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What changed in Newegg Commerce, Inc.'s 20-F — 2022 vs 2023

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Paragraph-level year-over-year comparison of Newegg Commerce, Inc.'s 2022 and 2023 20-F annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+383 added−395 removedSource: 20-F (2024-04-24) vs 20-F (2022-12-31)

Top changes in Newegg Commerce, Inc.'s 2023 20-F

383 paragraphs added · 395 removed · 311 edited across 5 sections

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

107 edited+35 added−54 removed290 unchanged
Biggest changeIf such third parties modify or terminate their relationship with us or increase the price they charge to us, if our competitors offer them greater fees for traffic, or if any free third-party platforms on which we rely begin charging fees for listing or placement, our expenses could rise and traffic to our websites could decrease, resulting in harm to our operations.
Biggest changeIf such third parties modify or terminate their relationship with us or increase the price they charge to us, if our competitors offer them greater fees for traffic, or if any free third-party platforms on which we rely begin charging fees for listing or placement, our expenses could rise and traffic to our websites could decrease, resulting in harm to our operations. 14 Our success also depends on our ability to convert visitors to our websites and mobile apps into paying customers, a process which is partially reliant upon our ability to identify and purchase relevant keyword search terms, provide relevant content on our online platforms and effectively target our other marketing programs, such as internet portal referrals, email campaigns and affiliate programs.
These and future claims could increase our cost of doing business as a result of legal expenses, adverse judgments or settlements, and reputational harm, and require us to change our business practices in a way that would be less efficient and more costly.
These and future claims could increase our cost of doing business as a result of legal expenses, adverse judgments or settlements, and reputational harm, and could require us to change our business practices in a way that would be less efficient and more costly.
If we were involved in a class action suit, it could divert a significant amount of our management’s attention and other resources from our business and operations, which could harm our results of operations and require us to incur significant expenses to defend the suit.
If we were involved in a class action suit, it could divert a significant amount of our management’s attention and other resources from our business and operations, which could harm our results of operations and require us to incur significant expenses to defend the suit.
In addition, California has in the past experienced power outages as a result of limited electric power supply; ● diseases or pandemics (including COVID-19) that have affected and may continue to affect the supply chain of our brand partners and Marketplace sellers, and our logistics in the future due to inconsistent and unanticipated order patterns, other diseases or pandemics or unforeseen natural disasters; ● computer malware, physical or electronic break-ins and similar disruptions; ● security breaches and hacking attacks; ● failure by third-party vendors, including data center and bandwidth providers, to provide steady and high-speed access to our online platforms and systems.
In addition, California has in the past experienced power outages as a result of limited electric power supply; ● diseases or pandemics (such as COVID-19) that have affected and may continue to affect the supply chain of our brand partners and Marketplace sellers, and our logistics in the future due to inconsistent and unanticipated order patterns, other diseases or pandemics or unforeseen natural disasters; ● computer malware, physical or electronic break-ins and similar disruptions; ● security breaches and hacking attacks; ● failure by third-party vendors, including data center and bandwidth providers, to provide steady and high-speed access to our online platforms and systems.
If search engines or social media platforms change their search engine algorithms periodically or penalize us for non-compliance with their guidelines while using their algorithms, terms of service, or display and featuring of search results, or if competition increases for advertisements, we may be unable to cost-effectively drive visitors to our websites and mobile apps.
Further, if search engines or social media platforms change their search engine algorithms periodically or penalize us for non-compliance with their guidelines while using their algorithms, terms of service, or display and featuring of search results, or if competition increases for advertisements, we may be unable to cost-effectively drive visitors to our websites and mobile apps.
However, any similar future matters that are not resolved in our favor could have a material impact on our consolidated financial position, cash flows, and results of operations. Significant developments stemming from recent U.S. government actions and proposals concerning tariffs and other economic proposals could have a material adverse effect on us.
However, any similar future matters that are not resolved in our favor could have a material impact on our consolidated financial position, cash flows, and results of operations. 21 Significant developments stemming from recent U.S. government actions and proposals concerning tariffs and other economic proposals could have a material adverse effect on us.
If finalized, Treasury Regulations currently proposed under Section 382 of the Code may further limit our ability to utilize our pre-change net operating losses and tax credit carryforwards if we undergo such an ownership change. 23 We are treated as a U.S. corporation for all U.S. federal tax purposes.
If finalized, Treasury Regulations currently proposed under Section 382 of the Code may further limit our ability to utilize our pre-change net operating losses and tax credit carryforwards if we undergo such an ownership change. We are treated as a U.S. corporation for all U.S. federal tax purposes.
If our customers become dissatisfied with the services provided by these third parties, our reputation and brand could suffer. 15 If we fail to manage our inventory effectively, our financial condition, results of operations and liquidity may be materially and adversely affected. Our scale and business model require us to manage a large volume of inventory effectively.
If our customers become dissatisfied with the services provided by these third parties, our reputation and brand could suffer. If we fail to manage our inventory effectively, our financial condition, results of operations and liquidity may be materially and adversely affected. Our scale and business model require us to manage a large volume of inventory effectively.
While we may invest in building our business in other markets, we may not be able to successfully manage the challenges associated with our current and future international operations due to risks, such as: ● international economic and political conditions or geopolitical events and security issues (including terrorist attacks, war, or other armed hostilities); 12 ● changes in, or impositions of, legislative or regulatory requirements on e-commerce businesses and companies, such as U.S. sanctions laws and regulations, and limitations on our ability to directly own or control key assets, such as overseas warehouses; ● the legal and regulatory environment in foreign jurisdictions, including with respect to consumer privacy and data protection laws, tax, law enforcement, network security, trade compliance and intellectual property matters, as well as consumer litigation; ● tax laws, regulations and treaties, including U.S. taxes on foreign operations and repatriation of funds; ● difficulties in identifying, attracting, hiring, training and retaining qualified personnel, and overseeing international operations, including the efficient management of our international operations; ● delays or additional costs resulting from import/export controls, duties, tariffs or other barriers to trade; and ● currency exchange controls or changes in exchange rates, which could make our pricing less competitive or reduce our profit margins.
While we may invest in building our business in other markets, we may not be able to successfully manage the challenges associated with our current and future international operations due to risks, such as: ● international economic and political conditions or geopolitical events and security issues (including terrorist attacks, war, or other armed hostilities); ● changes in, or impositions of, legislative or regulatory requirements on e-commerce businesses and companies, such as U.S. sanctions laws and regulations, and limitations on our ability to directly own or control key assets, such as overseas warehouses; ● the legal and regulatory environment in foreign jurisdictions, including with respect to consumer privacy and data protection laws, tax, law enforcement, network security, climate and emissions regulations, trade compliance and intellectual property matters, as well as consumer litigation; ● tax laws, regulations and treaties, including U.S. taxes on foreign operations and repatriation of funds; ● difficulties in identifying, attracting, hiring, training and retaining qualified personnel, and overseeing international operations, including the efficient management of our international operations; ● delays or additional costs resulting from import/export controls, duties, tariffs or other barriers to trade; and ● currency exchange controls or changes in exchange rates, which could make our pricing less competitive or reduce our profit margins.
Any one or more of these events may impede our operation and delivery efforts and adversely affect our sales results, or even for a prolonged period of time, which could materially and adversely affect our business, financial condition, and results of operations. We depend on our vendors to source sufficient quantities of merchandise on favorable terms.
Any one or more of these events may impede our operation and delivery efforts and adversely affect our sales results, or even for a prolonged period of time, which could materially and adversely affect our business, financial condition, and results of operations. 13 We depend on our vendors to source sufficient quantities of merchandise on favorable terms.
If we expand our product offerings and include more SKUs in our inventory, it could make it more challenging for us to manage our inventory effectively and put more pressure on our warehousing system. We purchase most of the merchandise that we sell directly to customers on our online platforms from manufacturers or distributors.
If we expand our product offerings and include more SKUs in our inventory, it could make it more challenging for us to manage our inventory effectively and put more pressure on our warehousing system. 15 We purchase most of the merchandise that we sell directly to customers on our online platforms from manufacturers or distributors.
If we are not able to acquire or protect our trademarks, domain names or other intellectual property, we may experience difficulties in achieving and maintaining brand recognition and customer loyalty. Assertions, claims and allegations, even if not true, that we have infringed or violated intellectual property rights could harm our business and reputation.
If we are not able to acquire or protect our trademarks, domain names or other intellectual property, we may experience difficulties in achieving and maintaining brand recognition and customer loyalty. 20 Assertions, claims and allegations, even if not true, that we have infringed or violated intellectual property rights could harm our business and reputation.
There is no assurance that we will be able to compete successfully against current and future competitors. Competitive pressures may materially and adversely affect our business, financial condition and results of operations. 6 A decline in demand for IT/CE products could adversely affect our operating results.
There is no assurance that we will be able to compete successfully against current and future competitors. Competitive pressures may materially and adversely affect our business, financial condition and results of operations. A decline in demand for IT/CE products could adversely affect our operating results.
Our ability to obtain additional capital on acceptable terms is subject to a variety of uncertainties, including: ● investors’ perception of, and demand for, our securities; ● conditions of the U.S. and other capital markets in which we may seek to raise funds; and ● our future results of operations and financial condition.
Our ability to obtain additional capital on acceptable terms is subject to a variety of uncertainties, including: ● investors’ perception of, and demand for, our securities; 19 ● conditions of the U.S. and other capital markets in which we may seek to raise funds; and ● our future results of operations and financial condition.
Even unsuccessful claims could result in the expenditure of significant funds and management time in defending them and could have a negative impact on our reputation and business. 21 We may incur additional costs due to tax assessments resulting from ongoing and future audits by tax authorities.
Even unsuccessful claims could result in the expenditure of significant funds and management time in defending them and could have a negative impact on our reputation and business. We may incur additional costs due to tax assessments resulting from ongoing and future audits by tax authorities.
The obligations under the credit agreements are also guaranteed by our assets or those of our subsidiaries. The terms of these credit agreements may restrict our current and future operations and could adversely affect our ability to finance our future operations or capital needs or to execute business strategies in the means or manner desired.
The obligations under the credit agreements are also guaranteed by our assets or those of our subsidiaries. 18 The terms of these credit agreements may restrict our current and future operations and could adversely affect our ability to finance our future operations or capital needs or to execute business strategies in the means or manner desired.
Any such sale could result in significant litigation and uncertainty over the ownership of those shares, which could cause our share price to fall. 24 The market price of our common shares has been extremely volatile and may continue to be volatile due to numerous circumstances beyond our control.
Any such sale could result in significant litigation and uncertainty over the ownership of those shares, which could cause our share price to fall. The market price of our common shares has been extremely volatile and may continue to be volatile due to numerous circumstances beyond our control.
Any such change in control could be viewed negatively by our shareholders, leading to a drop in the trading price of our shares. ● In addition, any transfer of those shares to a non-affiliate of Digital Grid would be subject to our amended and restated shareholders agreement.
Any such change in control could be viewed negatively by our shareholders, leading to a drop in the trading price of our shares. 24 ● In addition, any transfer of those shares to a non-affiliate of Digital Grid would be subject to our amended and restated shareholders agreement.
Our inability to execute an effective pricing strategy, or a determination by our Marketplace sellers that they can more competitively price their products through other distribution channels could adversely affect our business, financial condition, results of operations and prospects. 8 Operational Risks We face risks related to system interruption, including failures caused or experienced by third-party service providers, and lack of redundancy and timely upgrades.
Our inability to execute an effective pricing strategy, or a determination by our Marketplace sellers that they can more competitively price their products through other distribution channels could adversely affect our business, financial condition, results of operations and prospects. 7 Operational Risks We face risks related to system interruption, including failures caused or experienced by third-party service providers, and lack of redundancy and timely upgrades.
You should consider all of the risk factors described in our public filings when evaluating our business, including risks relating to: ● the impact of global macroeconomic conditions on consumer spending; ● the ongoing impact of COVID-19 on our business and financial results; ● our reputation and business if we or Newegg Marketplace sellers sell pirated, counterfeit, illegal or “gray market” items; ● the intense domestic and international competition we face; ● any decline in demand for IT/CE products; 1 ● our inability to provide a satisfactory customer experience; ● our use of software and systems contain open source software; ● pricing strategies not meeting customers’ price expectations or resulting in profitability; ● system interruptions, including failures caused or experienced by third-party service providers, and lack of redundancy and timely upgrade; ● our reliance on and relationships with third-party payment processors to process deposits and withdrawals made by users of our Marketplace; ● the loss of key employees or the failure to attract or retain qualified personnel; ● any significant inadvertent disclosure or breach of confidential or personal information we hold; ● our ability to promote and strengthen the Newegg brand; ● inflation, uncertainty and volatility in the financial markets and other macroeconomic factors; ● the material weaknesses we identified in our internal control over financial reporting; ● our international operations (principally in Canada); ● our expansion into new product categories, services, technologies and geographic regions; ● any interruption in our fulfillment operations; ● our reliance on a limited number of third-party courier service providers; ● pandemics and other public health crises, natural disasters, terrorist activities and political unrest; ● our dependence on relationships with vendors to source sufficient quantities of merchandise on favorable terms; ● our marketing activities to help attract visitors to our online platforms; ● delays, increased cost or quality control deficiencies in the importation of products manufactured abroad; ● our dependence on third parties to perform a number of our e-commerce functions; ● management of our inventory; ● the fact that we have incurred net losses in the past and may experience losses in the future; ● failure to adopt new technologies or adapt our websites, mobile apps and systems to changing customer requirements or emerging industry standards; ● the seasonality of our business; 2 ● the life cycle fluctuations of the products we sell; ● the performance, reliability and security of the internet infrastructure in the countries where we operate; ● management of our growth or execution of our strategies; ● any adverse change in our vendor payment terms and conditions; ● our disclosure controls and procedures; ● our revolving credit agreement, which contains a number of covenants that may restrict our current and future operations; ● access to international markets and applicable laws relating to trade, export and import controls and economic sanctions; ● our ability to raise additional capital; ● claims, litigation, government investigations, and other proceedings may adversely affect our business and results of operations; ● our ability to adequately protect our intellectual property rights; ● any assertions, claims and allegations that we have infringed or violated intellectual property rights; ● product liability claims, which could be costly and time-consuming to defend; ● any additional costs incurred due to tax assessments resulting from ongoing and future audits by tax authorities; ● significant developments stemming from recent U.S. government actions and proposals concerning tariffs and other economic proposals; ● relatively stringent employment laws in some of the countries in which we operate; ● our ability to use our net operating loss carryforwards and certain other tax attributes; ● our being treated as a U.S. corporation for all U.S. federal tax purposes; ● the shares pledged as collateral to support delinquent indebtedness of our parent company; ● the extreme volatility of the market price of our common shares due to numerous circumstances beyond our control; ● Mr.
You should consider all of the risk factors described in our public filings when evaluating our business, including risks relating to: ● the impact of global macroeconomic conditions on consumer spending; ● the intense domestic and international competition we face; ● any decline in demand for IT/CE products; ● our reputation and business if we or Newegg Marketplace sellers sell pirated, counterfeit, illegal or “gray market” items; ● our inability to provide a satisfactory customer experience; ● our use of software and systems contain open source software; 1 ● pricing strategies not meeting customers’ price expectations or resulting in profitability; ● system interruptions, including failures caused or experienced by third-party service providers, and lack of redundancy and timely upgrade; ● our reliance on and relationships with third-party payment processors to process deposits and withdrawals made by users of our Marketplace; ● the loss of key employees or the failure to attract or retain qualified personnel; ● any significant inadvertent disclosure or breach of confidential or personal information we hold; ● our ability to promote and strengthen the Newegg brand; ● inflation, uncertainty and volatility in the financial markets and other macroeconomic factors; ● the material weaknesses we identified in our internal control over financial reporting; ● our international operations (principally in Canada); ● our expansion into new product categories, services, technologies and geographic regions; ● any interruption in our fulfillment operations; ● our reliance on a limited number of third-party courier service providers; ● pandemics and other public health crises, natural disasters, terrorist activities and political unrest; ● our dependence on relationships with vendors to source sufficient quantities of merchandise on favorable terms; ● our marketing activities to help attract visitors to our online platforms; ● delays, increased cost or quality control deficiencies in the importation of products manufactured abroad; ● our dependence on third parties to perform a number of our e-commerce functions; ● management of our inventory; ● the fact that we have incurred net losses in the past and may experience losses in the future; ● failure to adopt new technologies or adapt our websites, mobile apps and systems to changing customer requirements or emerging industry standards; ● the seasonality of our business; ● the life cycle fluctuations of the products we sell; ● physical and transition risks related to climate change, such as severe weather events and regulatory and reputational risks; ● the performance, reliability and security of the internet infrastructure in the countries where we operate; ● management of our growth or execution of our strategies; 2 ● any adverse change in our vendor payment terms and conditions; ● our disclosure controls and procedures; ● our revolving credit agreement, which contains a number of covenants that may restrict our current and future operations; ● access to international markets and applicable laws relating to trade, export and import controls and economic sanctions; ● our ability to raise additional capital; ● claims, litigation, government investigations, and other proceedings may adversely affect our business and results of operations; ● our ability to adequately protect our intellectual property rights; ● any assertions, claims and allegations that we have infringed or violated intellectual property rights; ● product liability claims, which could be costly and time-consuming to defend; ● any additional costs incurred due to tax assessments resulting from ongoing and future audits by tax authorities; ● significant developments stemming from recent U.S. government actions and proposals concerning tariffs and other economic proposals; ● relatively stringent employment laws in some of the countries in which we operate; ● our ability to use our net operating loss carryforwards and certain other tax attributes; ● our being treated as a U.S. corporation for all U.S. federal tax purposes; ● the shares pledged as collateral to support delinquent indebtedness of our parent company; ● the extreme volatility of the market price of our common shares due to numerous circumstances beyond our control; ● Mr.
Fred Chang’s approximate 59.3% and 34.6% control, respectively, and 93.9%, collectively, of the voting power of our issued and outstanding common shares; ● our status as a “controlled company” within the meaning of the Nasdaq Listing Rules and the corresponding exemptions from certain corporate governance requirements; ● certain provisions of Newegg’s Amended Shareholders Agreement that may delay or prevent us from raising funding in the future and may have an adverse impact on us and the liquidity and market price of our common shares; ● any shareholder litigation due to the volatility in the price of our common shares, which may result in substantial costs and a diversion of our management’s attention and resources; ● our failure to maintain compliance with Nasdaq Listing Rules, which may lead to us being delisted from Nasdaq, which would result in a limited public market for trading our shares and make obtaining future debt or equity financing more difficult; 3 ● any involvement of our directors and officers in investigations or other forms of regulatory or governmental inquiry which may cause reputational harm to the Company, result in additional expenses, and distract our management from our day-to-day operations; ● securities or industry analysts not publishing research or reports about our business or adversely changing their recommendations regarding our common shares; ● techniques employed by short sellers to drive down the market price of our common shares; ● difficulty enforcing judgments against us, our directors and management; ● unavailability of certain types of class or derivative actions under British Virgin Islands law and other interests under U.S. law; ● protecting shareholder interests that would otherwise be normally available to shareholders of a U.S. corporation; ● our expectation not to pay dividends in the foreseeable future; ● certain home country (British Virgin Islands) practices in relation to corporate governance matters that differ significantly from Nasdaq’s corporate governance listing standards, which may afford less protection to shareholders; and ● our foreign private issuer status, which exempts us from certain reporting requirements applicable to U.S. domestic public companies.
Fred Chang’s approximate 58.7% and 32.9% control, respectively, and 91.6%, collectively, of the voting power of our issued and outstanding common shares; ● our status as a “controlled company” within the meaning of the Nasdaq Listing Rules and the corresponding exemptions from certain corporate governance requirements; ● certain provisions of Newegg’s Amended Shareholders Agreement that may delay or prevent us from raising funding in the future and may have an adverse impact on us and the liquidity and market price of our common shares; ● any shareholder litigation due to the volatility in the price of our common shares, which may result in substantial costs and a diversion of our management’s attention and resources; ● our failure to maintain compliance with Nasdaq Listing Rules, which may lead to us being delisted from Nasdaq, which would result in a limited public market for trading our shares and make obtaining future debt or equity financing more difficult; 3 ● any involvement of our directors and officers in investigations or other forms of regulatory or governmental inquiry which may cause reputational harm to the Company, result in additional expenses, and distract our management from our day-to-day operations; ● securities or industry analysts not publishing research or reports about our business or adversely changing their recommendations regarding our common shares; ● techniques employed by short sellers to drive down the market price of our common shares; ● difficulty enforcing judgments against us, our directors and management; ● unavailability of certain types of class or derivative actions under British Virgin Islands law and other interests under U.S. law; ● protecting shareholder interests that would otherwise be normally available to shareholders of a U.S. corporation; ● our expectation not to pay dividends in the foreseeable future; ● certain home country (British Virgin Islands) practices in relation to corporate governance matters that differ significantly from Nasdaq’s corporate governance listing standards, which may afford less protection to shareholders; and ● our foreign private issuer status, which exempts us from certain reporting requirements applicable to U.S. domestic public companies.
The loans have been guaranteed jointly and severally by Beijing Digital Grid Technology Co., Ltd., a subsidiary of Hangzhou Lianluo, and by Mr. Zhitao He. The total principal amount owed under these loans as of March 31, 2023 was RMB150 million in RMB-denominated loans plus USD$66.5 million in U.S. dollar-denominated loans.
The loans have been guaranteed jointly and severally by Beijing Digital Grid Technology Co., Ltd., a subsidiary of Hangzhou Lianluo, and by Mr. Zhitao He. The total principal amount owed under these loans as of March 31, 2024 was RMB150 million in RMB-denominated loans plus USD$66.5 million in U.S. dollar-denominated loans.
In particular, we rely on search engines, such as Google, Microsoft Bing and Yahoo!, and social media platforms, such as TikTok, Facebook and Instagram, as important marketing channels.
In particular, we rely on search engines, such as Google and Microsoft Bing and social media platforms, such as TikTok, Facebook and Instagram, as important marketing channels.
Because we qualify as a foreign private issuer under the Exchange Act of 1934, as amended (the “Exchange Act”), we are exempt from certain provisions of the securities rules and regulations in the United States that are applicable to U.S. domestic issuers, including: ● the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q or current reports on Form 8-K; ● the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act; ● the sections of the Exchange Act requiring insiders to file public reports of their share ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and ● the rules under Regulation FD governing selective disclosure rules of material nonpublic information.
Because we qualify as a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the securities rules and regulations in the United States that are applicable to U.S. domestic issuers, including: ● the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q or current reports on Form 8-K; ● the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act; ● the sections of the Exchange Act requiring insiders to file public reports of their share ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and ● the rules under Regulation FD governing selective disclosure rules of material nonpublic information.
This means that, notwithstanding that we are a company incorporated in the BVI, we will be treated for all U.S. federal tax purposes as if we are a U.S. corporation and you will be treated for all U.S. federal tax purposes as holding the stock of a U.S. corporation. See “Item 10. Additional Information – E. Taxation” for additional detail.
