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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>UNITED STATES<br/>
SECURITIES AND EXCHANGE COMMISSION<br/>
WASHINGTON, D.C. 20549</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>FORM <ix:nonNumeric contextRef="c0" name="dei:DocumentType">20-F</ix:nonNumeric></b></p><div>

</div><p style="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Mark One)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><ix:nonNumeric contextRef="c0" format="ixt:fixed-false" name="dei:DocumentRegistrationStatement"><span style="font-family: Times New Roman, Times, Serif">&#9744;</span></ix:nonNumeric>
<b>REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>OR</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><ix:nonNumeric contextRef="c0" format="ixt:fixed-true" name="dei:DocumentAnnualReport"><span style="font-family: Times New Roman, Times, Serif">&#9746;</span></ix:nonNumeric>
<b>ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the fiscal year ended <ix:nonNumeric contextRef="c0" format="ixt:date-monthname-day-year-en" name="dei:DocumentPeriodEndDate"><ix:nonNumeric contextRef="c0" format="ixt:date-monthname-day-en" name="dei:CurrentFiscalYearEndDate">December 31</ix:nonNumeric>, <ix:nonNumeric contextRef="c0" name="dei:DocumentFiscalYearFocus">2022</ix:nonNumeric></ix:nonNumeric></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 13.5pt; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>OR</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><ix:nonNumeric contextRef="c0" format="ixt:fixed-false" name="dei:DocumentTransitionReport"><span style="font-family: Times New Roman, Times, Serif">&#9744;</span></ix:nonNumeric>
<b>TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>OR</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><ix:nonNumeric contextRef="c0" format="ixt:fixed-false" name="dei:DocumentShellCompanyReport"><span style="font-family: Times New Roman, Times, Serif">&#9744;</span></ix:nonNumeric>
<b>SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</b></p><div>

</div><p style="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Date of event requiring this shell company report</p><div>

</div><p style="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the transition period from</b> __ <b>to</b>
__</p><div>

</div><p style="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 13.5pt; text-align: center"><b>Commission file number <ix:nonNumeric contextRef="c0" name="dei:EntityFileNumber">001-34661</ix:nonNumeric></b></p><div>

</div><p style="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b><ix:nonNumeric contextRef="c0" name="dei:EntityRegistrantName">Newegg Commerce, Inc.</ix:nonNumeric><br/>
</b>(Exact name of registrant as specified in its charter)</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="text-align: center; margin-top: 0; margin-bottom: 0"><ix:nonNumeric contextRef="c0" format="ixt-sec:edgarprovcountryen" name="dei:EntityIncorporationStateCountryCode"><span style="font-size: 10pt"><b>British Virgin Islands</b></span></ix:nonNumeric></p><div>

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</div><p style="text-align: center; margin-top: 0; margin-bottom: 0"><span style="font-size: 10pt"> (Jurisdiction of incorporation or organization)</span></p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Newegg Commerce, Inc.<br/>
<ix:nonNumeric contextRef="c0" name="dei:EntityAddressAddressLine1">17560 Rowland Street</ix:nonNumeric><br/>
<ix:nonNumeric contextRef="c0" name="dei:EntityAddressCityOrTown">City of Industry</ix:nonNumeric>, <ix:nonNumeric contextRef="c0" name="dei:EntityAddressCountry">CA</ix:nonNumeric>&#160;<ix:nonNumeric contextRef="c0" name="dei:EntityAddressPostalZipCode">91748</ix:nonNumeric><br/> </b>(Address of principal executive offices)</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Robert Chang</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Chief Financial Officer</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><ix:nonNumeric contextRef="c1" name="dei:ContactPersonnelName"><b>Newegg Commerce, Inc.</b></ix:nonNumeric></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><ix:nonNumeric contextRef="c1" name="dei:EntityAddressAddressLine1"><b>17560 Rowland Street</b></ix:nonNumeric></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b><ix:nonNumeric contextRef="c1" name="dei:EntityAddressCityOrTown">City of Industry</ix:nonNumeric>, <ix:nonNumeric contextRef="c1" name="dei:EntityAddressCountry">CA</ix:nonNumeric> <ix:nonNumeric contextRef="c1" name="dei:EntityAddressPostalZipCode">91748</ix:nonNumeric></b></p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Telephone: <ix:nonNumeric contextRef="c1" name="dei:CityAreaCode">(626)</ix:nonNumeric>&#160;<ix:nonNumeric contextRef="c1" name="dei:LocalPhoneNumber">271-9700</ix:nonNumeric></b><br/>
(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Securities registered or to be registered pursuant to Section 12(b)
of the Act.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td style="width: 32%; border-bottom: black 1.5pt solid; text-align: center"><span style="font-size: 10pt"><b>Title of each class</b></span></td> <td style="width: 2%; padding-bottom: 1.5pt">&#160;</td> <td style="width: 32%; border-bottom: black 1.5pt solid; text-align: center"><span style="font-size: 10pt"><b>Trading Symbols</b></span></td> <td style="width: 2%; padding-bottom: 1.5pt">&#160;</td> <td style="width: 32%; border-bottom: black 1.5pt solid; text-align: center"><span style="font-size: 10pt"><b>Name of each exchange on which registered</b></span></td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="text-align: center"><ix:nonNumeric contextRef="c0" name="dei:Security12bTitle"><span style="font-size: 10pt">Common Shares, par value $0.021848</span></ix:nonNumeric></td> <td>&#160;</td> <td style="text-align: center"><ix:nonNumeric contextRef="c0" name="dei:TradingSymbol"><span style="font-size: 10pt">NEGG</span></ix:nonNumeric></td> <td>&#160;</td> <td style="text-align: center"><span style="font-size: 10pt">The <ix:nonNumeric contextRef="c0" format="ixt-sec:exchnameen" name="dei:SecurityExchangeName">Nasdaq</ix:nonNumeric> Capital Market</span></td></tr> </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Securities registered or to be registered pursuant
to Section 12(g) of the Act. None.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Securities for which there is a reporting obligation
pursuant to Section 15(d) of the Act. None.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"></p><div>

</div><!-- Field: Page; Sequence: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="margin: 0pt">&#160;</p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">Indicate the number of outstanding shares of each
of the issuer&#8217;s classes of capital or common stock as of the close of the period covered by the annual report.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">As of December 31, 2022, there were <ix:nonFraction contextRef="c2" decimals="INF" format="ixt:num-dot-decimal" name="dei:EntityCommonStockSharesOutstanding" scale="0" unitRef="shares">376,660,069</ix:nonFraction>
shares of the registrant&#8217;s&#160;Common Shares outstanding.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Indicate by check mark if the registrant is a well-known seasoned issuer,
as defined in Rule 405 of the Securities Act. <span style="font-family: Times New Roman, Times, Serif">&#9744;</span> Yes <span style="font-family: Times New Roman, Times, Serif">&#9746;</span>
<ix:nonNumeric contextRef="c0" name="dei:EntityWellKnownSeasonedIssuer">No</ix:nonNumeric></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">If this report is an annual or transition report, indicate by check
mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. <span style="font-family: Times New Roman, Times, Serif">&#9744;</span>
Yes <span style="font-family: Times New Roman, Times, Serif">&#9746;</span> <ix:nonNumeric contextRef="c0" name="dei:EntityVoluntaryFilers">No</ix:nonNumeric></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Note &#8211; Checking the box above will not relieve any registrant
required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
<span style="font-family: Times New Roman, Times, Serif">&#9746;</span> <ix:nonNumeric contextRef="c0" name="dei:EntityCurrentReportingStatus">Yes</ix:nonNumeric> <span style="font-family: Times New Roman, Times, Serif">&#9744;</span>
No</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Indicate by check mark whether the registrant has submitted electronically
every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (&#167;232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit such files). <span style="font-family: Times New Roman, Times, Serif">&#9746;</span>
<ix:nonNumeric contextRef="c0" name="dei:EntityInteractiveDataCurrent">Yes</ix:nonNumeric> <span style="font-family: Times New Roman, Times, Serif">&#9744;</span> No</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of &#8220;large accelerated filer,&#8221;
&#8220;accelerated filer,&#8221; and &#8220;emerging growth company&#8221; in Rule 12b-2 of the Exchange Act.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td style="width: 15%">&#160;</td> <td style="width: 20%"><span style="font-size: 10pt">Large accelerated filer</span></td> <td style="width: 5%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9744;</span></td> <td style="width: 20%">&#160;</td> <td style="width: 25%"><ix:nonNumeric contextRef="c0" format="ixt-sec:entityfilercategoryen" name="dei:EntityFilerCategory"><span style="font-size: 10pt">Non-accelerated filer</span></ix:nonNumeric></td> <td style="width: 15%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9746;</span></td></tr> <tr style="vertical-align: bottom"> <td>&#160;</td> <td><span style="font-size: 10pt">Accelerated filer</span></td> <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9744;</span></td> <td>&#160;</td> <td><span style="font-size: 10pt">Emerging growth company</span></td> <td><ix:nonNumeric contextRef="c0" format="ixt:fixed-false" name="dei:EntityEmergingGrowthCompany"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9744;</span></ix:nonNumeric></td></tr> </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin-top: 0pt; margin-right: 0; margin-bottom: 0pt">If an emerging growth company that prepares its financial statements
in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards&#8224; provided pursuant to Section 13(a) of the Exchange Act. <span style="font-family: Times New Roman, Times, Serif">&#9744;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left">&#8224;</td><td style="text-align: left">The term &#8220;new or revised financial accounting standard&#8221;
refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.</td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Indicate by check mark whether the registrant has filed a report on
and attestation to its management&#8217;s assessment of the effectiveness of its internal control over financial reporting under Section
404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
<ix:nonNumeric contextRef="c0" format="ixt:fixed-false" name="dei:IcfrAuditorAttestationFlag"><span style="font-family: Times New Roman, Times, Serif">&#9744;</span></ix:nonNumeric>&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; ">If securities are registered
pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing
reflect the correction of an error to previously issued financial statements.&#160;<span style="font-family: Times New Roman, Times, Serif">&#9744;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 16.2pt; ">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; ">Indicate by check mark
whether any of those error corrections are restatements that required a recovery analysis of incentive based compensation received by
any of the registrant&#8217;s executive officers during the relevant recovery period pursuant to &#167;240.10D-1(b).&#160;<span style="font-family: Times New Roman, Times, Serif">&#9744;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Indicate by check mark which basis of accounting the registrant has
used to prepare the financial statements included in this filing:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: top"> <td style="width: 10%"><ix:nonNumeric contextRef="c0" name="dei:DocumentAccountingStandard"><span style="font-size: 10pt">U.S. GAAP</span></ix:nonNumeric></td> <td style="width: 18%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9746;</span></td> <td style="width: 40%"><span style="font-size: 10pt">International Financial Reporting Standards as issued by the International Accounting Standards Board</span></td> <td style="width: 7%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9744;</span></td> <td style="width: 20%; text-align: right"><span style="font-size: 10pt">Other</span></td> <td style="width: 5%; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9744;</span></td></tr> </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">If &#8220;Other&#8221; has been checked in response to the previous
question, indicate by check mark which financial statement item the registrant has elected to follow. <span style="font-family: Times New Roman, Times, Serif">&#9744;</span>
Item 17 <span style="font-family: Times New Roman, Times, Serif">&#9744;</span> Item 18</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">If this is an annual report, indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). <span style="font-family: Times New Roman, Times, Serif">&#9744;</span>
Yes <ix:nonNumeric contextRef="c0" format="ixt:fixed-false" name="dei:EntityShellCompany"><span style="font-family: Times New Roman, Times, Serif">&#9746;</span></ix:nonNumeric> No</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 100%"><div style="font-size: 1pt; border-top: Black 1pt solid; border-bottom: Black 2pt solid">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 2 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="margin: 0pt">&#160;</p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Background and Certain Defined Terms</b></p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As used in this annual report, unless otherwise specified, the terms
&#8220;we,&#8221; &#8220;our,&#8221; &#8220;us,&#8221; the &#8220;Company&#8221; and &#8220;Newegg&#8221; refer to the registrant, Newegg
Commerce, Inc. (previously known as &#8220;Lianluo Smart Limited&#8221; or &#8220;LLIT&#8221;).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">References to the &#8220;Merger&#8221; refer to the merger of Newegg
Inc. with Lianluo Smart Limited, which subsequently changed its name to Newegg Commerce, Inc.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Hangzhou Liaison Interactive Information Technology Co., Limited (&#8220;Hangzhou
Lianluo&#8221;), is a publicly traded company in China and a majority owner of Newegg Commerce, Inc. through a wholly-owned subsidiary,
Digital Grid (Hong&#160;Kong) Technology Co., Limited (&#8220;Digital Grid&#8221;).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>TABLE OF CONTENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="text-align: center; margin-top: 0; margin-bottom: 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr>
    <td style="vertical-align: top; width: 3%">&#160;</td>
    <td style="vertical-align: bottom; width: 86%">&#160;</td>
    <td style="vertical-align: bottom; width: 1%">&#160;</td>
    <td style="vertical-align: bottom; width: 10%; border-bottom: black 1.5pt solid; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Page</b></span></td></tr>
  <tr style="background-color: rgb(204,238,255)">
    <td colspan="2" style="vertical-align: top"><a href="#a_001"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">PART I</span></a></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">1</span></td></tr>
  <tr>
    <td style="vertical-align: top">&#160;</td>
    <td style="vertical-align: bottom"><a href="#a_002"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS</span></a></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">1</span></td></tr>
  <tr style="background-color: rgb(204,238,255)">
    <td style="vertical-align: top">&#160;</td>
    <td style="vertical-align: bottom"><a href="#a_003"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE</span></a></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">1</span></td></tr>
  <tr>
    <td style="vertical-align: top">&#160;</td>
    <td style="vertical-align: bottom"><a href="#a_004"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 3. KEY INFORMATION</span></a></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">1</span></td></tr>
  <tr style="background-color: rgb(204,238,255)">
    <td style="vertical-align: top">&#160;</td>
    <td style="vertical-align: bottom"><a href="#a_005"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 4. INFORMATION ON THE COMPANY</span></a></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">32</span></td></tr>
  <tr>
    <td style="vertical-align: top">&#160;</td>
    <td style="vertical-align: bottom"><a href="#a_006"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 4A. UNRESOLVED STAFF COMMENTS</span></a></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">49</span></td></tr>
  <tr style="background-color: rgb(204,238,255)">
    <td style="vertical-align: top">&#160;</td>
    <td style="vertical-align: bottom"><a href="#a_007"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS</span></a></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">49</span></td></tr>
  <tr>
    <td style="vertical-align: top">&#160;</td>
    <td style="vertical-align: bottom"><a href="#a_008"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES</span></a></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">62</span></td></tr>
  <tr style="background-color: rgb(204,238,255)">
    <td style="vertical-align: top">&#160;</td>
    <td style="vertical-align: bottom"><a href="#a_009"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS</span></a></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">72</span></td></tr>
  <tr>
    <td style="vertical-align: top">&#160;</td>
    <td style="vertical-align: bottom"><a href="#a_010"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 8. FINANCIAL INFORMATION</span></a></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">74</span></td></tr>
  <tr style="background-color: rgb(204,238,255)">
    <td style="vertical-align: top">&#160;</td>
    <td style="vertical-align: bottom"><a href="#a_011"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 9. THE OFFER AND LISTING</span></a></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">75</span></td></tr>
  <tr>
    <td style="vertical-align: top">&#160;</td>
    <td style="vertical-align: bottom"><a href="#a_012"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 10. ADDITIONAL INFORMATION</span></a></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">75</span></td></tr>
  <tr style="background-color: rgb(204,238,255)">
    <td style="vertical-align: top">&#160;</td>
    <td style="vertical-align: bottom"><a href="#a_013"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK</span></a></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">90</span></td></tr>
  <tr>
    <td style="vertical-align: top">&#160;</td>
    <td style="vertical-align: bottom"><a href="#a_014"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES</span></a></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">91</span></td></tr>
  <tr style="background-color: rgb(204,238,255)">
    <td colspan="2" style="vertical-align: top"><a href="#a_015"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">PART II</span></a></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">92</span></td></tr>
  <tr>
    <td style="vertical-align: top">&#160;</td>
    <td style="vertical-align: bottom"><a href="#a_016"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES</span></a></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">92</span></td></tr>
  <tr style="background-color: rgb(204,238,255)">
    <td style="vertical-align: top">&#160;</td>
    <td style="vertical-align: bottom"><a href="#a_017"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS</span></a></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">92</span></td></tr>
  <tr>
    <td style="vertical-align: top">&#160;</td>
    <td style="vertical-align: bottom"><a href="#a_018"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 15. CONTROLS AND PROCEDURES</span></a></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">92</span></td></tr>
  <tr style="background-color: rgb(204,238,255)">
    <td style="vertical-align: top">&#160;</td>
    <td style="vertical-align: bottom"><a href="#a_019"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 16. [RESERVED]</span></a></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">94</span></td></tr>
  <tr>
    <td style="vertical-align: top">&#160;</td>
    <td style="vertical-align: bottom"><a href="#a_020"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT</span></a></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">94</span></td></tr>
  <tr style="background-color: rgb(204,238,255)">
    <td style="vertical-align: top">&#160;</td>
    <td style="vertical-align: bottom"><a href="#a_021"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 16B. CODE OF ETHICS</span></a></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">94</span></td></tr>
  <tr>
    <td style="vertical-align: top">&#160;</td>
    <td style="vertical-align: bottom"><a href="#a_022"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES</span></a></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">94</span></td></tr>
  <tr style="background-color: rgb(204,238,255)">
    <td style="vertical-align: top">&#160;</td>
    <td style="vertical-align: bottom"><a href="#a_023"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES</span></a></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">94</span></td></tr>
  <tr>
    <td style="vertical-align: top">&#160;</td>
    <td style="vertical-align: bottom"><a href="#a_024"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS</span></a></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">94</span></td></tr>
  <tr style="background-color: rgb(204,238,255)">
    <td style="vertical-align: top">&#160;</td>
    <td style="vertical-align: bottom"><a href="#a_025"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 16F. CHANGE IN REGISTRANT&#8217;S CERTIFYING ACCOUNTANT</span></a></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">95</span></td></tr>
  <tr>
    <td style="vertical-align: top">&#160;</td>
    <td style="vertical-align: bottom"><a href="#a_026"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 16G. CORPORATE GOVERNANCE</span></a></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">95</span></td></tr>
  <tr style="background-color: rgb(204,238,255)">
    <td style="vertical-align: top">&#160;</td>
    <td style="vertical-align: bottom"><a href="#a_027"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 16H. MINE SAFETY DISCLOSURE</span></a></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">95</span></td></tr>
  <tr>
    <td style="vertical-align: top">&#160;</td>
    <td style="vertical-align: bottom"><a href="#a_028"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS</span></a></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">95</span></td></tr>
  <tr style="background-color: rgb(204,238,255)">
    <td colspan="2" style="vertical-align: top"><a href="#a_029"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">PART III</span></a></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-1</span></td></tr>
  <tr>
    <td style="vertical-align: top">&#160;</td>
    <td style="vertical-align: bottom"><a href="#a_030"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 17. FINANCIAL STATEMENTS</span></a></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-1</span></td></tr>
  <tr style="background-color: rgb(204,238,255)">
    <td style="vertical-align: top">&#160;</td>
    <td style="vertical-align: bottom"><a href="#a_031"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 18. FINANCIAL STATEMENTS</span></a></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-1</span></td></tr>
  <tr>
    <td style="vertical-align: top">&#160;</td>
    <td style="vertical-align: bottom"><a href="#a_032"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 19. EXHIBITS</span></a></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">96</span></td></tr>
  <tr style="background-color: rgb(204,238,255)">
    <td colspan="2" style="vertical-align: top"><a href="#a_033"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">SIGNATURES</span></a></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">97</span></td></tr>
  </table><div>
</div><p style="text-align: center; margin-top: 0; margin-bottom: 0">&#160;</p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: LowerRoman; Name: PageNo -->i<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">This annual report contains forward-looking statements that reflect
our current expectations and views of future events, all of which are subject to risks and uncertainties. Forward-looking statements give
our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly
to historical or current facts. You can find many (but not all) of these statements by the use of words such as &#8220;approximates,&#8221;
&#8220;believes,&#8221; &#8220;hopes,&#8221; &#8220;expects,&#8221; &#8220;anticipates,&#8221; &#8220;estimates,&#8221; &#8220;projects,&#8221;
&#8220;intends,&#8221; &#8220;plans,&#8221; &#8220;will,&#8221; &#8220;would,&#8221; &#8220;should,&#8221; &#8220;could,&#8221; &#8220;may&#8221;
or other similar expressions in this annual report. These statements are likely to address our growth strategy, financial results and
product and development programs. You must carefully consider any such statements and should understand that many factors could cause
actual results to differ from our forward-looking statements. These factors may include inaccurate assumptions and a broad variety of
other risks and uncertainties, including some that are known and some that are not. No forward-looking statement can be guaranteed and
actual future results may vary materially. Factors that could cause actual results to differ from those discussed in the forward-looking
statements include, but are not limited to:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">future financial and operating
results, including revenues, income, expenditures, cash balances and other financial items;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">our ability to execute our growth and expansion, or manage our contraction,
including our ability to meet our goals;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">current and future economic
and political conditions;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">our ability to compete in an
industry with low barriers to entry;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">our capital requirements and
our ability to raise any additional financing which we may require;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">our ability to attract customers,
and further enhance our brand recognition;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">our ability to hire and retain
qualified management personnel and key employees in order to enable us to develop our business;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">trends and competition in the
e-commerce industry;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left">uncertainty about the ongoing impact of the COVID-19 pandemic on the
Company&#8217;s operations, the demand for the Company&#8217;s products, supply chains, and economic activity in general;</td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">inflationary pressures and other macroeconomic factors that have affected
and may continue to affect our business and financial condition; and</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">other assumptions described
in this annual report underlying or relating to any forward-looking statements.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We describe material risks, uncertainties and assumptions that could
affect our business, including our financial condition and results of operations, under &#8220;Risk Factors.&#8221; We base our forward-looking
statements on our management&#8217;s beliefs and assumptions based on information available to our management at the time the statements
are made. We caution you that actual outcomes and results may, and are likely to, differ materially from what is expressed, implied or
forecast by our forward-looking statements. Accordingly, you should be careful about relying on any forward-looking statements. Except
as required under the federal securities laws, we do not have any intention or obligation to update publicly any forward-looking statements
after the distribution of this annual report, whether as a result of new information, future events, changes in assumptions, or otherwise.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><!-- Field: Page; Sequence: 5; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: LowerRoman; Name: PageNo -->ii<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_001"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>PART I</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><div><a id="a_002"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Item 1. Identity of Directors, Senior Management and Advisers </b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><div><a id="a_003"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Item 2. Offer Statistics and Expected Timetable</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><div><a id="a_004"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Item 3. Key Information</b>&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>A. [Reserved]</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>B. Capitalization and Indebtedness</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>C. Reasons for the Offer and Use of Proceeds</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>D. Risk Factors</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">An investment in the Company&#8217;s securities
involves a high degree of risk. You should carefully consider the risks and uncertainties described below together with the other information
set forth in this annual report. If any of the following risks or uncertainties actually occurs, our business, financial position and
results of operations could be materially and adversely affected. In such case, the trading price of our securities could decline and
you may lose all or part of your investment. Our business, financial condition, prospects, results of operations or cash flows could also
be harmed by risks and uncertainties not currently known to us or that we currently do not believe are material. We cannot assure you
that any of the events discussed in the risk factors below will not occur. The risks described below are organized by risk type and are
not listed in order of their priority to us.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">Summary of Factors That May Affect Our Future
Results</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">The following summarizes the principal factors
that make an investment in the Company speculative or risky. This summary should be read in conjunction with the remainder of this &#8220;Risk
Factors&#8221; section and should not be relied upon as an exhaustive summary of the material risks facing our business. The occurrence
of any of these risks could harm our business, financial condition, and results of operations or cause our actual results to differ materially
from those contained in forward-looking statements we have made in this annual report. You should consider all of the risk factors described
in our public filings when evaluating our business, including risks relating to:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">the impact of global macroeconomic conditions on consumer spending;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">the ongoing impact of COVID-19 on our business and financial results;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">our reputation and business if we or Newegg Marketplace sellers sell pirated, counterfeit, illegal or &#8220;gray market&#8221; items;</span></td></tr>
  </table><div>


