Company: NEGG
Filing Date: 2025-04-28
Form Type: 20-F
Source: 0001213900-25-036055
Chunk: 166

Company: Newegg Commerce, Inc.
Filing Date: 2025-04-28
Form: 20-F
Item: Item 18
Chunk 166
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 whether the consolidated
financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we
engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding
of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess
the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide
a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is
a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated
to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and
(2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter
in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit
matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Vendor Incentive Receivables

As described in Note 3 to the consolidated financial
statements, the Company’s vendor incentive receivables totaled $48.5 million as of December 31, 2024. The Company participates in
various vendor incentive programs that include, but are not limited to, purchasing-based volume discounts, sales-based volume incentives,
marketing development funds, including certain cooperative advertising and price protection agreements.

We identified management’s measurement of
vendor incentive receivables as a critical audit matter because the Company has a significant number of vendor agreements with various
terms and conditions that may require estimates in order to determine the receivable amounts earned. Auditing these vendor incentive receivables
was complex due to the extent of audit effort required to evaluate whether the vendor incentive receivables were earned and recorded in
accordance with the terms and