This means that, notwithstanding that we are a company incorporated in the BVI, we will be treated for all U.S. federal tax purposes as if we are a U.S. corporation and you will be treated for all U.S. federal tax purposes as holding the stock of a U.S. corporation. See “Item 10. Additional Information – E.
Failure to provide satisfactory levels of customer service may harm our reputation, causing potential loss of existing customers and difficulty in acquiring new customers. 7 Some of our software and systems contain open source software, which may pose particular risks to our proprietary software and solutions.
Failure to provide satisfactory levels of customer service may harm our reputation, causing potential loss of existing customers and difficulty in acquiring new customers. 6 Some of our software and systems contain open source software, which may pose particular risks to our proprietary software and solutions.
These inflationary pressures have affected, and may continue to affect, wages, the cost and our ability to obtain products, the price of our goods and services, our ability to meet customer demand, discretionary consumer spending that may lead to lesser demand for our products, our gross margins and operating profit.
Recent inflationary pressures have affected, and may continue to affect, wages, the cost and our ability to obtain products, the price of our goods and services, our ability to meet customer demand, discretionary consumer spending that may lead to lesser demand for our products, our gross margins and operating profit.
The failure to attract or retain qualified personnel could have a material adverse effect on our business. 10 A significant inadvertent disclosure or breach of confidential or personal information we hold could be detrimental to our business, reputation and results of operations.
The failure to attract or retain qualified personnel could have a material adverse effect on our business. 9 A significant inadvertent disclosure or breach of confidential or personal information we hold could be detrimental to our business, reputation and results of operations.
We are particularly subject to the risks associated with our discounting pricing practices as a result of the aggressive judicial interpretations of deceptive pricing laws, particularly in California, which has led to numerous class action settlements by online and brick-and-mortar retailers over the past few years.
We are particularly subject to the risks associated with our discounting pricing practices as a result of the aggressive judicial interpretations of deceptive pricing laws, particularly in California, which has led to numerous class action settlements by online and brick-and-mortar retailers in the past.
These factors include, without limitation: ● “short squeezes”; ● comments by securities analysts or other third parties, including blogs, articles, message boards and social and other media; ● actual or anticipated fluctuations in our financial and operating results; ● risks and uncertainties associated with the ongoing impact of the COVID-19 pandemic; ● shifts in the timing or content of certain promotions or service offerings; ● announcements of new products and services by us or our competitors; ● the effect of changes in tax rates in the jurisdictions in which we operate; ● announcements of new investments, acquisitions, strategic partnerships or joint ventures by us or our competitors; ● the mix of earnings in the countries in which we operate; ● changes in foreign currency exchange rates; ● announcements about our earnings that are not in line with shareholders’ expectations; ● changes in financial estimates by securities analysts; ● negative public perception of us, our competitors, or industry; ● release of lock-up or other transfer restrictions on our outstanding equity securities or sales of additional equity securities; ● potential litigation or regulatory investigations; and ● overall general market fluctuations.
These factors include, without limitation: ● “short squeezes”; ● comments by securities analysts or other third parties, including blogs, articles, message boards and social and other media; ● actual or anticipated fluctuations in our financial and operating results; ● shifts in the timing or content of certain promotions or service offerings; ● announcements of new products and services by us or our competitors; ● the effect of changes in tax rates in the jurisdictions in which we operate; ● announcements of new investments, acquisitions, strategic partnerships or joint ventures by us or our competitors; ● the mix of earnings in the countries in which we operate; ● changes in foreign currency exchange rates; ● announcements about our earnings that are not in line with shareholders’ expectations; ● changes in financial estimates by securities analysts; ● negative public perception of us, our competitors, or industry; ● release of lock-up or other transfer restrictions on our outstanding equity securities or sales of additional equity securities; ● potential litigation or regulatory investigations; and ● overall general market fluctuations.
Additionally, these and other external factors have caused and may continue to cause the market price and demand for our common shares to fluctuate, which may limit or prevent investors from readily selling their common shares and may otherwise negatively affect the liquidity of our common shares. Mr. Zhitao He and Mr.
Additionally, these and other external factors have caused and may continue to cause the market price and demand for our common shares to fluctuate, which may limit or prevent investors from readily selling their common shares and may otherwise negatively affect the liquidity of our common shares. 25 Mr.
For the year ended December 31, 2022, we recorded inventory write-offs or write-downs totaling $6.0 million, or 0.4% of our cost of goods sold. We may sell obsolete or dated merchandise at a discount or loss. If there were unforeseen product developments or if vendors were to change their terms and conditions, our inventory risks could increase.
For the year ended December 31, 2023, we recorded inventory write-offs or write-downs totaling $5.0 million, or 0.4% of our cost of goods sold. We may sell obsolete or dated merchandise at a discount or loss. If there were unforeseen product developments or if vendors were to change their terms and conditions, our inventory risks could increase.
If such third parties are unwilling or unable to continue providing these services, our business could be harmed. As of December 31, 2022, approximately 8.0% of our gross merchandise value (“GMV”) was generated by the sale of products fulfilled through third parties. These third parties provide various services on our behalf, including inventory maintenance and order processing.
If such third parties are unwilling or unable to continue providing these services, our business could be harmed. As of December 31, 2023, approximately 8.6% of our gross merchandise value (“GMV”) was generated by the sale of products fulfilled through third parties. These third parties provide various services on our behalf, including inventory maintenance and order processing.
As of December 31, 2022 and 2021, approximately 71% and 70% of our products that were sold through our platforms, both direct sales and marketplace, were manufactured in China, respectively. U.S. government actions since 2018 have imposed greater restrictions and economic disincentives on international trade impacting imports and exports.
As of December 31, 2023 and 2022, approximately 65% and 71% of our products that were sold through our platforms, both direct sales and marketplace, were manufactured in China, respectively. U.S. government actions since 2018 have imposed greater restrictions and economic disincentives on international trade impacting imports and exports.
We incurred net losses of $57.4 million and $17.0 million in 2022 and 2019, respectively, and reported net income of $36.3 million and $30.4 million in 2021 and 2020, respectively. We cannot assure you that we will be able to generate net profits or positive cash flow from operating activities in the future.
We incurred net losses of $59.0 million and $57.4 million in 2023 and 2022, respectively, and reported net income of $36.3 million and $30.4 million in 2021 and 2020, respectively. We cannot assure you that we will be able to generate net profits or positive cash flow from operating activities in the future.
The estimated total amount owed under the loans, including interest, fees, expenses and penalties, as of March 31, 2023 was approximately RMB448 million. Hangzhou Lianluo did not pledge any Common Shares owned by it or Digital Grid as collateral to support the ICBC loans.
The estimated total amount owed under the loans, including interest, fees, expenses and penalties, as of December 31, 2023 was approximately RMB485 million. Hangzhou Lianluo did not pledge any Common Shares owned by it or Digital Grid as collateral to support the ICBC loans.
As of December 31, 2022, approximately 34% of our website and mobile app visitors were referred to us through paid and unpaid search engine listings, shopping comparison sites and other affiliate networks that provide links to our online platforms.
As of December 31, 2023, approximately 24% of our website and mobile app visitors were referred to us through paid and unpaid search engine listings, shopping comparison sites and other affiliate networks that provide links to our online platforms.
Certain vendors provide a significant portion of our merchandise. In the United States and Canada, for the twelve months ended December 31, 2022, our ten largest suppliers accounted for approximately 73% of the merchandise we purchased.
Certain vendors provide a significant portion of our merchandise. In the United States and Canada, for the twelve months ended December 31, 2023, our ten largest suppliers accounted for approximately 71% of the merchandise we purchased.
We rely on a limited number of third-party courier service providers to deliver products to our customers. For the periods of the fiscal years ended December 31, 2022 and 2021, approximately 78.2% and 76.7%, respectively, of our total packages were shipped by our top three third-party courier service providers.
We rely on a limited number of third-party courier service providers to deliver products to our customers. For the periods of the fiscal years ended December 31, 2023 and 2022, approximately 85.3% and 78.2%, respectively, of our total packages were shipped by our top three third-party courier service providers.
Risks Related to our Common Shares A majority of Newegg’s capital shares are pledged as collateral to support delinquent indebtedness of our parent company and could be sold to satisfy that indebtedness or other delinquent indebtedness of our parent company.
Taxation” for additional detail. 23 Risks Related to our Common Shares A majority of Newegg’s capital shares are pledged as collateral to support delinquent indebtedness of our parent company and could be sold to satisfy that indebtedness or other delinquent indebtedness of our parent company.
The adoption and expansion of trade restrictions, the occurrence of a trade war, or other governmental action related to tariffs or trade agreements or policies has the potential to adversely impact demand for our products, our costs, our customers, our suppliers, and the U.S. economy, which in turn could adversely impact our business, financial condition and results of operations.
Moreover the evolving nature of trade restrictions, the occurrence of a trade war, or other governmental action related to tariffs or trade agreements or policies, have the potential to adversely impact demand for our products, our costs, our customers, our suppliers, and the U.S. economy, which in turn could adversely impact our business, financial condition and results of operations.
Fred Chang acting as a “Minority Representative” selected by a majority of the Legacy Shareholders (as defined in the Company’s Amended and Restated Memorandum and Articles of Association), who collectively own approximately 36.6% of our total voting power as of December 31, 2022.
Fred Chang acting as a “Minority Representative” selected by a majority of the Legacy Shareholders (as defined in the Company’s Amended and Restated Memorandum and Articles of Association), who collectively own approximately 34.5% of our total voting power as of December 31, 2023.
Three of our ten largest suppliers, Giga-Byte Technology, ASI Corporation, and MSI Computer Corporation, accounted for approximately 39% of our purchases for the same period. Failure to maintain a positive relationship with these key suppliers could impact our ability to sell to customers the products they want.
Three of our ten largest suppliers, ASI Corporation, MSI Computer Corporation, and TD Synnex, accounted for approximately 38% of our purchases for the same period. Failure to maintain a positive relationship with these key suppliers could impact our ability to sell to customers the products they want.
If this occurs, we could experience delays in responding to customer inquiries and addressing customer complaints and concerns. Our current level of customer support may also fail to meet the expectations of customers.
In addition, the future volume of customer complaints and inquiries may exceed our present system capacities. If this occurs, we could experience delays in responding to customer inquiries and addressing customer complaints and concerns. Our current level of customer support may also fail to meet the expectations of customers.
For example, Newegg was named as the defendant in a putative class action accusing it of violating the False Advertising Law, the Unfair Competition Law and the Consumer Legal Remedies Act by using allegedly deceptive list prices with allegedly overstated discounts for our products.
For example, Newegg was named as the defendant in a putative class action accusing it of violating the False Advertising Law, the Unfair Competition Law and the Consumer Legal Remedies Act by using allegedly deceptive list prices with allegedly overstated discounts for our products. This matter was dismissed by the court on September 18, 2023 for failure to prosecute.
We receive from time to time, and may receive in the future, communications alleging that Newegg or the Newegg Marketplace sellers sold pirated, counterfeit, illegal or “gray market” items.
Newegg’s reputation and business may be harmed if Newegg or the Newegg Marketplace sellers sell pirated, counterfeit, illegal or “gray market” items. We receive from time to time, and may receive in the future, communications alleging that Newegg or the Newegg Marketplace sellers sold pirated, counterfeit, illegal or “gray market” items.
Global pandemics, epidemics or other public health crises in China or elsewhere in the world, or natural disasters such as hurricanes, earthquakes, tsunamis, fire, or drought could disrupt our business operations, reduce or restrict our operations and services, incur significant costs to protect our employees and facilities, or result in regional or global economic distress, which may materially and adversely affect our business, financial condition, and results of operations.
Global pandemics, epidemics or other public health crises, or natural disasters such as hurricanes, earthquakes, tsunamis, fire, drought, rising sea levels, or other severe weather events, whether as a result of climate change or otherwise, could disrupt our business operations, reduce or restrict our operations and services, incur significant costs to protect our employees and facilities, or result in regional or global economic distress, which may materially and adversely affect our business, financial condition, and results of operations.
It has initiated the imposition of additional tariffs on certain foreign goods, including steel and aluminum, semiconductor manufacturing equipment and spare parts thereof, and has amended export regulations regarding sales to companies on the U.S. Entity List.
It imposed additional tariffs on certain foreign goods, including steel and aluminum, semiconductor manufacturing equipment and spare parts thereof, and has amended export regulations regarding sales to companies on the U.S. Entity List, and the export of semiconductor manufacturing equipment and advanced semiconductor technology and commodities to a range of countries, including China.
Our business, operating results, and cash flows may be adversely impacted by a rising rate of inflation. Due to labor and supply chain constraints, including those stemming from the ongoing effects of the COVID-19 pandemic, there has been an inflationary environment resulting in significant increases to the cost of components, labor and freight costs and other expenses.
Our business, operating results, and cash flows may be adversely impacted by inflation. Due to labor and supply chain constraints, there has been a volatile inflationary environment resulting in significant increases to the cost of components, labor and freight costs and other expenses.
As of December 31, 2022, our common stock closed at a price of $1.31 per share. If we fail to comply with this, or any other, Nasdaq Listing Rule, our common shares may lose their status on Nasdaq and they would likely be traded on the over-the-counter market, including the Pink Sheets market.
If we fail to comply with this, or any other, Nasdaq Listing Rule, our common shares may lose their status on Nasdaq and they would likely be traded on the over-the-counter market, including the Pink Sheets market.
In addition, BVI law does not make a distinction between public and private companies and some of the protections and safeguards (such as statutory pre-emption rights, save to the extent expressly provided for in the memorandum and articles of association) that investors may expect to find in relation to a public company are not provided for under BVI law.
In addition, BVI law does not make a distinction between public and private companies and some of the protections and safeguards (such as statutory pre-emption rights, save to the extent expressly provided for in the memorandum and articles of association) that investors may expect to find in relation to a public company are not provided for under BVI law. 29 There may be less publicly available information about us than is regularly published by or about U.S. issuers.
If our products are not delivered on time or are delivered in a damaged state, customers may refuse to accept our products and have less confidence in our services.
If our products are not delivered on time or are delivered in a damaged state, customers may refuse to accept our products and have less confidence in our services. As a result, we could lose customers, and our financial condition and market reputation could suffer.
Digital Grid and Mr. Fred Chang, who beneficially own approximately 59.3% and 34.6%, respectively, of our total voting power, have the right to appoint four directors and three directors, respectively, with Mr.
Fred Chang, who beneficially own approximately 58.7% and 32.9%, respectively, of our total voting power, have the right to appoint four directors and three directors, respectively, with Mr.
As of December 31, 2022, we had 1,355 full-time employees, of whom approximately 52% were located in the United States, 39% in China, 7% in Taiwan, and 2% in Canada and other countries and regions.
As of December 31, 2023, we had 932 full-time employees, of whom approximately 61% were located in the United States, 32% in China, 5% in Taiwan, and 2% in Canada and other countries and regions.
We may not have access to alternative networks in the event of disruptions, failures or other problems with the internet infrastructure in China or elsewhere. In addition, the internet infrastructure in the countries in which we operate may not support the demands associated with continued growth in internet usage.
We may not have access to alternative networks in the event of disruptions, failures or other problems with the internet infrastructure in China or elsewhere.
For example, we experience surges in online traffic and orders associated with promotional activities and holiday seasons, especially during Black Friday and the Christmas holiday season, which can put additional demands on our technology platform at specific times. 9 Additionally, we must continue to upgrade and improve our technology and infrastructure to support our business growth, and failure to do so could impede our growth.
For example, we experience surges in online traffic and orders associated with promotional activities and holiday seasons, especially during Black Friday and the Christmas holiday season, which can put additional demands on our technology platform at specific times.
Fred Chang control approximately 59.3% and 34.6%, respectively, and 93.9%, collectively, of the voting power of our issued and outstanding common shares. They will exert significant influence on our business and operations and may have a conflict of interest with our other shareholders. Mr. Zhitao He and Mr.
Zhitao He (as the Chairman and CEO of Hangzhou Lianluo and in his own capacity) and Mr. Fred Chang control approximately 58.7% and 32.9%, respectively, and 91.6%, collectively, of the voting power of our issued and outstanding common shares. They will exert significant influence on our business and operations and may have a conflict of interest with our other shareholders.
However, we cannot assure you that we will be successful in executing these system upgrades and improvement strategies. Any such upgrades to our systems and infrastructure could require substantial investments.
Additionally, we must continue to upgrade and improve our technology and infrastructure to support our business growth, and failure to do so could impede our growth. However, we cannot assure you that we will be successful in executing these system upgrades and improvement strategies. Any such upgrades to our systems and infrastructure could require substantial investments.
If we do not, or are unable to continue to, promote and strengthen the Newegg brand, or if the brand fails to continue to be viewed favorably, we may not be successful in attracting new customers and Marketplace sellers, which could have a material adverse effect on our financial condition and results of operations.
Any loss of trust in our brand could harm our reputation and result in consumers, sellers, brands, vendors and other participants reducing their activity level in our business, which could materially reduce our profitability. 10 If we do not, or are unable to continue to, promote and strengthen the Newegg brand, or if the brand fails to continue to be viewed favorably, we may not be successful in attracting new customers and Marketplace sellers, which could have a material adverse effect on our financial condition and results of operations.
This in turn could require us to increase prices to our customers, which may reduce demand or, if we are unable to increase prices, result in lowering our margin on goods and services sold.
Any of the measures outlined above can result in increased costs for goods imported into the U.S. This in turn could require us to increase prices to our customers, which may reduce demand or, if we are unable to increase prices, result in lowering our margin on goods and services sold.
There could be declines in the sales of the products offered by us and our Marketplace sellers due to several factors, including: ● decreased demand for IT/CE products, particularly computer components and parts that have historically generated a significant portion of our net sales; ● poor economic conditions and any related decline in customers’ demand for the products we and our Marketplace sellers offer; ● increased price competition from our competitors; or ● technological obsolescence of the products that we and our Marketplace sellers offer.
Factors including customer confidence, employment levels, conditions in the residential real estate and mortgage markets, access to credit, interest rates, tax rates, customer debt levels and fuel and energy costs could reduce customer spending or change customer purchasing habits in ways that materially and adversely affect demand for the products that we and our Marketplace sellers offer. 5 There could be declines in the sales of the products offered by us and our Marketplace sellers due to several factors, including: ● decreased demand for IT/CE products, particularly computer components and parts that have historically generated a significant portion of our net sales; ● poor economic conditions and any related decline in customers’ demand for the products we and our Marketplace sellers offer; ● increased price competition from our competitors; or ● technological obsolescence of the products that we and our Marketplace sellers offer.
Chang will have the ability to control the outcome of most corporate actions requiring shareholder approval, including the sale of all or substantially all of our assets and amendments to our Memorandum and Articles of Association.
Chang, and other directors exercising, in a manner fair to all of our shareholders, their fiduciary duties. Also, Mr. He and Mr. Chang will have the ability to control the outcome of most corporate actions requiring shareholder approval, including the sale of all or substantially all of our assets and amendments to our Memorandum and Articles of Association.
Any failure by us to raise additional funds on terms favorable to us, or at all, could limit our ability to grow our business and develop or enhance our product and service offerings to respond to market demand or competitive challenges. 19 Legal and Regulatory Risks Claims, Litigation, Government Investigations, and Other Proceedings May Adversely Affect Our Business and Results of Operations We are, or may be, subject to actual and threatened claims, litigation, investigations, and other proceedings, involving a wide range of issues, including patent and other intellectual property matters, taxes, labor and employment, privacy, data use, data protection, data security, network security, consumer protection, product liability, commercial disputes, and other matters.
Legal and Regulatory Risks Claims, Litigation, Government Investigations, and Other Proceedings May Adversely Affect Our Business and Results of Operations We are, or may be, subject to actual and threatened claims, litigation, investigations, and other proceedings, involving a wide range of issues, including patent and other intellectual property matters, taxes, labor and employment, privacy, data use, data protection, data security, network security, consumer protection, product liability, commercial disputes, and other matters.
Fred Chang and certain other shareholders (the “Principal Shareholders”). Under the Amended Shareholders Agreement, the Principal Shareholders have pre-emptive rights to acquire additional shares when the Company issues or sells additional securities in the future, except for “excluded issuances” as defined in the Amended Shareholders Agreement or common shares offered pursuant to a registration statement filed with the SEC.
Under the Amended Shareholders Agreement, the Principal Shareholders have pre-emptive rights to acquire additional shares when the Company issues or sells additional securities in the future, except for “excluded issuances” as defined in the Amended Shareholders Agreement or common shares offered pursuant to a registration statement filed with the SEC. 26 In addition, the Company and the Principal Shareholders also have rights of first refusal over certain transfers of the common shares by the Principal Shareholders, pursuant to the Amended Shareholders Agreement, as amended, and subject to compliance with applicable laws and Nasdaq’s Listing Rules.
We generally are not able to control the pricing strategies of our Marketplace sellers, which could affect our net income and our ability to effectively compete on price with other e-commerce retailers and brick-and-mortar stores.
An adverse outcome in any other lawsuits challenging deceptive pricing against us could have a material adverse effect on our reputation, business and financial condition. We generally are not able to control the pricing strategies of our Marketplace sellers, which could affect our net income and our ability to effectively compete on price with other e-commerce retailers and brick-and-mortar stores.
As of the fiscal year ended December 31, 2022 and 2021, accounts payable amounted to approximately $207.1 million and $220.8 million, respectively. Many of the products we sell are highly susceptible to technological advancement, product life cycle fluctuations and changes in consumer preferences. We operate in a highly and increasingly dynamic industry sector fueled by constant technology innovation and disruption.
Many of the products we sell are highly susceptible to technological advancement, product life cycle fluctuations and changes in consumer preferences. We operate in a highly and increasingly dynamic industry sector fueled by constant technology innovation and disruption.
These changes prevent sales of foreign produced direct products of the U.S. that are manufactured using controlled U.S.-origin equipment, technology, and software located outside the United States to certain companies on the U.S. Entity List. Examples of recent actions are tariffs on steel and aluminum product imports announced by the U.S.
These changes prohibit the sale and other transfers of U.S. origin and foreign produced direct products that are manufactured using controlled U.S.-origin and controlled equipment, technology, and software located outside the United States to certain companies on the U.S. Entity List and to targeted companies.
As a result, you will not have the same protection afforded to shareholders of companies that are subject to these corporate governance requirements. 25 The Amended and Restated Memorandum and Articles of Association limit your ability to appoint directors and influence corporate matters and could discourage others from pursuing any change of control transactions that minority holders of common shares may view as beneficial.
The Amended and Restated Memorandum and Articles of Association limit your ability to appoint directors and influence corporate matters and could discourage others from pursuing any change of control transactions that minority holders of common shares may view as beneficial. Digital Grid and Mr.
Brand recognition is a primary competitive factor in the e-commerce market and will be a key factor in maintaining and expanding our customer base, market position and bargaining power with vendors.