</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">the intense domestic and international
competition we face;</span></td>
</tr></table><div>


</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">any decline in demand for IT/CE
products;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 6; Options: NewSection; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->1<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">our inability to provide a
satisfactory customer experience;</span></td>
</tr></table><div>


</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">our use of software and systems
contain open source software;</span></td>
</tr></table><div>


</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">pricing strategies not meeting customers&#8217; price expectations or resulting in profitability;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">system interruptions, including failures caused or experienced by third-party service providers, and lack of redundancy and timely upgrade;</span></td></tr>
  </table><div>


</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">our reliance on and relationships
with third-party payment processors to process deposits and withdrawals made by users of our Marketplace;</span></td>
</tr></table><div>


</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">the loss of key employees or
the failure to attract or retain qualified personnel;</span></td>
</tr></table><div>


</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">any significant inadvertent
disclosure or breach of confidential or personal information we hold;</span></td>
</tr></table><div>


</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">our ability to promote and
strengthen the Newegg brand;</span></td>
</tr>
     <tr style="vertical-align: top; text-align: left">
<td>&#160;</td><td style="text-align: left">&#9679;</td><td style="text-align: left"><p style="margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">inflation, uncertainty and volatility in the financial markets and
other macroeconomic factors;</p></td></tr>
     <tr style="vertical-align: top; text-align: left">
<td>&#160;</td><td style="text-align: left">&#9679;</td><td style="text-align: left"><p style="margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">the material weaknesses we identified in our internal control over
financial reporting;&#160;</p></td></tr>
     </table><div>


</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">our international operations
(principally in Canada);</span></td>
</tr></table><div>


</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">our expansion into new product
categories, services, technologies and geographic regions;</span></td>
</tr></table><div>


</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">any interruption in our fulfillment operations;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">our reliance on a limited number of third-party courier service providers;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">pandemics and other public health crises, natural disasters, terrorist
activities and political unrest;</span></td></tr>
  </table><div>


</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">our dependence on  relationships
with vendors to source sufficient quantities of merchandise on favorable terms;</span></td>
</tr></table><div>


</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">our marketing activities to
help attract visitors to our online platforms;</span></td>
</tr></table><div>


</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">delays, increased cost or quality
control deficiencies in the importation of products manufactured abroad;</span></td>
</tr></table><div>


</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">our dependence on third parties
to perform a number of our e-commerce functions;</span></td>
</tr></table><div>


</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">management of our inventory;</span></td>
</tr></table><div>


</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">the fact that we have incurred net losses in the past and may experience losses in the future;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">failure to adopt new technologies or adapt our websites, mobile apps and systems to changing customer requirements or emerging industry standards;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">the seasonality of our business;</span></td></tr>
</table><div>

</div><p style="margin: 0">&#160;</p><div>

</div><p style="margin: 0"></p><div>

</div><!-- Field: Page; Sequence: 7; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->2<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="margin: 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
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  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">the performance, reliability and security of the internet infrastructure in the countries where we operate;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">management of our growth or execution of our strategies;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
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    <td><span style="font-size: 10pt">any adverse change in  our vendor payment terms and conditions;</span></td></tr>
  <tr style="vertical-align: top">
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    <td><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">our disclosure controls and procedures;</span></td></tr>
  <tr style="vertical-align: top">
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  <tr style="vertical-align: top">
    <td>&#160;</td>
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    <td><span style="font-size: 10pt">access to international markets and applicable laws relating to trade, export and import controls and economic sanctions;</span></td></tr>
  <tr style="vertical-align: top">
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    <td style="text-align: left"><span style="font-size: 10pt">claims, litigation, government investigations, and other proceedings may adversely affect our business and results of operations;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
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    <td><span style="font-size: 10pt">any assertions, claims and allegations that we have infringed or violated intellectual property rights;</span></td></tr>
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    <td><span style="font-size: 10pt">any additional costs incurred due to tax assessments resulting from ongoing and future audits by tax authorities;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
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    <td><span style="font-size: 10pt">significant developments stemming from recent U.S. government actions and proposals concerning tariffs and other economic proposals;</span></td></tr>
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  <tr style="vertical-align: top">
    <td>&#160;</td>
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    <td><span style="font-size: 10pt">our ability to use our net operating loss carryforwards and certain other tax attributes;</span></td></tr>
</table><div>

</div><p style="margin: 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
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    <td><span style="font-size: 10pt">our being treated as a U.S. corporation for all U.S. federal tax purposes;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#9679;</td>
    <td>the shares pledged as collateral to support delinquent indebtedness
of our parent company;</td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
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    <td><span style="font-size: 10pt">the extreme volatility of the market price of our common shares due
to numerous circumstances beyond our control;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
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    <td><span style="font-size: 10pt">Mr. Zhitao He and Mr. Fred Chang&#8217;s approximate 59.3% and 34.6% control, respectively, and 93.9%, collectively, of the voting power of our issued and outstanding common shares;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
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    <td><span style="font-size: 10pt">our status as a &#8220;controlled company&#8221; within the meaning of the Nasdaq Listing Rules and the corresponding exemptions from certain corporate governance requirements;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">certain provisions of Newegg&#8217;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;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">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&#8217;s attention and resources;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">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;</span></td></tr>
</table><div>

</div><p style="margin: 0">&#160;</p><div>


</div><p style="margin: 0"></p><div>

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</div><p style="margin: 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">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;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">securities or industry analysts not publishing research or reports about our business or adversely changing their recommendations regarding our common shares;</span></td></tr>
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    <td>&#160;</td>
    <td><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">techniques employed by short sellers to drive down the market price of our common shares;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-size: 10pt">&#9679;</span></td>
    <td><p style="margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">difficulty enforcing judgments against us, our directors and management;</p></td></tr>
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    <td>&#160;</td>
    <td><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: left"><span style="font-size: 10pt">unavailability of certain types of class or derivative actions under
British Virgin Islands law and other interests under U.S. law;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">protecting shareholder interests that would otherwise be normally available to shareholders of a U.S. corporation;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">our expectation not to pay dividends in the foreseeable future;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">certain home country (British Virgin Islands) practices in relation to corporate governance matters that differ significantly from Nasdaq&#8217;s corporate governance listing standards, which may afford less protection to shareholders; and</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">our foreign private issuer status, which exempts us from certain reporting requirements applicable to U.S. domestic public companies.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Risks Relating to Our Business</b>&#160;&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Global macroeconomic conditions and the effect of economic pressures
and other business factors on discretionary consumer spending and consumer preferences may have a material adverse effect on our business,
results of operations and financial condition.</i></b></p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Uncertainties in global macroeconomic conditions that are beyond our
control have in the past impacted our business and may in the future materially adversely affect our business, results of operations,
financial condition and stock price. These adverse economic conditions include inflation, slower growth or recession, new or increased
tariffs and other changes to fiscal and monetary policy, higher interest rates, high unemployment, decreased consumer confidence in the
economy, armed hostilities, foreign currency exchange rate fluctuations, conditions affecting the retail environment for products we sell,
and other matters that influence consumer spending and preferences.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In addition, consumer confidence and spending can be materially adversely
affected in response to financial market volatility, negative financial news, conditions in the real estate and mortgage markets, including
home equity loans and consumer credit, changes in net worth based on market changes and uncertainty, energy shortages and cost increases,
labor and healthcare costs, government actions and general uncertainty regarding the overall future economic environment. Some consumers
view a substantial portion of the products we offer as discretionary items rather than necessities. As a result, our operating results
are sensitive to changes in macroeconomic conditions that impact consumer spending, including discretionary spending.&#160;Declines in
consumer spending have resulted, and in the future may result, in decreased demand for our products and services which may have an adverse
effect on our results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->4<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">A downturn in the economic environment can also lead to financial instability;
increased credit and collectability risk on our receivables; the failure of important partners, including suppliers, logistics providers,
and financial institutions; limitations on our ability to issue new debt; reduced liquidity and declines in the fair value of our financial
instruments. These and other economic factors can materially adversely affect our business, results of operations, financial condition
and stock price.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>The ongoing impact of COVID-19, and any
future outbreaks or public health emergencies, may adversely affect our business and financial results.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The COVID-19 pandemic and the various responses to it negatively impacted
the global economy, disrupted consumer spending and global supply chains and created significant volatility and disruption of financial
markets. Authorities across the United States and the globe implemented varying degrees of restriction on social and commercial activity.
While certain of these restrictions have been lifted and phased re-openings occurred in some regions, some restrictions continued through
fiscal 2022 in certain regions or to certain extents, and other regions have seen a resurgence of COVID-19 cases resulting in reinstitution
or expansion of such measures.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We have at times seen increased demand for our products and services
during the pandemic that has contributed to increased sales and market share. However, the course of the outbreak and its effects on consumer
buying habits remains uncertain, and a prolonged global economic slowdown and increased unemployment could have a material adverse impact
on economic conditions, which in turn could lead to a reduced demand for our products and services.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">As a consequence of the COVID-19 outbreak, we
have experienced occasional supply constraints, primarily in the form of delays in shipment of inventory. We have also experienced increases
in the cost of certain products, as well as a decrease in promotions by some manufacturers. While we have so far considered such events
to be relatively minor and temporary, continued supply chain disruptions could lead to delayed receipt of, or shortages in, inventory
and higher costs.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">Further, COVID-19 has impacted, and may continue
to impact, the supply chain of our brand partners and Marketplace sellers, and our ability to timely fulfill orders and deliver such orders
to our customers, particularly as a result of mandatory shutdowns in different countries and cities to mitigate the spread of the virus.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">Although we cannot estimate the length or severity of the long-term
effects of the COVID-19 outbreak at this time, any additional waves of increased infections or emergence of new strains of the virus may
have an adverse effect on the results of our future operations. The full impact of COVID-19 on our operations remains uncertain and potentially
widespread, including potential impacts on:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="text-align: left; width: 24px">&#160;</td>
    <td style="width: 24px; text-align: left"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: left"><span style="font-size: 10pt">our ability to successfully forecast sales and execute our long-term growth strategy during these uncertain times;</span></td></tr>
  </table><div>


</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="text-align: left; width: 24px">&#160;</td>
    <td style="width: 24px; text-align: left"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: left"><span style="font-size: 10pt">the build-up of excess inventory as a result of lower consumer demand;</span></td></tr>
  </table><div>


</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="text-align: left; width: 24px">&#160;</td>
    <td style="width: 24px; text-align: left"><span style="font-size: 10pt">&#9679;</span></td>
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  </table><div>


</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="text-align: left; width: 24px">&#160;</td>
    <td style="width: 24px; text-align: left"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: left"><span style="font-size: 10pt">our ability to access capital sources and maintain compliance with our credit facilities, as well as the ability of our key customers, suppliers, and vendors to do the same in regard to their own obligations;</span></td></tr>
  </table><div>


</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="text-align: left; width: 24px">&#160;</td>
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    <td style="text-align: left"><span style="font-size: 10pt">our ability to collect outstanding receivables from our customers;</span></td></tr>
  </table><div>


</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="text-align: left; width: 24px">&#160;</td>
    <td style="width: 24px; text-align: left"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: left"><span style="font-size: 10pt">our ability to attend and participate in industry and trade shows; and</span></td></tr>
  </table><div>


</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="text-align: left; width: 24px">&#160;</td>
    <td style="width: 24px; text-align: left"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: left"><span style="font-size: 10pt">diversion of management and employee attention and resources from key business activities and risk management outside of COVID-19 response efforts, including cybersecurity and maintenance of internal controls, with resulting potential loss of employee productivity.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The impact of the COVID-19 pandemic continues to evolve and therefore,
there can be no assurance that these potential negative impacts will not materialize, and these and other impacts of COVID-19 may adversely
affect our future business, financial condition, cash flow, liquidity and results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->5<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>Newegg&#8217;s reputation and business may
be harmed if Newegg or the Newegg Marketplace sellers sell pirated, counterfeit, illegal or &#8220;gray market&#8221; items.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">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 &#8220;gray
market&#8221; items. 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. In addition, key manufacturers and vendors, for instance, may be less likely to offer us favorable terms or authorization to carry
their products if we sell products of theirs, purchased on the &#8220;gray market.&#8221; We currently do not have any insurance to cover
the types of claims that could be asserted in such litigation or in legal or administrative actions initiated by customers of such products,
or by government agencies. If a claim were brought against us successfully, it could expose us to significant liability, which could have
a material adverse effect on our business and operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>Our business faces intense domestic and
international competition.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">The e-commerce market is intensely competitive
with limited barriers to entry. Our current and potential competitors include retailers, manufacturers and distributors that offer a wide
range of similar product categories and companies that provide Direct-to-Consumer (&#8220;D2C&#8221;) platform services, fulfillment and
logistics services and other e-commerce related services. It is expected that the competition in this market will intensify in the future
as companies develop new business models and enhanced technologies, new competitors enter the market, competitors forge new business combinations
or alliances, and established companies in other market segments expand to become competitive with our business.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">Many of our current and potential online and brick-and-mortar
competitors have larger bases of customers or third-party sellers, better brand recognition and greater financial, marketing, technical,
management and other resources than we do. In addition, some of our competitors have used and may continue to use aggressive pricing or
promotional strategies, may have stronger supplier relationships with more favorable terms and inventory allocation and may devote substantially
greater resources to their online platforms and system development than we do. Increased competition may result in reduced operating margins,
reduced profitability, loss of market share and diminished brand recognition for Newegg.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">We compete with online retailers such as Amazon
and traditional retailers like Best Buy and Walmart, who sell through brick-and-mortar stores and their online websites. In addition,
we also face competition in the international markets in which we participate or may enter in the future. Certain other competitors in
countries where we operate are subsidiaries of e-commerce competitors in the United States with established local operations and brands
and with greater experience and resources than we have. In other countries that we may enter, there may be incumbent online and multi-channel
online or brick-and-mortar competitors presently selling Information Technology/Consumer Electronic (&#8220;IT/CE&#8221;) products. These
incumbents may have advantages that could impede our expansion and growth in these markets.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">We could also experience significant competitive
pressure if any of our manufacturers or distributors were to initiate or expand their own online or brick-and-mortar retail operations.
Because our manufacturers and distributors have access to merchandise at a lower cost than we do, they could sell products at lower prices
and maintain a higher gross margin on their product sales than we can, and they may have the ability to directly connect with buyers at
relatively low cost. This could result in our current and potential buyers deciding to purchase directly from these manufacturers and
distributors instead of from Newegg. Increased competition from any manufacturer or distributor capable of maintaining high sales volumes
and acquiring products at lower prices than we can, could significantly reduce our market share and adversely impact our operating results.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>A decline in demand for IT/CE products could
adversely affect our operating results.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">We and our Marketplace sellers primarily sell
IT/CE products that are often discretionary purchases rather than necessities for consumers. Consequently, our results of operations tend
to be sensitive to changes in macroeconomic conditions and their impact on consumer spending. 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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">There could be declines in the sales of the products
offered by us and our Marketplace sellers due to several factors, including:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">decreased demand for IT/CE
products, particularly computer components and parts that have historically generated a significant portion of our net sales;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">poor economic conditions and
any related decline in customers&#8217; demand for the products we and our Marketplace sellers offer;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">increased price competition
from our competitors; or</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">technological obsolescence
of the products that we and our Marketplace sellers offer.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">Additionally, it is expected that some of our
future growth should be driven by product releases or upgrades that may occur in the near future. If such product releases do not occur
or do not drive sales of IT/CE products to the extent expected, our future sales may be less than predicted, negatively impacting our
net sales and net income.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>If we are unable to provide a satisfactory
customer experience, our reputation would be harmed and we could lose customers.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">The success of our business depends largely on
our ability to provide a superior customer experience to maintain and grow our customer base and keep our customers highly engaged on
our online platforms, which in turn depends on a variety of factors. These include our ability to continue to maintain a wide range of
product offerings with attractive pricing, provide timely and reliable order fulfillment and provide high-quality customer support and
service. If our customers are not satisfied with our platforms, products or services, or our online platforms are severely interrupted
or otherwise fail to meet our customers&#8217; requests, our reputation could be adversely affected.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">As an e-commerce company, we have limited ability
to allow buyers to touch, test and feel products, personally interact with sales and customer service representatives, and receive or
return products without waiting or paying for the products to be shipped, like brick-and-mortar retailers or online retailers that have
brick-and-mortar operations do. Therefore, it is important that we continue to improve our online platforms, including efforts to encourage
the creation of more high-quality and useful user-generated content, such as reviews and commentary, on the products we and our Marketplace
sellers offer. If we do not continue to make investments in the development of our online platforms and customer service operations and,
as a result, or due to other reasons, fail to provide a high-quality customer experience, we may lose customers, which could adversely
impact our operating results.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">We currently operate customer service centers
in California and Texas, focusing on serving North American buyers. To enhance our service capabilities and maintain increased access,
Newegg operates an Asia-based multilingual customer service center that is available seven days a week, via email and instant messaging.
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. 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. Failure to provide satisfactory levels of customer service may harm our reputation, causing
potential loss of existing customers and difficulty in acquiring new customers.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>Some of our software and systems contain
open source software, which may pose particular risks to our proprietary software and solutions.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">We have incorporated open source software code
into some of our internal software and systems and expect to continue to use this open source software in the future. The licenses applicable
to open source software typically require that the source code subject to the license be made available to the public and that any modifications
or derivative works to open source software continue to be licensed under open source licenses. From time to time, we may face intellectual
property infringement claims from third parties, demands for the release or license of the open source software or derivative works that
we developed using such software (which could include our proprietary source code) or claims that otherwise seek to enforce the terms
of the applicable open source license. These claims could result in litigation and could require us to purchase a costly license, publicly
release the affected portions of our source code, be limited in the licensing of our technologies or cease offering the implicated solutions
unless and until we can re-engineer them to avoid infringement or change the use of the implicated open source software. In addition to
risks related to license requirements, use of certain open source software can lead to greater risks than use of third-party commercial
software, as open source licensors generally do not provide warranties, indemnities or other contractual protections with respect to the
software (for example, non-infringement or functionality). Our use of open source software may also present additional security risks
because the source code for open source software is publicly available, which may make it easier for hackers and other third parties to
determine how to breach our websites, mobile apps and systems that rely on open source software. Any of these risks could be difficult
to eliminate or manage and, if not addressed, could have a material adverse effect on our business, financial condition and results of
operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>We and our Marketplace sellers&#8217; pricing
strategy may not meet customers&#8217; price expectations or result in profitability.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">Demand for our products is generally highly sensitive
to price. Our pricing strategies have had, and may continue to have, a significant impact on our net sales and net income. We often offer
discounted prices, free or discounted shipping or bundled products as a means of attracting customers and encouraging repeat purchases.
Such offers and discounts may reduce our margins. Moreover, our competitors&#8217; pricing and marketing strategies are beyond our control
and can significantly impact the results of our pricing strategies. If we fail to meet our customers&#8217; price expectations in any
given period, or if our competitors decide to engage in aggressive pricing strategies, our business and results of operations would suffer.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">In addition, under applicable federal and state
unfair competition laws, including the California Consumer Legal Remedies Act, and U.S. Federal Trade Commission regulations, we are required
to accurately identify product offerings, not make misleading claims on our platforms, and use qualifying disclosures where and when appropriate.
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. 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. While the trial court had sustained without leave to amend our demurrer to such lawsuit,
in July 2018, a California appellate panel reversed the trial court&#8217;s judgment and reinstated the action against us. This matter
is still pending as of the date of this annual report. There can be no assurance that we will be able to prevail in the foregoing action
or that we will be able to settle the dispute on terms favorable to us. Any adverse outcome of the foregoing class action or other lawsuits
challenging deceptive pricing against us could have a material adverse effect on our reputation, business and financial condition.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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. 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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b>Operational Risks</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>We face risks related to system interruption,
including failures caused or experienced by third-party service providers, and lack of redundancy and timely upgrades.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">Our success depends on our ability to successfully
receive and fulfill orders and to promptly deliver such orders to our customers. We could lose existing customers or fail to attract new
customers, potentially resulting in a decline in net sales, if our online platforms are inaccessible or if our transaction processing
systems, order fulfillment processes or network infrastructure are not operational or performing to our customers&#8217; satisfaction.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">Any internet network interruptions, latency or
problems with our online platforms&#8217; availability could prevent customers from accessing, browsing and placing orders on our online
platforms, and impact our ability to fulfill orders or bill customers, which may cause customer dissatisfaction and damage our reputation
and brand. We have experienced brief computer system interruptions in the past and believe that others will occur from time to time in
the future. Our systems and operations potentially are vulnerable to damage or interruption from a number of sources, including the following:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="text-align: left; width: 24px">&#160;</td>
    <td style="width: 24px; text-align: left"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: left"><span style="font-size: 10pt">natural disaster or other catastrophic event such as earthquake, fire, power loss or interruption, telecommunications failure, hurricane, volcanic eruption, flood or terrorist attack. For example, our headquarters and the majority of our infrastructure, including some of our servers, are located in Southern California, a seismically active region. In addition, California has in the past experienced power outages as a result of limited electric power supply;</span></td></tr>
  </table><div>


</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="text-align: left; width: 24px">&#160;</td>
    <td style="width: 24px; text-align: left"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: left"><span style="font-size: 10pt">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;</span></td></tr>
  </table><div>


</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="text-align: left; width: 24px">&#160;</td>
    <td style="width: 24px; text-align: left"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: left"><span style="font-size: 10pt">computer malware, physical or electronic break-ins and similar disruptions;</span></td></tr>
  </table><div>


</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="text-align: left; width: 24px">&#160;</td>
    <td style="width: 24px; text-align: left"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: left"><span style="font-size: 10pt">security breaches and hacking attacks;</span></td></tr>
  </table><div>


