semi-annually in arrears.

In addition, the Notes bear interest at a rate of 4.25 % payable in kind (“PIK Interest”).

Additionally, the Company issued warrants to acquire an aggregate of up to 7,894,737 shares of the Company’s common stock to the holders of the Exchanged Notes.

On February 10, 2025, the Company entered into an exchange agreement with certain holders of its 2028 Notes to exchange $ 183.3 million in aggregate principal amount of the 2028 Notes for $ 146.7 million in aggregate principal amount of new convertible senior notes due 2031 (“2031 Notes”), issued pursuant to an Indenture, dated February 10, 2025.

The exchange was consummated, and the 2031 Notes were issued in a private placement, on February 10, 2025.

The 2031 Notes bear cash interest at a rate of 4.00 % per annum payable semi-annually in arrears on February 15 and August 15 of each year, beginning on August 15, 2025 (with additional interest being paid solely on the first interest payment date of the 2031 Notes in consideration for the accrued and unpaid interest on the 2028 Notes exchanged for the 2031 Notes) and will mature on February 15, 2031.

The 2031 Notes are convertible into shares of the Company’s common stock on the terms and subject to the conditions set forth in the Indenture.

The Company is currently evaluating the impact of this transaction on its financial statements.

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 9A. Controls and Procedures