We may not succeed in promoting and strengthening the Newegg brand, which may materially and adversely affect our business and results of operations. Brand recognition is a primary competitive factor in the e-commerce market and will be a key factor in maintaining and expanding our customer base, market position and bargaining power with vendors.
In addition, if a claim is successfully made against us, we may be required to pay significant damages, which could have a material adverse effect on our financial condition and results of operations. 26 If we fail to maintain compliance with Nasdaq Listing Rules, we may be delisted from Nasdaq, which would result in a limited public market for trading our shares and make obtaining future debt or equity financing more difficult for us.
If we fail to maintain compliance with Nasdaq Listing Rules, we may be delisted from Nasdaq, which would result in a limited public market for trading our shares and make obtaining future debt or equity financing more difficult for us.
There is no assurance that the steps that we have taken will adequately protect our proprietary rights, especially in countries where the laws or enforcement of the laws may not protect our rights to the same extent or in the same way as in the United States. 20 In addition, third parties may infringe or misappropriate our proprietary rights, and we could be required to enforce our intellectual property rights, which could require expenditure of significant financial and managerial resources.
There is no assurance that the steps that we have taken will adequately protect our proprietary rights, especially in countries where the laws or enforcement of the laws may not protect our rights to the same extent or in the same way as in the United States.
Therefore, you may have more difficulty protecting your interests in connection with actions taken by our directors and officers or our Principal Shareholders than you would as a shareholder of a corporation incorporated in the United States. 29 The laws of BVI provide limited protections for our shareholders, so our shareholders will not have the same options as to recourse in comparison to the United States if the shareholders are dissatisfied with the conduct of our affairs.
Therefore, you may have more difficulty protecting your interests in connection with actions taken by our directors and officers or our Principal Shareholders than you would as a shareholder of a corporation incorporated in the United States.
Such delisting from Nasdaq and continued or further declines in our common share price could also greatly impair our ability to raise additional necessary capital through equity or debt financing and could significantly increase the ownership dilution to shareholders caused by our issuing equity in financing or other transactions.
Such delisting from Nasdaq and continued or further declines in our common share price could also greatly impair our ability to raise additional necessary capital through equity or debt financing and could significantly increase the ownership dilution to shareholders caused by our issuing equity in financing or other transactions. 27 We and our directors and officers may be involved in investigations or other forms of regulatory or governmental inquiry which may cause reputational harm to the Company, result in additional expenses, and distract our management from our day-to-day operations.
Department of Commerce in March 2018, the scope of which increased on February 8, 2020, and a 25% tariff on certain products that originate in China announced by the United States Trade Representative (“USTR”) in June 2018 pursuant to an investigation under Title III of the Trade Act of 1974, 19 U.S.C. §§2411-2420 (“Section 301”).
Additional actions include tariffs between 7.5% and 25% on certain products that originate in China announced by the United States Trade Representative (“USTR”) between June 2018 and September 2019 following an investigation under Title III of the Trade Act of 1974, 19 U.S.C. §§2411-2420 (“Section 301”).
As sales begin to slow in the first and second quarters, inventory levels decrease, inventory turnover lengthens, and accounts payable and cash balances decrease as we pay our vendors.
As sales begin to slow in the first and second quarters, inventory levels decrease, inventory turnover lengthens, and accounts payable and cash balances decrease as we pay our vendors. As of the fiscal year ended December 31, 2023 and 2022, accounts payable amounted to approximately $206.6 million and $207.1 million, respectively.
Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud. Since the Merger, we have implemented a variety of measures designed to comply with the rules applicable to public companies in the United States.
Since the Merger, we have implemented a variety of measures designed to comply with the rules applicable to public companies in the United States.
We rely on third-party payment processors to process deposits and withdrawals made by users of our Marketplace, and if we cannot manage our relationships with such third parties and other payment-related risks, our business, financial condition and results of operations could be adversely affected.
If our existing or future technology and infrastructure do not function properly, it could cause system disruptions and slow response times, affecting data transmission, which in turn could materially and adversely affect our business, financial condition and results of operations. 8 We rely on third-party payment processors to process deposits and withdrawals made by users of our Marketplace, and if we cannot manage our relationships with such third parties and other payment-related risks, our business, financial condition and results of operations could be adversely affected.
Any material disruption or slowdown in our customer support services resulting from telephone or internet failures, power or service outages, natural disasters, labor disputes or other events could make it difficult or impossible for us to provide adequate customer support. In addition, the future volume of customer complaints and inquiries may exceed our present system capacities.
We currently operate customer service centers in California and Texas, focusing on serving North American buyers. Any material disruption or slowdown in our customer support services resulting from telephone or internet failures, power or service outages, natural disasters, labor disputes or other events could make it difficult or impossible for us to provide adequate customer support.
These and other issues may affect their ability to maintain their inventories, production levels and/or product quality and could cause them to raise prices, lower production levels or cease their operations, all of which may in turn materially adversely affect our net sales and net income. 14 We conduct marketing activities to help attract visitors to our online platforms, and if we are unable to attract these visitors or convert them into customers in a cost-effective manner, our business and results of operations could be harmed.
These and other issues may affect their ability to maintain their inventories, production levels and/or product quality and could cause them to raise prices, lower production levels or cease their operations, all of which may in turn materially adversely affect our net sales and net income.
As a result, we could lose customers, and our financial condition and market reputation could suffer. 13 Pandemics or other public health crises, natural disasters, terrorist activities, and political unrest could disrupt our delivery and operations, which could materially and adversely affect our business, financial condition, and results of operations.
Pandemics or other public health crises, natural disasters, climate change, terrorist activities, and political unrest could adversely affect our business, financial condition, and results of operations.

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Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeAs of December 31, 2022, the 10 largest suppliers, whom we have worked with for over a decade, accounted for 73% of the merchandise we purchased for direct sales. 37 The table below shows our major product categories offered through our platforms and their selected featured brands: Category Products Selected Featured Brands Computer System Desktops, laptops, gaming laptops, peripherals and accessories Asus, MSI, HP, Lenovo, Acer, Microsoft, Samsung, LG, Gigabyte, Westinghouse Components CPU/processors, Graphic Cards, Motherboards, storage devices and computer accessories Intel, AMD, Asus, MSI, Corsair, Gigabyte, ASRock, EVGA, Western Digital, Seagate, Samsung, G.Skill Electronics Home Video, Home Audio, Headphones, Pro Audio/Video, Cellphones, Wearables, Digital Cameras Samsung, LG, Denon, Yamaha, Polk Audio, Klipsch, Jabra, JBL, Sennheiser, Bose, Beyerdynamic Office Solutions Display & printing, office technology furniture, office supplies and mailing & inventory supplies HP, Brother, Epson, Xerox, Lexmark, Zebra, Honeywell, ELO Touch, Sony, Sharp, Asus, Acer, Samsung, Eureka Ergonomic, COUGAR Software & Services Software, Digital Downloads, Warranty & Services, 3 rd Party Gift Cards, and Entertainment Products Microsoft, Adobe, Norton, LifeLock, Intuit, Allstate Others Xbox, PlayStation, Home Networking, Server & Components, Smart Home Products, Car Electronics, Motorcycles and ATV, Wheels and Tires, Home Improvement Tools, Home Appliances, Kitchen Utensils, Outdoor & Garden Furniture, Fitness, Sports and Health Supplies Sony PlayStation, Microsoft Xbox, Google, Asus, TP-Link, Netgear, Alpine, Pioneer, Kenwood, Continental Tires, Goodyear Tires, Bosch, Dyson, Frigidaire, iRobot, Black & Decker, LG, Huffy, Razor, Garmin, Philips, GT Racing We strive for a steady supply of products and optimized pricing and allocation, and as a result, we maintain multiple sourcing arrangements for most of our products.
Biggest changeThe table below shows our major product categories offered through our platforms and their selected featured brands: Category Products Selected Featured Brands Computer System Desktops, laptops, gaming laptops, peripherals and accessories Asus, MSI, HP, Lenovo, Acer, Microsoft, Samsung, LG, Gigabyte, Logitech Components CPU/processors, graphic cards, motherboards, storage devices and computer accessories Intel, AMD, Asus, MSI, Corsair, Gigabyte, ASRock, Western Digital, Seagate, Samsung, G.Skill Others Software, virtual reality, gaming consoles, networking, digital games, home appliances, gaming desks/chairs and TVs Meta, PlayStation, Samsung, Dyson, Netgear, LG, Nintendo, H&R Block, Adobe 37 We strive for a steady supply of products and optimized pricing and allocation, and as a result, we maintain multiple sourcing arrangements for most of our products.
For more information, see “Risk Factors — Risks Related to Newegg’s Business — A significant inadvertent disclosure or breach of confidential or personal information we hold could be detrimental to our business, reputation and results of operations.” 45 Intellectual Property We rely on a combination of trademark, trade secret and other intellectual property laws as well as confidentiality agreements with our employees and suppliers for the purpose of protecting the proprietary rights associated with the products branded under our private labels.
For more information, see “Risk Factors — Risks Related to Newegg’s Business — A significant inadvertent disclosure or breach of confidential or personal information we hold could be detrimental to our business, reputation and results of operations.” Intellectual Property We rely on a combination of trademark, trade secret and other intellectual property laws as well as confidentiality agreements with our employees and suppliers for the purpose of protecting the proprietary rights associated with the products branded under our private labels.
This feature limits the number of orders placed for out-of-stock items, allowing us to better manage aging inventory and minimize customer dissatisfaction by eliminating backorder merchandise. ● Transaction management. We have developed and deployed a scalable back office platform that allows us to monitor transactions and changes to financial data as well as provide our management with daily updates.
This feature limits the number of orders placed for out-of-stock items, allowing us to better manage aging inventory and minimize customer dissatisfaction by eliminating backorder merchandise. 43 ● Transaction management. We have developed and deployed a scalable back office platform that allows us to monitor transactions and changes to financial data as well as provide our management with daily updates.
We capitalize on a robust transportation framework that connects international air and sea transport, domestic over-the-road carriers, and last-mile delivery to residential consumers such as United States Postal Service, Purolator, OnTrac and UPS. We have also engaged and are working with multiple logistics partners to offer a wide array of flexible delivery options. ● Virtual fulfillment.
We capitalize on a robust transportation framework that connects international air and sea transport, domestic over-the-road carriers, and last-mile delivery to residential consumers such as United States Postal Service, Purolator, and UPS. We have also engaged and are working with multiple logistics partners to offer a wide array of flexible delivery options. ● Virtual fulfillment.
This intra-year seasonal fluctuation in demand is in accord with historic experience in the retail and e-commerce industries, with increased volumes during the fourth calendar quarter of the year. Government Regulations We are subject to U.S. federal and state consumer protection laws, including laws protecting the privacy of customer personal information and regulations prohibiting unfair and deceptive trade practices.
This intra-year seasonal fluctuation in demand is in accord with historic experience in the retail and e-commerce industries, with increased volumes during the fourth calendar quarter of the year. 45 Government Regulations We are subject to U.S. federal and state consumer protection laws, including laws protecting the privacy of customer personal information and regulations prohibiting unfair and deceptive trade practices.
While each Newegg platform is strategically focused on different market segments, customers and/or product categories, the platforms share a common Newegg brand and are supported by our integrated logistics and fulfillment capability, operational expertise and technology infrastructure, and we offer the same level of customer service and dedication across all these platforms. 39 B2C Platforms ● Newegg.com.
While each Newegg platform is strategically focused on different market segments, customers and/or product categories, the platforms share a common Newegg brand and are supported by our integrated logistics and fulfillment capability, operational expertise and technology infrastructure, and we offer the same level of customer service and dedication across all these platforms. B2C Platforms ● Newegg.com.
This redundancy could allow us to continually fulfill most orders, albeit less efficiently, as long as a single warehouse is operational. ● Efficiency. We have a well-designed, fully customized, warehousing management software system that is adopted by all warehouses, featuring smart categorization of inventory assortment in various warehouse locations to maximize logistics efficiency.
This redundancy could allow us to continually fulfill most orders, albeit less efficiently, as long as a single warehouse is operational. 40 ● Efficiency. We have a well-designed, fully customized, warehousing management software system that is adopted by all warehouses, featuring smart categorization of inventory assortment in various warehouse locations to maximize logistics efficiency.
Also, we have leveraged our AI capabilities to allow category extraction for different products based on the unstructured content and images, the results of which have been used to provide miscategorization correction and site search relevancy improvement. 44 ● Inventory management. Our supply chain management system includes price optimization, inventory balancing, and inventory forecasting and other subsystems.
Also, we have leveraged our AI capabilities to allow category extraction for different products based on the unstructured content and images, the results of which have been used to provide miscategorization correction and site search relevancy improvement. ● Inventory management. Our supply chain management system includes price optimization, inventory balancing, and inventory forecasting and other subsystems.
We control access to use and distribution of our intellectual property through license agreements, confidentiality procedures, non-disclosure agreements with third parties and our employment and contractor agreements. Our intellectual property portfolio includes numerous domain names for websites that we use in our business. We have registered the domain names Newegg.com, Newegg.ca and NeweggBusiness.com and their variations.
We control access to use and distribution of our intellectual property through license agreements, confidentiality procedures, non-disclosure agreements with third parties and our employment and contractor agreements. 44 Our intellectual property portfolio includes numerous domain names for websites that we use in our business. We have registered the domain names Newegg.com, Newegg.ca and NeweggBusiness.com and their variations.
We typically enter into a master service agreement with our Newegg Logistics customers and charge service fees at a fixed rate. ● Newegg Staffing: We launched Newegg Staffing in 2020 with a focus on providing both direct placement and seasonal placement of employees to help our partners, offering clerical, manufacturing, and logistics employee placement.
We typically enter into a master service agreement with our Newegg Logistics customers and charge service fees at a fixed rate. 38 ● Newegg Staffing: We launched Newegg Staffing in 2020 with a focus on providing both direct placement and seasonal placement of employees to help our partners, offering clerical, manufacturing, and logistics employee placement.
We stock and ship the vast majority of our direct sales products. Fulfillment of orders from our Marketplace is executed by the sellers except for orders shipped through our Shipped by Newegg services, where the items will be shipped from one of our warehouses. 40 Our logistics and fulfillment infrastructure and capabilities include: ● Warehouses.
We stock and ship the vast majority of our direct sales products. Fulfillment of orders from our Marketplace is executed by the sellers except for orders shipped through our Shipped by Newegg services, where the items will be shipped from one of our warehouses. Our logistics and fulfillment infrastructure and capabilities include: ● Warehouses.
We monitor changes in these laws, regulations, treaties, and agreements, and believe that we are in material compliance with applicable laws. C. Organizational Structure See Exhibit 8.1 for a list of our significant subsidiaries. D.
We monitor changes in these laws, regulations, treaties, and agreements, and believe that we are in material compliance with applicable laws. C. Organizational Structure See Exhibit 8.1 for a list of our significant subsidiaries. 46 D.
For more details, see “— Technology — Our IT Capability — Mobile site and apps.” B2B Platforms In 2009, we launched NeweggBusiness.com, a site that currently supports substantially all of our B2B operations.
For more details, see “— Technology — Our IT Capability — Mobile site and apps.” 39 B2B Platforms In 2009, we launched NeweggBusiness.com, a site that currently supports substantially all of our B2B operations.
While Newegg.com operates predominantly as a B2C e-commerce platform, Newegg.com supports both direct sales, where we sell merchandise directly to customers, and the Marketplace model where third-party sellers offer their inventory to our customers. As of December 31, 2022, Newegg.com fulfilled orders originating from various countries, mostly in North America. ● Newegg.ca.
While Newegg.com operates predominantly as a B2C e-commerce platform, Newegg.com supports both direct sales, where we sell merchandise directly to customers, and the Marketplace model where third-party sellers offer their inventory to our customers. As of December 31, 2023, Newegg.com fulfilled orders originating from various countries, mostly in North America. ● Newegg.ca.
NeweggBusiness.com supports both direct sales and a B2B Marketplace that connects our B2B customers with over 1,820 third-party sellers globally. Other Platforms In addition to the major Newegg platforms discussed above, we also operate Newegglogistics.com, a platform dedicated to providing reliable logistics and supply chain solutions through 3PL operations.
NeweggBusiness.com supports both direct sales and a B2B Marketplace that connects our B2B customers with over 1,680 third-party sellers globally. Other Platforms In addition to the major Newegg platforms discussed above, we also operate Newegglogistics.com, a platform dedicated to providing reliable logistics and supply chain solutions through 3PL operations.
We also offer open-term accounts for business and public sector customers. For example, in response to increasing customer demand, we introduced Bitcoin payment solution in 2014 and Apple Pay in 2016. In Q4 2020, we also started offering a Pay-in-4 program, where customers are given the freedom and flexibility to spread their payment in four interest-free installments.
We also offer open-term accounts for business and public sector customers. For example, in response to increasing customer demand, we introduced Bitcoin payment solution in 2014 and Apple Pay in 2016. In late 2020, we also started offering a Pay-in-4 program, where customers are given the freedom and flexibility to spread their payment in four interest-free installments.
We maintain regional warehouses in Southern California, New Jersey, Indiana, Georgia, and Ontario, Canada to fulfill customer orders in the United States and Canada. The geographical placement of our warehouses in North America enables us to reach approximately 96% of the North American population in two business days. ● Cooperation with reliable logistics service providers.
We maintain regional warehouses in Southern California, Indiana, Georgia, and Ontario, Canada to fulfill customer orders in the United States and Canada. The geographical placement of our warehouses in North America enables us to reach approximately 96% of the North American population in two business days. ● Cooperation with reliable logistics service providers.
For more information about merchandise sourced for direct sales, see “— Merchandise Sourcing.” Marketplace Our Marketplace operations enable customers to discover and purchase products from qualified third-party sellers from over 40 countries and regions globally as of December 31, 2022.
For more information about merchandise sourced for direct sales, see “— Merchandise Sourcing.” Marketplace Our Marketplace operations enable customers to discover and purchase products from qualified third-party sellers from over 40 countries and regions globally as of December 31, 2023.
We have continued to offer additional functionalities to foster this community by operating Newegg Media Services, which produces Unbox This, The Gamer Lounge, Newegg Live, and many other original video and editorial content platforms, where like-minded technology enthusiasts can get information about Newegg and technology products. ● Competitive Offerings. o Competitive Pricing.
We have continued to offer additional functionalities to foster this community by operating Newegg Media Services, which produces Unbox This, Newegg Live, and many other original video and editorial content platforms, where like-minded technology enthusiasts can get information about Newegg and technology products. ● Competitive Offerings. o Competitive Pricing.
We select Marketplace sellers based on a number of factors, including service level, logistics capability, operation efficiency, category focus, sales volume, brand assortment, customer rating and market reputation.
We select Marketplace sellers based on a number of factors, including service level, logistics capability, operational efficiency, category focus, sales volume, brand assortment, customer rating and market reputation.
As of December 31, 2022, we had over 2.7 million active customers, defined as a unique customer ID with at least one item purchased on our platforms in the past 12 months. Our core customers include both our business-to-consumer (“B2C”) customers and our business-to-business (“B2B”) customers. See “Our Business Models” for more information about our B2C and B2B businesses.
As of December 31, 2023, we had over 2.5 million active customers, defined as a unique customer ID with at least one item purchased on our platforms in the past 12 months. Our core customers include both our business-to-consumer (“B2C”) customers and our business-to-business (“B2B”) customers. See “Our Business Models” for more information about our B2C and B2B businesses.
B2B With a focus on providing office and IT equipment, NeweggBusiness.com offers our B2B customers access to our extensive product assortment and account managers with expertise in sourcing technology for business and processing industry specific requirements. Our B2B operations generated GMV of $379.5 million and $537.6 million for the years ended December 31, 2022 and 2021, respectively.
B2B With a focus on providing office and IT equipment, NeweggBusiness.com offers our B2B customers access to our extensive product assortment and account managers with expertise in sourcing technology for business and processing industry specific requirements. Our B2B operations generated GMV of $325.6 million and $379.5 million for the years ended December 31, 2023 and 2022, respectively.
Our IT infrastructure enables us to support over 160 million page views per day and provides the capability to process up to 1 million orders per day. Our platform obtained PCI Level 1 certification in 2010. Our IT Capability ● Websites. Our website incorporates proprietary technology internally developed on a primarily Microsoft.NET platform.
Our IT infrastructure enables us to support over 90 million page views per day and provides the capability to process up to 0.93 million orders per day. Our platform obtained PCI Level 1 certification in 2010. Our IT Capability ● Websites. Our website incorporates proprietary technology internally developed on a primarily Microsoft.NET platform.
We believe our success is built upon our ability to cater to the preferences, tastes and habits of this demographic. As of December 31, 2022, we served customers in the United States, Canada and over 20 additional countries and region through our Newegg.com, Newegg.ca and Newegg Global platforms.
We believe our success is built upon our ability to cater to the preferences, tastes and habits of this demographic. As of December 31, 2023, we served customers in the United States, Canada and over 20 additional countries and regions through our Newegg.com, Newegg.ca and Newegg Global platforms.
We operate in-house video production that generates original content to engage and inform customers, and we continue to enhance these capabilities in order to produce more and better content. Our platforms also provide an extensive portfolio of user-generated content, including over 4.6 million reviews as of December 31, 2022. o Timely, secure and reliable fulfillment.
We operate in-house video production that generates original content to engage and inform customers, and we continue to enhance these capabilities in order to produce more and better content. Our platforms also provide an extensive portfolio of user-generated content, including over 4.8 million reviews as of December 31, 2023. 33 o Timely, secure and reliable fulfillment.
As of December 31, 2022, we sourced merchandise from over 2,970 brand partners for our direct sales business, and featured the official online stores of a number of brand partners, including some of the most well-known brands such as AMD, Asus, Gigabyte, Intel, Lenovo, Meta Quest, Microsoft, MSI, Nvidia, and Samsung.
As of December 31, 2023, we sourced merchandise from over 2,580 brand partners for our direct sales business, and featured the official online stores of a number of brand partners, including some of the most well-known brands such as AMD, Asus, Gigabyte, HP, Intel, Lenovo, Meta Quest, Microsoft, MSI, Nvidia, and Samsung.
For details of these platforms, see “— Our Platforms — B2C Platforms.” Our B2C operations generated GMV of $1.7 billion and $2.4 billion for the years ended December 31, 2022 and 2021, respectively.
For details of these platforms, see “— Our Platforms — B2C Platforms.” Our B2C operations generated GMV of $1.4 billion and $1.7 billion for the years ended December 31, 2023 and 2022, respectively.
Other online marketing channels include click-through based advertising on publishers’ sites, targeted messages, email distribution, banner advertisements on high-traffic portals, social networking via major social media sites and our own branded portal, and onsite promotions and cross-selling opportunities on our websites. 43 Offline Marketing We also devote marketing resources to various offline formats, including hosting or exhibiting at live events.
Other online marketing channels include click-through based advertising on publishers’ sites, targeted messages, email distribution, banner advertisements on high-traffic portals, social networking via major social media sites and our own branded portal, and onsite promotions and cross-selling opportunities on our websites. 42 Offline Marketing We also devote marketing resources to various offline formats, including hosting or exhibiting at live events, including trade shows, conferences and various industry and consumer networking events.