</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="text-align: left; width: 24px">&#160;</td>
    <td style="width: 24px; text-align: left"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: left"><span style="font-size: 10pt">failure by third-party vendors, including data center and bandwidth providers, to provide steady and high-speed access to our online platforms and systems. Any disruption in our network access or co-location services, which are the services that house some of our servers and provide internet access to them, provided by these third-party providers or any failure of these third-party vendors to handle existing or higher volumes of use could significantly harm our business. Any financial or other difficulties these vendors face could also adversely affect our business; and</span></td></tr>
  </table><div>


</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="text-align: left; width: 24px">&#160;</td>
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    <td style="text-align: left"><span style="font-size: 10pt">incidents of fraud.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">We have not yet created sufficient redundancy for our information technology
systems and data, and we do not presently maintain backup copies of all of its data. Newegg has a limited disaster recovery plan in effect
and may not have sufficient insurance for losses that may occur from natural disasters, catastrophic events or the resulting business
interruption. Any substantial damage to, or disruption of, our technology infrastructure could cause interruptions or delays, loss of
data, or reduced system availability, which could have a material adverse effect on our business, financial condition and results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">We may be unable to accurately project the rate
or timing of traffic flow, including any traffic increases, or successfully and cost-effectively upgrade our systems and infrastructure
in a timely manner to accommodate higher traffic levels on our online platforms. If the volume of traffic on our online platforms or the
number of purchases made by our customers increases substantially, we may experience unanticipated system disruptions, slower response
times, reduced levels of customer service and impaired quality and delays in reporting accurate financial information. 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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">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. In particular, our systems may experience interruptions during upgrades, and
the new technologies or infrastructures may not be fully integrated with the existing systems on a timely basis, or at all. 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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>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.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">We rely on a limited number of third-party payment
solutions to process deposits and withdrawals made by users of our Marketplace. If any third-party payment solution terminates its relationship
with Newegg or refuses to renew its agreement with Newegg on commercially reasonable terms, we would need to find an alternate payment
solution, and may not be able to secure similar terms or replace such payment solution in an acceptable time frame. Further, the software
and services provided by our third-party payment solutions may not meet our expectations, contain errors or vulnerabilities, be compromised
or experience outages. Any of these risks could cause us to lose our ability to accept online payments or other payment transactions or
make timely payments to users of our Marketplace, any of which could make our Marketplace less trustworthy and convenient and adversely
affect our ability to attract and retain our users.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">Nearly all of our users&#8217; payments are made
by credit card, debit card or through other third-party payment services, which subjects Newegg to certain regulations and to the risk
of fraud. We may in the future offer new payment options to users that may be subject to additional regulations and risks. We are also
subject to a number of other laws and regulations relating to the payments we accept from our users, including with respect to money laundering,
money transfers, privacy and information security. If we fail to comply with applicable rules and regulations, we may be subject to civil
or criminal penalties, fines and/or higher transaction fees and may lose our ability to accept online payments or other payment card transactions,
which could make our Marketplace less convenient and attractive to our users. If any of these events were to occur, our business, financial
condition and results of operations could be adversely affected.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">Additionally, card organizations, including Visa,
require Newegg to comply with payment card network operating rules, which are set and interpreted by the payment card networks. The payment
card networks could adopt new operating rules or interpret or reinterpret existing rules in ways that might prohibit us from providing
certain offerings to some users, be costly to implement or difficult to follow. We have agreed to reimburse our payment processors for
fines, penalties or assessments that are assessed by card organizations if we or the users on our Marketplace violate these rules, and
as a result we may be subject to fines, penalties or assessments assessed by card organizations against us from time to time. Any of the
foregoing risks could adversely affect our business, financial condition and results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>The loss of key employees or the failure
to attract or retain qualified personnel can have a material adverse effect on our ability to run our business.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">The loss of any of our current executives, key
employees or key advisors, or the failure to attract, integrate, motivate and retain additional key employees, can have a material adverse
effect on our business. Competition for well-qualified and skilled employees has been increasingly intense, and our future success also
depends on our continuing ability to attract, develop, motivate and retain highly qualified and skilled employees, including, in particular,
software engineers, data scientists and technology and fulfillment professionals. Although we have employment agreements with our executive
officers, all of our executive officers are employed &#8220;at-will&#8221; and could terminate their employment at any time. If we lose
one or more of our executive officers or other key employees, our ability to implement our business strategy successfully can be seriously
harmed. Furthermore, replacing executive officers or other key employees with other highly skilled and qualified candidates has been and
may continue to be difficult, taking an extended period of time. Recruiting skilled personnel is highly competitive. The increased availability
of flexible or remote work arrangements, accelerated by the COVID-19 pandemic, has both intensified and expanded competition for qualified
personnel. There can be no assurance that we will continue to attract and retain the personnel needed for our business. The failure to
attract or retain qualified personnel could have a material adverse effect on our business.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>A significant inadvertent disclosure or
breach of confidential or personal information we hold could be detrimental to our business, reputation and results of operations.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">Our business requires the storage, transmission
and utilization of data, including personal information, much of which must be maintained on a confidential basis. These activities have
made, and may in the future make, us a target of cyber-attacks by third parties seeking unauthorized access to the data we maintain, including
our customer data, or to disrupt our ability to provide service. As a result of the types and volume of personal data on our systems,
we believe that we are a particularly attractive target for such breaches and attacks. For example, in 2018, Newegg suffered an intrusion
of a portion of its network, as a result of which access was gained to a limited amount of credit card information.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">In recent years, the frequency, severity and sophistication
of cyber-attacks, computer malware, viruses, social engineering, and other intentional misconduct by computer hackers has significantly
increased, and government agencies and security experts have warned about the growing risks of hackers, cyber criminals and other potential
attackers targeting information technology systems. Such third parties could attempt to gain entry to our systems for the purpose of stealing
data or disrupting the systems. In addition, our security measures may also be breached due to employee error, malfeasance, system errors
or vulnerabilities, including vulnerabilities of our vendors, suppliers, their products, or otherwise. Third parties may also attempt
to fraudulently induce employees or customers into disclosing sensitive information such as usernames, passwords or other information
to gain access to our customers&#8217; data or our data, including intellectual property and other confidential business information.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">While we have implemented security measures designed
to protect against security breaches, these measures could fail or may be insufficient, particularly as techniques used to sabotage or
obtain unauthorized access to systems change frequently and generally are not recognized until launched against a target, resulting in
the unauthorized disclosure, modification, misuse, destruction, or loss of our or our customers&#8217; data or other sensitive information.
Any failure to prevent or mitigate security breaches and improper access to or disclosure of the data we maintain, including personal
information, could result in litigation, indemnity obligations, regulatory enforcement actions, investigations, fines, penalties, mitigation
and remediation costs, disputes, reputational harm, diversion of management&#8217;s attention, and other liabilities and damage to our
business.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">We believe we have taken appropriate measures
to protect our systems from intrusion, but we cannot be certain that advances in criminal capabilities, discovery of new vulnerabilities
in our systems and attempts to exploit those vulnerabilities, physical system or facility break-ins and data thefts or other developments
will not compromise or breach the technology protecting our systems and the information we possess.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">We may incur significant costs in protecting against
or remediating cyber-attacks. Any security breach could result in operational disruptions that impair our ability to meet our customers&#8217;
requirements, which could result in decreased revenue. Also, whether there is an actual or a perceived breach of our security, our reputation
could suffer irreparable harm, causing our current and prospective customers to reject our products and services in the future, deterring
data suppliers from supplying us data or customers from uploading their data on our platform, or changing consumer behaviors and use of
our technology. Further, we could be forced to expend significant resources in response to a security breach, including those expended
in notifying individuals and providing mitigating services, repairing system damage, increasing cybersecurity protection costs by deploying
additional personnel and protection technologies, and litigating and resolving legal claims or governmental inquiries and investigations,
all of which could divert the attention of our management and key personnel away from our business operations. Federal, state and foreign
governments continue to consider and implement laws and regulations addressing data privacy, cybersecurity, and data protection laws,
which include provisions relating to breaches. In any event, a significant security breach could materially harm our business, operating
results and financial condition.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>We may not succeed in promoting and strengthening
the Newegg brand, which may materially and adversely affect our business and results of operations.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">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. 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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">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. Additionally,
we compete not only for customers and Marketplace sellers, but also for favorable product allocations and cooperative advertising support
from our vendors. If we fail to maintain favorable recognition of our brand, we may not be successful in maintaining and strengthening
our relationships with vendors in existing and new product categories or in maintaining existing offerings and sourcing new products at
competitive prices and with adequate levels of inventory.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">Adverse publicity about Newegg may arise from
time to time. Negative comments about our online platforms, the products and services offered by us and our Marketplace sellers or our
management may appear in internet postings and other media sources from time to time, and there is no assurance that other types of negative
publicity of a more serious nature will not arise in the future. For example, if our customer service representatives fail to satisfy
the individual needs of the customers, the customers may become disgruntled and disseminate negative comments about our customer service.
In addition, our Marketplace sellers and brand partners may also be subject to negative publicity for various reasons, such as customers&#8217;
complaints about the quality of their products and related services or other public relations incidents, which may adversely affect the
sales of their products through Newegg and indirectly affect our reputation. Moreover, negative publicity about other online retailers
or the e-commerce industry in general may arise from time to time and cause customers to lose confidence in the products and services
Newegg offers. Any such negative publicity, regardless of veracity, may have a material adverse effect on our business, reputation and
financial condition.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Our business, operating results, and cash flows may be adversely
impacted by a rising rate of inflation.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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. 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. If we are unable to successfully
manage the effects of inflation, our business, operating results, cash flows and financial condition may be adversely affected. In addition,
inflation may amplify or exacerbate many of the other risks discussed in this &#8220;Risk Factors&#8221; section.&#160;&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>We identified material weaknesses in our internal control over
financial reporting and may identify additional material weaknesses in the future or otherwise fail to maintain an effective system of
internal controls, which could result in material misstatements of our consolidated financial statements or cause us to fail to meet our
periodic reporting obligations.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We have identified material weaknesses in our internal control over
financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting
such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented
or detected on a timely basis. We have concluded that material weaknesses arose because we did not have effective internal controls in
place with respect to the Control Activities and Information &amp; Communication components of the Committee of Sponsoring Organizations
of the Treadway Commission (COSO) internal control framework.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">For a description of the identified material weaknesses, see Item 15,
&#8220;Controls and Procedures.&#8221; In connection with management&#8217;s identification of these material weaknesses, management has
concluded that our disclosure controls and procedures were not effective as of December 31, 2022 and 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As further described in Item 15 &#8220;Controls and Procedures,&#8221;
we have undertaken steps to improve our internal control over financial reporting. We expect that we will need to improve existing procedures
and controls, and implement new ones, to remediate the material weaknesses. We may not be successful in making the improvements necessary
to remediate the material weaknesses identified by management or be able to do so in a timely manner. Any inability to remediate the material
weaknesses effectively or in a timely manner, or the identification of any new material weaknesses in the future, could limit our ability
to prevent or detect a misstatement of our accounts or disclosures and could result in a material misstatement of our annual or interim
financial statements. In such case, we may be unable to maintain compliance with securities law requirements regarding timely filing of
periodic reports in addition to applicable stock exchange listing requirements, investors may lose confidence in our financial reporting
and the price of our common stock may decline as a result.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>We are, or may become, subject to risks
associated with our international operations, principally in Canada, which may harm our business.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">Newegg began operations on our Canadian retail
website, www.newegg.ca, in October 2008. We also have a physical presence in China and Taiwan. 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:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

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    <td style="text-align: left"><span style="font-size: 10pt">international economic and political conditions or geopolitical events and security issues (including terrorist attacks, war, or other armed hostilities);</span></td></tr>
  </table><div>

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  </table><div>


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    <td style="text-align: left"><span style="font-size: 10pt">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;</span></td></tr>
  </table><div>

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    <td style="text-align: left"><span style="font-size: 10pt">tax laws, regulations and treaties, including U.S. taxes on foreign operations and repatriation of funds;</span></td></tr>
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    <td style="text-align: left"><span style="font-size: 10pt">difficulties in identifying, attracting, hiring, training and retaining qualified personnel, and overseeing international operations, including the efficient management of our international operations;</span></td></tr>
  </table><div>


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    <td style="text-align: left"><span style="font-size: 10pt">delays or additional costs resulting from import/export controls, duties, tariffs or other barriers to trade; and</span></td></tr>
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    <td style="text-align: left"><span style="font-size: 10pt">currency exchange controls or changes in exchange rates, which could make our pricing less competitive or reduce our profit margins.</span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">Any one of the foregoing factors could cause our
business, financial condition and results of operations to suffer.</p><div>


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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>Any future expansion into new product categories,
services, technologies and geographic regions may subject us to additional business, legal, financial and competitive risks.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">Any future expansion into new product categories,
services, technologies and regions, such as our expansion into Canada and our third-party service offerings under Newegg Partner Services
(&#8220;NPS&#8221;), is subject to risk. In directing our focus into new areas, we face numerous risks and challenges, including alienating
our core customer base, facing new competitors, having the increased need to develop new strategic relationships and straining our management,
personnel, operations, systems, technical performance, financial resources, and internal financial control and reporting functions. There
is no assurance that our strategy will result in increased net sales or net income. Furthermore, growth into new business areas may require
changes to our existing business model and cost structure, modifications to our infrastructure, and exposure to new regulatory and legal
risks related to operating in new jurisdictions, any of which may require expertise in areas in which we have little or no experience.
These risks may pose a material adverse risk to our business, financial condition and results of operations.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>Any interruption in our fulfillment operations
may have an adverse impact on our business.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">Our ability to process and fulfill orders accurately
and provide high-quality customer service depends on the smooth operation of our fulfillment infrastructure, including our warehouses
and order processing centers. If we do not optimize and operate our fulfillment infrastructure successfully and efficiently, it could
result in excess or insufficient fulfillment capacity, an increase in costs or impairment charges and a reduction in our gross profit
margin, or harm our business in other ways. If we do not have sufficient fulfillment capacity or experience a problem fulfilling orders
in a timely manner or if certain products are out of stock, our customers may experience delays in receiving their orders, which could
harm our reputation and our relationship with our customers.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">Our fulfillment infrastructure may be vulnerable
to damage caused by fire, floods, power outages, telecommunications failures, break-ins, earthquakes, human error and other events. For
example, our warehouse located in Indianapolis experienced a significant fire in January 2019, causing damage to our inventory. In addition,
in May 2022, our warehouse located in Toronto, Canada experienced a break-in and theft of approximately $3.4 million of inventory. Our
fulfillment infrastructure and processes may also contain undetected errors or design flaws that may cause our fulfillment operations
to fail and materially impact our business and results of operations. If, for example, any of our warehouses were rendered incapable of
operations, we may be unable to fulfill any orders in areas that rely on that warehouse. While we maintain property and business interruption
insurance to protect against losses of this nature, we cannot guarantee that such insurance will be available in the future at terms and
rates acceptable to us, nor can we guarantee that any related insurance claims will be paid out in a timely manner, or at all. The occurrence
of any of the foregoing risks could have a material adverse effect on our business, prospects, financial condition and results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>We rely on a limited number of third-party
courier service providers to deliver our products, and their failure to provide high-quality courier services in a timely manner, if
at all, to our customers may negatively impact the procurement experience of our customers, damage our market reputation and materially
and adversely affect our business and results of operations.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">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. Interruptions to or failures in these couriers&#8217; shipping services could prevent the timely or successful delivery
of our products. These interruptions may be due to unforeseen events that are beyond our control or the control of these third-party
couriers, such as inclement weather, natural disasters or labor unrest. 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.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>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.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">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.
Actual or threatened war, terrorist activities, political unrest, civil strife, and other geopolitical uncertainty could have a similar
adverse effect on our business, financial condition, and results of operations. It is difficult to assess the likelihood of such threat
and any potential impact at this time. 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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>We depend on our vendors to source sufficient
quantities of merchandise on favorable terms. If we fail to maintain strong vendor relationships or if our vendors are otherwise unable
to supply products that meet our standards in a timely manner, our net sales and net income could suffer.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">Our contracts or arrangements with vendors generally
do not guarantee the availability of merchandise or provide for the continuation of particular pricing or other practices. Our vendors
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. In most cases, our relationships with our vendors do not restrict them from selling
their products through our competitors. Newegg competes with other retailers for favorable product allocations and vendor incentives from
product manufacturers and distributors, including but not limited to marketing dollars and volume-based sales incentive programs. Some
of our competitors could enter into exclusive or favorable distribution arrangements for certain products with our vendors, which would
deny us complete or partial access to those products and marketing and promotional resources. In addition, some vendors whose products
are offered on our online platforms also sell their products directly to customers. If we are unable to develop and maintain relationships
with vendors that permit us to obtain sufficient quantities of desirable merchandise on favorable terms, our business, financial condition
and results of operations could be adversely impacted.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">Our relationship with any particular vendor is
dependent on our sales of products manufactured or distributed by that vendor. For certain products, we do not currently, and in the future
may not be able to, meet the sales volumes or other requirements necessary to receive favorable treatment from the manufacturer of that
product. As a result, we may not receive favorable pricing, vendor incentives or other considerations from those vendors. During times
of short supply for highly desirable products, we may not receive adequate, or any, allocation of a popular product, leading to lost sales
and customer dissatisfaction.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">Certain products help create and maintain customer
loyalty to the Newegg brand. Failing to maintain an adequate supply of these products could damage our ability to retain customers. We
currently do not carry the full product portfolio of, and in some cases do not carry any products of, certain well-known brands. As a
result, consumers who are searching for those brands may not be able to purchase products from us or purchase them at the most favorable
prices, leading to potentially reduced net sales and net income.</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">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. 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.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">Our vendors&#8217; financial performance, liquidity
and access to capital may be materially adversely affected by many factors, including, but not limited to: general economic factors, such
as a continued slowdown in the U.S. or global economy or an uncertain economic outlook; political or financial instability; merchandise
quality issues; product safety concerns; trade restrictions; work stoppages; tariffs; international trade war; foreign currency exchange
rates; transportation capacity and costs; inflation; or outbreak of pandemics. 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.</p><div>

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</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>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.</i></b></p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our success depends on our ability to attract visitors to our online
platforms and convert them into customers in a cost-effective manner. We rely on search engines, social media, shopping comparison sites
and other affiliate networks to provide content, advertising banners and other links that direct visitors to our online platforms. 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. 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. 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. We also
sometimes pay these third parties to include or highlight our websites in their search results. If 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.</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">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. If we are unable to attract visitors to our websites and mobile
apps and convert them into customers cost-effectively, our business and financial results may be harmed.</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>Because many of the products that we sell
are manufactured abroad, we may face delays, increased cost or quality control deficiencies in the importation of these products, which
could reduce our net sales and profitability.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">Many of the products that we purchase for direct
sale on our online platforms are manufactured in countries outside the United States. These imported products subject us to the risk of
changes in import duties or quotas, new restrictions on imports, work stoppages, delays in shipment, freight cost increases, product cost
increases due to foreign currency fluctuations or revaluations and economic uncertainties (including the imposition of antidumping or
countervailing duty orders, safeguards, remedies or compensation and retaliation due to illegal foreign trade practices) and instability
in the political and economic environments of the countries in which the manufacturers of these products operate. If any of these or other
factors were to cause a disruption of trade from these countries, we may be unable to obtain sufficient quantities of these imported products
to satisfy our requirements or our cost of obtaining such products may increase. Historically, instability in the political and economic
environments of the countries in which our suppliers operate has not had a material adverse effect on our operations. However, the effect
that future changes in economic or political conditions in the foreign countries where our supplying manufacturers are located may have
on our operations cannot be predicted. Potential disruptions or delays in supply due to economic or political conditions in foreign countries
could adversely affect our results of operations unless and until alternative supply arrangements are made.</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;&#160;</b></p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>We are partially dependent on third parties to perform a number
of our e-commerce functions. If such third parties are unwilling or unable to continue providing these services, our business could be
harmed.</i></b></p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As of December 31, 2022, approximately 8.0% of our gross merchandise
value (&#8220;GMV&#8221;) 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. We have no effective means to ensure that these third parties will
continue to perform these services to our satisfaction, in a manner satisfactory to our customers or on commercially reasonable terms.
Our customers may become dissatisfied and cancel their orders or decline to make future purchases if these third parties fail to deliver
products on a timely basis. If our customers become dissatisfied with the services provided by these third parties, our reputation and
brand could suffer.</p><div>

