Company: NEGG
Filing Date: 2025-04-28
Form Type: 20-F
Source: 0001213900-25-036055
Chunk: 26

Company: Newegg Commerce, Inc.
Filing Date: 2025-04-28
Form: 20-F
Item: Item 3
Chunk 26
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 fines and penalties.

The seasonality of our business places increased
strain on our operations.

Newegg historically experiences higher sales in
the fourth quarter due to the holiday season. If we do not stock or restock popular products in sufficient amounts such that we fail to
meet customer demand, it could significantly affect our revenue and future growth. If we overstock products, we may be required to take
significant inventory markdowns or write-offs and incur commitment costs, which could reduce profitability. We may experience an increase
in our net shipping cost due to complimentary upgrades, split-shipments and additional long-zone shipments necessary for timely delivery
for the holiday season. If too many customers access our online platforms within a short period of time due to increased holiday demand,
we may experience system interruptions that make our online platforms unavailable or prevent us from efficiently fulfilling orders, which
may reduce the volume of goods sold through our online platforms and the attractiveness of our products and services. In addition, we
may be unable to adequately staff our fulfillment and customer service capability during these peak periods.

As we tend to experience higher sales in the fourth
quarter, we generally experience an increase in our cash position at year-end, as compared to the first, second and third quarters when
sales are lower. Historically, our cash, cash equivalents, and marketable securities balances typically reach their highest level (other
than as a result of cash flows provided by or used in investing and financing activities) at December 31 of each year. In anticipation
of higher sales during the holiday season, we typically begin building up inventory levels in the later part of the third quarter. 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 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, 2024 and 2023, accounts
payable amounted to approximately $148.3 million and $206.6 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. This manifests itself in a variety of ways: the emergence of
new products and categories, the often rapid maturation of categories, cannibalization of