With approximately 20.2 million SKUs and 1,605 categories as of December 31, 2022, we are viewed by our customers as a one-stop shop for a vast selection of technology products, ranging from brand-name IT/CE products and in-house brands of computer hardware to peripherals under our private labels.
With approximately 6.2 million SKUs and 1,595 categories as of December 31, 2023, we are viewed by our customers as a one-stop shop for a vast selection of technology products, ranging from brand-name IT/CE products and in-house brands of computer hardware to peripherals under our private labels.
In the United States, virtual fulfillment accounted for approximately 7.6% of direct sales for the year ended December 31, 2022. Our logistics and fulfillment focus on reliable, efficient, and flexible delivery. ● Reliability. We have a reliable technology platform and order process for our fulfillment operation. Each order is verified at least twice before being shipped.
In the United States, virtual fulfillment accounted for approximately 8.4% of direct sales for the year ended December 31, 2023. Our logistics and fulfillment focus on reliable, efficient, and flexible delivery. ● Reliability. We have a reliable technology platform and order process for our fulfillment operation. Each order is verified at least twice before being shipped.
Our Marketplace offers a wide and increasing portfolio of categories, including emerging smart home automation, VR, lifestyle electronics, health and beauty technology products and houses online stores of some of the most well-known brands in the technology industry, such as Dyson and Lenovo.
Our Marketplace offers a variety of product categories, including emerging smart home automation, VR, lifestyle electronics, health and beauty technology products and houses online stores of some of the most well-known brands in the technology industry, such as Dyson and Lenovo.
We currently have one company-owned data center in City of Industry, California and two co-location data centers at facilities in Los Angeles, California, and New Jersey to provide redundancy for our e-commerce data. We maintain approximately 1,062 servers stored in our data centers and approximately 262 network devices.
We currently have one company-owned data center in City of Industry, California and three co-location data centers at facilities in Los Angeles, California, and New Jersey to provide redundancy for our e-commerce data. We maintain approximately 1,242 servers stored in our data centers and approximately 268 network devices.
In addition, our Newegg Media team also provides social media and video content service offerings to market our brand partners to over five million social fans across various internet platforms, including Facebook, TikTok, Twitter, YouTube and Instagram through live stream shopping, video content, and engaging social posts by offering promotions, sweepstakes, and reviews in order to maximize our brand partners’ exposure.
In addition, our Newegg Media team also provides social media and video content service offerings to market our brand partners to millions of social fans across various internet platforms, including Facebook, TikTok, X, YouTube and Instagram through live stream shopping, video content, and engaging social posts by offering promotions, sweepstakes, and reviews in order to maximize our brand partners’ exposure.
Our Marketplace connects sellers, whether brand owners or retailers, to a large and growing customer base, the majority of whom are tech-savvy, in more than 20 countries and regions as of December 31, 2022, without expanding their physical footprint. In 2022, approximately 1.4 million active customers purchased $552.2 million in gross merchandise value from our Marketplace business.
Our Marketplace connects sellers, whether brand owners or retailers, to a large and growing customer base, the majority of whom are tech-savvy, in more than 20 countries and regions as of December 31, 2023, without expanding their physical footprint. In 2023, approximately 1.0 million active customers purchased $369.7 million in gross merchandise value from our Marketplace business.
We stock and ship from our own warehouses, and also drop-ship directly to customers from our partners’ warehouses. 36 Direct sales is a significant driver of our business, generating approximately 70.3% of our GMV for the year ended December 31, 2022.
We stock and ship from our own warehouses, and also drop-ship directly to customers from our partners’ warehouses. 36 Direct sales is a significant driver of our business, generating approximately 74.2% of our GMV for the year ended December 31, 2023.
See also “— Payment.” Marketplace Sellers On our Newegg Marketplace, third-party sellers offer their products to our customers through our platforms and pay us commissions on their sales. See “— Our Business Models — Marketplace” for more details. Our Newegg Marketplace has over 9,500 sellers, approximately 20.0 million SKUs and over 1,500 categories as of December 31, 2022.
See also “— Payment.” Marketplace Sellers On our Newegg Marketplace, third-party sellers offer their products to our customers through our platforms and pay us commissions on their sales. See “— Our Business Models — Marketplace” for more details. Our Newegg Marketplace has over 8,000 sellers, approximately 6.1 million SKUs and over 1,500 categories as of December 31, 2023.
Free traffic includes mobile apps, email & SMS, social media, and brand mentions, reviews and shares. Paid traffic includes affiliate marketing, sponsorships, influences, connected TV, and paid searches. In 2022, 81% of traffic was free, as compared to the paid traffic of 19%.
Free traffic includes mobile apps, email & SMS, social media, and brand mentions, reviews and shares. Paid traffic includes affiliate marketing, sponsorships, influences, connected TV, and paid searches. In 2023, 90% of traffic was free, as compared to the paid traffic of 10%.
This has allowed us to deliver over 21,994 parcels per day on average, with an average accuracy rate of over 99.9%, a 95.8% one-business day fulfillment rate in the United States and Canada if ordered prior to our 3:00 p.m. local time order cut-off and a 99.0% two-business day fulfillment rate in the United States and Canada, as of December 31, 2022.
This has allowed us to deliver over 22,850 parcels per day on average, with an average accuracy rate of over 99.9%, a 95.8% one-business day fulfillment rate in the United States and Canada if ordered prior to our 2:00 p.m. local time order cut-off and a 98.8% two-business day fulfillment rate in the United States and Canada, as of December 31, 2023.
We launched Newegg.ca in 2008 to sell IT/CE products in Canada with a business model similar to that of Newegg.com. Newegg.ca is a leading e-commerce platform focusing on IT/CE products in Canada, with approximately 1.9 million registered accounts, and GMV of $159.3 million for the year ended December 31, 2022 and $244.3 million for the year ended December 31, 2021.
We launched Newegg.ca in 2008 to sell IT/CE products in Canada with a business model similar to that of Newegg.com. Newegg.ca is a leading e-commerce platform focusing on IT/CE products in Canada, with approximately 2.0 million registered accounts, and GMV of $129.6 million for the year ended December 31, 2023 and $159.3 million for the year ended December 31, 2022.
We believe the best approach in serving our customers is to maintain reasonable inventory levels and to ship directly from our own inventory. As of December 31, 2022, we operated nine strategically located fulfillment centers, including eight warehouses located in North America and one in China, covering more than 2 million square feet in total.
We believe the best approach in serving our customers is to maintain reasonable inventory levels and to ship directly from our own inventory. As of December 31, 2023, we operated seven strategically located fulfillment centers, including six warehouses located in North America and one in China, covering more than 1.5 million square feet in total.
These obligations or changes could have an adverse effect on our financial position and results of operations. 47 Our international operations are subject to foreign laws and regulations addressing topics such as customs duties and taxes, advertising and marketing practices, privacy, data protection and information security and consumer rights, as well as additional laws and regulations, including restrictions on imports from, exports to, and services provided to persons located in certain countries and territories, any of which might apply by virtue of our operations in foreign countries and territories or our contacts with consumers in such foreign countries and territories.
Our international operations are subject to foreign laws and regulations addressing topics such as customs duties and taxes, advertising and marketing practices, privacy, data protection and information security and consumer rights, as well as additional laws and regulations, including restrictions on imports from, exports to, and services provided to persons located in certain countries and territories, any of which might apply by virtue of our operations in foreign countries and territories or our contacts with consumers in such foreign countries and territories.
As of December 31, 2022, our Marketplace consisted of over 3,500 active sellers based in the United States, over 4,800 active sellers based in China, and over 1,100 active sellers coming from other countries. Our Marketplace sellers pay us commissions on their sales, with published commission rates varying from 8% to 14% according to product category.
As of December 31, 2023, our Marketplace consisted of over 3,100 active sellers based in the United States, over 3,900 active sellers based in China, and over 900 active sellers coming from other countries. Our Marketplace sellers pay us commissions on their sales, with published commission rates varying from 8% to 15% according to product category.
We are a leading technology-focused e-commerce company in North America and ranked No. 1 as the global top electronics online Marketplace according to Web Retailer’s report as of July 2022, as measured by an average of 20.1 million visits per month in 2022. Since 2005, we have recognized GMV of approximately $41 billion and have processed over 187 million orders.
We are a leading technology-focused e-commerce company in North America and ranked No. 1 as the global top electronics online Marketplace according to Web Retailer’s report as of April 2023, as measured by an average of 16.9 million visits per month in 2023. Since 2005, we have recognized GMV of approximately $42 billion and have processed over 193 million orders.
In 2022, 2.7 million buyers purchased over 604,000 items from us, making us one of the largest e-commerce businesses in the United States. In 2022, we offered more than 20 million SKUs for sale on our platform, representing over 51,000 brands in the IT, consumer electronics and other related categories.
In 2023, 2.5 million buyers purchased over 436,000 items from us, making us one of the largest e-commerce businesses in the United States. In 2023, we offered more than 6 million SKUs for sale on our platform, representing over 35,000 brands in the IT, consumer electronics and other related categories.
Our standard “Hassle Free” return policy generally allows certain items that are directly sold and shipped by us to be returned within 30 days of the delivery date for a full refund or replacement. Restocking fees are waived for all items directly sold by Newegg, but may be charged on items sold by third-party sellers on our marketplace.
Our standard “Hassle Free” return policy generally allows most items that are directly sold and shipped by us to be returned within 30 days of the delivery date for a full refund or replacement. Restocking fees are waived for all items.
Our research and development team, coupled with our proprietary technology infrastructure and the large volume of data generated and collected on our platforms, has created opportunities for continuous improvements in our technology capabilities, empowering reliability, scalability, and flexibility.
Technology Our technology systems are a critical component of our success and designed to enhance efficiency and scalability. Our research and development team, coupled with our proprietary technology infrastructure and the large volume of data generated and collected on our platforms, has created opportunities for continuous improvements in our technology capabilities, empowering reliability, scalability, and flexibility.
See also “— Logistics and Fulfillment.” As of December 31, 2022, we achieved, for orders directly fulfilled by us, an over 99.9% average delivery accuracy rate, a 95.8% one-business day fulfillment rate in the United States and Canada if ordered prior to our 3:00 p.m. local time order cut-off, and a 99.0% two-business day fulfillment rate in the United States and Canada. 33 ● Vibrant community of tech-savvy customers.
See also “— Logistics and Fulfillment.” As of December 31, 2023, we achieved, for orders directly fulfilled by us, an over 99.9% average delivery accuracy rate, which is a measure of orders that are delivered with the correct contents and to the correct address as a percentage of total orders, a 95.8% one-business day fulfillment rate in the United States and Canada if ordered prior to our 2:00 p.m. local time order cut-off, and a 98.8% two-business day fulfillment rate in the United States and Canada. ● Vibrant community of tech-savvy customers.
We have undergone and expect to continue to undergo an increase in activity during the year-end holiday period. These seasonal effects cause differences in revenues and expenses among the various quarters of any financial year, which means that the individual quarters should not be directly compared with one another or be used to predict annual financial results.
These seasonal effects cause differences in revenues and expenses among the various quarters of any financial year, which means that the individual quarters should not be directly compared with one another or be used to predict annual financial results.
See also “— Customer Service and Support — Marketplace monitoring.” Merchandise Sourcing As of December 31, 2022, we offered approximately 20.2 million SKUs across our platforms, consisting of over 124,400 direct sales SKUs sourced from at least 390 suppliers globally and approximately 20.0 million SKUs on our Marketplace from over 9,500 third-party sellers globally.
See also “— Customer Service and Support — Marketplace monitoring.” Merchandise Sourcing As of December 31, 2023, we offered approximately 6.2 million SKUs across our platforms, consisting of over 103,100 direct sales SKUs sourced from at least 330 suppliers globally and approximately 6.1 million SKUs on our Marketplace from over 8,000 third-party sellers globally.
We periodically evaluate our facility requirements as necessary and believe our existing and planned facilities will be sufficient for our needs for at least the next twelve months. 48 Item 4A. Unresolved Staff Comments None.
We also periodically evaluate our facility requirements as necessary and believe our existing and planned facilities will be sufficient for our needs for at least the next 12 months.
Our merchandising professionals review our product categories and brands on a regular basis to assess demand and trends so that we offer our customers access to the most current and desirable products. Private Labels In 2004, Newegg launched and offered our first private label brand, Rosewill, on Newegg.com.
Our merchandising professionals review our product categories and brands on a regular basis to assess demand and trends so that we offer our customers access to the most current and desirable products.
As of December 31, 2022, our Marketplace connected B2C and B2B customers to over 9,500 third-party sellers offering approximately 20.0 million SKUs.
As of December 31, 2023, our Marketplace connected B2C and B2B customers to over 8,000 third-party sellers offering approximately 6.1 million SKUs.
We currently have a mobile app for Apple devices and for Android devices, and we launch updated versions of our apps periodically. We have also developed live-streaming shopping features that enable our customers to engage in real time product discovery through media channels such as Newegg Live and TikTok.
We have also developed live-streaming shopping features that enable our customers to engage in real time product discovery through media channels such as Newegg Live and TikTok.
Our principal market is in the United States, where we compete with retail stores and resellers, including superstores such as Best Buy, Costco and Walmart, hardware and software vendors that sell directly to end users, online retailers such as Amazon, and other marketers and resellers of IT/CE products. 46 See also Item 3 under the heading “Risk Factors,” the subheading “Our business faces intense domestic and international competition.” Seasonality Our business performance is subject to seasonal fluctuations.
Our principal market is in the United States, where we compete with retail stores and resellers, including superstores such as Best Buy, Costco and Walmart, hardware and software vendors that sell directly to end users, online retailers such as Amazon, and other marketers and resellers of IT/CE products.
We provide high-quality customer service and support throughout our customers’ entire engagement with us, from purchase to returns. ● Customer service. Our in-house customer service staff are trained to resolve customers’ inquiries as quickly as possible. We currently operate customer service centers in California and Texas, focusing on serving North American buyers.
Customer Service and Support We have built our brand on the principle of superior customer service. We provide high-quality customer service and support throughout our customers’ entire engagement with us, from purchase to returns. ● Customer service. Our in-house customer service staff are trained to resolve customers’ inquiries as quickly as possible.
We also empower customers to make informed purchasing decisions by offering customized shopping tools, detailed product information, customer opinions, peer reviews, product tutorials and the opportunity to network with other members of the Newegg community.
We also empower customers to make informed purchasing decisions by offering customized, AI-enabled shopping features, such as an AI shopping assistant and a PC builder which leverages AI to understand a customer’s intended system design configuration, detailed product information, customer opinions, peer reviews, product tutorials and the opportunity to network with other members of the Newegg community.
Property, Plants and Equipment Our Facilities As of December 31, 2022, we leased the following principal facilities: Description of Use Approximate Square Footage (in thousands) Geographic Location Lease Expirations Corporate office facilities 150,884 North America 01/31/2025 through 11/30/2029 Corporate office facilities 23,732 China 03/26/2023 through 12/31/2023 Corporate office facilities 1,218 Taiwan Through 04/30/2024 Fulfillment and warehouse operations 1,863,912 North America 05/31/2024 through 02/17/2032 Fulfillment and warehouse operations 43,737 China Through 01/17/2024 As of December 31, 2022, Newegg owned the following principal facilities: Description of Use Approximate Square Footage (in thousands) Geographic Location Corporate office facilities 391,362 China Corporate office facilities 2,707 Taiwan Fulfillment and warehouse operations 109,473 China Our corporate headquarters is located in the City of Industry, California.
Property, Plants and Equipment Our Facilities As of December 31, 2023, we leased the following principal facilities: Description of Use Approximate Square Footage Geographic Location Lease Expirations Corporate office facilities 44,440 North America 01/31/2025 through 12/31/2025 Corporate office facilities 19,817 China 03/26/2025 through 8/31/2025 Corporate office facilities 8,146 Taiwan Through 04/30/2024 Fulfillment and warehouse operations 1,414,478 North America 05/31/2024 through 09/30/2034 As of December 31, 2023, Newegg owned the following principal facilities: Description of Use Approximate Square Footage Geographic Location Corporate office facilities 81,796 North America Corporate office facilities 391,367 China Corporate office facilities 50,674 Taiwan Leased warehouse facilities 109,469 China Our corporate headquarters is located in the City of Industry, California.
In Q4 2020, we started offering “Pay in 4” payment option that allows customers to pay in four interest-free installments within a six-week timeframe. This payment option is offered through Zip.
In late 2020, we started offering “Pay in 4” payment option that allows customers to pay in four interest-free installments within a six-week timeframe. This payment option is offered through Zip. We also allow our customers to pay at their own pace for up to a period of 24 months through Affirm. 41 ● B2B payment options.
We believe by providing these services, we create additional value for our business partners and customers and ultimately benefit our ecosystem and all its participants. Supply Chain Third-party (3PL) Services ● Shipped by Newegg® Service. We began to offer Shipped by Newegg, a comprehensive suite of warehousing and fulfillment services, to our Marketplace sellers in 2013.
Other Services and Solutions In addition to online retail sales, we also generate revenues from a range of ancillary value-added partner services. We believe by providing these services, we create additional value for our business partners and customers and ultimately benefit our ecosystem and all its participants. Supply Chain Third-party (3PL) Services ● Shipped by Newegg® Service.
We leverage our data and insights from customers and activity on the platform to determine products and features to focus our investment. The private label assortment is primarily focused around categories where we believe that we can compete at higher than average margins while delivering cost effective, high quality options to our customers.
Our private label assortment is primarily focused around categories where we believe that we can compete at higher than average margins while delivering cost effective, high quality options to our customers. We offer our Rosewill and ABS products across our platforms and on other e-commerce platforms, such as Walmart, Amazon, and eBay.
With a focus on selling IT/CE products, our B2C business has expanded to include an increasingly wide range of products, including emerging tech product categories such as 3D printers, home automation, wearable and health tech, E-sports, drones, and others. 35 Our B2C customers consist primarily of sophisticated IT professionals, gamers, do-it-yourself technology enthusiasts and early technology adopters who generally occupy a well-educated, affluent, and IT trendsetting demographic with relatively high purchase frequency and strong willingness to embrace technology trends and try new products.
Our B2C customers consist primarily of sophisticated IT professionals, gamers, do-it-yourself technology enthusiasts and early technology adopters who generally occupy a well-educated, affluent, and IT trendsetting demographic with relatively high purchase frequency and strong willingness to embrace technology trends and try new products.
For the year ended December 31, 2022, our spending on paid search engine marketing represented approximately 65% of our total marketing spending and 11% of total traffic to Newegg’s websites, including desktop, mobile, and app traffic.
For the year ended December 31, 2023, our spending on paid search engine marketing represented approximately 57% of our total marketing spending and 5% of total traffic to Newegg’s websites, including desktop, mobile, and app traffic. We bid for specific keywords and products on search engine sites, such as Google and Microsoft Bing, for optimum visibility in the displayed results.
The following chart sets forth our business models: B2C We have maintained a B2C business since launching our e-commerce platform in 2001.
The following chart sets forth our business models: 35 B2C We have maintained a B2C business since launching our e-commerce platform in 2001. With a focus on selling IT/CE products, our B2C business has expanded to include an increasingly wide range of products.
We have also been making investments in artificial intelligence and machine learning technologies, such as ChatGPT, to enhance our chatbot functionality and better serve our customers. ● Marketplace monitoring. When customers purchase items from our Marketplace sellers, we make them confident that they receive the same level of customer service they expect from our direct sales.
When customers purchase items from our Marketplace sellers, we make them confident that they receive the same level of customer service they expect from our direct sales.
We launched Newegg Global in 2017 as an expansion of our footprint in the global e-commerce market. Newegg Global currently fulfills orders originating from 21 countries or regions.
We launched Newegg Global in 2017 to expand our footprint in the global e-commerce market. Newegg Global currently fulfills orders originating from 20 countries or regions. Newegg Global had over 1.2 million registered customers outside North America as of December 31, 2023. ● Mobile apps.
We also lease additional corporate office facilities and fulfillment and warehouse operations throughout North America, principally in California, Indiana, Georgia, and New Jersey in the United States, and Toronto in Canada. Outside of North America, we also own or lease corporate office facilities and fulfillment and warehouse operations, principally in China and Taiwan. Our Asia headquarters is in Shanghai.
Outside of North America, we also own or lease corporate office facilities principally in China and Taiwan. We own warehouse facilities in Shanghai, China that are currently leased to third party tenants. Our Asia headquarters is in Shanghai.
Our mobile app aims to create a convenient shopping experience for our customers by, for example, enabling users to save their profiles and payment information for future purchases, and to provide helpful tools to Marketplace sellers by, for example, offering a mobile dashboard allowing them to better manage their inventory and orders on the go. ● Data and analytics.
Our mobile app aims to create a convenient shopping experience for our customers by, for example, enabling users to save their profiles and payment information for future purchases. ● Data and analytics. Data collected from our operations, including inventory data, behavioral and transactional data and pricing data, are housed in our data centers.
Our sophisticated user behavior analysis system leverages our large customer database to create customized product recommendations, allowing us to efficiently acquire new customers and increase sales.
We have deployed commercial business intelligence software to analyze this data and improve the shopping experience. We apply various AI capabilities and deep learning technologies across our platforms to enhance the shopping experience. Our sophisticated user behavior analysis system leverages our large customer database to create customized product recommendations, allowing us to efficiently acquire new customers and increase sales.
As of December 31, 2022, approximately 63.7% of our direct sales inventory was purchased directly from manufacturers, 33.6% from distributors and 2.7% from other sources.
As of December 31, 2023, approximately 60.6% of our direct sales inventory was purchased directly from manufacturers, 36.7% from distributors and 2.7% from other sources. As of December 31, 2023, the 10 largest suppliers, whom we have worked with for over a decade, accounted for 71% of the merchandise we purchased for direct sales.
Our integrated marketing framework represents a core competency that we regard as essential to the success of our platforms.
Sales and Marketing Our marketing strategy includes generating customer traffic, increasing our brand recognition, acquiring customers cost-efficiently, building customer loyalty and maximizing repeat purchases. Our integrated marketing framework represents a core competency that we regard as essential to the success of our platforms.
In Q4 2021, we began offering Affirm to our customers to allow them to pay at their own pace for up to a period of 12 months. ● B2B payment options. B2B customers can make payment during checkout or request credit and pay on terms via the above-mentioned online payment options or via ACH, wire transfer, or bank check.
B2B customers can make payment during checkout or request credit and pay on terms via the above-mentioned online payment options or via ACH, wire transfer, or bank check. We also offer open-term accounts for business and public sector customers. In most cases, the payment term that we grant to our B2B customers is 30 days.
We also use sophisticated software to strategically manage our keyword and SKU-level bids to maximize marketing performance at an efficient rate. ● Affiliate marketing. We also engage in affiliate marketing programs where we offer affiliated websites commissions for sales resulting from directing customer traffic to our websites through embedded hyperlinks.