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</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>If we fail to manage our inventory effectively, our financial
condition, results of operations and liquidity may be materially and adversely affected.</i></b></p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="text-indent: 0pt; font: 10pt Times New Roman, Times, Serif; margin: 0pt">Our scale and business model require us to manage a large volume of
inventory effectively. 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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">We purchase most of the merchandise that we sell
directly to customers on our online platforms from manufacturers or distributors. We assume inventory damage, theft, obsolescence, and
price erosion risks for our inventory. These risks are especially significant as most of the merchandise sold on our online platforms
is characterized by rapid technological change, obsolescence and price erosion. 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. We also periodically take advantage of cost savings associated with certain opportunistic bulk inventory purchases offered by
our vendors. These bulk purchases increase our exposure to inventory obsolescence. Our success depends on our ability to sell our inventory
rapidly, purchase inventory at attractive prices relative to our resale value and manage customer returns and the shrinkage resulting
from theft, loss, and misrecording of inventory. If we are unsuccessful in any of these areas, we may be forced to write down or write
off substantial amounts of inventory, or sell it at a discount or loss, which could materially and adversely impact our business, financial
condition and results of operations.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">We depend on our demand forecasts for various
kinds of products to make purchase decisions and to manage our inventory. We are exposed to inventory risks as a result of seasonality,
new product launches, rapid changes in product cycles and pricing, defective merchandise, changes in consumer demand, tastes and spending
patterns, and other factors. While we endeavor to accurately predict these trends and avoid overstocking or understocking products we
sell, the demand for products can change significantly between the time inventory is ordered and the date of sale, and we may be unable
to sell products in sufficient quantities as we expect. Furthermore, we may in the future open additional warehouses and duplicate part
of the inventory for our direct sales business that is stored at our current warehouses to increase our overall fulfillment efficiency
as we grow our business, which will also increase the inventory risks our direct sales business faces. Failure to effectively manage our
inventory risk could have a material adverse effect on our business, financial condition and results of operations.</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>We have incurred net losses in the past and may experience losses
in the future.</i></b></p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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. Our ability to achieve and maintain
profitability will depend in large part on our ability to, among other things, source and sell higher margin products, grow and diversify
our supplier base, and optimize our cost structure. We may not be able to achieve any of the above. If we grow and expand our business,
our operating expenses may increase further. As a result of the foregoing, we may incur net losses in the future.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>If we fail to adopt new technologies or adapt our websites, mobile
apps and systems to changing customer requirements or emerging industry standards, our business may be materially and adversely affected.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">To remain competitive, we must continue to enhance and improve the
responsiveness, functionality and features of our online platforms, including our websites and mobile apps. The internet and the e-commerce
industry are characterized by rapid technological evolution, such as emerging artificial intelligence (&#8220;AI&#8221;) and machine learning
technologies, frequent introductions of new products and services embodying new technologies and the emergence of new industry standards
and practices, and changes in customer requirements and preferences, any of which could render our existing technologies and systems obsolete.
We may be required to devote substantial resources to developing proprietary technologies or license technologies, enhancing our existing
websites and mobile apps, developing new services and technology such as AI and machine learning that address the increasingly sophisticated
and varied needs of our current and prospective customers and adapting to technological advances and emerging industry and regulatory
standards and practices in a cost-effective and timely manner. The development of proprietary technology entails significant technical
and business risks. There can be no assurance that our efforts to develop proprietary technologies will succeed or that any technology
licenses will be available on commercially reasonable terms. Substantial investments will be required to remain technologically competitive,
and our failure to do so may harm our business and results of operations.</p><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>The seasonality of our business places increased
strain on our operations.</i></b></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">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. While the early part of the COVID-19 pandemic resulted in increased
cash and accounts payable balances and faster inventory turnaround times due to an increased demand in our products, we have seen that
trend reverse in 2022 with reduced consumer demand and a more challenging macroeconomic environment. As of the fiscal year ended December
31, 2022 and 2021, accounts payable amounted to approximately $207.1 million and $220.8 million, respectively.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>Many of the products we sell are highly
susceptible to technological advancement, product life cycle fluctuations and changes in consumer preferences.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">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 categories, changing price points and product
replacement and upgrade cycles.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 23.75pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">This rapid pace of change can be hard to predict and manage, and there
is no guarantee we can effectively do so all the time. If we fail to interpret, predict and react to these changes in a timely and effective
manner, the consequences can include: failure to offer the products and services that our customers want; excess inventory, which may
require heavy discounting or liquidation; inability to secure adequate access to brands or products for which consumer demand exceeds
supply; delays in adapting our merchandising, marketing or supply chain capabilities to accommodate changes in product trends; and damage
to our brand and reputation. In addition, consumer preferences may be influenced even further as the social and economic environment navigates
through the post-pandemic environment. These and other similar factors could have a material adverse impact on our revenue and profitability.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>The successful operation of our business
depends upon the performance, reliability and security of the internet infrastructure in the countries where we operate.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">Our business depends on the performance, reliability
and security of the telecommunications and internet infrastructure in the countries where we operate. We have several servers located
in China that provide development, testing and quality control services. Almost all access to the internet in China is maintained through
state-owned telecommunication operators under the administrative control and regulatory supervision of the Ministry of Industry and Information
Technology of the People&#8217;s Republic of China. In addition, the national networks in China are connected to the internet through
state-owned international gateways, which are the only channels through which a domestic user can connect to the internet outside China.
We may face similar or other limitations in other countries in which we operate. 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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">The failure of telecommunications network operators
to provide Newegg with the requisite bandwidth could also interfere with the speed and availability of our websites and mobile apps. If
the prices that we pay for telecommunications and internet services rise significantly, our net income could be adversely affected. In
addition, if internet access fees or other charges to internet users increase, our user traffic may decrease, which in turn may significantly
decrease our revenues.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>If we are unable to manage our growth or
execute our strategies effectively, our business and prospects may be materially and adversely affected.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">Our success depends upon our ability to manage
the growth of our operations effectively. We anticipate expanding further as we pursue our growth strategies. Our expansion increases
the complexity of our business and places a significant strain on our management, operations, technical systems, financial resources and
internal control over financial reporting functions. Our current and planned personnel, systems, procedures and controls may not be adequate
to support and effectively manage our future operations, especially as we employ personnel in several geographic locations. In addition,
our growth will require us to improve our operational and financial systems, procedures and controls, successfully manage international
operations and hire additional personnel. These efforts may not be successful, and we may be unable to improve our systems, procedures
and controls in a timely manner.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">Delays or problems associated with any of these
initiatives could harm our business and operating results. These initiatives will also cause our operating expenses to increase. If we
fail to accurately estimate and assess our growth or fail to increase net sales to match our increased operating expenses, our financial
condition and results of operations could suffer.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>An adverse change in  our vendor payment
terms and conditions may have a material adverse effect on our business, financial condition and results of operations.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">We purchase our inventory from vendors on trade
accounts typically requiring payment between 30 and 60 days after the date the inventory is shipped to us. As of December 31, 2022, our
accounts payable balance was $207.1 million with 50 days of payables outstanding. Our accounts payable balances as of December 31, 2022
represented 38.2% of our liabilities and shareholders&#8217; equity. An adverse change in our vendors&#8217; payment terms and conditions
would significantly increase our working capital requirements and have a material adverse effect on our business, financial condition
and results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>Our disclosure controls and procedures may
not prevent or detect all errors or acts of fraud.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Since the Merger, we have implemented a variety of measures designed
to comply with the rules applicable to public companies in the United States. To the extent these new procedures and policies have not
changed historical behaviors that might be inconsistent with the rules and practices regulating a U.S. public company, we could be at
risk of violation or poor reporting as a public company. If our directors or executive officers inadvertently fail to identify, review
or disclose a new relationship or arrangement causing the Company to fail to properly disclose any related party transaction or in the
event that we fail to comply with SEC reporting and internal controls and procedures, we may be subject to securities laws violations
that may result in additional compliance costs or costs associated with SEC judgments or fines, both of which will increase our costs
and negatively affect our potential profitability and our ability to conduct our business. The public reporting requirements and controls
are new for our management since completion of the Merger in May 2021 and may require us to obtain outside assistance from legal, accounting
or other professionals that will increase our costs of doing business.</p><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>We and certain of our subsidiaries are parties
to a revolving credit agreement, which contains a number of covenants that may restrict our current and future operations and could adversely
affect our ability to execute business needs.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">We and certain of our subsidiaries have entered
into certain credit agreements with financial institutions which contains a number of covenants that limit our ability and our subsidiaries&#8217;
ability to, among other things, incur indebtedness, create liens, make investments, merge with other companies, dispose of our assets,
prepay other indebtedness and make other distributions. The obligations under the credit agreements are also guaranteed by our assets
or those of our subsidiaries.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">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. In addition, complying with these covenants may make it more difficult to successfully
execute our business strategy, invest in our growth strategy and compete against companies who are not subject to such restrictions. The
credit agreement also contains financial covenants that require us to maintain certain minimum financial ratios and maintain an operating
banking relationship with the financial institutions. Although we are currently in compliance with the financial covenants, we cannot
guarantee that we will continue to be able to generate sufficient cash flow or sales to meet the financial covenants or pay the principal
or interest under the credit agreements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">If we are unable to comply with our payment requirements,
the financial institutions may accelerate our obligations under the credit agreement and foreclose upon the collateral, or we may be forced
to sell assets, restructure our indebtedness or seek additional equity capital, which would dilute shareholders&#8217; interests. If we
fail to comply with any covenant it could result in an event of default under the agreement and the lenders could make the entire debt
immediately due and payable. If this occurs, we might not be able to repay the debt or borrow sufficient funds to refinance it. Even if
new financing is available, it may not be on terms that are acceptable to us. See &#8220;Note 8 - Line of Credit&#8221; to our consolidated
financial statements for more information.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Our international sales and operations require access to international
markets and are subject to applicable laws relating to trade, export and import controls and economic sanctions, the violation of which
could adversely affect our operations.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Newegg must comply with all applicable U.S. export and import laws
and regulations. Such laws and regulations include, but are not limited to, the Export Administration Act and the Export Administration
Regulations. Newegg must also comply with U.S. sanctions laws and regulations, which are primarily administered by the U.S. Department
of Treasury&#8217;s Office of Foreign Assets Control, as well as other U.S. government agencies. U.S. sanctions generally prohibit transactions
by U.S. persons, including us, involving sanctioned countries, entities and persons, without U.S. government authorization (which will
rarely be granted). Non-U.S. subsidiaries of U.S. companies are required to comply with U.S. sanctions against Cuba and Iran.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Violations of U.S. laws and regulations relating to trade, export and
import controls and economic sanctions could result in significant civil and/or criminal penalties on us or on our foreign subsidiaries,
including fines, prohibitions on exporting and importing, prohibitions on receiving government contracts or other government assistance
and other trade-related restrictions. U.S. enforcement of such laws and regulations continues to increase.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We must also comply with applicable foreign laws relating to trade,
export and import controls and economic sanctions. We may not be aware of all of such laws applicable in the markets in which we do business,
which subjects us to the risk of potential violations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>We may need additional capital and failure to raise additional
capital on terms favorable to us, or at all, could limit our ability to grow our business and develop or enhance our service offerings
to respond to market demand or competitive challenges.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We believe that our current cash, cash flow from operations and borrowings
are sufficient to meet our anticipated cash needs for at least the next 12&#160;months. We may, however, require additional cash resources
due to changed business conditions or other future developments, including any investments or acquisitions we may decide to pursue. If
these resources are insufficient to satisfy our cash requirements, we may seek to sell additional equity or debt securities, or draw from
or refinance our credit facilities. The sale of additional equity securities could result in dilution to our shareholders. The incurrence
of indebtedness would result in increased debt service obligations and could require us to agree to operating and financing covenants
that would restrict our operations. Our ability to obtain additional capital on acceptable terms is subject to a variety of uncertainties,
including:</p><div>

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</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: left">investors&#8217; perception of, and demand for, our securities;</td>
</tr>
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<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: left">conditions of the U.S.&#160;and other capital markets in
which we may seek to raise funds; and</td>
</tr></table><div>



</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: left">our future results of operations and financial condition.</td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 24pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In addition, adverse developments that affect financial institutions,
or concerns about such developments, have in the past and may in the future lead to market-wide liquidity problems and disruptions in
the financial services industry. For example, in March 2023, the closure of Silicon Valley Bank and Signature Bank destabilized many financial
institutions and created uncertainty across the industry. Although we did not have any funds in&#160;Silicon&#160;Valley&#160;Bank&#160;or
Signature Bank, future defaults or other similar destabilizing events could impact the credit markets and adversely impact our ability
to access our capital and to obtain debt financing on favorable terms.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">Financing may not be available
in amounts or on terms acceptable to us, if at all. 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.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b>Legal and Regulatory Risks</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>Claims, Litigation, Government Investigations,
and Other Proceedings May Adversely Affect Our Business and Results of Operations</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">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. Any of these types of proceedings can have an adverse effect on us because of legal
costs, disruption of our operations, diversion of management resources, negative publicity, and other factors. The outcomes of these matters
are inherently unpredictable and subject to significant uncertainties.&#160;Determining legal reserves or possible losses from such matters
involves judgment and may not reflect the full range of uncertainties and unpredictable outcomes. Until the final resolution of such matters,
we may be exposed to losses in excess of the amount recorded, and such amounts could be material. Should any of our estimates and assumptions
change or prove to have been incorrect, it could have a material effect on our business or results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>We may not be able to adequately protect
our intellectual property rights.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">We rely on trademark and copyright law, trade
secret protection and confidentiality or licensing agreements with employees, buyers, third-party sellers, brand partners and others to
protect our proprietary rights. These steps may be inadequate, agreements may be violated or there may be inadequate remedies for a violation
of such agreements. Our competitors may independently develop equivalent proprietary information and rights or may otherwise gain access
to our trade secrets or proprietary information, which could affect our ability to compete in the market. 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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">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. We have registered and common law trademark rights in the United States and certain foreign jurisdictions,
as well as pending trademark applications for a number of marks and associated domain names. Such pending applications are not certain
to be approved, and even if we obtain approval for such pending applications, the resulting registrations may not adequately cover our
trademarks or protect us against infringement or dilution by others. Effective trademark, service mark, copyright, patent and trade secret
protection may not be available in every country or jurisdiction in which our products may be made available online, which may cause our
business and operating results to suffer. In addition, we may be unable to acquire or protect relevant domain names in the United States
and in other countries. 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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>Assertions, claims and allegations, even
if not true, that we have infringed or violated intellectual property rights could harm our business and reputation.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">Third parties have, and likely will in the future,
assert allegations and claims of intellectual property infringement against us on the items or their descriptions listed on our websites
and mobile apps. Any such claims, disputes or litigation, even if resolved in our favor or not true, could be time-consuming and costly
to defend, and could divert our management&#8217;s efforts from growing our business. We have intellectual property complaint and take-down
procedures in place to address communications alleging that items listed on online platforms, including the Newegg Marketplace, infringe
third-party copyrights, trademarks or other intellectual property rights. We follow these procedures to review complaints and relevant
facts to determine the appropriate action, which may include removal of the item from our online platforms and, in certain cases, discontinuing
our relationship with a Marketplace seller or brand partner who violates our policies. However, these rules and procedures may not effectively
reduce or eliminate our liability. In particular, Newegg may be subject to civil or criminal liability for activities carried out, including
products listed, by sellers or brands on our online platforms.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">If any third parties prevail in their intellectual
property rights claims against Newegg, we may be required to pay significant licensing fees, damages and attorney&#8217;s fees, and may
even be liable for punitive damages if Newegg is found to have willfully infringed third parties&#8217; proprietary rights. We may have
to stop using certain technology or solutions and need to develop or acquire alternative, non-infringing technology or solutions, which
could require significant time and resources. We could even be required to obtain a license to use certain technologies, although such
licenses may not be available on reasonable terms or at all, which may result in substantial payments and royalties and significantly
increase our operating expenses. If we cannot develop non-infringing technology or license the appropriate technology at commercially
reasonable rates, an intellectual property claim successfully asserted against us could cause significant business interruptions in our
operations, which could restrict our ability to compete effectively and have a material adverse effect on our financial condition and
results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>Newegg may be subject to product liability
claims, which could be costly and time-consuming to defend.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">The majority of the products sold on our online
platforms are manufactured by third parties, and some of them may be defectively designed or manufactured. If any product we sell were
to cause physical injury or injury to property, an injured party could bring claims against us as the retailer of the product. Furthermore,
we also offer computer systems, IT components, peripherals, household appliances and other goods under our private labels, Rosewill and
ABS, on our platforms or through other e-commerce platforms, such as eBay, which could potentially create more exposure for Newegg with
respect to product liability than if we had simply acted as a retailer of third-party products. Our insurance coverage may not be adequate
against such product liability claims. If a successful claim were brought against Newegg in excess of our insurance coverage, it could
adversely affect our financial condition and results of operations. 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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>We may incur additional costs due to tax
assessments resulting from ongoing and future audits by tax authorities.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In the ordinary course of business, Newegg is subject to tax examinations
by various governmental tax authorities. The global and diverse nature of our business means that there could be additional examinations
by governmental tax authorities and the resolution of ongoing and other probable audits which could impose a future risk to the results
of our business. For example, in February 2018, we received from the Commonwealth of Massachusetts Department of Revenue a notice of intent
to assess sales and use taxes relating to a prior tax period, which subsequently resulted in an assessment of approximately $0.3 million,
plus penalties and interest. In May 2020, we received from the Commonwealth of Massachusetts Department of Revenue another notice of assessment
for sales and use taxes for additional prior tax periods in the amount of a total assessment of $2.7 million, including penalties and
interest. We appealed these assessments, and ultimately prevailed. 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.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>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.</i></b>&#160;&#160;&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">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. The U.S. government has adopted changes, and may adopt further changes, to trade policy and in some cases, to renegotiate,
or potentially terminate, certain existing bilateral or multi-lateral trade agreements. 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. 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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Examples of recent actions are tariffs on steel and aluminum product
imports announced by the U.S. 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 (&#8220;USTR&#8221;) in June 2018 pursuant
to an investigation under Title III of the Trade Act of 1974, 19 U.S.C. &#167;&#167;2411-2420 (&#8220;Section 301&#8221;). The USTR announced
in June and July 2018 two additional supplemental lists of products that are subject to tariffs if the goods imported into the United
States originate in China, which increased the cost of these imported products. These supplemental lists issued by the USTR added an additional
25% tariff on certain semiconductor equipment and parts originating in China that are sold by Newegg or used in our business in the United
States. In August 2018, the second list was made effective with a 25% tariff and in September 2018 the third list (&#8220;List 3&#8221;)
was made effective with a 10% tariff, increasing to 25% in May 2019. A fourth list was proposed by USTR in May 2019 for all remaining
items originating in China. A portion of the fourth list (&#8220;List 4a&#8221;), was made effective September 1, 2019, with an additional
tariff of 15%, reduced to 7.5% on February 14, 2020. The remainder of the fourth list (&#8220;List 4b&#8221;) was scheduled to have an
additional tariff of 15% go into effect on December 15, 2019; however, on December 13, 2019, the tariffs for List 4b were suspended after
the U.S. announced it would enter into a trade agreement with China (the &#8220;Phase 1 Agreement&#8221;). A Phase 2 Agreement has not
been announced as of the date of this annual report. On April 1, 2022, the U.S. Court of International Trade upheld the List 3 and List
4a tariffs and rejected arguments brought by plaintiff importers that the tariffs exceeded the authority of the USTR to impose. Certain
procedural issues with the tariffs were remanded to USTR to reconsider. It is expected that this litigation, which only covers tariffs
imposed on goods originating from China, will continue into 2023. In May 2022, the USTR began the statutory four-year review of the Section
301 actions taken against China. The agency determined that two separate actions had been taken as part of the investigation (the first
and second list), and that they had been subsequently modified by imposing additional duties on supplemental lists of products (List 3
and List 4a), as well as by temporarily removing or suspending duties on some of them through exclusions. The USTR announced that the
first step of this review process would be to notify representatives of domestic industries that benefit from the trade actions (as modified)
of their possible termination, and to offer them the opportunity to request their continuation. The USTR announced in September 2022 that
it had received several such requests and that as a result, it would keep the actions in place&#8212;subject to possible further modifications&#8212;and
proceed with the second phase of the review process.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">Any increase in the cost of importing goods and
parts could decrease our margins, reduce the competitiveness of our products, or inhibit our ability to sell products or purchase necessary
parts, which could have a material adverse effect on our business results, results of operations, or financial condition.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On April 28, 2020 the U.S. Department of Commerce issued new rules
that (1) expand the definition of military end use and (2) eliminate the applicability of certain license exceptions for exports to countries
on Country Group D of Supplement No. 1 to part 740 of the Export Administration Regulations. These changes expand export license requirements
for U.S. companies to sell certain items to companies in China that have operations that could support military end uses, even if the
items sold by the U.S. companies are for civilian end use and they reduce the applicability of license exceptions for exports to those
countries listed on Country Group D, including China. Additionally, amendments have been made to General Prohibition Three (Foreign-Produced
Direct Product Rule) and the Entity List, the most recent of which were effective August 17, 2020. These amendments expand the restrictions
on the sale of goods manufactured outside the United States that are produced using certain controlled U.S. technology or software to
companies on the U.S. Entity List, and regulate the use of U.S.-origin semiconductor manufacturing equipment that produces semiconductor
devices for companies on the U.S. Entity List. The rule changes for export controls may reduce or impair our ability to sell products
internationally, which could in turn decrease the demand for our products and have a material adverse effect on our revenues and profitability.
At this time, the rule changes are not anticipated to impact the Company&#8217;s sales of non-U.S. products; however, any unpredicted
rule changes could adversely affect our business results, operations, or financial condition.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">Changes in U.S. trade policy could result in one
or more U.S. trading partners adopting responsive trade policy making it more difficult or costly for us to export our products to those
countries. As indicated above, these measures could also 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. To the extent that trade tariffs and other restrictions imposed by the U.S. increase the price of semiconductor
equipment and related parts imported into the U.S., the cost of our materials may be adversely affected and the demand from customers
for products and services may be diminished, which could adversely affect our revenues and profitability. See &#8220;&#8212; Newegg&#8217;s
Business Model&#8221; for more information about direct sales and marketplace.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">We cannot predict future trade policy, the terms
of any renegotiated trade agreements or additional imposed tariffs and their impact on our business. 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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">Changes in U.S. social, political, regulatory
and economic conditions or in laws and policies governing foreign trade, manufacturing, development and investment in the territories
and countries where we currently develop and sell products, and any negative sentiments towards the United States as a result of such
changes, could adversely affect our business. In addition, negative sentiments towards the United States among non-U.S. customers and
among non-U.S. employees or prospective employees could adversely affect sales or hiring and retention, respectively.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>Employment laws in some of the countries
in which we operate are relatively stringent.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">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. In some of the countries in which we operate, employment laws may grant significant job protection to employees, including
rights on termination of employment and setting maximum number of hours and days per week that a particular employee is permitted to work.
In addition, in certain countries in which we operate, Newegg is or may be required to consult and seek the advice of employee representatives
and/or unions. These laws, coupled with the requirement to consult with any relevant employee representatives and unions, could impact
our ability to react to market changes and the needs of our business.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>Our ability to use our net operating loss
carryforwards and certain other tax attributes may be limited and could adversely impact our business, financial condition and operating
results.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">Under Sections 382 and 383 of the Code, if a corporation
undergoes an &#8220;ownership change,&#8221; the corporation&#8217;s ability to use its pre-change net operating loss carryforwards and
other pre-change tax attributes to offset its post-change income and taxes may be limited. In general, an &#8220;ownership change&#8221;
occurs if there is a cumulative change in our ownership by one or more &#8220;5% shareholders&#8221; (as defined under U.S. income tax
laws) that exceeds 50 percentage points over a rolling three-year period. Similar rules apply under state tax laws. We believe it is possible
that we may experience an ownership change in the future as a result of shifts in our stock ownership, some of which are outside our control,
in which case we may be limited in our ability to use our net operating loss carryforwards and other tax assets to reduce taxes owed on
the net taxable income that we earn. 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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>We are treated as a U.S. corporation for
all U.S. federal tax purposes.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We believe that we are an inverted corporation for U.S. federal tax
purposes. 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 &#8220;Item 10. Additional Information &#8211; E. Taxation&#8221; for additional detail.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b>Risks Related to our Common Shares</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>A majority of Newegg&#8217;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.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The shares of our common stock 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. 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. 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&#8217;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 loans
are in default in a final, non-appealable judgment. On December 19, 2022, Digital Grid, BOC, Newegg, and Hangzhou Lianluo entered into
a supplemental agreement (the &#8220;Supplemental Agreement&#8221;) to agree upon procedures to temporarily remove BOC&#8217;s lien on
Digital Grid&#8217;s Newegg Common Shares to enable their sale and use of proceeds to repay BOC.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In addition, on April 11, 2023, the Industrial and Commercial Bank
of China (&#8220;ICBC&#8221;) filed a lawsuit against Hangzhou Lianluo in the Hangzhou Intermediate People&#8217;s Court in China alleging
that Hangzhou Lianluo failed to repay when due three separate loans, provided by ICBC to Hangzhou Lianluo, and was in breach of the related
loan agreements. 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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Sales of the Common Shares owned or pledged by Digital Grid or Hangzhou
Lianluo, including for the payment of financial or settlement obligations to BOC or ICBC, could cause the market price of the Common Shares
to drop significantly.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">BOC could sell, or force Digital Grid to sell, some or all of its shares
while the BOC loans remain delinquent.&#160; Digital Grid could also choose to voluntarily sell some or all of its shares at any time
to satisfy the BOC or ICBC loans.&#160; Any such sale or attempted sale could:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Occur at a discount to our public trading price and over a short time period;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Result in a change of control of us to the buyer of such shares; or</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Result in litigation over the ownership and title to those shares.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Each of these risks could cause our share price to fall significantly
and is described further below.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">BOC could attempt to foreclose upon and sell Digital Grid&#8217;s shares in Newegg at any time.&#160; Any such sale could be done quickly and without regard for maximizing the sale price, other than to enable BOC to recover the amount of indebtedness owed to it by Hangzhou Lianluo.&#160; In such a case, the sale price would likely be significantly less than the public trading price of our shares, which would likely cause our share price to fall significantly.</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If Digital Grid sold some or all of its shares, its ownership percentage in Newegg could drop below 50%, causing it to lose control of our board of directors, leading to a potential change in control of the Company.&#160; Any such change in control could be viewed negatively by our shareholders, leading to a drop in the trading price of our shares.</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In addition, any transfer of those shares to a non-affiliate of Digital Grid would be subject to our amended and restated shareholders agreement.&#160; The shareholders agreement gives a right of first refusal in favor of the Company, and a right of second refusal in favor of the pre-merger Newegg Inc. shareholders (which primarily includes Mr. Fred Chang), to purchase some or all of the shares being transferred, subject to certain exemptions.&#160;See &#8220;Item 10. Additional Information &#8211; B. Memorandum and Articles of Association &#8211; <i>Rights of Certain Principal Shareholders</i> &#8211; <i>Right of First Refusal of the Company and Principal Shareholders</i>&#8221; for additional detail. The shareholders agreement may not be recognized or enforceable in China&#8217;s courts, because the agreement is governed by the laws of the British Virgin Islands, and China courts generally do not recognize court decisions from that jurisdiction. &#160;As a result, BOC or Digital Grid could try to sell some or all of Digital Grid&#8217;s shares without complying with those agreements.&#160; Any such sale could result in significant litigation and uncertainty over the ownership of those shares, which could cause our share price to fall.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->24<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>The market price of our common shares has
been extremely volatile and may continue to be volatile due to numerous circumstances beyond our control.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">The market price of our common shares has fluctuated,
and may continue to fluctuate, widely, due to many factors, some of which may be beyond our control. These factors include, without limitation:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">&#8220;short squeezes&#8221;;</span></td>
</tr></table><div>

