Company: NEGG
Filing Date: 2025-04-28
Form Type: 20-F
Source: 0001213900-25-036055
Chunk: 93

Company: Newegg Commerce, Inc.
Filing Date: 2025-04-28
Form: 20-F
Item: Item 4A
Chunk 93
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,
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. Vendor incentives may include estimates and are calculated based
on the terms of vendor incentive agreements which may include non-standard contract terms. Vendor incentives are recognized in the consolidated
statements of operations as an offset to marketing and promotional expenses to the extent that they represent reimbursement of advertising
costs incurred by us on behalf of the vendors that are specific, incremental, and identifiable. Reimbursements that are in excess of such
costs and all other vendor incentive programs are accounted for as a reduction of cost of sales, or if the related product inventory is
still on hand at the reporting date, inventory is reduced in the consolidated balance sheets.

Income Taxes

The Company is subject to federal and state income
taxes in the United States and taxes in foreign jurisdictions. In accordance with ASC Topic 740, the Company uses the asset
and liability method of accounting for income taxes. Under the asset and liability method, deferred taxes are determined based on the
temporary differences between the financial statement and tax bases of assets and liabilities, using tax rates expected to be in effect
during the years in which the bases differences are expected to reverse. A valuation allowance is established against deferred tax
assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized.

The Company considers a number of factors in assessing
the realizability of a deferred tax asset associated with net operating losses and tax credit carryforwards, including the reversal of
temporary differences and future taxable income. 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.

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 measures the recognized tax benefit as the largest amount of tax benefit that
has greater than a 50% likelihood of being realized upon the ultimate settlement with a taxing authority. The Company reverses a previously
recognized tax benefit if it determines