We also engage in affiliate marketing programs where we offer affiliated websites commissions for sales resulting from directing customer traffic to our websites through embedded hyperlinks. Such affiliates are typically deal sites that advertise retailer deals to their audiences.
We use advanced, “pick-to-light” conveyer systems to allow our warehouse staff to fulfill orders quickly. ● Flexibility. Our customers may choose various shipping methods, including basic ground delivery and expedited overnight shipping, and we have continuously optimized our available delivery options to upgrade the shopping experience of our customers.
Our customers may choose from various date options for order delivery, for which our system will select the most economical shipping method, from basic ground shipping to expedited overnight shipping, to meet our delivery commitment. We have continuously optimized our available delivery options to upgrade the shopping experience of our customers.
Launched in 2001 in the United States, Newegg.com is our first online platform and currently our flagship e-commerce platform. Newegg.com offers a typical range of IT/CE categories with the continuous addition of emerging categories across the internet of things (IoT), home automation, robotics, drones, sporting goods, and more.
Launched in 2001 in the United States, Newegg.com is our first online platform and currently our flagship e-commerce platform.
Our private labels currently include Rosewill, which is focused on offering computer components and accessories, gaming peripherals and home electronics, and ABS, offering high-end gaming PCs for consumers. 38 Other Services and Solutions In addition to online retail sales, we also generate revenues from a range of ancillary value-added partner services.
Private Labels We currently offer two private label brands on Newegg.com: Rosewill, which is focused on offering computer components and accessories, gaming peripherals and home electronics, and ABS, which offers high-end gaming PCs for consumers, on Newegg.com. We leverage our data and insights from customers and activity on the platform to determine products and features to focus our investment.
Newegg Global had over 1.1 million registered customers outside North America as of December 31, 2022 and had a GMV of $31.3 million and $65.4 million for the year ended December 31, 2022 and 2021, respectively. ● Mobile apps. Since the launch of our first mobile app in 2008, we have accumulated millions of downloads of our mobile apps.
Since the launch of our first mobile app in 2008, we have accumulated millions of downloads of our mobile apps. We currently have a mobile app for Apple devices and for Android devices, and we launch updated versions of our apps periodically.
We bid for specific keywords and products on search engine sites, such as Google, Yahoo! and Microsoft Bing, for optimum visibility in the displayed results. Our broad and evolving product selection enables us to utilize a large quantity of keywords that we frequently test and measure for their effectiveness.
Our broad and evolving product selection enables us to utilize a large quantity of keywords that we frequently test and measure for their effectiveness. We also use sophisticated software to strategically manage our keyword and SKU-level bids to maximize marketing performance at an efficient rate. ● Affiliate marketing.
Such affiliates are typically deal sites that advertise retailer deals to their audiences. Affiliate marketing is our second largest paid marketing channel and represents approximately 27% of our total marketing expense for the year ended December 31, 2022. ● Targeting and personalization marketing. Targeting and personalization have proved to be highly effective in terms of conversion and customer acquisition.
Affiliate marketing is our second largest paid marketing channel and represents approximately 32% of our total marketing expense for the year ended December 31, 2023. ● Personalized email marketing efforts and customer retargeting. Our personalized email marketing efforts and customer retargeting strategies are based on customers’ on-site behavioral data and purchase history data.
Removed
We offer our private label products both across our platforms and on other e-commerce platforms, such as Walmart, Amazon, and eBay.
Added
Our selection spans emerging technology categories such as virtual reality, video game consoles and digital games catering to the e-sports segment, wearable devices for health and fitness enthusiasts, home appliances and smart home automation solutions, as well as software, networking equipment, gaming accessories, home office furniture, headphones and portable devices, home video systems, cell phones, home audio, and surveillance products.

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Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeFor the Year Ended December 31, 2022 2021 2020 (in millions, except for percentages and net earnings per share) Amount % of Net Sales Amount % of Net Sales Amount % of Net Sales Net Sales $ 1,720.3 100.0 $ 2,376.2 100.0 $ 2,114.9 100.0 Cost of sales 1,503.6 87.4 2,050.2 86.3 1,841.2 87.1 Gross profit 216.7 12.6 326.0 13.7 273.7 12.9 Selling, general and administrative expenses (1) 266.2 15.5 292.5 12.3 250.2 11.8 Income (loss) from operations (49.5 ) (2.9 ) 33.5 1.4 23.5 1.1 Interest income 1.2 0.1 1.1 0.0 1.1 0.1 Interest expense (0.7 ) (0.0 ) (0.6 ) (0.0 ) (0.7 ) (0.0 ) Other income, net 5.2 0.2 1.8 0.1 5.2 0.2 Impairment of equity method investment (2.3 ) (0.1 ) — — — — Income (loss) from equity method investment — — (7.4 ) (0.3 ) 3.2 0.2 Gain from sale of investment 1.7 0.1 — — — — Gain from disposal of subsidiary — — 2.0 0.1 — — Change in fair value of warrants liabilities 1.1 0.1 0.1 0.0 — — Income (loss) before provision for income taxes (43.3 ) (2.5 ) 30.5 1.3 32.3 1.5 Provision for (benefit from) income taxes 14.1 0.8 (5.8 ) (0.2 ) 1.9 0.1 Net income (loss) $ (57.4 ) (3.3 ) $ 36.3 1.5 $ 30.4 1.4 Net earnings (loss) per share, basic $ (0.15 ) $ 0.10 $ 0.08 Net earnings (loss) per share, diluted $ (0.15 ) $ 0.08 $ 0.08 Weighted average number of common stock outstanding used in computing per share amounts, basic 373.1 — 366.7 — 363.3 — Weighted average number of common stock outstanding used in computing per share amounts, diluted 373.1 — 432.2 — 385.0 — Note: (1) Includes share-based compensation expenses of $33.9 million, $6.3 million, and $1.6 million, respectively, in years ended December 31, 2022, 2021, and 2020.
Biggest changeFor the Year Ended December 31, 2023 2022 2021 (in millions, except for percentages and net earnings per share) Amount % of Net Sales Amount % of Net Sales Amount % of Net Sales Net Sales $ 1,497.0 100.0 $ 1,720.3 100.0 $ 2,376.2 100.0 Cost of sales 1,329.4 88.8 1,503.6 87.4 2,050.2 86.3 Gross profit 167.6 11.2 216.7 12.6 326.0 13.7 Selling, general and administrative expenses (1) 238.6 15.9 266.2 15.5 292.5 12.3 Income (loss) from operations (71.0 ) (4.7 ) (49.5 ) (2.9 ) 33.5 1.4 Interest income 2.3 0.2 1.2 0.1 1.1 0.0 Interest expense (2.5 ) (0.2 ) (0.7 ) (0.0 ) (0.6 ) (0.0 ) Other income, net 2.6 0.2 5.2 0.2 1.8 0.1 Impairment of equity method investment — — (2.3 ) (0.1 ) — — Loss from equity method investment — — — — (7.4 ) (0.3 ) Gain from sale of investment 6.8 0.5 1.7 0.1 — — Gain from disposal of subsidiary — — — — 2.0 0.1 Change in fair value of warrants liabilities 0.1 0.0 1.1 0.1 0.1 0.0 Income (loss) before provision for income taxes (61.7 ) (4.0 ) (43.3 ) (2.5 ) 30.5 1.3 Provision for (benefit from) income taxes (2.7 ) (0.2 ) 14.1 0.8 (5.8 ) (0.2 ) Net income (loss) $ (59.0 ) (3.8 ) $ (57.4 ) (3.3 ) $ 36.3 1.5 Net earnings (loss) per share, basic $ (0.16 ) $ (0.15 ) $ 0.10 Net earnings (loss) per share, diluted $ (0.16 ) $ (0.15 ) $ 0.08 Weighted average number of common shares outstanding used in computing per share amounts, basic 378.6 373.1 366.7 Weighted average number of common shares outstanding used in computing per share amounts, diluted 378.6 373.1 432.2 Note: (1) Includes share-based compensation expenses of $33.7 million, $33.9 million, and $6.3 million, respectively, in years ended December 31, 2023, 2022, and 2021.
Financing activities Net cash provided by financing activities was $1.5 million for the year ended December 31, 2022, which was mainly due to (i) borrowings under line of credit of $46.2 million; and (ii) proceeds from exercise of stock options of $2.9 million, partially offset by (a) the repayment of line of credit of $45.7 million; and (b) payments for employee taxes related to stock compensation of $1.5 million.
Net cash provided by financing activities was $1.5 million for the year ended December 31, 2022, which was mainly due to (i) borrowings under line of credit of $46.2 million; and (ii) proceeds from exercise of stock options of $2.9 million, partially offset by (a) the repayment of line of credit of $45.7 million; and (b) payments for employee taxes related to stock compensation of $1.5 million.
Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our historical consolidated financial condition and results of operations: 61 Incentives Earned from Vendors We participate in various vendor incentive programs that include, but are not limited to, purchasing-based volume discounts, sales-based volume incentives, marketing development funds, including for certain cooperative advertising, and price protection agreements.
Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our historical consolidated financial condition and results of operations: Incentives Earned from Vendors We participate in various vendor incentive programs that include, but are not limited to, purchasing-based volume discounts, sales-based volume incentives, marketing development funds, including for certain cooperative advertising, and price protection agreements.
We refer to the net sales generated from Newegg Marketplace as Marketplace revenues. 49 ● Newegg Partner Services (“NPS”), where we generate net sales primarily by charging service fees for a range of e-commerce services and solutions rendered to our vendor partners, Marketplace sellers and various types of customers and businesses, including 3PL and other fulfillment and logistics services, advertising services, and online marketing services.
We refer to the net sales generated from Newegg Marketplace as Marketplace revenues. ● Newegg Partner Services (“NPS”), where we generate net sales primarily by charging service fees for a range of e-commerce services and solutions rendered to our vendor partners, Marketplace sellers and various types of customers and businesses, including 3PL and other fulfillment and logistics services, advertising services, and online marketing services.
Our suppliers may not continue to sell their inventory to us on current terms or at all, and, if the terms are changed, we may not be able to establish new supply relationships on similar or better terms. We compete with other retailers and direct marketers for favorable product allocations and vendor incentive programs from product manufacturers and distributors.
Our suppliers may not continue to sell their inventory to us on current terms or at all, and, if the terms are changed, we may not be able to establish new supply relationships on similar or better terms. 49 We compete with other retailers and direct marketers for favorable product allocations and vendor incentive programs from product manufacturers and distributors.
Accordingly, we believe that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors. 57 Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP.
Accordingly, we believe that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors. Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP.
Because of these limitations, you should consider Adjusted EBITDA alongside other financial performance measures, including various cash flow metrics, operating profit and our other GAAP results. The following table reflects the reconciliation of net income (loss) to Adjusted EBITDA for each of the periods indicated.
Because of these limitations, you should consider Adjusted EBITDA alongside other financial performance measures, including various cash flow metrics, operating profit and our other GAAP results. 56 The following table reflects the reconciliation of net income (loss) to Adjusted EBITDA for each of the periods indicated.
GMV also includes the services fees charged through our NPS in rendering services such as 3PL, SBN, SLS, staffing and media ad services, as well as the sales made by our Asia subsidiaries.
GMV also includes the services fees charged through our NPS in rendering services such as 3PL, SBN, staffing and media ad services, as well as the sales made by our Asia subsidiaries.
The following table sets forth the components of our cost of sales, in absolute amounts and as percentages of total net sales, for the periods indicated.
The following table sets forth the components of our net sales in absolute amounts and as percentages of total net sales, for the periods indicated.
The published commission rates are based on a percentage of the GMV transacted, exclusive of the shipping fees charged, which commission rates range from 8% to 14%, depending on the product category.
The published commission rates are based on a percentage of the GMV transacted, exclusive of the shipping fees charged, which commission rates range from 8% to 15%, depending on the product category.
As of December 31, 2022 and December 31, 2021, we were in compliance with all covenants related to the line of credit. C. Research and Development, Patents and Licenses, etc. See Item 4.B under the subheadings, “Technology” and “Intellectual Property.” D.
As of December 31, 2023 and December 31, 2022, we were in compliance with all covenants related to the line of credit. 59 C. Research and Development, Patents and Licenses, etc. See Item 4.B under the subheadings, “Technology” and “Intellectual Property.” D.
Impairment of equity method investment For the year ended December 31, 2022, we impaired our equity method investment of $2.3 million on our investment in Mountain Capital Fund L.P. (“Mountain Capital”). See Note 6 to the consolidated financial statements for further information.
Impairment of equity method investment For the year ended December 31, 2022, we impaired our equity method investment of $2.3 million on our investment in Mountain Capital Fund L.P. (“Mountain Capital”). Mountain Capital was fully dissolved in 2023. See Note 6 to the consolidated financial statements for further information.
For the year ended December 31, 2022 and 2021, we recorded gain on the change in fair value of warrant liabilities of $1.1 million and $0.1 million, respectively.
For the year ended December 31, 2023 and 2022, we recorded gain on the change in fair value of warrant liabilities of $0.01 million and $1.1 million, respectively.
For the Year Ended December 31, 2022 2021 2020 (in millions) Net income (loss) $ (57.4 ) $ 36.3 $ 30.4 Adjustments: Stock-based compensation expenses 33.9 6.3 1.6 Interest income, net (0.5 ) (0.5 ) (0.4 ) Income tax (benefit) provision 14.1 (5.8 ) 1.9 Depreciation and amortization 11.0 10.8 9.1 Impairment of equity method investment 2.3 — — Loss (income) from equity method investment — 7.4 (3.2 ) Gain from sale of investment (1.7 ) — — Gain from disposal of subsidiary — (2.0 ) — Gain from change in fair value of warrants liabilities (1.1 ) (0.1 ) — Adjusted EBITDA $ 0.6 $ 52.4 $ 39.4 B.
For the Year Ended December 31, 2023 2022 2021 (in millions) Net income (loss) $ (59.0 ) $ (57.4 ) $ 36.3 Adjustments: Stock-based compensation expenses 33.7 33.9 6.3 Interest expense (income), net 0.2 (0.5 ) (0.5 ) Income tax (benefit) provision (2.7 ) 14.1 (5.8 ) Depreciation and amortization 13.4 11.0 10.8 Impairment of equity method investment — 2.3 — Loss from equity method investment — — 7.4 Gain from sale of investment (6.8 ) (1.7 ) — Gain from disposal of subsidiary — — (2.0 ) Gain from change in fair value of warrants liabilities (0.1 ) (1.1 ) (0.1 ) Adjusted EBITDA $ (21.3 ) $ 0.6 $ 52.4 B.
Newegg’s ability to source products from key suppliers on favorable terms As of December 31, 2022, we offered over 124,000 direct sales SKUs sourced from at least 395 suppliers globally. We maintain extensive, long-standing and mutually beneficial relationships with many of the biggest tech product brands and distributors globally.
Newegg’s ability to source products from key suppliers on favorable terms As of December 31, 2023, we offered over 103,000 direct sales SKUs sourced from at least 325 suppliers globally. We maintain extensive, long-standing and mutually beneficial relationships with many of the biggest tech product brands and distributors globally.
For the Year Ended December 31, 2022 2021 2020 (in millions, except for percentages) Cost of sales Amount % Amount % Amount % Purchase price of goods sold by us directly $ 1,405.0 93.4 $ 1,916.3 93.5 $ 1,678.3 91.2 Costs related to Marketplace & service revenues 49.4 3.3 59.6 2.9 69.9 3.8 Inbound and outbound freight costs 49.2 3.3 64.5 3.1 84.8 4.6 Inventory write-downs 6.0 0.4 8.2 0.4 4.7 0.3 Addition to (release of) inventory reserves (6.0 ) (0.4 ) 1.6 0.1 3.5 0.1 Total $ 1,503.6 100.0 $ 2,050.2 100.0 $ 1,841.2 100.0 Selling, General and Administrative Expenses The largest component of our selling, general and administrative expenses (“SG&A expenses”), is salary and other compensation costs, consisting of expenses relating to the employment of our employees, as well as temporary personnel to meet our needs in areas such as customer service and fulfillment during seasonal peaks in orders.
For the Year Ended December 31, 2023 2022 2021 (in millions, except for percentages) Cost of sales Amount % Amount % Amount % Purchase price of goods sold by us directly $ 1,227.5 92.3 $ 1,405.0 93.4 $ 1,916.3 93.5 Costs related to Marketplace & service revenues 50.9 3.8 49.4 3.3 59.6 2.9 Inbound and outbound freight costs 48.1 3.6 49.2 3.3 64.5 3.1 Inventory write-downs 5.0 0.4 6.0 0.4 8.2 0.4 Addition to (release of) inventory reserves (2.1 ) (0.1 ) (6.0 ) (0.4 ) 1.6 0.1 Total $ 1,329.4 100.0 $ 1,503.6 100.0 $ 2,050.2 100.0 Selling, General and Administrative Expenses The largest component of our selling, general and administrative expenses (“SG&A expenses”), is salary and other compensation costs, consisting of expenses relating to the employment of our employees, as well as temporary personnel to meet our needs in areas such as customer service and fulfillment during seasonal peaks in orders.
The number of active customers, repeat purchase rates, and average order value are indicators of the size and engagement of our customer base. Newegg’s product mix We offer a wide range of technology products from a broad mix of brands and sellers. As of December 31, 2022, we offered approximately 20.2 million SKUs across over 1,605 categories.
The number of active customers, repeat purchase rates, and average order value are indicators of the size and engagement of our customer base. 48 Newegg’s product mix We offer a wide range of technology products from a broad mix of brands and sellers. As of December 31, 2023, we offered approximately 6.2 million SKUs across over 1,595 categories.
For the Year Ended December 31, 2022 2021 2020 Summary Consolidated Cash Flow Data: (in millions) Net cash provided by (used in) operating activities $ 20.5 $ (53.3 ) $ 84.5 Net cash used in investing activities (3.8 ) (13.8 ) (5.2 ) Net cash provided by (used in) financing activities 1.5 12.7 (1.7 ) Foreign currency effect on cash, cash equivalents and restricted cash 1.0 1.0 (0.4 ) Net increase (decrease) in cash and cash equivalents 19.2 (53.4 ) 77.2 Cash, cash equivalents and restricted cash at beginning of the year 104.3 157.7 80.5 Cash, cash equivalents and restricted cash at end of the year $ 123.5 $ 104.3 $ 157.7 Operating activities Net cash provided by operating activities was $20.5 million in 2022.
For the Year Ended December 31, 2023 2022 2021 Summary Consolidated Cash Flow Data: (in millions) Net cash provided by (used in) operating activities $ (3.8 ) $ 20.5 $ (53.3 ) Net cash used in investing activities (14.3 ) (3.8 ) (13.8 ) Net cash provided by financing activities 1.6 1.5 12.7 Foreign currency effect on cash, cash equivalents and restricted cash (0.5 ) 1.0 1.0 Net increase (decrease) in cash and cash equivalents (17.0 ) 19.2 (53.4 ) Cash, cash equivalents and restricted cash at beginning of the year 123.5 104.3 157.7 Cash, cash equivalents and restricted cash at end of the year $ 106.5 $ 123.5 $ 104.3 Operating activities Net cash used in operating activities was $3.8 million for the year ended December 31, 2023.
For the Year Ended December 31, 2022 2021 2020 (in millions, except for percentages) Selling, general and administrative expenses Amount % Amount Amount % Salary and other compensation costs $ 134.5 50.5 $ 126.6 43.3 $ 107.1 42.8 Merchant processing fees 42.7 16.0 59.3 20.3 51.5 20.6 Advertising and marketing 14.7 5.5 32.8 11.2 29.0 11.6 Depreciation and amortization 11.0 4.1 11.1 3.8 9.1 3.6 Others 63.3 23.9 62.7 21.4 53.5 21.4 Total $ 266.2 100.0 $ 292.5 100.0 $ 250.2 100.0 52 Results of Operations The following table summarizes our consolidated results of operations in absolute amounts and as percentages of our net sales for the periods indicated.
For the Year Ended December 31, 2023 2022 2021 (in millions, except for percentages) Selling, general and administrative expenses Amount % Amount Amount % Salary and other compensation costs $ 121.8 51.0 $ 134.5 50.5 $ 126.6 43.3 Merchant processing fees 35.3 14.8 42.7 16.0 59.3 20.3 Advertising and marketing 12.7 5.3 14.7 5.5 32.8 11.2 Depreciation and amortization 13.4 5.6 11.0 4.1 11.1 3.8 Others 55.4 23.3 63.3 23.9 62.7 21.4 Total $ 238.6 100.0 $ 266.2 100.0 $ 292.5 100.0 51 Results of Operations The following table summarizes our consolidated results of operations in absolute amounts and as percentages of our net sales for the periods indicated.
During the same periods, our Newegg Marketplace generated net sales of $47.0 million, $63.5 million, and $57.6 million, respectively, and accounted for 2.7%, 2.7%, and 2.7%, respectively, of our total net sales.
During the same periods, our Newegg Marketplace generated net sales of $32.3 million, $47.0 million, and $63.5 million, respectively, and accounted for 2.2%, 2.7%, and 2.7%, respectively, of our total net sales.
For the Year Ended December 31, 2022 2021 2020 (in millions, except for percentages) Net sales Amount % Amount % Amount % Direct sales revenues $ 1,607.0 93.4 $ 2,243.4 94.4 $ 1,974.9 93.4 Marketplace revenues 47.0 2.7 63.5 2.7 57.6 2.7 Services revenues 66.3 3.9 69.3 2.9 82.4 3.9 Total $ 1,720.3 100.0 $ 2,376.2 100.0 $ 2,114.9 100.0 Cost of Sales The largest component of our cost of sales is the purchase price of goods that we directly sell to customers.
For the Year Ended December 31, 2023 2022 2021 (in millions, except for percentages) Net sales Amount % Amount % Amount % Direct sales revenues $ 1,396.6 93.3 $ 1,607.0 93.4 $ 2,243.4 94.4 Marketplace revenues 32.3 2.2 47.0 2.7 63.5 2.7 Services revenues 68.1 4.5 66.3 3.9 69.3 2.9 Total $ 1,497.0 100.0 $ 1,720.3 100.0 $ 2,376.2 100.0 Cost of Sales The largest component of our cost of sales is the purchase price of goods that we directly sell to customers.
For the Year Ended December 31, Key Operating Metrics: 2022 2021 2020 Number of active customers (1) 2.7 million 3.5 million 4.7 million Repeat purchase rate (2) 31.3 % 31.9 % 32.5 % Average order value (3) $ 411 $ 442 $ 301 Note: 1.
For the Year Ended December 31, Key Operating Metrics: 2023 2022 2021 Number of active customers (1) 2.5 million 2.7 million 3.5 million Repeat purchase rate (2) 29.2 % 31.3 % 31.9 % Average order value (3) $ 379 $ 411 $ 442 Note: 1.
Net cash used in operating activities was $53.3 million in 2021. Net income was $36.3 million for the period.
Net cash used in operating activities was $53.3 million for the year ended December 31, 2021. Net income was $36.3 million for the period.