</div><p style="margin-top: 0; margin-bottom: 0"></p><div>


</div><p style="margin-top: 0; margin-bottom: 0"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"></p><div>


</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">comments by securities analysts
or other third parties, including blogs, articles, message boards and social and other media;</span></td>
</tr></table><div>

</div><p style="margin-top: 0; margin-bottom: 0"></p><div>



</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">actual or anticipated fluctuations
in our financial and operating results;</span></td>
</tr></table><div>


</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">risks and uncertainties associated
with the ongoing impact of the COVID-19 pandemic;</span></td>
</tr></table><div>




</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="text-align: left; width: 24px">&#160;</td>
    <td style="width: 24px; text-align: left"><span style="font-size: 10pt">&#9679;</span></td>
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  </table><div>


</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">announcements of new products
and services by us or our competitors;</span></td>
</tr></table><div>


</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">the effect of changes in tax
rates in the jurisdictions in which we operate;</span></td>
</tr></table><div>


</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="text-align: left; width: 24px">&#160;</td>
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  </table><div>


</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">the mix of earnings in the
countries in which we operate;</span></td>
</tr></table><div>


</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
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exchange rates;</span></td>
</tr></table><div>


</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">announcements
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</tr></table><div>


</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">changes in financial estimates
by securities analysts;</span></td>
</tr></table><div>


</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">negative public perception
of us, our competitors, or industry;</span></td>
</tr></table><div>


</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="text-align: left; width: 24px">&#160;</td>
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  </table><div>


</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">potential litigation or regulatory
investigations; and</span></td>
</tr></table><div>


</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">overall general market fluctuations.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Stock markets in general and our share price in particular have recently
experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those
companies and our company. For example, on March 28, 2022, our common shares experienced an intra-day trading high of $8.48 per share
and a low of $5.01 per share. In addition, from March 1, 2022 to April 29, 2022, the closing price of our common shares on Nasdaq ranged
from as low as $4.14 to as high as $8.48 and daily trading volume ranged from approximately 143,800 to 39,024,100 shares. During this
time, we have not experienced any material changes in our financial condition or results of operations that would explain such price volatility
or trading volume. These broad market fluctuations may adversely affect the trading price of our common shares. In particular, a large
proportion of our common shares has been and may continue to be traded by short sellers which has put and may continue to put pressure
on the supply and demand for our common shares, further influencing volatility in its market price. 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.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>Mr. Zhitao He and Mr. 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.</i></b>&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">Mr. Zhitao He and Mr. Fred Chang control approximately
59.3% and 34.6%, respectively, of the voting power of our issued and outstanding common shares, and 93.9%, collectively, as of December
31, 2022. Additionally, Mr. Zhitao He and Mr. Fred Chang, both of whom serve as our directors, will be able to exercise substantial influence
over our business and operations. They may also have a conflict of interest with our other shareholders. Where such a conflict exists,
our other shareholders will be dependent upon Mr. He, Mr. 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. Moreover,
such concentration of voting power could have the effect of delaying, deterring, or preventing a change of control or other business combination,
which may, in turn, have an adverse effect on the market price of our shares or prevent our shareholders from realizing a premium over
the then-prevailing market price for their shares.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>We are a &#8220;controlled company&#8221;
within the meaning of the Nasdaq Listing Rules and, as a result, qualify for exemptions from certain corporate governance requirements.
You will not have the same protections afforded to shareholders of companies that are subject to such requirements.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">Mr. Zhitao He, through Hangzhou Lianluo, Hyperfinite
Galaxy Holding Limited, and Digital Grid, controls a majority of the voting power of our outstanding common shares. As a result, we are
a &#8220;controlled company&#8221; within the meaning of Nasdaq&#8217;s corporate governance standards. Under these rules, a company of
which more than 50% of the voting power is held by an individual, group or another company is a &#8220;controlled company.&#8221; For
so long as we remain a controlled company under this definition, we are permitted to elect to rely on certain exemptions from corporate
governance rules, including:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">an exemption from the rule
that a majority of our board must be independent directors;</span></td>
</tr></table><div>


</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">an exemption from the rule
that the compensation of our chief executive officer must be determined or recommended solely by independent directors; and</span></td>
</tr></table><div>


</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">an exemption from the rule
that our director nominees must be selected or recommended solely by independent directors.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">As a result, you will not have the same protection
afforded to shareholders of companies that are subject to these corporate governance requirements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->25<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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 acting as a &#8220;Minority Representative&#8221; selected by a majority of the Legacy Shareholders (as defined in
the Company&#8217;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. The number of directors that Digital Grid and the Minority Representative are entitled to appoint
will decrease proportionately with the decrease of the respective voting power of Digital Grid and the Legacy Shareholders. Any director
positions which neither Digital Grid nor the Minority Representative is entitled to appoint shall be appointed by the remaining directors,
or by any other means allowed under the Amended and Restated Memorandum and Articles of Association.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">The Amended and Restated Memorandum and Articles
of Association limit your ability to appoint or elect persons for service on our board and may discourage proxy contests for the election
of directors and purchases of substantial blocks of shares by making it more difficult for a potential acquirer to gain control of our
board.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>Certain provisions of Newegg&#8217;s Amended
Shareholders Agreement 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.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">We are party to an amended and restated shareholders
agreement (the &#8220;Amended Shareholders Agreement&#8221;) with Digital Grid, Mr. Fred Chang and certain other shareholders (the &#8220;Principal
Shareholders&#8221;).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">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 &#8220;excluded issuances&#8221; as defined in the Amended Shareholders Agreement or common shares offered pursuant
to a registration statement filed with the SEC.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">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&#8217;s Listing Rules. If any Principal Shareholder receives
a bona fide offer from any person other than its affiliate to acquire any of the Principal Shareholder&#8217;s common shares (the &#8220;ROFR
Shares&#8221;), then the Company has a right of first refusal, but not the obligation, to elect to purchase all (and not less than all)
of the ROFR Shares, at the same price, and on the same terms and conditions offered by the purchaser (the &#8220;ROFR Terms&#8221;). In
the event the Company does not decide to purchase all such ROFR Shares, then each of the Principal Shareholders other than the selling
Principal Shareholder shall have a right of first refusal to elect to purchase all (and not less than all) of its Pro Rata Share of the
ROFR Shares on the ROFR Terms; provided, however, that notwithstanding anything to the contrary, twenty percent (20%) of Company common
shares collectively held by each Principal Shareholder and its affiliates, calculated as of May 19, 2021, that are subject to any ROFR
Rights shall be exempt from any ROFR Rights. For the purpose of the Amended Shareholders Agreement, &#8220;Pro Rata Share&#8221; means
the percentage which corresponds to the ratio which each selling Principal Shareholder&#8217;s &#8220;Percentage Interest&#8221; (which
is calculated by dividing (i) the number of the common shares owned by such Principal Shareholder, by (ii) total number of the then outstanding
shares of the common shares held by all Principal Shareholders) bears to the total Percentage Interests of all Principal Shareholders
exercising their right of first refusal. In the event that the ROFR Shares are in exchange for non-cash consideration, then such right
of first refusal shall be exercisable based on the fair market value determined in good faith by the board of such non-cash consideration.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>We may be subject to 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&#8217;s
attention and resources.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">In the past, shareholders of a public company
often brought securities class action suits following periods of instability in the market price of a company&#8217;s securities. If we
were involved in a class action suit, it could divert a significant amount of our management&#8217;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.
Any such class action suit, whether or not successful, could harm our reputation and restrict our ability to raise capital in the future.
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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>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.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our common shares are traded and listed on Nasdaq under the symbol
&#8220;NEGG.&#8221; However, there is no assurance that we will be able to continue to maintain compliance with Nasdaq continued listing
requirements. The Nasdaq Listing Rules require, among other things, that listed securities maintain a minimum bid price of $1.00 per share
(the &#8220;Minimum Bid Price Requirement&#8221;), and failure to meet the Minimum Bid Price Requirement within specified compliance periods
following receipt of a deficiency notice may result in delisting. 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. As a result, selling our common shares could
be more difficult because smaller quantities of shares would likely be bought and sold, transactions could be delayed, and security analysts&#8217;
coverage of us may not arise. In addition, in the event our common shares are delisted, broker dealers would bear certain regulatory burdens
which may discourage broker dealers from effecting transactions in our common shares and further limit the liquidity of our shares. These
factors could result in lower prices and larger spreads in the bid and ask prices for our common shares. 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.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>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.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">From time to time, we and our directors and officers may be involved
in investigations or other forms of regulatory or governmental inquiry covering a range of possible issues including but not limited to
securities laws compliance.&#160; See &#8220;Item 6.C. Board Practices &#8211; Involvement in Certain Legal Proceedings&#8221; for a discussion
of current legal proceedings.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">These inquiries or investigations could lead to administrative, civil
or criminal proceedings involving us and could result in fines, penalties, restitution, other types of sanctions, or the need for us to
undertake remedial actions, or to alter our business, financial or accounting practices. Our practice is to cooperate fully with regulatory
and governmental inquiries and investigations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Legal proceedings, inquiries and regulatory investigations are often
unpredictable, and it is possible that the ultimate resolution of any such matters, if unfavorable, may be material to our results of
operations in any future period, depending, in part, upon the size of the loss or liability imposed and the operating results for the
period, and could have a material adverse effect on our business. In addition, regardless of the ultimate outcome of any such legal proceeding,
inquiry or investigation, any such matter could cause us to incur additional expenses, which could be significant, and possibly material,
to our results of operations in any future period.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Any of these factors may result in large and sudden changes in the
volume and price at which the common shares will trade.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Shareholders of a public company often bring securities class action
suits against the company following periods of instability in the market price of that company&#8217;s securities. If we were involved
in a class action suit, it could divert a significant amount of our management&#8217;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. Any such class
action suit, whether or not successful, could harm our reputation and restrict our ability to raise capital in the future. 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.</p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>If securities or industry analysts do not
publish research or reports about our business, or if they adversely change their recommendations regarding the common shares, the market
price for the common shares and trading volume could decline.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">The trading market for the common shares could
be influenced by research or reports that industry or securities analysts may publish about our business in the future. Currently we have
one security analyst covering our company. If any additional analysts cover us in the future and downgrade the common shares, the market
price for the common shares would likely decline. If no additional analysts initiate coverage of us or fail to regularly publish reports
on us, we could lose visibility in the financial markets, which in turn could cause the market price or trading volume for the common
shares to decline.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>Techniques employed by short sellers may
drive down the market price of our common shares.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">Short selling is the practice of selling securities
that the seller does not own but rather has borrowed from a third party with the intention of buying identical securities back at a later
date to return to the lender. The short seller hopes to profit from a decline in the value of the securities between the sale of the borrowed
securities and the purchase of the replacement shares, as the short seller expects to pay less in that purchase than it received in the
sale. As it is in the short seller&#8217;s interest for the price of the security to decline, many short sellers publish, or arrange for
the publication of, negative opinions and allegations regarding the relevant issuer and its business prospects in order to create negative
market momentum and generate profits for themselves after selling a security short. These short attacks appear to have, in the past, led
to selling of our shares in the market. If we were to become the subject of any unfavorable allegations, whether such allegations are
proven to be true or untrue, we could have to expend a significant amount of resources to investigate such allegations and/or defend ourselves.
We may not be able to defend against any such short seller attacks and may be constrained in the manner in which we can proceed against
the relevant short seller by principles of freedom of speech, applicable state law or issues of commercial confidentiality.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>Investors may have difficulty enforcing
judgments against us, our directors and management.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">We are incorporated under the laws of the BVI
and many of our directors reside outside the United States. Moreover, many of these persons do not have significant assets in the United
States. As a result, it may be difficult or impossible to effect service of process within the United States upon these persons, or to
recover against us or them on judgments of U.S. courts, including judgments predicated upon the civil liability provisions of the U.S.
federal securities laws.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">The courts of the BVI would not automatically
enforce judgments of U.S. courts obtained in actions against us or our directors and officers, or some of the experts named herein, predicated
upon the civil liability provisions of the U.S. federal securities laws, or entertain actions brought in the BVI against us or such persons
predicated solely upon U.S. federal securities laws. Further, there is no treaty in effect between the United States and the BVI providing
for the enforcement of judgments of U.S. courts in civil and commercial matters, and there are grounds upon which BVI courts may decline
to enforce the judgments of U.S. courts. Some remedies available under the laws of U.S. jurisdictions, including remedies available under
the U.S. federal securities laws, may not be allowed in the BVI courts if contrary to public policy in the BVI. Because judgments of U.S.
courts are not automatically enforceable in the BVI, it may be difficult for you to recover against us or our directors and officers based
upon such judgments.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In addition, under PRC law, a foreign judgment, which does not otherwise
violate basic legal principles, state sovereignty, safety or social public interest, may be recognized and enforced by a PRC court, based
either on treaties between China and the country where the judgment is made or on principles of reciprocity between jurisdictions. As
currently there exists no treaty or other form of reciprocity between China and the United States or the BVI governing the recognition
and enforcement of judgments, including those predicated upon the liability provisions of the U.S. federal securities laws, there is uncertainty
whether and on what basis a PRC court would enforce judgments rendered by courts in the United States or the BVI. In addition, Taiwan
does not have treaties providing for the reciprocal recognition and enforcement of judgments of courts with the United States and the
BVI. Therefore, recognition and enforcement in Taiwan of judgement of United States and BVI courts in relation to any matter not subject
to a binding arbitration provision would need to be enforced in accordance with common law principles.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>Certain types of class or derivative actions
generally available under U.S. law may not be available as a result of the fact that we are incorporated in the BVI. As a result, the
rights of shareholders may be limited.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">Shareholders of BVI companies may not have standing
to initiate a shareholder derivative action in a court of the United States. The BVI courts are also unlikely to recognize or enforce
against us judgments of courts in the United States based on certain liability provisions of U.S. securities law or to impose liabilities
against us, in original actions brought in the BVI, based on certain liability provisions of U.S. securities laws that are penal in nature.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>You may have more difficulty protecting
your interests than you would as a shareholder of a U.S. corporation.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">Our corporate affairs will be governed by the
provisions of our memorandum and articles of association, as amended and restated from time to time, and by the provisions of applicable
BVI law. The rights of shareholders and the fiduciary responsibilities of our directors and officers under BVI law are not as clearly
established as they would be under statutes or judicial precedents in some jurisdictions in the United States, and some states (such as
Delaware) have more fully developed and judicially interpreted bodies of corporate law.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">These rights and responsibilities are to a large
extent governed by the Companies Act and the common law of the BVI. The common law of the BVI is derived in part from judicial precedent
in the BVI as well as from English common law, which has persuasive, but not binding, authority on a court in the BVI. 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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">There may be less publicly available information
about us than is regularly published by or about U.S. issuers. Also, the BVI regulations governing the securities of BVI companies may
not be as extensive as those in effect in the United States, and the BVI law and regulations regarding corporate governance matters may
not be as protective of our shareholders as state corporation laws 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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->29<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">Under the laws of the BVI there is limited statutory
protection of our shareholders other than the provisions of the Companies Act dealing with shareholder remedies. The principal protections
under BVI statutory law are derivative actions, actions brought by one or more shareholders for relief from unfair prejudice, oppression
and unfair discrimination and/or to enforce the Companies Act or the memorandum and articles of association. Shareholders are entitled
to have the affairs of the company conducted in accordance with the Companies Act and the memorandum and articles of association, and
are entitled to payment of the fair value of their respective shares upon dissenting from certain enumerated corporate transactions.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">There are common law rights for the protection
of shareholders that may be invoked, largely dependent on English company law, since the common law of the BVI is limited. Under the general
rule pursuant to English company law known as the rule in Foss v. Harbottle, a court will generally refuse to interfere with the management
of a company at the insistence of a minority of its shareholders who express dissatisfaction with the conduct of the company&#8217;s affairs
by the majority or the board of directors. However, every shareholder is entitled to seek to have the affairs of the company conducted
properly according to law and the constitutional documents of the company. As such, if those who control the company have persistently
disregarded the requirements of company law or the provisions of the company&#8217;s memorandum and articles of association, then the
courts may grant relief. Generally, the areas in which the courts will intervene are the following: (i) a company is acting or proposing
to act illegally or beyond the scope of its authority; (ii) the act complained of, although not beyond the scope of the authority, could
only be effected if duly authorized by more than the number of votes which have actually been obtained; (iii) the individual rights of
the plaintiff shareholder have been infringed or are about to be infringed; or (iv) those who control the company are perpetrating a &#8220;fraud
on the minority.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">These rights may be more limited than the rights
afforded to our shareholders under the laws of states in the United States.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">Under the Companies Act, members of the general
public, on payment of a nominal fee, can obtain copies of the public records of a company available at the office of the Registrar which
will include the company&#8217;s certificate of incorporation, its memorandum and articles of association (with any amendments) and records
of license fees paid to date and will also disclose any articles of dissolution, articles of merger and a register of charges if the company
has elected to file such a register.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">A member of a company is entitled, on giving written
notice to the company, to inspect:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">a.</span></td><td style="text-align: left"><span style="font-size: 10pt">the memorandum and articles;</span></td>
</tr></table><div>


</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="text-align: left; width: 24px">&#160;</td>
    <td style="width: 24px; text-align: left"><span style="font-size: 10pt">b.</span></td>
    <td style="text-align: left"><span style="font-size: 10pt">the register of members;</span></td></tr>
  </table><div>


</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="text-align: left; width: 24px">&#160;</td>
    <td style="width: 24px; text-align: left"><span style="font-size: 10pt">c.</span></td>
    <td style="text-align: left"><span style="font-size: 10pt">the register of directors; and</span></td></tr>
  </table><div>


</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="text-align: left; width: 24px">&#160;</td>
    <td style="width: 24px; text-align: left"><span style="font-size: 10pt">d.</span></td>
    <td style="text-align: left"><span style="font-size: 10pt">the minutes of meetings and resolutions of members and of those classes of members of which he is a member; and to make copies of or take extracts from the documents and records referred to in (a) to (d) above.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">Subject to the memorandum and articles of association,
the directors may, if they are satisfied that it would be contrary to the company&#8217;s interests to allow a member to inspect any document,
or part of a document, specified in (b), (c) or (d) above, refuse to permit the member to inspect the document or limit the inspection
of the document, including limiting the making of copies or the taking of extracts from the records. Where a company fails or refuses
to permit a member to inspect a document or permits a member to inspect a document subject to limitations, that member may apply to the
BVI Court for an order that he or she should be permitted to inspect the document or to inspect the document without limitation.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">This may make it more difficult for you to obtain
the information needed to establish any facts necessary for a shareholder motion or to solicit proxies from other shareholders in connection
with a proxy contest.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">As a result of all of the above, our public shareholders
may have more difficulty in protecting their interests in the face of actions taken by our management, members of the Board or controlling
shareholders than they would as public shareholders of a company incorporated in the United States. For a discussion of significant differences
between the provisions of the Companies Act and the laws applicable to companies incorporated in the United States and their shareholders,
see &#8220;Description of Shares &#8212; Differences between the Law of Different Jurisdictions.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>Because we do not expect to pay dividends
in the foreseeable future, you must rely on a price appreciation of the common shares for a return on your investment.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">We currently intend to retain most, if not all,
of our funds and any future earnings to fund the development and growth of our business. As a result, we do not expect to pay any cash
dividends in the foreseeable future. Therefore, you should not rely on an investment in the common shares as a source for any future dividend
income.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">Our Board has complete discretion as to whether
to distribute dividends, subject to certain requirements of BVI law. In addition, our shareholders may by ordinary resolution declare
a dividend, but no dividend may exceed the amount recommended by our directors. Under BVI law, a BVI company may pay a dividend out of
either profit or share premium account, provided that in no circumstances may a dividend be paid if this would result in the company being
unable to pay its debts as they fall due in the ordinary course of business. Even if our Board decides to declare and pay dividends, the
timing, amount and form of future dividends, if any, will depend on our future results of operations and cash flow, our capital requirements
and surplus, the amount of distributions, if any, received by us from our subsidiaries, our financial condition, contractual restrictions,
and other factors deemed relevant by our Board. Accordingly, the return on your investment in the common shares will likely depend entirely
upon any future price appreciation of the common shares. There is no guarantee that the common shares will appreciate in value or even
maintain the price at which you purchased the common shares. You may not realize a return on your investment in the common shares and
you may even lose your entire investment in the common shares. Additionally, because we are a holding company, our ability to pay dividends
on our common shares may be limited by restrictions on the ability of our subsidiaries to pay dividends or make distributions to us, including
restrictions that are imposed under the terms of the agreements governing our subsidiaries&#8217; loan and credit facilities. There is
no assurance that future dividends will be paid, and if dividends are paid, there is no assurance with respect to the amount of such dividend.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>As a company incorporated in the British
Virgin Islands, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly
from Nasdaq&#8217;s corporate governance listing standards. These practices may afford less protection to shareholders than they would
enjoy if we complied fully with Nasdaq&#8217;s corporate governance listing standards.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">As a BVI company listed on Nasdaq, we are subject
to Nasdaq&#8217;s corporate governance listing standards. However, Nasdaq rules permit a foreign private issuer like us to follow the
corporate governance practices of its home country. Certain provision in the Companies Act relating to corporate governance in the BVI,
which is our home country, may differ significantly from Nasdaq&#8217;s corporate governance listing standards. We intend to follow the
relevant provisions in the Companies Act in lieu of the following corporate governance requirements of Nasdaq that listed companies must
have for as long as we qualify as a foreign private issuer: (i) a majority of independent directors; (ii) a nominating/corporate governance
committee composed entirely of independent directors; and (iii) a compensation committee composed entirely of independent directors. &#160;To
the extent we choose to follow home country practice in the future, our shareholders may be afforded less protection than they otherwise
would enjoy under Nasdaq&#8217;s corporate governance listing standards applicable to U.S. domestic issuers.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">In addition, in September 2018, California&#8217;s
Senate Bill 826 was signed into law. Senate Bill 826 generally requires public companies with principal executive offices in California
to have a minimum number of females on its board of directors. As of December 31, 2019, each public company with principal executive offices
in California was required to have at least one female on its board of directors. As of December 31, 2021, each public company was required
to have at least two females on its board of directors if the company has at least five directors, and at least three females on its board
of directors if the company has at least six directors. However, on May 13, 2022, the Superior Court of the State of California for the
County of Los Angeles held in Crest v. Padilla, Case No. 19STCV27561, that such minimum female board member requirement violates the Equal
Protection Clause of the California Constitution. The case is currently being appealed by the State of California, and we intend to monitor
legislative developments accordingly. &#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->31<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">Our board of directors currently includes one
female director. There is uncertainty as to whether this law applies to foreign private issuers with their principal executive offices
in California, like us. If the law is deemed to apply to foreign private issuers, we may be deemed out of compliance. An initial violation
of Senate Bill 826 can result in a fine from the California Secretary of State in the amount of $100,000, with each subsequent violation
resulting in a fine of $300,000. We cannot assure you that we can recruit, attract and/or retain qualified members of the board and meet
gender requirements under California law, which may expose us to financial penalties and adversely affect our reputation.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>We are a foreign private issuer within the
meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions applicable to U.S. domestic public companies.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Because we qualify as a foreign private issuer under the Exchange Act
of 1934, as amended (the &#8220;Exchange Act&#8221;), 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:</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">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;</span></td>
</tr></table><div>