The long-term effects of the COVID-19 pandemic amplify many of these risks. Actual results and the timing of events may differ significantly from those expressed or implied in such forward-looking statements due to a number of factors, including those set forth in the sections entitled “Risk Factors” and “Disclosure Regarding Forward-Looking Statements” and elsewhere in this annual report.
Actual results and the timing of events may differ significantly from those expressed or implied in such forward-looking statements due to a number of factors, including those set forth in the sections entitled “Risk Factors” and “Disclosure Regarding Forward-Looking Statements” and elsewhere in this annual report.
Selling, general and administrative expenses (“SG&A”) For the year ended December 31, 2022, SG&A expenses decreased to $266.2 million from $292.5 million for the year ended December 31, 2021, which mainly resulted from (i) a decrease in merchant payment fee by $16.6 million which is variable to sales and (ii) a decrease in marketing expense by $18.1 million, partially offset by an increase in salary and other compensation cost of $7.8 million mainly due to an increase in stock-based compensation by $27.6 million and a decrease in personnel expense by $19.8 million.
Selling, general and administrative expenses (“SG&A”) For the year ended December 31, 2022, SG&A expenses decreased to $266.2 million from $292.5 million for the year ended December 31, 2021, which mainly resulted from (i) a decrease in merchant payment fee by $16.6 million which is variable to sales and (ii) a decrease in marketing expense by $18.1 million, partially offset by an increase in salary and other compensation cost of $7.8 million mainly due to an increase in stock-based compensation by $27.6 million and a decrease in personnel expense by $19.8 million. 54 Interest income and expense Interest income is earned on (i) our loans to affiliates; and (ii) cash invested in money market accounts or certificates of deposit.
Amounts due to us from payment processors that are classified as cash and cash equivalents totaled $13.0 million and $14.3 million at December 31, 2022 and December 31, 2021, respectively.
Amounts due to us from payment processors that are classified as cash and cash equivalents totaled $12.9 million and $13.0 million at December 31, 2023 and December 31, 2022, respectively.
Other income, net For the year ended December 31, 2022 and 2021, we recorded other income, net of $5.2 million and $1.8 million, respectively.
Other income, net For the year ended December 31, 2023 and 2022, we recorded other income, net of $2.6 million and $5.2 million, respectively.
As a result, the customer demand for technology products has significantly decreased compared to the prior year period. 53 Cost of sales & gross profit For the year ended December 31, 2022, our cost of sales decreased by 26.7% compared to the comparable prior year period from $2,050.2 million in 2021 to $1,503.6 million in 2022, generally reflective of the decrease in our net sales.
Cost of sales & gross profit For the year ended December 31, 2022, our cost of sales decreased by 26.7% compared to the comparable prior year period from $2,050.2 million in 2021 to $1,503.6 million in 2022, generally reflective of the decrease in our net sales.
For the Year Ended December 31, 2022 2021 2020 (in millions) Net Sales $ 1,720.3 $ 2,376.2 $ 2,114.9 Adjustments: GMV – Marketplace 552.2 742.4 663.7 Marketplace Commission (49.6 ) (67.0 ) (58.5 ) Deferred Revenue (9.3 ) (8.3 ) 16.4 Other (17.5 ) (14.9 ) 8.7 GMV $ 2,196.1 $ 3,028.4 $ 2,745.2 Adjusted EBITDA Adjusted EBITDA is a financial measure that includes the removal of various one-time, irregular, and non-recurring items from EBITDA.
See “— Newegg’s Business Model.” For the Year Ended December 31, 2023 2022 2021 (in millions) Net Sales $ 1,497.0 $ 1,720.3 $ 2,376.2 Adjustments: GMV – Marketplace 369.7 552.2 742.4 Marketplace Commission (33.6 ) (49.6 ) (67.0 ) Deferred Revenue (5.4 ) (9.3 ) (8.3 ) Other (15.2 ) (17.5 ) (14.9 ) GMV $ 1,812.5 $ 2,196.1 $ 3,028.4 Adjusted EBITDA Adjusted EBITDA is a financial measure that includes the removal of various one-time, irregular, and non-recurring items from EBITDA.
Gain from sale of investment For the year ended December 31, 2022, we sold 25% of our investment in Bitmain Technologies Holding Company for $5.4 million and recorded a gain on sale of investment of $1.7 million.
Gain from sale of investment For the year ended December 31, 2022, we sold 25% of our investment in Bitmain Technologies Holding Company for $5.4 million and recorded a gain on sale of investment of $1.7 million. See Note 6 to the consolidated financial statements for further information.
Interest income remained consistent at $1.2 million and $1.1 million for the year ended December 31, 2022 and 2021, respectively. Interest expense remained consistent at $0.7 million and $0.6 million for the year ended December 31, 2022 and 2021, respectively.
Interest expense remained consistent at $0.7 million and $0.6 million for the year ended December 31, 2022 and 2021, respectively. Other income, net For the year ended December 31, 2022 and 2021, we recorded other income, net of $5.2 million and $1.8 million, respectively.
These VIPs are sometimes tied to the volume of our purchases or sales and represent an indirect or effective reduction of the selling price of the suppliers’ products. Therefore, we treat these program payments as reductions to cost of sales.
These VIPs are sometimes tied to the volume of our purchases or sales and represent an indirect or effective reduction of the selling price of the suppliers’ products.
Such inventory build-up may require us to expend cash faster than we generate by our operations during these periods. Also, as a result of this inventory build-up and faster inventory turnover during the fourth quarter, our accounts payable are typically at their highest levels at year-end, as compared to the first, second and third quarters when sales are lower.
Also, as a result of this inventory build-up and faster inventory turnover during the fourth quarter, our accounts payable are typically at their highest levels at year-end, as compared to the first, second and third quarters when sales are lower.
We anticipate that our existing cash and funds generated from operations will be sufficient to meet our working capital needs and expected capital expenditures for at least 12 months from the date of the filing of this annual report.
We anticipate that our existing cash and funds generated from operations, combined with periodic draws from our existing line of credit, will be sufficient to meet our working capital needs and expected capital expenditures for at least 12 months from the date of the filing of this annual report. Our cash and cash equivalents are primarily denominated in U.S. dollars.
Such assets include all receivables, equipment and fixtures, general intangibles, inventory, subsidiary stock, securities, investment property, and financial assets, contract rights, and ledger sheets, as defined in the loan agreement.
The line of credit is secured by certain of our U.S. subsidiaries and is collateralized by certain of our assets. Such assets include all receivables, equipment and fixtures, general intangibles, inventory, subsidiary stock, securities, investment property, and financial assets, contract rights, and ledger sheets, as defined in the loan agreement.
We recognized a $2.0 million gain from disposal of Lianluo Connection for the year ended December 31, 2021. 56 Change in fair value of warrants liabilities Warrants are remeasured at fair value with changes in fair value recorded in earnings in each reporting period.
Change in fair value of warrants liabilities Warrants are remeasured at fair value with changes in fair value recorded in earnings in each reporting period. For the year ended December 31, 2022 and 2021, we recorded gain on the change in fair value of warrant liabilities of $1.1 million and $0.1 million, respectively.
The incurrence of debt would divert cash for working capital and capital expenditures to service debt obligations and could result in operating and financial covenants that restrict our operations and our ability to pay dividends to our shareholders. If we are unable to obtain additional equity or debt financing as required, our business operations and prospects may suffer.
The incurrence of debt would divert cash for working capital and capital expenditures to service debt obligations and could result in operating and financial covenants that restrict our operations and our ability to pay dividends to our shareholders.
Provision for/(benefit from) income taxes Our benefit from income taxes was $5.8 million for the year ended December 31, 2021 compared to a provision of $1.9 million for the year ended December 31, 2020.
Provision for/(benefit from) income taxes Our benefit from income taxes was $2.7 million for the year ended December 31, 2023 compared to a provision of $14.1 million for the year ended December 31, 2022.
In the event of the permanent or indefinite cessation of the Term SOFR Rate, the Benchmark Replacement will replace the Term SOFR Rate. If the Benchmark Replacement is Daily Simple SOFR, all interest payments will be payable on a monthly basis.
In the event of the permanent or indefinite cessation of the Term SOFR Rate, the Benchmark Replacement will replace the Term SOFR Rate. If the Benchmark Replacement is Daily Simple SOFR, all interest payments will be payable on a monthly basis. As of December 31, 2023 and December 31, 2022, there was no balance outstanding under this line of credit.
Net cash used in investing activities was $5.2 million for the year ended December 31, 2020, which was primarily attributable to the payments made to acquire property and equipment of $6.2 million partially offset by the proceeds from insurance of $0.8 million and disposal of fixed assets of $0.1 million.
Net cash used in investing activities was $3.8 million for the year ended December 31, 2022, which was primarily attributable to the payments made to acquire property and equipment of $9.2 million and partially offset by the proceeds received from sale of investment of $5.4 million. 58 Net cash used in investing activities was $13.8 million for the year ended December 31, 2021, which was primarily attributable to the payments made to acquire property and equipment.
Net income For the year ended December 31, 2021, we recorded a net income of $36.3 million in 2021, as compared to a net income of $30.4 million for the same period in 2020. The increase in net income is primarily driven by a growth in our net sales and improvement in our gross margin.
Net income/(loss) For the year ended December 31, 2023, we recorded a net loss of $59.0 million, as compared to $57.4 million for the same period in 2022. The decrease in net income is primarily driven by a decline in our net sales and gross margin.
Net loss was $57.4 million for the period.
Net loss was $59.0 million for the period.
Leveraging our extensive fulfillment and warehousing network and the global footprint of our suppliers and sellers, we are able to offer merchandise sourced from over 40 countries and regions to customers located in over 20 countries and regions and deliver customer services in multiple languages.
Leveraging our extensive fulfillment and warehousing network and the global footprint of our suppliers and sellers, we are able to offer merchandise sourced from over 40 countries and regions to customers located in over 20 countries and regions and deliver customer services in multiple languages. 47 Newegg’s Business Model GMV is the primary driver of our net sales, as we derive a significant majority of net sales from the GMV transacted on our online platforms, net of cancellations and returns.
Net cash used in investing activities was $13.8 million for the year ended December 31, 2021, which was primarily attributable to the payments made to acquire property and equipment.
Investing activities Net cash used in investing activities was $14.3 million for the year ended December 31, 2023, which was primarily attributable to the payments made to acquire property and equipment of $30.3 million and partially offset by the proceeds received from sale of investment of $15.8 million.
We have prepared our financial statements in accordance with accounting principles generally accepted in the United States (“GAAP”). Overview Newegg is a leading technology-focused e-commerce company in North America, and ranked No. 1 as of July 2022 as the global top electronics online marketplace according to Web Retailer’s report, as measured by 20.1 million average visits per month in 2022.
We have prepared our financial statements in accordance with accounting principles generally accepted in the United States (“GAAP”). Overview Newegg is a leading technology-focused e-commerce company in North America, and ranked as the number one online marketplace in the electronics product category according to Web Retailer, based on an estimated 16.9 million website visits for the month of April 2023.
Our net sales are reported net of anticipated discounts, returns, allowances, sales tax and credit card chargebacks, which are all estimated from historical experience.
Our net sales are reported net of anticipated discounts, returns, allowances, sales tax and credit card chargebacks, which are all estimated from historical experience. We also offer customer promotional programs, which we record as reductions in sales based on anticipated redemption rates estimated from historical experience.
Our capital expenditures were $9.2 million, $13.8 million, and $6.2 million for the years ended December 31, 2022, 2021, and 2020, respectively. Credit Agreements We entered into a credit agreement in August 2021 with several financing institutions that provided a revolving credit facility of up to $100 million with a maturity date of August 20, 2024.
Credit Agreements We entered into a credit agreement in August 2021 with several financing institutions that provided a revolving credit facility of up to $100 million with a maturity date of August 20, 2024.
The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by the taxing authorities based on the technical merits of the position.
The Company also considers the uncertainty posed by the current economic environment and the effect of this uncertainty on the various factors that the Company takes into account in evaluating the need for valuation allowance. 60 The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by the taxing authorities based on the technical merits of the position.
There are a few factors that led to the decrease in GMV and net sales in our Marketplace business for the year ended December 31, 2022 versus prior years: (i) a reduction in the number of Marketplace sellers and SKUs due to fraud and counterfeit prevention initiatives; and (ii) category consolidation initiatives designed to streamline our Marketplace catalogue.
The decrease in GMV and net sales in our Marketplace business for the year ended December 31, 2023 versus prior years is primarily due to a decrease in consumer demand, but also partially attributable to a significant year-over-year reduction in the number of Marketplace sellers and SKUs due to quality control and fraud prevention initiatives, as well as category consolidation initiatives designed to streamline our Marketplace catalogue.
For the year ended December 31, 2021, other income, net, primarily consisted of sales tax rebate from Texas of $1.3 million, insurance proceeds of approximately $1.0 million related to the inventory loss in the United States, property rental income of $1.6 million, sales tax discount income of $0.4 million, and other miscellaneous income of $0.8 million, which was partially offset by foreign exchange loss of $3.3 million.
For the year ended December 31, 2022, other income, net, primarily consisted of sales tax rebate from Texas of $1.2 million, property rental income of $1.4 million, sales tax discount income of $0.4 million, foreign exchange gain of $0.9 million and other miscellaneous income of $1.3 million.
Success of Newegg Marketplace A key component of our long-term strategy is the success of our Newegg Marketplace, which we believe is an important driver of future profitable growth. 50 For the years ended December 31, 2022, 2021, and 2020, our Newegg Marketplace generated GMV of $552.2 million, $742.4 million, and $663.7 million, respectively, and accounted for approximately 25.1%, 24.5% and 24.2%, respectively, of our total GMV.
For the years ended December 31, 2023, 2022, and 2021, our Newegg Marketplace generated GMV of $369.7 million, $552.2 million, and $742.4 million, respectively, and accounted for approximately 20.4%, 25.1% and 24.5%, respectively, of our total GMV.
Year Ended December 31, 2021 Compared to Year Ended December 31, 2020 Net sales Net sales increased by 12.4% for the year ended December 31, 2021 compared to the comparable prior year period from $2,114.9 million in 2020 to $2,376.2 million in 2021, which was mainly due to the increase in GMV from our direct sales and marketplace businesses from $1,968.7 million and $663.7 million for the year ended December 31, 2020, respectively, to $2,195.9 million and $742.4 million for the year ended December 31, 2021, respectively.
Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Net sales Net sales decreased by 13.0% for the year ended December 31, 2023 compared to the comparable prior year period from $1,720.3 million in 2022 to $1,497.0 million in 2023, which was mainly due to the decrease in GMV from our direct sales and marketplace businesses from $1,544.8 million and $552.2 million for the year ended December 31, 2022, respectively, to $1,344.4 million and $369.7 million for the year ended December 31, 2023, respectively.
Interest income and expense Interest income is earned on (i) our loans to affiliates; and (ii) cash invested in money market accounts or certificates of deposit. See “Related Party Transactions” for more information about our loans to affiliates. Interest expense represents the interest we are charged on our borrowings, including term loan, line of credit and capital leases.
See “Related Party Transactions” for more information about our loans to affiliates. Interest expense represents the interest we are charged on our borrowings, including term loan, line of credit and capital leases. Interest income remained consistent at $1.2 million and $1.1 million for the year ended December 31, 2022 and 2021, respectively.
Our cash and cash equivalents are primarily denominated in U.S. dollars. 58 We historically experience higher sales in the fourth quarter due to the holiday season. In anticipation of such higher sales, we typically begin building up our inventory levels in the late third quarter.
We historically experience higher sales in the fourth quarter due to the holiday season. In anticipation of such higher sales, we typically begin building up our inventory levels in the late third quarter. Such inventory build-up may require us to expend cash faster than we generate by our operations during these periods.
During the same period, our gross profit increased by 19.1% from $273.7 million for the year ended December 31, 2020 to $326.0 million for the year ended December 31, 2021.
During the same period, our gross profit decreased by 22.7% from $216.7 million for the year ended December 31, 2022 to $167.6 million for the year ended December 31, 2023.
Historical Cash Flows The following table sets forth our selected consolidated cash flow data for the years ended December 31, 2022, 2021, and 2020.
If we are unable to obtain additional equity or debt financing as required, our business operations and prospects may suffer. 57 Historical Cash Flows The following table sets forth our selected consolidated cash flow data for the years ended December 31, 2023, 2022, and 2021.
Net cash provided by operating activities was $84.5 million in 2020. Net income was $30.4 million for the period. The adjustments for non-cash expenses are primarily comprised of (i) $9.1 million of depreciation and amortization that was associated with property and equipment; (ii) $7.3 million of bad debt expense, and (iii) $4.2 million of provision for obsolete and excess inventory.
The adjustments for non-cash expenses are primarily comprised of (i) $13.4 million of depreciation and amortization that was associated with property and equipment; (ii) $3.4 million of provision for obsolete and excess inventory; (iii) $33.7 million of stock-based compensation and partially offset by (a) $6.8 million gain from sale of investment and (b) $0.7 million from deferred income taxes.
The changes in operating assets and liabilities represented a $34.4 million increase in cash provided by (i) an increase in accounts payable of $76.3 million; (ii) an increase in accrued liabilities and other liabilities of $44.6 million; and (iii) an increase in deferred revenue of $21.8 million, partially offset by (a) an increase in inventory of $76.2 million; (b) an increase in accounts receivable of $14.1 million; (c) an increase in other assets of $10.5 million; and (d) an increase in prepaid expenses of $7.5 million. 59 Investing activities Net cash used in investing activities was $3.8 million for the year ended December 31, 2022, which was primarily attributable to the payments made to acquire property and equipment of $9.2 million and partially offset by the proceeds received from sale of investment of $5.4 million.
The changes in operating assets and liabilities represented $11.8 million cash provided by (i) a decrease in inventory of $16.8 million; (ii) a decrease in prepaid expenses of $3.6 million; (iii) a decrease in other assets of $7.1 million; (iv) a decrease in accounts receivable of $2.8 million, partially offset by (a) a decrease in deferred revenue of $5.5 million; (c) a decrease in accrued liabilities and other liabilities of $12.1 million; and (d) a decrease in accounts payable of $0.9 million.
Non-GAAP Financial Measures We have included GMV and Adjusted EBITDA, non-GAAP financial measures, in this annual report. We believe that these are key measures used by our management and board of directors to evaluate our operating performance, generate future operating plans, and make strategic decisions regarding the allocation of capital.
We believe that these are key measures used by our management and board of directors to evaluate our operating performance, generate future operating plans, and make strategic decisions regarding the allocation of capital. 55 GMV GMV is the total dollar value of products sold on our websites and third-party marketplace platforms, directly to customers and by our Marketplace sellers through Newegg Marketplace, net of returns, discounts, taxes, and cancellations.
We also offer customer promotional programs, which we record as reductions in sales based on anticipated redemption rates estimated from historical experience. 51 The following table sets forth the components of our net sales in absolute amounts and as percentages of total net sales, for the periods indicated.
Therefore, we treat these program payments as reductions to cost of sales. 50 The following table sets forth the components of our cost of sales, in absolute amounts and as percentages of total net sales, for the periods indicated.
The decrease in our provision for income taxes was mainly due to the net change of the valuation allowance of $13.9 million, partially offset by $3.2 million provision for income tax for Canada.
The decrease in our provision for income taxes was mainly due to the recording of the tax audit settlement of $2.7 million and the Canada net operating loss carryback of $2.8 million in year 2023, as well as the valuation allowance of $17.5 million in year 2022.
Equity income from equity method investment For the year ended December 31, 2021, we recorded a loss on equity method investment of $7.4 million on our investment in Mountain Capital. For the year ended December 31, 2020, we recorded a gain on equity method investment of $3.2 million on our investment in Mountain Capital.
Impairment of equity method investment For the year ended December 31, 2022, we impaired our equity method investment of $2.3 million on our investment in Mountain Capital. See Note 6 to the consolidated financial statements for further information.
Overall, the customer demand for technology products has also remained strong in 2021 as customers tend to find better solutions to help them work, learn, entertain, and stay connected while being at home. 55 Cost of sales & gross profit For the year ended December 31, 2021, our cost of sales increased by 11.4% compared to the comparable prior year period from $1,841.2 million in 2020 to $2,050.2 million in 2021, generally reflective of the increase in our net sales.
As a result, the customer demand for technology products has decreased compared to the prior year period. 52 Cost of sales & gross profit For the year ended December 31, 2023, our cost of sales decreased by 11.6% compared to the comparable prior year period from $1,503.6 million in 2022 to $1,329.4 million in 2023, generally reflective of the decrease in our net sales.
Selling, general and administrative expenses For the year ended December 31, 2021, SG&A expenses increased to $292.5 million from $250.2 million for the year ended December 31, 2020, which mainly resulted from (i) an increase in salary and other compensation costs by $19.5 million due to an increase in North America headcount to 1,216 as of December 31, 2021 from 1,005 as of the same period in 2020, (ii) an increase in merchant payment fees by $7.8 million which is variable to sales, and (iii) an increase in other expenses by $9.2 million related to professional fees incurred for the recapitalization.
Selling, general and administrative expenses (“SG&A”) For the year ended December 31, 2023, SG&A expenses decreased to $238.6 million from $266.2 million for the year ended December 31, 2022, which mainly resulted from (i) a decrease in salary and other compensation costs by $12.7 million, (ii) a decrease in merchant payment fee by $7.4 million which is variable to sales, and (iii) a decrease in marketing expense by $2.0 million.
For the year ended December 31, 2020, other income, net, primarily consisted of partnership incentives of $1.5 million, sales tax rebates and discounts of $1.4 million, and insurance proceeds of $0.8 million.
For the year ended December 31, 2023, other income, net, primarily consisted of sales tax rebate from Texas of $0.9 million, property rental income of $1.1 million, sales tax discount income of $0.3 million, and foreign exchange gain of $0.3 million.
Net cash used in financing activities was $1.7 million for the year ended December 31, 2020, due to the repayment of our line of credit. Capital Expenditures Our capital expenditures are incurred primarily in connection with purchases of property and equipment and leasehold improvements.
Capital Expenditures Our capital expenditures are incurred primarily in connection with purchases of property and equipment and leasehold improvements. Our capital expenditures were $30.3 million, $9.2 million, and $13.8 million for the years ended December 31, 2023, 2022, and 2021, respectively.
Interest income remained consistent at $1.1 million and $1.1 million for the year ended December 31, 2021 and 2020, respectively. Interest expense remained consistent at $0.6 million and $0.7 million for the year ended December 31, 2021 and 2020, respectively.
For the year ended December 31, 2023, interest income increased to $2.3 million from $1.2 million for the year ended December 31, 2022. For the year ended December 31, 2023, interest expense increased to $2.5 million from $0.7 million for the year ended December 31, 2022.
See Note 6 to the consolidated financial statements for further information. 54 Change in fair value of warrants liabilities Warrants are remeasured at fair value with changes in fair value recorded in earnings in each reporting period.
See Note 6 to the consolidated financial statements for further information.
Our profit margin increased to 13.7% for the year ended December 31, 2021 from 12.9% for the year ended December 31, 2020 primarily due to the significant growth in sales of our private label brand, ABS , that has higher margin, and increased demand for certain products such as video graphic cards, hard disk and solid-state drives, where aggressive promotions are not required to move inventories.
Our profit margin decreased to 11.2% for the year ended December 31, 2023 from 12.6% for the year ended December 31, 2022, primarily due to the significant decline in consumer demand caused by reduction in consumer discretionary spending for certain products such as video graphic cards, desktops and notebooks.
Removed
Newegg’s Business Model GMV is the primary driver of our net sales, as we derive a significant majority of net sales from the GMV transacted on our online platforms, net of cancellations and returns.
Added
Success of Newegg Marketplace A key component of our long-term strategy is the success of our Newegg Marketplace, which we believe is an important driver of future profitable growth.
Removed
In addition to core technology products, in recent years we have also complemented our product assortment in areas such as apparel and accessories, home furnishings, home automation, personal goods and certain other products of IT — adjacent categories.
Added
The decrease in GMV was primarily due to conservative consumer spending in technology products in light of economic uncertainty and the inflationary environment as consumers reduced their discretionary spending. In addition, consumer purchases of technology products during the pandemic, along with longer expected product lifespans, have extended the upgrade cycle.
Removed
Such increase in GMV was primarily due to the optimization of products with high demand, refinement of our product selection, increase in the number of SKUs offered in our platforms, and improvement in relationships with key suppliers that helped them make strategic decisions in their product offerings.
Added
We implemented aggressive promotions in 2023 in order to stay competitive which caused the decline in margin.
Removed
Other income, net For the year ended December 31, 2021 and 2020, we recorded other income, net of $1.8 million and $5.2 million, respectively.
Added
Gain from sale of investment For the year ended December 31, 2023, we sold 60% of our investment in Bitmain Technologies Holding Company for $14.1 million and all of our investment in Bitdeer Technologies Holding Company for $1.7 million. The Company recorded a total gain on sale of investment of $6.8 million.
Removed
Gain from disposal of subsidiary On May 19, 2021, we disposed all of LLIT’s legacy business contemplated by that certain Equity Transfer Agreement dated October 23, 2020, by and among LLIT, our wholly owned subsidiary, Lianluo Connection and Beijing Fenjin.
Added
For the year ended December 31, 2022, we sold 25% of our investment in Bitmain Technologies Holding Company for $5.4 million and recorded a gain on sale of investment of $1.7 million. 53 Change in fair value of warrants liabilities Warrants are remeasured at fair value with changes in fair value recorded in earnings in each reporting period.
Removed
We sold all of our equity interests in Lianluo Connection to Beijing Fenjin immediately following completion of the Merger for a purchase price of RMB 0.

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Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

47 edited+14 added−6 removed64 unchanged
Biggest changeThe functions and powers of our board include, among others: ● appointing officers and determining the term of office of the officers; ● authorizing the payment of donations to religious, charitable, public or other bodies, clubs, funds or associations as deemed advisable; ● exercising the borrowing powers of the Company and mortgaging the property of the Company; ● executing checks, promissory notes and other negotiable instruments on behalf of the Company; and ● maintaining or registering a register of mortgages, charges or other encumbrances of the Company. 68 Limitation of Director and Officer Liability British Virgin Islands law does not limit the extent to which a company’s memorandum and articles of association may provide for indemnification of officers and directors, except to the extent any such provision may be held by the British Virgin Islands courts to be contrary to public policy, such as to provide indemnification against civil fraud or the consequences of committing a crime.
Biggest changeThe functions and powers of our board include, among others: ● appointing officers and determining the term of office of the officers; ● authorizing the payment of donations to religious, charitable, public or other bodies, clubs, funds or associations as deemed advisable; ● exercising the borrowing powers of the Company and mortgaging the property of the Company; ● executing checks, promissory notes and other negotiable instruments on behalf of the Company; and ● maintaining or registering a register of mortgages, charges or other encumbrances of the Company.
Mr. Zhitao He. Mr. He has served as a director of the Company since October 2016 and has been chairman of the board of directors since March 2018 (other than a brief hiatus in 2020-2021). He has been a director of Newegg Inc. since March 2017. Mr.
Zhitao He. Mr. He has served as a director of the Company since October 2016 and has been chairman of the board of directors since March 2018 (other than a brief hiatus in 2020-2021). He has been a director of Newegg Inc. since March 2017. Mr.
The nominating and corporate governance committee is responsible for, among other things: ● identifying and recommending nominees for election or re-election to our Board or for appointment to fill any vacancy; ● reviewing annually with our Board its current composition in light of the characteristics of independence, age, skills, experience and availability of service to us; ● identifying and recommending to our Board which directors to serve as members and chairpersons of committees of the Board; ● reviewing our corporate governance principles and advising the Board periodically of any significant developments as appropriate; and ● reviewing related person transactions as well as the policies and procedures for the review, approval and ratification of related person transactions.
The nominating and corporate governance committee is responsible for, among other things: ● identifying and recommending nominees for election or re-election to our Board or for appointment to fill any vacancy; 69 ● reviewing annually with our Board its current composition in light of the characteristics of independence, age, skills, experience and availability of service to us; ● identifying and recommending to our Board which directors to serve as members and chairpersons of committees of the Board; ● reviewing our corporate governance principles and advising the Board periodically of any significant developments as appropriate; and ● reviewing related person transactions as well as the policies and procedures for the review, approval and ratification of related person transactions.
We do not have a lead independent director because we believe our independent directors are encouraged to freely voice their opinions on a relatively small company board. Our Amended and Restated Memorandum and Articles of Association, subject to compliance with applicable laws and Nasdaq Listing Rules, provides that Digital Grid and Mr.
We do not have a lead independent director because we believe our independent directors are encouraged to freely voice their opinions on a relatively small company board. 66 Our Amended and Restated Memorandum and Articles of Association, subject to compliance with applicable laws and Nasdaq Listing Rules, provides that Digital Grid and Mr.
Chang holds a Bachelor’s degree in Economics from Soochow University, and a Master’s degree in Finance from University of La Verne. 64 Mr. Jamie Spannos. Mr. Spannos is the Global Chief Operating Officer of Newegg. In this role, he is responsible for the strategic direction and development of Newegg’s operations as well as executing the Company’s long term goals. Mr.
Chang holds a Bachelor’s degree in Economics from Soochow University, and a Master’s degree in Finance from University of La Verne. Mr. Jamie Spannos. Mr. Spannos is the Global Chief Operating Officer of Newegg. In this role, he is responsible for the strategic direction and development of Newegg’s operations as well as executing the Company’s long term goals. Mr.
From 2001 to 2004, she served as the Accounting Manager at GVison USA Inc., a US division for Taiwan manufacturing company specialized in liquid-crystal display (LCD) display supplied to Best Buy & CompUSA. She holds a Bachelor’s degree of Science in Accounting from University of Phoenix, Arizona. 65 B.
From 2001 to 2004, she served as the Accounting Manager at GVison USA Inc., a US division for Taiwan manufacturing company specialized in liquid-crystal display (LCD) display supplied to Best Buy & CompUSA. She holds a Bachelor’s degree of Science in Accounting from University of Phoenix, Arizona. B.
In September 2015, the Newegg 2005 Incentive Award Plan was amended to permit additional awards to be made after the tenth anniversary of the original adoption of said plan. 66 2021 Equity Incentive Plan In November 2021, the Newegg 2021 Equity Incentive Plan was approved, with 7,374,900 common shares reserved for issuance thereunder.
In September 2015, the Newegg 2005 Incentive Award Plan was amended to permit additional awards to be made after the tenth anniversary of the original adoption of said plan. 2021 Equity Incentive Plan In November 2021, the Newegg 2021 Equity Incentive Plan was approved, with 7,374,900 common shares reserved for issuance thereunder.
The agreement also contains customary confidentiality, non-solicit and invention assignment provisions. 67 C. Board Practices Board of Directors Our Board currently consists of seven directors. None of our directors has a service contract with us that provides for benefits upon termination of service as a director.
The agreement also contains customary confidentiality, non-solicit and invention assignment provisions. C. Board Practices Board of Directors Our Board currently consists of seven directors. None of our directors has a service contract with us that provides for benefits upon termination of service as a director.
Spannos to continue to expand Newegg’s operational excellence, positively impacting Newegg’s customers and the many businesses that rely on Newegg’s Media Services. Mr. Montaque Hou. Mr. Hou has served as Newegg’s Chief Information Security Officer since December 2022. In this role, Mr.
Spannos to continue to expand Newegg’s operational excellence, positively impacting Newegg’s customers and the many businesses that rely on Newegg’s Media Services. 63 Mr. Montaque Hou. Mr. Hou has served as Newegg’s Chief Information Security Officer since December 2022. In this role, Mr.
Item 6. Directors, Senior Management and Employees A. Directors and Senior Management Set forth below is information concerning our directors, executive officers and other key employees. 62 MANAGEMENT Set forth below is information concerning our directors, executive officers and other key employees as of the date of this annual report.
Item 6. Directors, Senior Management and Employees A. Directors and Senior Management Set forth below is information concerning our directors, executive officers and other key employees. MANAGEMENT Set forth below is information concerning our directors, executive officers and other key employees as of the date of this annual report.
Under the Discretionary Bonus Program, executives are eligible to receive an annual cash bonus payment based upon corporate and individual performance, as determined in the discretion of the Compensation Committee, with target bonus amounts ranging from 5% of base salary to 30% of base salary for plan year 2022.
Under the Discretionary Bonus Program, executives are eligible to receive an annual cash bonus payment based upon corporate and individual performance, as determined in the discretion of the Compensation Committee, with target bonus amounts ranging from 5% of base salary to 30% of base salary for plan year 2023.
Under the annual Profit Sharing Program, the CEO and other executive officers are entitled to an annual cash bonus, as determined in the discretion of the Compensation Committee, based upon the Company’s GMV and adjusted EBITDA for the year, with the bonus payout weighted 70% based on GMV performance and 30% based upon adjusted EBITDA performance for program year 2022.
Under the annual Profit Sharing Program, the CEO and other executive officers are entitled to an annual cash bonus, as determined in the discretion of the Compensation Committee, based upon the Company’s GMV and adjusted EBITDA for the year, with the bonus payout weighted 70% based on GMV performance and 30% based upon adjusted EBITDA performance for program year 2023.
Chow left Newegg to become CEO of OTTO Group China, the Chinese subsidiary of Germany’s largest online retailer of fashion and lifestyle products. In this role, he helped the company extend its reach beyond Europe and into key parts of Asia.
In 2011, Mr. Chow left Newegg to become CEO of OTTO Group China, the Chinese subsidiary of Germany’s largest online retailer of fashion and lifestyle products. In this role, he helped the company extend its reach beyond Europe and into key parts of Asia.
Gregory Moore, Mr. Poi (Paul) Wu, and Mr. Fuya (Frank) Zheng. Mr. Wu is the chairman of our compensation committee. The compensation committee assists the board in reviewing and approving the compensation structure, including all forms of compensation relating to our directors and executive officers.
Compensation Committee Our compensation committee currently consists of Mr. Gregory Moore, Mr. Poi (Paul) Wu, and Mr. Fuya (Frank) Zheng. Mr. Wu is the chairman of our compensation committee. The compensation committee assists the board in reviewing and approving the compensation structure, including all forms of compensation relating to our directors and executive officers.
The audit committee is responsible for, among other things: ● appointing the independent auditors and pre-approving all auditing and non-auditing services permitted to be performed by the independent auditors; ● reviewing with the independent auditors any audit problems or difficulties and management’s response; ● discussing the annual audited financial statements with management and the independent auditors; ● reviewing the adequacy and effectiveness of our accounting and internal control policies and procedures and any steps taken to monitor and control major financial risk exposures; ● reviewing and approving all proposed related party transactions; ● meeting separately and periodically with management and the independent auditors; and ● monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures for proper compliance. 70 Compensation Committee Our compensation committee currently consists of Mr.
The audit committee is responsible for, among other things: ● appointing the independent auditors and pre-approving all auditing and non-auditing services permitted to be performed by the independent auditors; ● reviewing with the independent auditors any audit problems or difficulties and management’s response; ● discussing the annual audited financial statements with management and the independent auditors; ● reviewing the adequacy and effectiveness of our accounting and internal control policies and procedures and any steps taken to monitor and control major financial risk exposures; ● reviewing and approving all proposed related party transactions; ● meeting separately and periodically with management and the independent auditors; and ● monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures for proper compliance.
The estimated total amount owed under the loans, including interest, fees, expenses and penalties, as of March 31, 2023 was approximately RMB448 million . Hangzhou Lianluo did not pledge any Common Shares owned by it or Digital Grid as collateral to support the ICBC loans.
The estimated total amount owed under the loans, including interest, fees, expenses and penalties, as of December 31, 2023 was approximately RMB485 million. Hangzhou Lianluo did not pledge any Common Shares owned by it or Digital Grid as collateral to support the ICBC loans.
D. Employees As of December 31, 2022 and 2021, we employed a total of 1,355 and 2,205 full-time employees, respectively. The reduction in our employee count was primarily due to workforce optimization measures made in response to changing macroeconomic conditions and shifting consumer demand for our products.
D. Employees As of December 31, 2023 and 2022, we employed a total of 932 and 1,355 full-time employees, respectively. The reduction in our employee count was primarily due to workforce optimization measures made in response to changing macroeconomic conditions and shifting consumer demand for our products.
Fred Chang has nominated Mr. Fred Chang, Mr. Gregory Moore and Mr. Anthony Chow to serve as directors. Duties of Directors Under British Virgin Islands law, our directors have duties to act honestly, in good faith and with a view to our best interests.
Fred Chang has nominated Mr. Fred Chang, Mr. Gregory Moore and Mr. Richard Weil to serve as directors. Duties of Directors Under British Virgin Islands law, our directors have duties to act honestly, in good faith and with a view to our best interests.
Hou has broad oversight over identifying and mitigating cyber threats, developing security policies and procedures, and ensuring compliance with industry regulations and standards. He also works closely with other executives and departments to ensure that security is integrated into all aspects of the organization’s operations.
Hou has broad oversight over identifying and mitigating cyber threats, developing security policies and procedures, and ensuring compliance with industry regulations and standards. He also works closely with other executives and departments to integrate security into all aspects of the organization’s operations.
Compensation 2022 Compensation of Directors and Executive Officers For the year ended December 31, 2022, the aggregate cash compensation accrued for directors, as a group, was approximately $0.9 million, of which about $0.1 million is related to the proceeds from the exercise of stock options. Employee directors did not receive any compensation for their services as directors.
Compensation 2023 Compensation of Directors and Executive Officers For the year ended December 31, 2023, the aggregate cash compensation accrued for directors, as a group, was approximately $1.0 million, of which less than $0.1 million is related to the proceeds from the exercise of stock options. Employee directors did not receive any compensation for their services as directors.
As of the date hereof, to the best of our knowledge, no Common Shares have been sold by Hangzhou Lianluo in connection with the repayment of the BOC or ICBC loans. 69 To the best of our knowledge, except as disclosed herein, none of our directors or executive officers has been convicted in a criminal proceeding, excluding traffic violations or similar misdemeanors, or has been a party to any judicial or administrative proceeding during the past ten years that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities or commodities laws, any laws respecting financial institutions or insurance companies, any law or regulation prohibiting mail or wire fraud in connection with any business entity or been subject to any disciplinary sanctions or orders imposed by a stock, commodities or derivatives exchange or other self-regulatory organization, except for matters that were dismissed without sanction or settlement.
To the best of our knowledge, except as disclosed herein, none of our directors or executive officers has been convicted in a criminal proceeding, excluding traffic violations or similar misdemeanors, or has been a party to any judicial or administrative proceeding during the past ten years that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities or commodities laws, any laws respecting financial institutions or insurance companies, any law or regulation prohibiting mail or wire fraud in connection with any business entity or been subject to any disciplinary sanctions or orders imposed by a stock, commodities or derivatives exchange or other self-regulatory organization, except for matters that were dismissed without sanction or settlement.
Moore qualifies as an audit committee financial expert within the meaning of the SEC rules or possesses financial sophistication within the meaning of the Nasdaq Listing Rules. The audit committee oversees our accounting and financial reporting processes and the audits of the financial statements of our company.
Our board also has determined that Mr. Moore qualifies as an audit committee financial expert within the meaning of the SEC rules or possesses financial sophistication within the meaning of the Nasdaq Listing Rules. The audit committee oversees our accounting and financial reporting processes and the audits of the financial statements of our company.
Yang was the Chief Financial Officer and Secretary of the Board of Beijing Digit Horizon Technology Limited, the predecessor of Hangzhou Lianluo. 63 Mr. Fuya (Frank) Zheng. Mr. Zheng was appointed as an independent director in April 2020. Mr. Zheng has extensive experience in corporate finance and investment management.
From February 2013 to January 2015, Ms. Yang was the Chief Financial Officer and Secretary of the Board of Beijing Digit Horizon Technology Limited, the predecessor of Hangzhou Lianluo. Mr. Fuya (Frank) Zheng. Mr. Zheng was appointed as an independent director in April 2020. Mr. Zheng has extensive experience in corporate finance and investment management.
In addition, she has acted as the Vice President of Hangzhou Lianluo Information Technology Co., Ltd. from February 2018 to September 2020. From January 2015 to February 2018, Ms. Yang served as Chief Financial Officer and Vice President of Hangzhou Lianluo. From February 2013 to January 2015, Ms.
Yang served as interim Chief Financial Officer of Lianluo Smart Limited from March 2018 to May 2021. In addition, she has acted as the Vice President of Hangzhou Lianluo Information Technology Co., Ltd. from February 2018 to September 2020. From January 2015 to February 2018, Ms. Yang served as Chief Financial Officer and Vice President of Hangzhou Lianluo.
For the year ended December 31, 2022, the aggregate cash compensation accrued for our executive officers, as a group, was approximately $4.3 million, of which approximately $1.7 million was related to 2022 bonus payments that were paid out in February 2023.
For the year ended December 31, 2023, the aggregate cash compensation accrued for our executive officers, as a group, was approximately $5.4 million, of which approximately $2.3 million was related to 2023 bonus payments that were paid out in July 2023 and February 2024.
Name* Age Position(s) Zhitao He 41 Chairman and Director Fred Faching Chang 66 Vice Chairman and Director Yingmei Yang 52 Director Fuya Zheng 56 Independent Director Gregory Moore 73 Independent Director Poi (Paul) Wu 52 Independent Director Anthony Chow 57 Chief Executive Officer and Director Robert Chang 55 Chief Financial Officer Jamie Spannos 45 Chief Operating Officer Montaque Hou 42 Chief Information Security Officer Michael Chen 38 Chief Legal Officer Christina Ching 55 Chief Accounting Officer * Except as otherwise indicated below, the business address of our directors and executive officers is 17560 Rowland Street, City of Industry, CA, United States 91748.
Name* Age Position(s) Zhitao He 42 Chairman and Director Fred Faching Chang 67 Vice Chairman and Director Yingmei Yang 53 Director Fuya (Frank) Zheng 57 Independent Director Gregory Moore 74 Independent Director Poi (Paul) Wu 53 Independent Director Richard Weil 55 Independent Director Anthony Chow 58 Chief Executive Officer Robert Chang 56 Chief Financial Officer Jamie Spannos 46 Chief Operating Officer Montaque Hou 43 Chief Information Security Officer Michael Chen 39 Chief Legal Officer Christina Ching 56 Chief Accounting Officer * Except as otherwise indicated below, the business address of our directors and executive officers is 17560 Rowland Street, City of Industry, CA, United States 91748. 61 Mr.
He first served as Vice President of Newegg Inc.’s North American business from 2006 until 2008, before moving to Shanghai to oversee Newegg Inc.’s China operation, as well as OZZO Logistics, a Newegg subsidiary providing 3PL support for other e-commerce companies based in China. In 2011, Mr.
Mr. Chow’s leadership has guided Newegg through some of the Company’s most transformative years. He first served as Vice President of Newegg Inc.’s North American business from 2006 until 2008, before moving to Shanghai to oversee Newegg Inc.’s China operation, as well as OZZO Logistics, a Newegg subsidiary providing 3PL support for other e-commerce companies based in China.
Moore is the chairman of our audit committee. We have determined that Mr. Moore, Mr. Wu, and Mr. Zheng satisfy the “independence” requirements of Section 5605(a)(2) of the Nasdaq Listing Rules and Rule 10A-3 under the Exchange Act. Our board also has determined that Mr.
Audit Committee Our audit committee currently consists of Mr. Gregory Moore, Mr. Poi (Paul) Wu, and Mr. Fuya (Frank) Zheng. Mr. Moore is the chairman of our audit committee. We have determined that Mr. Moore, Mr. Wu, and Mr. Zheng satisfy the “independence” requirements of Section 5605(a)(2) of the Nasdaq Listing Rules and Rule 10A-3 under the Exchange Act.
He previously served as the CEO of Pocketnet Tech, a mobile content provider, and has also served in various roles with MediaTek, Hon Hai Foxconn Technology Group and Hong Kong Hutchison Wampoa’s TOM Group. Mr.
Wu is the founder and CEO of Carota, a supplier of connected car services. Mr. Wu is also the co-founder of the MOX mobile accelerator. He previously served as the CEO of Pocketnet Tech, a mobile content provider, and has also served in various roles with MediaTek, Hon Hai Foxconn Technology Group and Hong Kong Hutchison Wampoa’s TOM Group. Mr.
We rely on this “home country practice” exception and do not have a majority of independent directors serving on our Board. Mr. Gregory Moore, Mr. Poi (Paul) Wu, and Mr. Fuya (Frank) Zheng are our independent directors.
We currently have a majority of independent directors serving on our Board, but may rely on this “home country practice” exception in the future. Mr. Gregory Moore, Mr. Richard Weil, Mr. Poi (Paul) Wu, and Mr. Fuya (Frank) Zheng are our independent directors.
We believe we have a good working relationship with our employees and we have not experienced any significant labor disputes. E. Share Ownership For information regarding the share ownership of our directors and executive officers, see Item 7 under the heading “Principal Shareholders.” 71
We believe we have a good working relationship with our employees and we have not experienced any significant labor disputes. E. Share Ownership For information regarding the share ownership of our directors and executive officers, see Item 7 under the heading “Major Shareholders.” F. Disclosure of a Registrant’s Action to Recover Erroneously Awarded Compensation None.
On October 19, 2020, Hangzhou Lianluo announced that it has received a notice of administrative punishment from the Zhejiang Regulatory Bureau of CSRC, which provided, among other things, that (i) Hangzhou Lianluo received a warning and would be required to correct its unlawful acts and pay a fine of RMB 300,000, and (ii) Mr.