</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">the sections of the Exchange
Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act;</span></td>
</tr></table><div>


</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">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</span></td>
</tr></table><div>


</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">the rules under Regulation
FD governing selective disclosure rules of material nonpublic information.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">We are and will continue to be required to file
an annual report on Form 20-F within four months of the end of each fiscal year. In addition, we intend to publish our results on a semi-annual
basis as press releases, distributed pursuant to the rules and regulations of Nasdaq. Press releases relating to financial results and
material events will also be furnished to the SEC on Form 6-K. However, the information we are required to file with or furnish to the
SEC will be less extensive and less timely compared to that required to be filed with the SEC by U.S. domestic issuers. As a result, you
may not be afforded the same protections or information that would be made available to you were you investing in a U.S. domestic issuer.</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><div><a id="a_005"></a></div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Item 4. Information on the Company</b>&#160;&#160;</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><b>&#160;</b></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt"><b>A.</b></span></td><td style="text-align: left"><span style="font-size: 10pt"><b>History and Development of
the Company</b></span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Newegg Commerce, Inc. (previously known as &#8220;Lianluo Smart Limited&#8221;)
was incorporated as an international business company under the International Business Companies Act, 1984, in the British Virgin Islands
on July 22, 2003. The Company&#8217;s registered office is located at 17560 Rowland Street, City of Industry, CA 91748 and its telephone
number is (626) 271-9700, and its website address is www.Newegg.com. The address of the Company&#8217;s registered agent is Vistra License
Holdings (BVI) Limited, Vistra Corporate Services Centre, Wickhams Cay II, Road Town, Tortola, VG1110, British Virgin Islands. The SEC
maintains an internet site that contains reports, proxy information, and other information regarding issuers that file electronically
with the SEC at www.sec.gov. &#160;&#160;</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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&#8217;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. 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. We offer brands and sellers a wide range of options to sell through our platform, as
well as services that we offer to help make their online businesses more efficient and effective. Our Direct offering allows brands to
sell directly to us and we manage the inventory and transaction directly with our consumers. Our Marketplace offering allows brands to
leverage our platform, buyer audience and e-commerce solutions in order to generate sales on the Newegg platform.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt"><b>B.</b></span></td><td style="text-align: left"><span style="font-size: 10pt"><b>Business Overview</b></span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in"><b>&#160;</b></p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>The Newegg Ecosystem</b>&#160;</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Founded in 2001, we have developed a technology-focused e-commerce
ecosystem that enables all of our participants to discover, engage and transact with each other. We take pride in connecting customers
to a wide and increasing selection of technology products and a large range of brands, sellers, suppliers, manufacturers, distributors
and third-party service providers.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->32<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We have developed a powerful online marketplace that delivers value
to consumers, brands and sellers in the technology products sector. Our new product and service introductions are aimed at continually
improving our value proposition to these key constituents of our ecosystem and marketplace. For consumers, on the demand side, we provide
access to a vast, yet curated selection of technology products sourced globally. On the supply side, we create value for brand partners,
Marketplace sellers and suppliers by connecting them to one of the largest audiences of technology product consumers online. Additionally,
our platforms offer a comprehensive suite of e-commerce solutions, including product listing, fulfillment, marketing, customer service
and other value-added tools and services.</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><img alt="" src="image_001.jpg" style="width: 700px; height: 180px"/>&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Key Ecosystem Participants and How We Create Value for Them</i></b></p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">There are three key participants of our ecosystem: customers, Marketplace
sellers, and brand partners.</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Customers</b></p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We have built a large, highly engaged and loyal customer base. 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.</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our core customers include both our business-to-consumer (&#8220;B2C&#8221;)
customers and our business-to-business (&#8220;B2B&#8221;) customers. See &#8220;Our Business Models&#8221; for more information about
our B2C and B2B businesses.</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We believe that we offer the following compelling value propositions
to our customers:</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">Wide range of technology-focused
products. 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. Our extensive product offerings enable us to meet the diverse needs of a group of sophisticated
customers, which is difficult for brick-and-mortar retailers to match due to shelf space constraints.</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">Data-driven shopping experience.</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="text-align: left; width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">o</span></td><td style="text-align: left"><span style="font-size: 10pt">Content-rich, user-friendly
interface. Our platforms are user-friendly and easy to navigate, with features enabling customers to easily discover new products and
trends, such as intelligent product recommendations and curated, personalized content supported by data and analytics. 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 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.</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="text-align: left; width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">o</span></td><td style="text-align: left"><span style="font-size: 10pt">Timely, secure and reliable fulfillment. Leveraging our reliable
                                                                                                                                       logistics network and infrastructure, we are able to maintain a high level of shipping accuracy and reliability and timely delivery.
                                                                                                                                       See also &#8220;&#8212; Logistics and Fulfillment.&#8221; 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.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->33<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">Vibrant community of tech-savvy
customers. While expanding our range of product offerings, we continue to maintain a large and vibrant community of tech-savvy customers,
providing inspiration for visitors to discover new technology trends and products and valuable decision-making intelligence typically
not found at traditional retailers. 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.</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">Competitive Offerings.</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="text-align: left; width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">o</span></td><td style="text-align: left"><span style="font-size: 10pt">Competitive Pricing. We are
able to offer competitive pricing across a broad range of categories because of our scale, strong supplier and Marketplace seller relationships,
and our ability to maintain a cost-efficient infrastructure. Our experienced product management team leverages data to cost-effectively
match demand with supply, minimize inventory and reduce infrastructure costs associated with brick-and-mortar retailers. We are also
able to find optimized pricing points by leveraging our data and analytics capabilities and by monitoring our major competitors&#8217;
pricing trends.</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="text-align: left; width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">o</span></td><td style="text-align: left"><span style="font-size: 10pt">Flexible payment options. We
accept a variety of payment options and have sought to add new payment methods to cater to the needs of our customers. 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. See also &#8220;&#8212; Payment.&#8221;</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Marketplace Sellers</i></b></p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On our Newegg Marketplace, third-party sellers offer their products
to our customers through our platforms and pay us commissions on their sales. See &#8220;&#8212; Our Business Models &#8212; Marketplace&#8221;
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.</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;&#160;</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We are a business enabler for our Newegg Marketplace sellers in many
ways. We believe that our Marketplace sellers choose to partner with us not just because we offer a large online sales channel, but also
because we deliver the following additional value:</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">Scaled access to technology-focused
consumers. 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. In addition
to consumers, our Newegg Marketplace also provides smaller vendors and retailers with access to profitable B2B opportunities that would
otherwise be difficult to reach due to the challenges associated with providing specialized support for business&#8217; purchasing needs.</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">Access to premium e-commerce
solutions. Sellers generally face high barriers entering the e-commerce market, including logistics and scalable economics. Our Marketplace
addresses these challenges by providing sellers with a comprehensive suite of e-commerce solutions, including an API-enabled portal,
on-site promotions, a curated marketing program, and fulfillment and delivery services. Particularly, we provide Marketplace sellers
with valuable data insights, which help them to market their products more effectively, generate additional traffic and increase conversion.</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">Human touch. Our Marketplace
is a key component of our ecosystem. Since we launched our Marketplace model in 2010, we have carefully nurtured our relationships with
Marketplace sellers and have invested in their success, which we believe drives our continued growth in the long run. For example, we
assign dedicated account managers to qualified sellers to help them tackle the variety of challenges associated with operating a virtual
storefront.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->34<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Brand Partners</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We are a trusted partner and a go-to channel for many leading technology
product brands and are increasingly establishing partnerships with brands in a growing number of adjacent product categories. 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.</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We provide the following benefits for our brand partners:</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="text-align: left; width: 24px">&#160;</td>
    <td style="text-align: left; width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: left"><span style="font-size: 10pt">Access to a targeted customer base. Enabling brands to cost-effectively reach target audiences, our existing, loyal customer base is highly valued by companies targeting ready-to-buy, tech-savvy customers as well as foreign brands seeking to sell products and build brand awareness in the markets we serve.</span></td></tr>
  </table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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  <tr style="vertical-align: top">
    <td style="text-align: left; width: 24px">&#160;</td>
    <td style="text-align: left; width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: left"><span style="font-size: 10pt">Comprehensive and cost-efficient distribution channel. Leveraging Newegg&#8217;s customer-friendly online platforms, established logistics network and infrastructure and extensive e-commerce experience and expertise, we offer to our brand partners comprehensive and cost-efficient distribution channels and comprehensive supply chain capabilities, including marketing, warehousing, fulfillment and customer service.</span></td></tr>
  </table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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  <tr style="vertical-align: top">
    <td style="text-align: left; width: 24px">&#160;</td>
    <td style="text-align: left; width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: left"><span style="font-size: 10pt">Brand building and promotion solutions. We offer our brand partners solutions and support to run special promotions and targeted marketing and brand-building campaigns through our platforms utilizing data and interactive media in ways that cannot be achieved through traditional media. See &#8220;&#8212; Our Business Models &#8212; Marketing Services.&#8221;</span></td></tr>
  </table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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    <td style="text-align: left; width: 24px">&#160;</td>
    <td style="text-align: left; width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: left"><span style="font-size: 10pt">Data insights. We collect insights from our customers&#8217; interactions on the platform using our data and analytics capabilities. We use these insights, coupled with customer feedback and our knowledge of the e-commerce market, to facilitate our brand partners&#8217; product and marketing decision-making.</span></td></tr>
  </table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Our Business Models</b></p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our primary business model is to help customers find and purchase their
desired products through our platforms. From a customer base and target audience perspective, we categorize our business model into B2C
and B2B operations. We strive to offer a compelling online shopping experience, reliable and timely order fulfilment and superior customer
service across our B2C and B2B operations through our Direct sales, Marketplace and NPS platforms.</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following chart sets forth our business models:</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><img alt="" src="image_002.jpg" style="width: 624px; height: 300px"/>&#160;</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0"><b><i>B2C</i></b></p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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, including
emerging tech product categories such as 3D printers, home automation, wearable and health tech, E-sports, drones, and others.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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. 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. For details of these platforms, see &#8220;&#8212; Our Platforms &#8212; B2C Platforms.&#8221; Our B2C operations generated
GMV of $1.7 billion and $2.4 billion for the years ended December 31, 2022 and 2021, respectively.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>B2B</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our B2B customers span across a range of verticals, including healthcare
providers, K-12 and higher educational institutions, government agencies, and businesses of all sizes, and our B2B operations have been
focused on providing specialized support for their industry- and business-specific needs.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Currently, while we position NeweggBusiness.com as our dedicated B2B
website, a significant number of our B2B customers also shop via our account managers, or on our flagship retail platform, Newegg.com.
See &#8220;&#8212; Our Platforms &#8212; B2B Platforms&#8221; for more information about these platforms.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>How We Deliver Our Service</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We sell products to our B2C and B2B businesses through direct sales
and Marketplace.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We believe that the integration of our direct sales and Marketplace
operations has created a virtuous, self-reinforcing cycle. Our Marketplace is built on the success of our direct sales business, and we
believe that many sellers are attracted to our Marketplace by our direct sales credentials. On the other hand, as we continue to source
new products and recruit quality sellers, the choices available to customers also should increase, generating momentum for our growth.
We believe that this self-reinforcement, coupled with our reliable logistics network, has made it a top online destination for IT/CE products.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Direct Sales</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We acquire products directly from our partners that consist of manufacturers,
distributors and wholesalers, and sell them directly to our B2C and B2B customers. For our direct sales, we generally source the products,
take inventory risk, process customer payments, prepare packages for shipment and delivery, and provide customer service and support.
We stock and ship from our own warehouses, and also drop-ship directly to customers from our partners&#8217; warehouses.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Direct sales is a significant driver of our business, generating approximately
70.3% of our GMV for the year ended December 31, 2022. The success of our direct sales business depends largely upon our ability to secure
a broad selection of products from suppliers at competitive costs. Since the commencement of our operations, we have sought and cultivated
deep, longstanding relationships with some of the biggest IT brands in the world and many of the largest, most important IT distributors.
We continuously seek to build similar relationships with suppliers in new and emerging categories and geographies. Due to our strong supplier
relationships and our purchasing volume, we are able to obtain favorable pricing, early allocation of new products, preferential allocation
of products in shortage, and funding for product promotion and cooperative marketing. We also enjoy exclusive arrangements with certain
suppliers where we are able to offer highly demanded products exclusively on our platforms. For more information about merchandise sourced
for direct sales, see &#8220;&#8212; Merchandise Sourcing.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Marketplace</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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. 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. We also charge membership fees for the additional value-added services and
tools that we provide to sellers based on their enrollment.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our Marketplace operations consist of the Newegg Marketplace that launched
in 2010, the Newegg B2B Marketplace, and the Newegg Canada Marketplace that launched in 2014. 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. 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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">While we encourage Marketplace sellers to offer the most attractive
prices, they have the flexibility to price the products sold through our Marketplace. Due to our partnership, unique customer base, scale
and large visitor traffic, some of the Marketplace sellers also set aside exclusive offers, promotion, and product supplies for us and
offer some of the best offers tailored specifically to our customers. We have a rigorous process in place to assess our Marketplace sellers.
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 also require third-party sellers to meet our strict standards
and protocols in terms of product authenticity, customer service, and delivery and fulfillment so that customers are confident that they
receive the same level of buying experience and customer service that they expect when buying directly from us. See also &#8220;&#8212;
Customer Service and Support &#8212; Marketplace monitoring.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;<b><i>Merchandise Sourcing</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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. 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, 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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The table below shows our major product categories offered through
our platforms and their selected featured brands:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left; border-bottom: Black 1.5pt solid; width: 20%; font-weight: bold; vertical-align: top">Category</td><td style="width: 2%; font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; vertical-align: top; width: 38%; font-weight: bold; text-align: center">Products</td><td style="width: 2%; font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; vertical-align: top; width: 38%; font-weight: bold; text-align: center">Selected Featured Brands</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; vertical-align: top; font-weight: bold; text-align: left">Computer System</td><td>&#160;</td>
    <td style="vertical-align: top; text-align: left">Desktops, laptops, gaming laptops, peripherals and accessories</td><td>&#160;</td>
    <td style="vertical-align: top; text-align: left">Asus, MSI, HP, Lenovo, Acer, Microsoft, Samsung, LG, Gigabyte, Westinghouse</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left; font-weight: bold; vertical-align: top">Components</td><td>&#160;</td>
    <td style="vertical-align: top; text-align: left">CPU/processors, Graphic Cards, Motherboards, storage devices and computer accessories</td><td>&#160;</td>
    <td style="vertical-align: top; text-align: left">Intel, AMD, Asus, MSI, Corsair, Gigabyte, ASRock, EVGA, Western Digital, Seagate, Samsung, G.Skill</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left; font-weight: bold; vertical-align: top">Electronics</td><td>&#160;</td>
    <td style="vertical-align: top; text-align: left">Home Video, Home Audio, Headphones, Pro Audio/Video, Cellphones, Wearables, Digital Cameras</td><td>&#160;</td>
    <td style="vertical-align: top; text-align: left">Samsung, LG, Denon, Yamaha, Polk Audio, Klipsch, Jabra, JBL, Sennheiser, Bose, Beyerdynamic</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-indent: -0.125in; vertical-align: top; font-weight: bold; text-align: left">Office Solutions</td><td>&#160;</td>
    <td style="vertical-align: top; text-align: left">Display&#160;&amp; printing, office technology furniture, office supplies and mailing&#160;&amp; inventory supplies</td><td>&#160;</td>
    <td style="vertical-align: top; text-align: left">HP, Brother, Epson, Xerox, Lexmark, Zebra, Honeywell, ELO Touch, Sony, Sharp, Asus, Acer, Samsung, Eureka Ergonomic, COUGAR</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; vertical-align: top; font-weight: bold; text-align: left">Software&#160;&amp; Services</td><td>&#160;</td>
    <td style="vertical-align: top; text-align: left"><span style="font-size: 10pt">Software, Digital Downloads, Warranty&#160;&amp; Services, 3<sup>rd</sup> Party Gift Cards, and Entertainment Products</span></td><td>&#160;</td>
    <td style="vertical-align: top; text-align: left">Microsoft, Adobe, Norton, LifeLock, Intuit, Allstate</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left; font-weight: bold; vertical-align: top">Others</td><td>&#160;</td>
    <td style="vertical-align: top; text-align: left">Xbox, PlayStation, Home Networking, Server &amp; Components, Smart Home Products, Car Electronics, Motorcycles and ATV, Wheels and Tires, Home Improvement Tools, Home Appliances, Kitchen Utensils, Outdoor &amp; Garden Furniture, Fitness, Sports and Health Supplies</td><td>&#160;</td>
    <td style="vertical-align: top; text-align: left">Sony PlayStation, Microsoft Xbox, Google, Asus, TP-Link, Netgear, Alpine, Pioneer, Kenwood, Continental Tires, Goodyear Tires, Bosch, Dyson, Frigidaire, iRobot, Black &amp; Decker, LG, Huffy, Razor, Garmin, Philips, GT Racing</td></tr>
  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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. Leveraging our scale, brand and global
footprint, we seek to enter into exclusive agreements with selected suppliers and third-party distributors for some or all of their products
with favorable terms.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We deploy a flexible sourcing model, utilizing different distribution
channels when economically and logistically beneficial while maintaining our reseller authorizations and relationships with our brand
partners. As we increase in scale in new or emerging product categories, we endeavor to increase our purchases directly from manufacturers
and, where appropriate, to become an authorized reseller, which we believe provides improved product pricing and better access to preferred
product allocation.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our technology savvy customer base, our online marketing and merchandising
expertise and our ability to quickly and efficiently launch new products make us the go-to channel for many manufacturers and distributors.
We are particularly strong in the components categories where we are one of the largest channels online or offline and we continue to
gain significant traction with suppliers in other categories, such as desktop PCs, laptops, and input/output devices.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We maintain extensive and longstanding relationships with many of the
biggest technology product brands and distributors globally. We employ a team of merchandising professionals specifically trained to cultivate
and manage relationships with large international IT brands, such as AMD, Asus, Intel, Lenovo, Microsoft, MSI, Nvidia, and Samsung. 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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Private Labels</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In 2004, Newegg launched and offered our first private label brand,
Rosewill, 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. 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. We offer our private label products both
across our platforms and on other e-commerce platforms, such as Walmart, Amazon, and eBay.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Other Services and Solutions</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Supply Chain Third-party (3PL) Services</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">Shipped by Newegg&#174; Service.
We began to offer Shipped by Newegg, a comprehensive suite of warehousing and fulfillment services, to our Marketplace sellers in 2013.
Enrolled Newegg Marketplace sellers deliver their products to one of our fulfillment centers, and we handle the fulfillment of orders
placed in the sellers&#8217; online stores and charge service fees based on the size of the products and the shipping methods requested.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">Newegg Logistics. We launched
Newegg Logistics in 2014, a division dedicated to providing end-to-end e-commerce logistics and supply chain solutions covering warehousing,
inventory management, order processing, packing, and shipping, designed to reduce inventory costs and streamline supply chain efficiencies,
to our business partners, manufacturers, whole-sellers, Marketplace sellers and B2B clients. We provide our clients recommendations based
on their supply chain strategy and roadmap. To address our clients&#8217; concerns in managing customer returns, we customize a cost-effective
reverse logistics solution catered to their businesses. Our solutions range from small parcel delivery to Less Than Truckload, heavy
freight, and all the way up to intermodal transport and cross-border shipping, with easy access to road, rail, water, and air transport.
We typically enter into a master service agreement with our Newegg Logistics customers and charge service fees at a fixed rate.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">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. Clients such as vendor partners utilize these services as a one-stop shop
solution for all their business needs.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Marketing Services</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In 2020 we began rolling out the first of our marketing services for
Newegg Marketplace sellers. We offer flexible marketing packages consisting of advertising sales, event organization and other marketing
campaigns to our brand partners. We help brands reach a potential audience by leveraging our online portals, marketing affiliates and
promotional emails. We help our brand partners and Marketplace sellers design marketing activities with highly effective cost of sales.
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&#8217;
exposure.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Our Platforms</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our websites and mobile applications, which we refer to as the &#8220;Newegg
platforms,&#8221; are the foundation of our ecosystem. 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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>B2C Platforms</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">Newegg.com. 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. 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.</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">Newegg.ca. 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. Currently, nearly half of orders on Newegg.ca are fulfilled
from our warehouses. We also deliver to our Canadian customers via Shipped by Newegg or other third-party shipping companies. Orders
for merchandise offered by Canada-based Marketplace sellers are fulfilled locally by such sellers in Canada as well.</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">Newegg Global. 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. 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.</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">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 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. For
more details, see &#8220;&#8212; Technology &#8212; Our IT Capability &#8212; Mobile site and apps.&#8221;</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>B2B Platforms</i></b></p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In 2009, we launched NeweggBusiness.com, a site that currently supports
substantially all of our B2B operations. Over the years, we have built NeweggBusiness.com into a dedicated B2B e-commerce platform offering
a full range of IT, office and industrial products and solutions with a wide customer base ranging from government agencies, healthcare
institutions, and education institutions to other businesses of all sizes. NeweggBusiness.com supports both direct sales and a B2B Marketplace
that connects our B2B customers with over 1,820 third-party sellers globally.</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Other Platforms</i></b></p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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. For
details of Newegg&#8217;s 3PL services, see &#8220;&#8212; Our Business Models &#8212; Supply Chain Third-party (3PL) Services.&#8221;</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Logistics and Fulfillment</b></p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We have a reliable logistics network and infrastructure designed to
prioritize timely and accurate shipment of large quantities of orders. 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.</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our logistics and fulfillment infrastructure and capabilities include:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">Warehouses. 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 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.</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">Cooperation with reliable logistics
service providers. 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.</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">Virtual fulfillment. We ship
certain products to customers directly from vendors and distributors who meet our quality fulfillment standards without going through
our warehouses, a practice which we refer to as virtual fulfillment. Virtual fulfillment is fully utilized to broaden our product assortment
and avoid loss of sales when SKUs are out of stock. In the United States, virtual fulfillment accounted for approximately 7.6% of direct
sales for the year ended December 31, 2022.</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our logistics and fulfillment focus on reliable, efficient, and flexible
delivery.</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">Reliability. We have a reliable
technology platform and order process for our fulfillment operation. Each order is verified at least twice before being shipped. Customers
can track the shipping status of their purchases through links to our email and/or our websites and mobile applications. Our inventory
management and tracking also have redundant capabilities to enable each facility, if necessary, to fulfill most of our direct orders.
This redundancy could allow us to continually fulfill most orders, albeit less efficiently, as long as a single warehouse is operational.</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">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. When we order product from a supplier, we track the receipt
of the merchandise and can &#8220;material optimize,&#8221; or direct, the inventory to a specific warehouse to match customer demand
in a geographical area; when a purchase order is received, we match the order to our inventory and distribute a specific order fulfillment