He was the former Chairman and the former Chief Executive Officer of Lianluo Smart Limited (the predecessor company of Newegg prior to the Merger) and is currently the chairman of our board. 67 On October 19, 2020, Hangzhou Lianluo announced that it has received a notice of administrative punishment from the Zhejiang Regulatory Bureau of CSRC, which provided, among other things, that (i) Hangzhou Lianluo received a warning and would be required to correct its unlawful acts and pay a fine of RMB 300,000, and (ii) Mr.
Moore previously served as the Senior Vice President and Controller of Yum! Brands, Inc. until he retired in 2005. Yum! Brands is the worldwide parent company of Taco Bell, KFC and Pizza Hut. Prior to becoming Yum! Brands’ Controller, Mr. Moore was the Vice President and General Auditor of Yum! Brands.
Moore has also been a member of Newegg Inc.’s board of directors since July 2011. Mr. Moore previously served as the Senior Vice President and Controller of Yum! Brands, Inc. until he retired in 2005. Yum! Brands is the worldwide parent company of Taco Bell, KFC and Pizza Hut. Prior to becoming Yum! Brands’ Controller, Mr.
He was previously a director of Newegg Inc. from June 2005 to August 2018 and was a member of the compensation committee of Newegg Inc.’s board of directors from 2017 to 2018. During the periods from October 2005 to August 2008, January 2013 to January 2015, and October 2019 to March 2020, Mr.
He has been a member of Newegg Inc.’s board from September 2019 to the present. He was previously a director of Newegg Inc. from June 2005 to August 2018 and was a member of the compensation committee of Newegg Inc.’s board of directors from 2017 to 2018.
Agreements with Executive Officers Pursuant to our standard employment agreements with each of our executive officers (excluding our Chief Executive Officer), the employment with each of such executive officers is for a single three-year term, renewable thereafter in one-year increments.
In addition, a combined total of 225,000 RSUs were granted to two executive officers who joined the Company in September and October of 2022. 65 Agreements with Executive Officers Pursuant to our standard employment agreements with each of our executive officers (excluding our Chief Executive Officer), the employment with each of such executive officers is for a single three-year term, renewable thereafter in one-year increments.
Chang was also Newegg Inc.’s Chief Executive Officer. Ms. Yingmei Yang. Ms. Yang has served as a director of the Company since April 2020, and as a director of Newegg Inc. since July 2018. Ms. Yang served as interim Chief Financial Officer of Lianluo Smart Limited from March 2018 to May 2021.
During the periods from October 2005 to August 2008, January 2013 to January 2015, and October 2019 to March 2020, Mr. Chang was also Newegg Inc.’s Chief Executive Officer. Ms. Yingmei Yang. Ms. Yang has served as a director of the Company since April 2020, and as a director of Newegg Inc. since July 2018. Ms.
The payout can vary from zero to 100% based on actual results and performance goals may be adjusted by the Compensation Committee from time to time in its sole discretion. In addition, a combined total of 225,000 RSUs were granted to two executive officers who joined the Company in September and October of 2022.
The payout can vary from zero to 100% based on actual results and performance goals may be adjusted by the Compensation Committee from time to time in its sole discretion.
Zheng received a Bachelor of Business Administration majoring in accounting from City University of New York in 1994. Mr. Gregory Moore. Mr. Moore has been a member of our board of directors since May 2021, and has been a member of Newegg Inc.’s board of directors since July 2011. Mr.
Zheng received a Bachelor of Business Administration majoring in accounting from City University of New York in 1994. Mr. Gregory Moore. Mr.
Discretionary Bonus and Profit Sharing Program Newegg’s CEO and other executive officers are eligible to participate in the Company’s annual Discretionary Bonus Program and Profit Sharing Program.
In addition, during the year, Mr. Chow exercised restricted stock units with total proceeds of $1.1 million. Discretionary Bonus and Profit Sharing Program Newegg’s CEO and other executive officers are eligible to participate in the Company’s annual Discretionary Bonus Program and Profit Sharing Program.
In addition, the executive officers exercised stock options for the year ended December 31, 2022 that resulted in aggregate proceeds of $3.3 million. We did not separately set aside any amounts for pensions, retirement, or other benefits for our executive officers, other than pursuant to relevant statutory requirements.
We did not separately set aside any amounts for pensions, retirement, or other benefits for our executive officers, other than pursuant to relevant statutory requirements. 64 For the year ended December 31, 2023, the aggregate cash compensation accrued for our CEO was approximately $2.6 million, of which $1.6 million was for a 2023 bonus that was paid in July 2023 and February 2024.
Moore also serves as Chairman of the Board of Texas Roadhouse Inc. (Nasdaq: TXRH). Mr. Moore holds a Bachelor’s degree in Business Administration from University of Texas at Austin, and a Master of Business Administration from St. Johns University. Mr. Poi (Paul) Wu. Mr.
Moore holds a Bachelor’s degree in Business Administration from University of Texas at Austin, and a Master of Business Administration from St. Johns University. 62 Mr. Poi (Paul) Wu. Mr. Wu has been a member of our board since May 2021, and has been a member of Newegg Inc.’s board of directors since February 2020. Mr.
Before that, he was with PepsiCo, Inc. and held the position of Vice President, Controller of Taco Bell and Controller of PepsiCo Wines & Spirits International, a division of PepsiCola International. Before joining PepsiCo he was an Audit Manager at Arthur Young & Company in its New York, New York and Stamford, Connecticut offices. Mr.
Moore was the Vice President and General Auditor of Yum! Brands. Before that, he was with PepsiCo, Inc. and held the position of Vice President, Controller of Taco Bell and Controller of PepsiCo Wines & Spirits International, a division of PepsiCola International.
This investment plan has allowed Hangzhou Lianluo to become a closed loop of “Software and Hardware + Platform + Channels.” Mr.
This investment plan has allowed Hangzhou Lianluo to become a closed loop of “Software and Hardware + Platform + Channels.” Mr. He currently serves on the board of directors of Hangzhou Lianluo, Beijing Digital Grid Technology Co., Ltd., Shenzhen Ailianluo Investment Co., Ltd., Hangzhou Lianluo Holding CO., Ltd. and Shenyang Zhitongrong Networking Technology Co., Ltd. Mr.
Wu obtained his bachelor’s degree from the Department of Agricultural Economics at Taiwan University, and obtained an MBA from RSM Rotterdam Business School in the Netherlands. Mr. Anthony Chow. Mr. Chow is the Global Chief Executive Officer of Newegg. He sets the Company’s strategic direction and works closely with Newegg’s executives for consistent execution across the organization.
Wu obtained his bachelor’s degree from the Department of Agricultural Economics at Taiwan University, and obtained an MBA from RSM Rotterdam Business School in the Netherlands. Mr. Richard Weil. Mr.
All of our executive officers are appointed by and serve at the discretion of our board. Qualification There is currently no shareholding qualification for directors, although a shareholding qualification for directors may be fixed by our shareholders by ordinary resolution.
Qualification There is currently no shareholding qualification for directors, although a shareholding qualification for directors may be fixed by our shareholders by ordinary resolution. 68 Committees of the Board of Directors Currently, three committees have been established under the Board: the audit committee, the compensation committee and the nominating committee. Each committee’s members and functions are described below.
He founded Hangzhou Lianluo in 2007, which was then-known as Beijing Digital Grid Technology Co. Mr. Fred Faching Chang (or Mr. Fred Chang). Mr. Chang currently serves as the Vice Chairman of our board of directors. He has been a member of Newegg Inc.’s board from September 2019 to the present.
He received his master’s degree from Beijing University of Posts and Telecommunications. Mr. He founded Hangzhou Lianluo in 2007, which was then-known as Beijing Digital Grid Technology Co. Mr. Fred Faching Chang (or Mr. Fred Chang). Mr.
For the year ended December 31, 2022, the aggregate cash compensation accrued for our CEO was approximately $2.3 million, of which $1.2 million was for a 2022 bonus that was paid in February 2023. In addition, during the year, Mr. Chow exercised stock options with total proceeds of $1.9 million.
In addition, the executive officers exercised stock options and restricted stock units for the year ended December 31, 2023 that resulted in aggregate proceeds of $1.7 million.
Removed
He currently serves on the board of directors of Hangzhou Lianluo, Avegant Light Field Technology, Beijing Digital Grid Technology Co., Ltd., Shenzhen Ailianluo Investment Co., Ltd., Hangzhou Lianluo Holding CO., Ltd., Beijing Lianluo Youjia Technology Co., Ltd. and Shenyang Zhitongrong Networking Technology Co., Ltd. Mr. He received his master’s degree from Beijing University of Posts and Telecommunications. Mr.
Added
Chang currently serves as the Vice Chairman of our board of directors and was appointed to the Board by the Minority Representative, as one of Board appointees that the Minority Representative is entitled to make pursuant to our Amended and Restated Memorandum and Articles of Association.
Removed
Poi (Paul) Wu has been a member of our board since May 2021, and has been a member of Newegg Inc.’s board of directors since February 2020. Mr. Wu is the founder and CEO of Carota, a supplier of connected car services. Mr. Wu is also the co-founder of the MOX mobile accelerator.
Added
Moore has been a member of our board of directors since May 2021 and was appointed to the Board by the Minority Representative, as one of the Board appointees that the Minority Representative is entitled to make pursuant to our Amended and Restated Memorandum and Articles of Association. Mr.
Removed
In addition to Mr. Chow’s role as Global CEO, he also serves on the Company’s board of directors. Mr. Chow’s leadership has guided Newegg through some of the Company’s most transformative years.
Added
Before joining PepsiCo he was an Audit Manager at Arthur Young & Company in its New York, New York and Stamford, Connecticut offices. Mr. Moore also serves as Chairman of the Board of Texas Roadhouse Inc. (Nasdaq: TXRH). Mr.
Removed
He was the former Chairman and the former Chief Executive Officer of Lianluo Smart Limited (the predecessor company of Newegg prior to the Merger) and is currently the chairman of our board.
Added
Richard Weil has been a member of our board of directors since April 2024 and was appointed to the Board by the Minority Representative, as one of the Board appointees that the Minority Representative is entitled to make pursuant to our Amended and Restated Memorandum and Articles of Association. Mr.
Removed
Committees of the Board of Directors Currently, three committees have been established under the Board: the audit committee, the compensation committee and the nominating committee. Each committee’s members and functions are described below. Audit Committee Our audit committee currently consists of Mr. Gregory Moore, Mr. Poi (Paul) Wu, and Mr. Fuya (Frank) Zheng. Mr.
Added
Weil is the VP Finance for CarbonCapture Inc., a company that develops, manufactures, and deploys direct air capture equipment to decarbonize the atmosphere. Mr. Weil is also a co-Founder and Managing Director of Mount Wilson Ventures, an early-stage venture fund that invests in hard science companies rooted in biology, chemistry, materials science, and data science.
Removed
The following table gives a breakdown of our full-time employees as of December 31, 2022 by region. Location Count China 525 Taiwan 92 U.S. 714 Canada 24 Total 1,355 During the holiday season, we have historically added temporary workers to augment our full-time work force.
Added
He is an experienced finance and operating professional with a background in start-up growth, financing and restructuring; banking; and management consulting. Richard has served as CFO or in a similar executive capacity for start-up companies operating in industries as diverse as near field communications hardware and software, video game commerce, paid search advertising, retail financial services and electricity transmission. Mr.
Added
Weil served as the CFO of the Museum of Contemporary Art (MOCA) from late 2008-2011, during which time he dramatically restructured the museum’s operations and staffing. In 2005 he sold his publishing company to LexisNexis. At Tokai Bank Europe (now part of Mitsubishi UFJ) Richard developed innovative new financial products and advised clients on risk management and derivative product pricing.
Added
Prior to Tokai, he served as a strategy consultant for the MAC Group. Richard graduated from Columbia College, magna cum laude, in 1990 and is a CFA charter holder. Mr. Anthony Chow. Mr. Chow is the Global Chief Executive Officer of Newegg. He sets the Company’s strategic direction and works closely with Newegg’s executives for consistent execution across the organization.
Added
Limitation of Director and Officer Liability British Virgin Islands law does not limit the extent to which a company’s memorandum and articles of association may provide for indemnification of officers and directors, except to the extent any such provision may be held by the British Virgin Islands courts to be contrary to public policy, such as to provide indemnification against civil fraud or the consequences of committing a crime.
Added
As disclosed by Hangzhou Lianluo on February 26, 2024, the court has ruled in a court judgment that Hangzhou Lianluo owed ICBC RMB332 million (including interest) under one of such loans.
Added
As of the date hereof, to the best of our knowledge, no Common Shares have been sold by Hangzhou Lianluo in connection with the repayment of the BOC or ICBC loans.
Added
All of our executive officers are appointed by and serve at the discretion of our board.
Added
The following tables give breakdowns of our full-time employees as of December 31, 2023 by function and by region.
Added
Department Count Customer Service 54 Finance 58 Fraud Prevention 22 HR 17 Internal Audit 4 IT 347 Legal 6 Logistics 232 Operations 27 Sales & Marketing 165 Total 932 Location Count China 296 Taiwan 46 U.S. 574 Canada 16 Total 932 During the holiday season, we have historically added temporary workers to augment our full-time work force.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

10 edited+2 added−2 removed5 unchanged
Biggest changeContemporaneously, Fred Chang entered into a new loan with East West Bank, pursuant to which Tekhill USA, LLC pledged a total of 18,208,303 common shares as collateral to East West Bank to secure a loan from East West Bank to Fred Chang with a principal amount of $20.0 million.
Biggest changeContemporaneously, Fred Chang entered into a new loan with East West Bank, pursuant to which Tekhill USA, LLC pledged a total of 18,208,303 common shares as collateral to East West Bank to secure a loan from East West Bank to Fred Chang with a principal amount of $20.0 million. 71 (3) Comprised of (i) 2,468,555 Common Shares, (ii) vested stock options exercisable for 13,708,271 Common Shares, and (iii) stock options exercisable for 714,636 Common Shares and restricted stock units representing the right to receive 112,185 Common Shares upon vesting that will vest within 60 days of March 31, 2024.
Major Shareholders The following table sets forth information with respect to the beneficial ownership, within the meaning of Rule 13d-3 under the Exchange Act, of our common shares as of March 31, 2023 for: ● each of our directors and executive officers; ● all of our directors and executive officers as a group; and ● each shareholder or group of shareholders known to us to own beneficially more than 5% of our common shares.
Major Shareholders The following table sets forth information with respect to the beneficial ownership, within the meaning of Rule 13d-3 under the Exchange Act, of our common shares as of March 31, 2024 for: ● each of our directors and executive officers; ● all of our directors and executive officers as a group; and ● each shareholder or group of shareholders known to us to own beneficially more than 5% of our common shares.
(2) Comprised of (i) 89,091,406 Common Shares held by Tekhill USA, LLC, (ii) 23,624,115 Common Shares held by Fred Chang Partners Trust, (iii) 9,158,558 Common Shares held by Nabal Spring, LLC, (iv) 5,435,754 Common Shares held by Chang Trust 2008, (v) 797,625 Common Shares held by Chang 2009 Annuity Trust No. 1, (vi) 332,340 Common Shares held by Chang 2009 Annuity Trust No. 2, (vii) 664,691 Common Shares held by Chang 2009 Annuity Trust No. 3, (viii) vested stock options exercisable for 5,461,990 Common Shares at an exercise price of $1.19/share held by Fred Chang, and (ix) 331,030 stock options that will vest within 60 days of March 31, 2023.
(2) Comprised of (i) 83,591,406 Common Shares held by Tekhill USA, LLC, (ii) 23,624,115 Common Shares held by Fred Chang Partners Trust, (iii) 9,158,558 Common Shares held by Nabal Spring, LLC, (iv) 5,435,754 Common Shares held by Chang Trust 2008, (v) 797,625 Common Shares held by Chang 2009 Annuity Trust No. 1, (vi) 332,340 Common Shares held by Chang 2009 Annuity Trust No. 2, (vii) 664,691 Common Shares held by Chang 2009 Annuity Trust No. 3, (viii) vested stock options exercisable for 7,448,167 Common Shares at an exercise price of $1.19/share held by Fred Chang, and (ix) 331,030 stock options that will vest within 60 days of March 31, 2024.
(4) Comprised of vested stock options exercisable for the indicated number of Common Shares for each person. The exercise price for all of these stock options is $0.55/share. Rights of Certain Principal Shareholders See Item 10.B. “Memorandum and Articles of Association” under the subheadings “Rights of Certain Principal Shareholders” and “Requirements of Board Approval on Certain Matters.” 73 B.
The exercise price for all of these stock options is $0.55/share. Rights of Certain Principal Shareholders See Item 10.B. “Memorandum and Articles of Association” under the subheadings “Rights of Certain Principal Shareholders” and “Requirements of Board Approval on Certain Matters.” B.
In computing the number of common shares beneficially owned by a person listed below and the percentage ownership of such person, common shares underlying options, warrants, restricted stock units, or convertible securities held by each such person that are exercisable or convertible within 60 days of March 31, 2023 are deemed outstanding.
In computing the number of common shares beneficially owned by a person listed below and the percentage ownership of such person, common shares underlying options, warrants, restricted stock units, or convertible securities held by each such person that are exercisable or convertible within 60 days of March 31, 2024 are deemed outstanding. 70 The ownership information shown in the column titled “Percentage of Common Shares Beneficially Owned” in the table below is based on 381,766,825 common shares outstanding as of March 31, 2024.
(3) Comprised of (i) Common Shares, (ii) vested stock options, and (iii) stock options and restricted stock units that will vest within 60 days of March 31, 2023 for the indicated number of Common Shares for each person. The exercise price for all of these stock options is $0.55/share.
The exercise price for all of these stock options is $0.55/share. (4) Comprised of (i) 76,350 Common Shares and (ii) restricted stock units representing the right to receive 4,712 Common Shares upon vesting that will vest within 60 days of March 31, 2024. (5) Comprised of vested stock options exercisable for the indicated number of Common Shares for each person.
The loans have been guaranteed jointly and severally by Beijing Digital Grid Technology Co., Ltd., a subsidiary of Hangzhou Lianluo, and by Mr. Zhitao He. The total principal amount owed under these loans as of March 31, 2023 was RMB150 million in RMB plus $66.5 million in U.S. dollars.
Zhitao He. The total principal amount owed under these loans as of March 31, 2024 was RMB150 million in RMB plus $66.5 million in U.S. dollars. In May 2020, BOC filed several lawsuits against Hangzhou Lianluo, Digital Grid, Beijing Digital Grid Technology Co., Ltd. and Mr.
Name and Address of Beneficial Owner Number of Common Shares Beneficially Owned Percentage of Common Shares Beneficially Owned 5% or Greater Shareholders Zhitao He (1) 230,488,957 57.2 % Fred Chang (2) 134,897,509 33.5 % Executive Officers and Directors Anthony Chow (3) 7,087,426 1.8 % Robert Chang (3) 1,601,973 * Jamie Spannos (3) 2,673,318 * Montaque Hou (3) 1,654,024 * Michael Chen — * Christina Ching — * Fred Chang (2) 134,897,509 33.5 % Fuya Zheng — * Gregory Moore — * Zhitao He (1) 230,488,957 57.2 % Yingmei Yang (4) 613,952 * Poi (Paul) Wu — * All Directors and Executive Officers as a Group (12 persons) 379,017,159 94.0 % * Less than 1% of total outstanding shares (1) Comprised of (i) 222,821,592 Common Shares owned by Digital Grid, (ii) 473,388 Common Shares and warrants to purchase 125,000 Common Shares at an exercise price of $17.60/share owned by Hangzhou Lianluo, (iii) 58,937 Common Shares owned by Hyperfinite Galaxy Holding Limited and (iv) vested stock options exercisable for 7,010,040 Common Shares at an exercise price of $0.55/share held by Mr.
Name and Address of Beneficial Owner Number of Common Shares Beneficially Owned Percentage of Common Shares Beneficially Owned 5% or Greater Shareholders Zhitao He (1) 233,993,977 59.6 % Fred Chang (2) 131,383,686 33.7 % Executive Officers and Directors Anthony Chow (3) 10,152,771 2.6 % Robert Chang (3) 1,385,126 * Jamie Spannos (3) 3,664,570 * Montaque Hou (3) 1,801,180 * Michael Chen (4) 47,828 * Christina Ching (4) 33,234 * Fred Chang (2) 131,383,686 33.7 % Fuya Zheng — * Gregory Moore — * Zhitao He (1) 233,993,977 59.6 % Yingmei Yang (5) 877,402 * Poi (Paul) Wu — * Richard Weil — * All Directors and Executive Officers as a Group (12 persons) 383,339,774 92.2 % * Less than 1% of total outstanding shares (1) Comprised of (i) 222,821,592 Common Shares owned by Digital Grid, (ii) 473,388 Common Shares and warrants to purchase 125,000 Common Shares at an exercise price of $17.60/share owned by Hangzhou Lianluo, (iii) 58,937 Common Shares owned by Hyperfinite Galaxy Holding Limited and (iv) vested stock options exercisable for 10,515,060 Common Shares at an exercise price of $0.55/share held by Mr.
Zhitao He. All of those persons are affiliated with each other and under the control of Mr. Zhitao He. 72 The Common Shares owned by Digital Grid have been pledged to Bank of China Limited Zhejiang Branch, or BOC, as collateral to support working capital loans and letters of credit provided by BOC to Hangzhou Lianluo.
The Common Shares owned by Digital Grid have been pledged to Bank of China Limited Zhejiang Branch, or BOC, as collateral to support working capital loans and letters of credit provided by BOC to Hangzhou Lianluo. The loans have been guaranteed jointly and severally by Beijing Digital Grid Technology Co., Ltd., a subsidiary of Hangzhou Lianluo, and by Mr.
In May 2020, BOC filed several lawsuits against Hangzhou Lianluo, Digital Grid, Beijing Digital Grid Technology Co., Ltd. and Mr. Zhitao He in the Hangzhou Intermediate People’s Court in China alleging that Hangzhou Lianluo has failed to repay the loans when due and is in breach of the loan agreements.
Zhitao He in the Hangzhou Intermediate People’s Court in China alleging that Hangzhou Lianluo has failed to repay the loans when due and is in breach of the loan agreements. The court has ruled that the loan is in default in a final, non appealable judgment.
Removed
The ownership information shown in the column titled “Percentage of Common Shares Beneficially Owned” in the table below is based on 377,758,760 common shares outstanding as of March 31, 2023.
Added
Zhitao He. All of those persons are affiliated with each other and under the control of Mr. Zhitao He. Based on public disclosures filed by Hangzhou Lianluo on March 29, 2024, Mr. Zhitao He beneficially owned 10.2% of Hangzhou Lianluo’s total capital shares. Mr. He is the Chairman and Chief Executive Officer of Hangzhou Lianluo. In addition, Mr.
Removed
The court has ruled that the loan is in default in a final, non appealable judgment.
Added
He has the right to nominate directors to Hangzhou Lianluo’s board, subject to Hangzhou Lianluo’s board nomination process and stockholder approval. Hangzhou Lianluo’s public disclosures indicate that Mr. He is the control person of Hangzhou Lianluo.

Other NEGG 10-K year-over-year comparisons