assignment to one or more warehouses for processing. We use advanced, &#8220;pick-to-light&#8221; conveyer systems to allow our warehouse
staff to fulfill orders quickly.</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">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. For example, in 2019, in collaboration with UPS,
we introduced an option allowing customers to pick up the products they purchase at a nearby UPS location instead of having them delivered
at their own addresses. This is a safe and convenient shipping option and reduces the waiting time customers would otherwise experience
between the time an order is placed and when their products are received.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Customer Service and Support</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We have built our brand on the principle of superior customer service.
We provide high-quality customer service and support throughout our customers&#8217; entire engagement with us, from purchase to returns.</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">Customer service. Our in-house customer service staff are trained to
resolve customers&#8217; inquiries as quickly as possible. We currently operate customer service centers in California and Texas, focusing
on serving North American buyers. To enhance our service capabilities and maintain increased access, Newegg operates an Asia-based customer
service center that is available seven days a week, via email and instant messaging. Our customer service representatives are available
by phone, live-chat, chatbot or email. 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.</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">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. With that in mind, we closely monitor the performance of our Marketplace sellers to monitor compliance
with Newegg Marketplace rules, have a reliable logistics network, provide customers with quality customer support, ship orders on time,
and respond to customer queries in a timely fashion. We have adopted a zero-tolerance policy on counterfeit products and have rules in
place to take down allegedly counterfeit or pirated products and disqualify sellers selling counterfeit or pirated products. For more
information, see &#8220;Risk Factors &#8212; Risks Related to Newegg&#8217;s Business &#8212; Our reputation and business may be harmed
if we or our Marketplace sellers sell pirated, counterfeit, illegal or &#8220;gray market&#8221; items.&#8221;</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">Newegg Marketplace Guarantee
service. We also offer a special customer service program, Newegg Marketplace Guarantee, for Marketplace orders. With Newegg Marketplace
Guarantee, if a Marketplace seller fails to reimburse the customer for products that are damaged, defective, not received by customer,
or materially different from what was displayed on our platform by that seller, the customer can submit a claim directly to us and may
be eligible for reimbursement of the purchase price of any product they purchase from a Newegg Marketplace seller.</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">Return policy. Our standard
&#8220;Hassle Free&#8221; 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.</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">From a customer service perspective, in addition to customers, we broadly
define our customers to also include our Marketplace sellers, from whom we earn commissions, and purchasers of our 3PL services and other
ancillary e-commerce solutions and services. See &#8220;&#8212; The Newegg Ecosystem &#8212; Key Ecosystem Participants and How We Create
Value for Them &#8212; Marketplace Sellers&#8221; and &#8220;&#8212; Our Business Models &#8212; Supply Chain Third-party (3PL) Services&#8221;
for more information about our engagement with these customers.</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Payment</b></p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We provide our customers with the flexibility to choose from a number
of traditional online payment options, along with certain alternative payment solutions that are popular with our predominantly technology-enthusiast
customers.</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="text-align: left; width: 24px">&#160;</td>
    <td style="text-align: left; width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: left"><p style="margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">B2C payment options. We offer various mainstream online payment options
to customers on our B2C platform, including credit cards, debit cards and prepaid gift cards. We offer customers the opportunity to pay
for items purchased on our platforms with the Newegg Store Credit Card, a private-label credit card that Newegg launched in partnership
with Synchrony Financial, a U.S. consumer financial services company. Newegg Store Credit Card has a revolving credit line and offers
numerous attractive financing options, which we believe improves customer loyalty and purchase frequency and results in increased sales.
We also allow customers to use Bitcoin, Bitcoin cash, and other cryptocurrencies to pay for purchases made on our platforms through our
third-party payment service provider, BitPay, who converts and settles all transactions to U.S. dollars in real time. In Q4 2020, we started
offering &#8220;Pay in 4&#8221; 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 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.</p></td></tr>
  </table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="text-align: left; width: 24px">&#160;</td>
    <td style="text-align: left; width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: left"><span style="font-size: 10pt">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. 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.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Sales and Marketing</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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. We are focused on continuing
to enhance our brand awareness through a variety of online and offline marketing and brand promotion activities, while leveraging technology
to drive scalability and sustainability and eventually achieve optimal return on investment and highly effective cost of traffic as well
as sales.</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Referral</i></b></p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We benefit significantly from word-of-mouth referrals and positive
product reviews, and we believe our reputation as a one-stop&#8211;technology shop has led to strong word-of-mouth promotion, especially
among the technology-savvy. We have efficient customer acquisition strategies, because the majority of our web traffic is free. Free traffic
includes mobile apps, email &amp; 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%.</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Online Marketing</i></b></p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We conduct the majority of our marketing efforts online through targeted
marketing via affiliates, search engines, promotional emails, social media traffic, targeting and personalization, and online promotion
campaigns.</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">Paid search engine marketing.
Search engine marketing is an important driver of our traffic and customer acquisition. 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&#8217;s
websites, including desktop, mobile, and app traffic. 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. We also use sophisticated software to strategically
manage our keyword and SKU-level bids to maximize marketing performance at an efficient rate.</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">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. 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.</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">Targeting and personalization
marketing. Targeting and personalization have proved to be highly effective in terms of conversion and customer acquisition. Our Customer
Relationship Management Marketing Team runs various and highly diversified marketing programs through personalization and segmentation
on multiple channels including website, email, social, paid search engine, and more. Based on customers&#8217; onsite behavioral data
and purchase history data, we are able to identify prospective customers (that is, visitors sharing similar shopping patterns with current
Newegg customers) as well as existing customers and display our brand and product advertising ads to them when they are on social media
or Google search or other affiliate sites.</span></td>
</tr></table><div>
</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="text-align: left; width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">Other online marketing channels.
Other online marketing channels include click-through based advertising on publishers&#8217; 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.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Offline Marketing</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We also devote marketing resources to various offline formats, including
hosting or exhibiting at live events.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We are beginning to selectively participate in live events in the wake
of the COVID-19 pandemic, with a focus on the health and safety of our employees and event attendees.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Technology</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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. Our technology strategy is to develop our own proprietary software
and license technologies from third parties as appropriate in order to simplify and improve the shopping experience, as well as facilitate
our fulfillment, financial and customer service operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>IT Infrastructure</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We have built our technology platform by relying primarily on software
and systems that we have developed in-house and, to a lesser extent, on third-party software. Our technology infrastructure is designed
for scalability and reliability to support business growth. We utilize high-availability clusters comprising groups of servers to provide
sufficient redundancy and maintain continued service in the event of single point server failure due to hostile attacks, systematic errors
or other reasons. Our high-availability data system is designed so that back-up servers instantly connect to our network once master servers
experience technical difficulties.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We currently have one company-owned data center in City of Industry,
California and two co-location&#160;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. 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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Our IT Capability</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">Websites. &#160;&#160;Our website incorporates proprietary technology internally developed on a primarily Microsoft.NET platform. It provides product descriptions, search and ordering functionalities, and product reviews.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">Mobile site and apps. &#160;&#160;Customer activity on mobile devices is growing, and we are investing significantly in mobile technology to increase sales to customers using mobile devices. 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.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">Data and analytics. &#160;&#160;Data collected from our operations, including inventory data, behavioral and transactional data and pricing data, are housed in our data centers. 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. 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.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">Inventory management. &#160;&#160;Our supply chain management system includes price optimization, inventory balancing, and inventory forecasting and other subsystems. It enables effective sales forecasting and inventory management that increases the efficiency of our supply chain and helps us control costs. Our inventory availability is coordinated through our technology platform. We have added functionality to update our platforms on a real-time basis when items become out of stock in our fulfillment centers. 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.</span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">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 utilize both proprietary and third-party applications for accepting and validating purchase orders, placing and tracking orders with suppliers, managing inventory and assigning it to purchase orders, and ensuring proper shipment of products to customers.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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    <td style="width: 24px">&#160;</td>
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    <td><span style="font-size: 10pt">Fulfillment management. We have software for our fulfillment operations that tracks customer orders from placement through packing and shipping. We have installed sophisticated, &#8220;pick-to-light&#8221; conveyor systems and associated software and are making investments in new warehouse robotics technology. We have also developed software modules that efficiently manage the sorting and picking process of our products. Our systems are integrated with those from our primary U.S. shipping partners to facilitate tracking of the orders after shipment.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">Anti-fraud monitoring. &#160;&#160;Online fraud is a constant threat to the security and reliability of e-commerce retailers. We work with third-party vendors to monitor our network security devices and secure our online payment systems. We have developed proprietary tools in-house to monitor our online traffic for suspicious activities. Our websites have earned certifications from organizations and agencies like Tevora, based on our meeting of their information protection and fraud prevention standards.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Research &amp; Development Team</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our global research and development team is focused on innovation through
software development, algorithm design and development, and IT infrastructure design and maintenance. Our research and development personnel
continually upgrade our platforms and test new features to improve our customer experience. Our research and development team also develops
custom-built proprietary systems and engages third-party solutions to support our specific customer, vendor and Marketplace seller requirements,
including handling heavy traffic on our platforms, and providing quick and efficient fulfillment services to meet customer expectations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Security and Privacy Policy</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We are committed to protecting information security across all Newegg
platforms. We use a variety of techniques to protect the integrity of our networks and the confidential data we collect and store. Confidential
information concerning our customers, sellers and suppliers is encrypted and protected using SSL encryption software. In addition, we
use multiple layers of network segregation and hierarchical levels of firewall technology to protect against attacks or unauthorized access
to our networks, servers, and databases. We also continue to build new procedural safeguards as part of our comprehensive privacy program.
We operate in a secured and locked facility that requires all of our employees to check in and wear valid ID badges.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We have adopted a detailed privacy policy that describes in plain language
our data use practices and how privacy is protected at Newegg, including the extent to which other Newegg users may have access to this
information. We require users to acknowledge and expressly agree to this policy when registering with our platforms. For more information,
see &#8220;Risk Factors &#8212; Risks Related to Newegg&#8217;s Business &#8212; A significant inadvertent disclosure or breach of confidential
or personal information we hold could be detrimental to our business, reputation and results of operations.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Intellectual Property</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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. 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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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.
Our &#8220;Newegg&#8221; trademark and logo have also been registered with the relevant authorities in the United States, Canada and China
(as well as in other regions, such as the European Union and Brazil). Furthermore, we have also registered the trademarks and logos of
our private labels, such as Rosewill and ABS.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In addition to the protection of our intellectual property, we are
focusing on ensuring that our product offerings (especially our private-label products) do not infringe on the intellectual property of
others. Generally, our agreements with suppliers contain provisions to safeguard us against potential intellectual property infringement
by our suppliers and impose penalties in the event of any infringement. We reserve the right to refuse to work with or terminate our relationship
with suppliers where we become aware that they are violating the intellectual property rights of a third party.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Competition</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The worldwide market in which we compete is evolving rapidly and intensely
competitive, and we face a broad array of competitors from many different industry sectors around the world. Our current and potential
competitors include: (i) online, offline and multichannel retailers, publishers, vendors, distributors, manufacturers, and producers of
the products we offer and sell to customers; (ii) companies that provide ancillary D2C platform services and solutions, including website
development, advertising, customer service and payment processing; (iii) companies that provide fulfillment and logistics services for
themselves or for third parties, whether online or offline; and (iv) companies that design, manufacture, market, or sell consumer electronics,
telecommunication, and electronic devices.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We believe the principal competitive factors in our market are:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">breadth and quality of product
offerings;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">pricing;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">fulfillment capabilities;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">brand recognition and reputation;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">customer service;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">ability to respond more quickly
to changing consumer preferences;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">ability to reach a geographically
broader set of customers; and</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">ability to be more flexible in marketing to a specific set of potential customers.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Some of our current and potential competitors have greater resources,
longer histories, more customers, greater brand recognition, and greater control over inputs critical to our various businesses. They
may secure better terms from suppliers, adopt more aggressive pricing, pursue restrictive distribution agreements that restrict our access
to supply, direct consumers to their own offerings instead of ours, lock-in potential customers with restrictive terms, and devote more
resources to technology, infrastructure, fulfillment, and marketing. Each of our businesses is also subject to rapid change and the development
of new business models and the entry of new and well-funded competitors. Other companies also may enter into business combinations or
alliances that strengthen their competitive positions.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 51; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->46<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">See also Item 3 under the heading &#8220;Risk Factors,&#8221; the subheading
&#8220;Our business faces intense domestic and international competition.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Seasonality</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our business performance is subject to seasonal fluctuations. 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. 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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Government Regulations</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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.
Other existing and future laws cover issues such as user privacy, spyware and the tracking of consumer activities, marketing emails and
communications, other advertising and promotional practices, money transfers, pricing, content and quality of products and services, taxation,
electronic contracts and other communications and information security.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Particularly, under applicable federal and state laws and regulations
addressing privacy and data security, we must provide notice to consumers of our policies with respect to the collection and use of personal
information, and our sharing of personal information with third parties and notice of changes to our data handling practices. In some
instances, we may be obligated to give customers the right to prevent sharing of their personal information with third parties. Under
applicable federal and state laws, we also are required to comply with a number of requirements when sending commercial email to consumers,
including identifying advertising and promotional emails as such, ensuring that subject lines are not deceptive, giving consumers an opportunity
to opt out of further communications and clearly disclosing our name and physical address in each commercial email. Regulation of privacy
and data security matters is an evolving area, with new laws and regulations enacted frequently. For example, California enacted legislation
that, among other things, requires new disclosures to California consumers, and affords such consumers new abilities to opt out of certain
sales of personal information, which was effective on January 1, 2020. In addition, under applicable federal and state unfair competition
laws, including the California Consumer Legal Remedies Act, and U.S. Federal Trade Commission, regulations, we must accurately identify
product offerings, not make misleading claims on our platforms, and use qualifying disclosures where and when appropriate.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">There is also great uncertainty over whether or how existing laws governing
issues such as property ownership, sales and other taxes, auctions, libel, and personal privacy apply to the Internet and commercial online
services. For example, tax authorities in a number of states are currently reviewing the appropriate tax treatment of companies engaged
in online commerce, and new state tax regulations may subject us to additional state sales and income taxes. Additionally, new state legislation
may also subject us to other types of taxes. New legislation or regulation, the application of laws and regulations from jurisdictions
whose laws do not currently apply to our business or the application of existing laws and regulations to the Internet and commercial online
services could result in significant additional taxes or regulatory restrictions on our business or may necessitate changes to our business
practices. These obligations or changes could have an adverse effect on our financial position and results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 52; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->47<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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. For example, in Canada, we are subject to labor
and employment laws, laws governing advertising, privacy and data security laws, safety regulations and other laws, including consumer
protection regulations that apply to online retailers and/or the promotion and sale of merchandise and the operation of stores and warehouse
facilities. We monitor changes in these laws, regulations, treaties, and agreements, and believe that we are in material compliance with
applicable laws.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt"><b>C.</b></span></td><td style="text-align: left"><span style="font-size: 10pt"><b>Organizational Structure</b></span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">See Exhibit 8.1 for a list of our significant subsidiaries.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in"><b>&#160;</b></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt"><b>D.</b></span></td><td style="text-align: left"><span style="font-size: 10pt"><b>Property, Plants and Equipment</b></span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Our Facilities</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As of December 31, 2022, we leased the following principal facilities:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: bottom">
    <td style="border-bottom: black 1.5pt solid; text-align: left; vertical-align: bottom"><span style="font-size: 10pt"><b>Description of Use</b></span></td>
    <td style="padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><span style="font-size: 10pt"><b>Approximate<br/>
Square&#160;Footage<br/>
(in thousands)</b></span></td>
    <td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: black 1.5pt solid; text-align: center"><span style="font-size: 10pt"><b>Geographic<br/>
Location</b></span></td>
    <td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: black 1.5pt solid; text-align: center"><span style="font-size: 10pt"><b>Lease Expirations</b></span></td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; white-space: nowrap; width: 46%; vertical-align: top"><span style="font-size: 10pt">Corporate office facilities</span></td>
    <td style="white-space: nowrap; width: 1%">&#160;</td>
    <td style="white-space: nowrap; width: 1%">&#160;</td>
    <td style="white-space: nowrap; width: 11%; text-align: right"><span style="font-size: 10pt">150,884</span></td>
    <td style="white-space: nowrap; width: 1%">&#160;</td>
    <td style="white-space: nowrap; width: 1%">&#160;</td>
    <td style="white-space: nowrap; width: 11%; text-align: center"><span style="font-size: 10pt">North&#160;America</span></td>
    <td style="white-space: nowrap; width: 1%">&#160;</td>
    <td style="white-space: nowrap; width: 27%; text-align: center"><span style="font-size: 10pt">01/31/2025 through<br/>
11/30/2029</span></td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; white-space: nowrap; vertical-align: top"><span style="font-size: 10pt">Corporate office facilities</span></td>
    <td style="white-space: nowrap">&#160;</td>
    <td style="white-space: nowrap">&#160;</td>
    <td style="white-space: nowrap; text-align: right"><span style="font-size: 10pt">23,732</span></td>
    <td style="white-space: nowrap">&#160;</td>
    <td style="white-space: nowrap">&#160;</td>
    <td style="white-space: nowrap; text-align: center"><span style="font-size: 10pt">China</span></td>
    <td style="white-space: nowrap">&#160;</td>
    <td style="white-space: nowrap; text-align: center"><span style="font-size: 10pt">03/26/2023 through<br/>
12/31/2023</span></td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; white-space: nowrap; vertical-align: top"><span style="font-size: 10pt">Corporate office facilities</span></td>
    <td style="white-space: nowrap">&#160;</td>
    <td style="white-space: nowrap">&#160;</td>
    <td style="white-space: nowrap; text-align: right"><span style="font-size: 10pt">1,218</span></td>
    <td style="white-space: nowrap">&#160;</td>
    <td style="white-space: nowrap">&#160;</td>
    <td style="white-space: nowrap; text-align: center"><span style="font-size: 10pt">Taiwan</span></td>
    <td style="white-space: nowrap">&#160;</td>
    <td style="white-space: nowrap; text-align: center"><span style="font-size: 10pt">Through 04/30/2024</span></td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; white-space: nowrap; vertical-align: top"><span style="font-size: 10pt">Fulfillment and warehouse operations</span></td>
    <td style="white-space: nowrap">&#160;</td>
    <td style="white-space: nowrap">&#160;</td>
    <td style="white-space: nowrap; text-align: right"><span style="font-size: 10pt">1,863,912</span></td>
    <td style="white-space: nowrap">&#160;</td>
    <td style="white-space: nowrap">&#160;</td>
    <td style="white-space: nowrap; text-align: center"><span style="font-size: 10pt">North&#160;America</span></td>
    <td style="white-space: nowrap">&#160;</td>
    <td style="white-space: nowrap; text-align: center"><span style="font-size: 10pt">05/31/2024&#160;through<br/>
02/17/2032</span></td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; white-space: nowrap; vertical-align: top"><span style="font-size: 10pt">Fulfillment and warehouse operations</span></td>
    <td style="white-space: nowrap">&#160;</td>
    <td style="white-space: nowrap">&#160;</td>
    <td style="white-space: nowrap; text-align: right"><span style="font-size: 10pt">43,737</span></td>
    <td style="white-space: nowrap">&#160;</td>
    <td style="white-space: nowrap">&#160;</td>
    <td style="white-space: nowrap; text-align: center"><span style="font-size: 10pt">China</span></td>
    <td style="white-space: nowrap">&#160;</td>
    <td style="white-space: nowrap; text-align: center"><span style="font-size: 10pt">Through 01/17/2024</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As of December 31, 2022, Newegg owned the following principal facilities:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="font-weight: bold; border-bottom: Black 1.5pt solid">Description of Use</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Approximate<br/>
Square&#160;Footage<br/>
(in thousands)</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Geographic<br/>
Location</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 76%; text-align: left">Corporate office facilities</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">391,362</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 11%; text-align: center">China</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Corporate office facilities</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">2,707</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: center">Taiwan</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Fulfillment and warehouse operations</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">109,473</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: center">China</td></tr>
  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our corporate headquarters is located in the City of Industry, California.
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.
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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 53; Value: 1 --><div>
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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><div><a id="a_006"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Item 4A. Unresolved Staff Comments</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">None.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><div><a id="a_007"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Item 5. Operating and Financial Review and Prospects</b>&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>You should read the following discussion and analysis of our financial
condition and results of operations in conjunction with our consolidated financial statements and the related notes included elsewhere
in this annual report. This discussion contains forward-looking statements that are subject to known and unknown risks and uncertainties.
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 &#8220;Risk Factors&#8221; and &#8220;Disclosure Regarding Forward-Looking Statements&#8221; and elsewhere in this annual report.
We have prepared our financial statements in accordance with accounting principles generally accepted in the United States (&#8220;GAAP&#8221;).</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt -0.5in; text-indent: 0.5in"><b>Overview</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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&#8217;s report, as
measured by 20.1&#160;million average visits per month in 2022. Through <i>Newegg.com</i>, our flagship retail site, and other online
platforms, we connect our global customer base to a wide and increasing assortment of tech products and a massive pool of brands, sellers,
suppliers, manufacturers, distributors, and third-party service providers.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Headquartered in California, Newegg&#8217;s reach is global. 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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt -0.5in; text-indent: 0.5in"><b>Newegg&#8217;s Business Model</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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. We define GMV as 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. GMV also includes the services fees charged through our NPS in
rendering services for our 3PL, SBN, SLS, staffing and media ad services, as well as the sales made by our Asia subsidiaries. We generate
GMV and net sales primarily from the following sources:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-indent: -24pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt"><i>Direct sales</i>, where
we control inventories sourced from suppliers and directly sell goods to our customers on our platforms or certain other third-party
platforms. Our direct sales revenues include net sales generated from sales of products directly by us to customers on our Newegg platforms
(including wholesale where we sell inventories in bulk and mostly at a discount), sales through third-party websites of products we source
from suppliers, and freight revenues from fees we charge for delivery of goods that we directly sell to customers.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt"><i>Newegg Marketplace</i>,
where third-party sellers sell products through our Newegg Marketplace, and we recognize commission and service fees from such third-party
sellers in our net sales. 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. We refer to the net sales generated from Newegg
Marketplace as Marketplace revenues.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt"><i>&#9679;</i></span></td><td style="text-align: left"><span style="font-size: 10pt"><i>Newegg Partner Services
(&#8220;NPS&#8221;), </i>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 such net sales as services revenues.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Factors Affecting Newegg&#8217;s Results of Operations</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our financial condition and results of operations have been, and will
continue to be, affected by a number of important factors, including the following:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Newegg&#8217;s ability to grow our customer base and increase
their engagement level</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We monitor the following key operating metrics to evaluate our user
traffic and the engagement of our customer base.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="10" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">For the Year Ended <br/>
December&#160;31,</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="font-weight: bold; border-bottom: Black 1.5pt solid">Key Operating Metrics:</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2021</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2020</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">Number of active customers<sup>(1)</sup></span></td><td>&#160;</td>
    <td colspan="2" style="text-align: right">2.7 million</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">3.5 million</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">4.7&#160;million</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="width: 64%; text-align: left; text-indent: -10pt; padding-left: 10pt"><span style="font-size: 10pt">Repeat purchase rate<sup>(2)</sup></span></td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">31.3</td><td style="width: 1%; text-align: left">%</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">31.9</td><td style="width: 1%; text-align: left">%</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">32.5</td><td style="width: 1%; text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -10pt; padding-left: 10pt"><span style="font-size: 10pt">Average order value<sup>(3)</sup></span></td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">411</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">442</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">301</td><td style="text-align: left">&#160;</td></tr>
  </table><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Note:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">1.</span></td><td style="text-align: left"><span style="font-size: 10pt">Active customers as of a given
date are calculated by unique customer ID with at least one transaction purchased on our platforms during the relevant 12-month measurement
period.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">2.</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Measured by the percentage of customers who made at least two purchases on Newegg platforms during the relevant 12-month measurement period.</span></td></tr>
  <tr style="vertical-align: top">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">3.</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Calculated by dividing sales volume by number of transactions during the relevant 12-month measurement period.</span></td></tr>
  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We use the above operating metrics to measure our overall customer
engagement with our platforms. Our operating metrics vary from time to time due to factors including economic trends, new product releases,
the level of competition we face, and the purchase patterns of our customers. The number of active customers, repeat purchase rates, and
average order value are indicators of the size and engagement of our customer base.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Newegg&#8217;s product mix</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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&#160;million SKUs across over 1,605 categories. Products are offered
on our online platforms across a range of types, brands, and price points. We believe that customers are attracted to our online platforms
primarily by the breadth and depth of our product offerings, a critical component of our ability to increase sales and drive long-term
profitability. In addition to core technology products, in recent&#160;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&#160;&#8212;&#160;adjacent
categories.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">Our results of operations are affected by our merchandise mix, as products
of different categories, brands and price points have a range of margin and profitability profiles. For example, categories where we hold
lower market share and we strive to grow at an accelerated rate over market may offer relatively lower margins. Our merchandise mix may
shift over time due to the combination of a variety of factors, including consumer demands and preferences, average selling prices, our
ability to maintain and expand our supplier relationships, our ability to forecast market trends, and our marketing and promotional efforts.
We continuously monitor the GMV and margin mix of our product offerings and we seek to increase the percentage of GMV and net sales from
categories and brands with attractive margin profiles.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Success of Newegg Marketplace</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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.</p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->50<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">For the years ended December 31, 2022, 2021, and 2020, our Newegg Marketplace
generated GMV of $552.2&#160;million, $742.4 million, and $663.7&#160;million, respectively, and accounted for approximately 25.1%, 24.5%
and 24.2%, respectively, of our total GMV.&#160;During the same periods, our Newegg Marketplace generated net sales of $47.0&#160;million,
$63.5 million, and $57.6&#160;million, respectively, and accounted for 2.7%, 2.7%, and 2.7%, respectively, of our total net sales. 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)&#160;a reduction in the number of Marketplace sellers and SKUs due to fraud and counterfeit prevention initiatives; and
(ii)&#160;category consolidation initiatives designed to streamline our Marketplace catalogue.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our results of operations have been, and will continue to be, influenced
by shifts over time in the GMV mix between direct sales and Marketplace. This is primarily due to the difference in revenue recognition&#160;&#8212;&#160;we
recognize revenues from direct sales on a gross basis, while we recognize revenues from the Newegg Marketplace on a net basis. See &#8220;&#8212;&#160;Key
Components of Results of Operations&#8221; for details. Accordingly, for the same amount of GMV, direct sales generates more net sales
than Marketplace and, therefore, an increase in the GMV contribution of Marketplace as a portion of the total GMV would have a negative
impact on our net sales.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0"><b><i>Newegg&#8217;s ability to forecast consumer needs and preferences</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">The IT/CE e-commerce market in North America and globally is characterized
by rapidly evolving technologies, fast-changing consumer requirements and preferences and frequent releases of new products and introductions
of updated industry standards and practices. We must effectively respond to these changes to remain competitive. We may have difficulty
anticipating consumer demand and preferences, and the goods offered on our online platforms may not be accepted by the market or may be
rendered obsolete or uneconomical. Our inability to adapt to these developments may lead to excessive or deficient inventories or a failure
to attract new customers and retain existing customers, which could materially and adversely affect our financial condition and results
of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0"><b><i>Newegg&#8217;s ability to source products from key suppliers
on favorable terms</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">As of December&#160;31, 2022, we offered over 124,000 direct sales
SKUs sourced from at least 395&#160;suppliers globally. We maintain extensive, long-standing and mutually beneficial relationships with
many of the biggest tech product brands and distributors globally. However, our contracts or arrangements with such suppliers generally
do not guarantee the availability of merchandise or provide for the continuation of particular pricing or other practices. 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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">We compete with other retailers and direct marketers for favorable
product allocations and vendor incentive programs from product manufacturers and distributors. Some of our competitors could enter into
exclusive or favorable distribution arrangements for certain products with our vendors, which would deny us complete or partial access
to those products and marketing and promotional resources. In addition, some vendors whose products are offered on our online platforms
also sell their products directly to customers. If we are unable to develop and maintain relationships with suppliers that permit us to
obtain sufficient quantities of desirable merchandise on favorable terms, our results of operations could be adversely impacted.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b>Segment Information</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">Our chief operating decision maker (i.e. chief executive officer) reviews
financial information presented on a consolidated basis, accompanied by disaggregated information about revenue by countries or regions&#160;for
purposes of allocating resources and evaluating financial performance. There are no segment managers who are held accountable for operations,
operating results and plans for levels or components below the consolidated unit level. Based on qualitative and quantitative criteria
established by Accounting Standards Codification (&#8220;<b>ASC</b>&#8221;) 280, &#8220;Segment Reporting,&#8221; we consider ourselves
to be operating within one reportable segment.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0 0pt 0.25in"><b>&#160;</b></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt"><b>A.</b></span></td><td style="text-align: left"><span style="font-size: 10pt"><b>Operating Results</b></span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0 0pt 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b>Key Components of Results of Operations</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0 0pt 0.25in"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>Net Sales</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">Our net sales consist of direct sales revenues, Marketplace revenues
and services revenues. See &#8220;&#8212;&#160;Newegg&#8217;s Business Model&#8221; for more information about these sources of net sales.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our net sales are reported net of anticipated discounts, returns, allowances,
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which we record as reductions in sales based on anticipated redemption rates estimated from historical experience.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="width: 1%; text-align: left">$</td><td style="width: 6%; text-align: right">2,243.4</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">57.6</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>Cost of Sales</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">The largest component of our cost of sales is the purchase price of
goods that we directly sell to customers. Cost of sales also includes (i)&#160;costs relating to our service revenues, which include personnel
expenses and other costs relating to our third-party logistics services; (ii)&#160;inbound and outbound freight costs; and (iii)&#160;inventory
write-offs relating to refurbished, slow-moving and obsolete inventories and adjustments for vendor incentives related to inventory still
on hand at the reporting date.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">Cost of sales is partially offset by payments we earn under vendor
incentive programs, or VIPs, such as purchase rebates, marketing development funds that vendors give us to advertise their products, cooperative
marketing programs jointly funded with vendors, and price protection refunds to offset reductions in the manufacturer&#8217;s suggested
retail price. 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&#8217; products. Therefore, we treat these program payments as reductions to cost of sales.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="text-align: center; padding-bottom: 1.5pt">&#160;</td><td style="text-align: center; padding-bottom: 1.5pt; font-weight: bold">&#160;</td>
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; ">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>Selling, General and Administrative Expenses</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The largest component of our selling, general and administrative expenses
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following table sets forth the components of our SG&amp;A expenses,
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="padding-bottom: 1.5pt; text-align: center">&#160;</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td>
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following table summarizes our consolidated results of operations
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(2.9</td><td style="text-align: left">)</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">23.5</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">1.2</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">0.1</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">1.1</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">0.0</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">1.1</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">0.1</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(0.7</td><td style="text-align: left">)</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(0.6</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(0.0</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(0.7</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(0.0</td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">5.2</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">0.2</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">1.8</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">0.1</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">5.2</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">0.2</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(2.3</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(0.1</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; text-indent: -0.125in; padding-left: 0.125in">Income (loss) from equity method investment</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(7.4</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(0.3</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">3.2</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">0.2</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">1.7</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">0.1</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; text-indent: -0.125in; padding-left: 0.125in">Gain from disposal of subsidiary</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">2.0</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">0.1</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt; text-indent: -0.125in; padding-left: 0.125in">Change in fair value of warrants liabilities</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">1.1</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">0.1</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">0.1</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">0.0</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">&#8212;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">&#8212;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; text-indent: -0.125in; padding-left: 0.125in">Income (loss) before provision for income taxes</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(43.3</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(2.5</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">30.5</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">1.3</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">32.3</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">1.5</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt; text-indent: -0.125in; padding-left: 0.125in">Provision for (benefit from) income taxes</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">14.1</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">0.8</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(5.8</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(0.2</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">1.9</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">0.1</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="font-weight: bold; text-align: left; padding-bottom: 4pt; text-indent: -0.125in; padding-left: 0.125in">Net income (loss)</td><td style="font-weight: bold; padding-bottom: 4pt">&#160;</td>
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    <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">(3.3</td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left">)</td><td style="font-weight: bold; padding-bottom: 4pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -0.125in; padding-left: 0.125in">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">0.08</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">$</td><td style="text-align: right">(0.15</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">0.08</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">0.08</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">363.3</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -0.125in; padding-left: 0.125in">Weighted average number of common stock outstanding used in computing per share amounts, diluted</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">373.1</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">432.2</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">385.0</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td></tr>
  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">Note:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">(1)</span></td><td style="text-align: left"><span style="font-size: 10pt">Includes share-based compensation
expenses of $33.9 million, $6.3&#160;million, and $1.6&#160;million, respectively, in&#160;years ended December&#160;31, 2022, 2021,
and 2020.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Year Ended December 31, 2022 Compared to Year Ended December 31,
2021</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>Net sales</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Net sales decreased by 27.6%&#160;for the year ended December 31, 2022
compared to the comparable prior year period from $2,376.2&#160;million in 2021 to $1,720.3&#160;million in 2022, which was mainly due
to the decrease in GMV from our direct sales and marketplace businesses from $2,195.9&#160;million and $742.4&#160;million for the year
ended December 31, 2021, respectively, to $1,544.8&#160;million and $552.2&#160;million for the year ended December 31, 2022, respectively.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The decrease in GMV was primarily due to a downward trend in consumer
spending in technology products in light of economic uncertainty and recession fears as consumers reduced their discretionary spending.
In addition, recent consumer purchases of technology products during the pandemic, along with longer expected product lifespans, have
extended the upgrade cycle. As a result, the customer demand for technology products has significantly decreased compared to the prior
year period.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->53<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>Cost of sales&#160;&amp; gross profit</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">For the year&#160;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&#160;million in 2022, generally reflective
of the decrease in our net sales. During the same period, our gross profit decreased by 33.5% from $326.0&#160;million for the year ended
December 31, 2021 to $216.7&#160;million for the year ended December 31, 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our profit margin decreased to 12.6% for the year ended December 31,
2022 from 13.7% for the year ended December 31, 2021, primarily due to the significant decline in consumer demand caused by reduction
in consumer discretionary spending for certain products such as video graphic cards, hard disk and solid-state drives which led to excess
inventory in 2022. We implemented aggressive promotions in 2022 to move inventory which caused a significant drop in margin.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>Selling, general and administrative expenses (&#8220;SG&amp;A&#8221;)</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">For the year ended December 31, 2022, SG&amp;A expenses decreased to
$266.2&#160;million from $292.5&#160;million for the year ended December 31, 2021, which mainly resulted from (i)&#160;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.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>Interest income and expense</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Interest income is earned on (i)&#160;our loans to affiliates; and
(ii)&#160;cash invested in money market accounts or certificates of deposit. See &#8220;Related Party Transactions&#8221; 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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Interest income remained consistent at $1.2&#160;million and $1.1&#160;million
for the year ended December 31, 2022 and 2021, respectively.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Interest expense remained consistent at $0.7&#160;million and $0.6
million for the year ended December&#160;31, 2022 and 2021, respectively.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>Other income, net</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">For the year ended December 31, 2022 and 2021, we recorded other income,
net of $5.2&#160;million and $1.8&#160;million, respectively. 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&#160;million, sales tax discount income of $0.4 million,
foreign exchange gain of $0.9 million and other miscellaneous income of $1.3&#160;million. For the year ended December&#160;31, 2021,
other income, net, primarily consisted of sales tax rebate from Texas of $1.3 million, insurance proceeds of approximately $1.0&#160;million
related to the inventory loss in the U.S., property rental income of $1.6&#160;million, sales tax discount income of $0.4 million, and
other miscellaneous income of $0.8&#160;million, which was partially offset by foreign exchange loss of $3.3 million.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>Impairment of equity method investment</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">For the year ended December&#160;31, 2022, we impaired our equity method
investment of $2.3 million on our investment in Mountain Capital Fund L.P. (&#8220;Mountain Capital&#8221;). See Note 6 to the consolidated
financial statements for further information.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>Gain from sale of investment</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">For the year ended December&#160;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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>Change in fair value of warrants liabilities</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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&#160;million, respectively.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>Provision for/(benefit from) income taxes</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our provision for income taxes was $14.1&#160;million for the year
ended December 31, 2022 compared to a benefit of $5.8&#160;million for the year ended December 31, 2021. The increase in our provision
for income taxes was mainly due to the recording of the valuation allowance of $17.5 million.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>Net income/(loss)</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">For the year ended December&#160;31, 2022, we recorded a net loss of
$57.4&#160;million in 2022, as compared to a net income of $36.3&#160;million for the same period in 2021. The decrease in net income
is primarily driven by a decline in our net sales and gross margin.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Year Ended December 31, 2021 Compared to Year Ended December 31,
2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>Net sales</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Net sales increased by 12.4%&#160;for the year ended December 31, 2021
compared to the comparable prior year period from $2,114.9&#160;million in 2020 to $2,376.2&#160;million in 2021, which was mainly due
to the increase in GMV from our direct sales and marketplace businesses from $1,968.7&#160;million and $663.7 million for the year ended
December 31, 2020, respectively, to $2,195.9&#160;million and $742.4&#160;million for the year ended December 31, 2021, respectively.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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. 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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>Cost of sales&#160;&amp; gross profit</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">For the year&#160;ended December 31, 2021, our cost of sales increased
by 11.4% compared to the comparable prior year period from $1,841.2&#160;million in 2020 to $2,050.2&#160;million in 2021, generally reflective
of the increase in our net sales. During the same period, our gross profit increased by 19.1% from $273.7&#160;million for the year ended
December 31, 2020 to $326.0&#160;million for the year ended December 31, 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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, <i style="font-style: normal; font-weight: normal">ABS</i>,
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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>Selling, general and administrative expenses </i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">For the year ended December 31, 2021, SG&amp;A expenses increased to
$292.5&#160;million from $250.2&#160;million for the year ended December 31, 2020, which mainly resulted from (i)&#160;an increase in
salary and other compensation costs by $19.5&#160;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)&#160;an increase in merchant payment fees by $7.8&#160;million which is variable to sales,
and (iii)&#160;an increase in other expenses by $9.2&#160;million related to professional fees incurred for the recapitalization.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>Interest income and expense</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Interest income is earned on (i)&#160;our loans to affiliates; and
(ii)&#160;cash invested in money market accounts or certificates of deposit. See &#8220;Related Party Transactions&#8221; 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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Interest income remained consistent at $1.1&#160;million and $1.1&#160;million
for the year ended December 31, 2021 and 2020, respectively.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Interest expense remained consistent at $0.6&#160;million and $0.7
million for the year ended December&#160;31, 2021 and 2020, respectively.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>Other income, net</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">For the year ended December 31, 2021 and 2020, we recorded other income,
net of $1.8&#160;million and $5.2&#160;million, respectively. 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&#160;million related to the inventory loss in
the United States, property rental income of $1.6&#160;million, sales tax discount income of $0.4 million, and other miscellaneous income
of $0.8&#160;million, which was partially offset by foreign exchange loss of $3.3 million. For the year ended December&#160;31, 2020,
other income, net, primarily consisted of partnership incentives of $1.5&#160;million, sales tax rebates and discounts of $1.4&#160;million,
and insurance proceeds of $0.8&#160;million.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>Equity income from equity method investment</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">For the year ended December&#160;31, 2021, we recorded a loss on equity
method investment of $7.4&#160;million on our investment in Mountain Capital. For the year ended December&#160;31, 2020, we recorded a
gain on equity method investment of $3.2&#160;million on our investment in Mountain Capital.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>Gain from disposal of subsidiary</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On May&#160;19, 2021, we disposed all of LLIT&#8217;s legacy business
contemplated by that certain Equity Transfer Agreement dated October&#160;23, 2020, by and among LLIT, our wholly owned subsidiary, Lianluo
Connection and Beijing Fenjin. 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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We recognized a $2.0&#160;million gain from disposal of Lianluo Connection
for the year ended December 31, 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>Change in fair value of warrants liabilities</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Warrants are remeasured at fair value with changes in fair value recorded
in earnings in each reporting period. We recorded a gain on the change in fair value of warrant liabilities of $0.1&#160;million due to
the increase in stock price as of December 31, 2021, as compared to the stock price as of May&#160;19, 2021. There were no warrant liabilities
as of December 31, 2020.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>Provision for/(benefit from) income taxes</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our benefit from income taxes was $5.8&#160;million for the year ended
December 31, 2021 compared to a provision of $1.9&#160;million for the year ended December 31, 2020. The decrease in our provision for
income taxes was mainly due to the net change&#160;of the valuation allowance of $13.9 million, partially offset by $3.2 million provision
for income tax for Canada.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>Net income</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">For the year ended December&#160;31, 2021, we recorded a net income
of $36.3&#160;million in 2021, as compared to a net income of $30.4&#160;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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Non-GAAP Financial Measures</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>GMV</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">GMV is the total dollar value of products sold on our websites and
third-party marketplace platforms (including Nutrend, an online retailer specialized in automotive, motorcycle, ATV, and RV products,
and Rosewill sales), directly to customers and by our Marketplace sellers through Newegg Marketplace, net of returns, discounts, taxes,
and cancellations. 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. It helps us assess and analyze changes in revenues, and if reviewed
in conjunction with net sales&#160;and other GAAP financial measures, it can provide more information in evaluating our current performance
and in assessing our future performance. See &#8220;&#8212;&#160;Newegg&#8217;s Business Model.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">GMV, in previous filings, was defined as the total dollar value of
products sold on our websites, directly to customers and by our Marketplace sellers through Newegg Marketplace, net of returns, discounts,
taxes and cancellations.&#160; We redefined GMV, as of the date of the filing of our Annual Report on Form 20-F for the year ended December
31, 2021, to include Nutrend and Rosewill sales through third-party marketplace platforms, service and other revenues through NPS, such
as 3PL, SBN, SLS, staffing, and media ad services, as well as sales made by our Asia subsidiaries.&#160; The change was warranted to ensure
that we report GMV to include all revenues of the company across all our revenue streams that will allow the readers to better understand
our overall performance.&#160; The change in the GMV definition resulted in an increase in GMV for 2020 of $110.7 million.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="padding-bottom: 1.5pt">&#160;</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td>
    <td colspan="10" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">For the Year Ended December 31,</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="padding-bottom: 1.5pt">&#160;</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td>
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(67.0</td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(9.3</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(8.3</td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  </table><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>Adjusted EBITDA</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Adjusted EBITDA is a financial measure that includes the removal of
various one-time, irregular, and non-recurring items from EBITDA.&#160;We believe that exclusion of certain expenses in calculating Adjusted
EBITDA facilitates operating performance comparisons on a period-to-period basis and excludes items that we do not consider to be indicative
of our core operating performance. 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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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.&#160;Some of these limitations are:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-indent: -24pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">although depreciation and amortization
are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not
reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-indent: -24pt"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">Adjusted EBITDA does not reflect
changes in, or cash requirements for, our working capital needs;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-indent: -24pt"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">Adjusted EBITDA does not consider
the potentially dilutive impact of stock-based compensation;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-indent: -24pt"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">Adjusted EBITDA does not reflect
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</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-indent: -24pt"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">Other companies, including
companies in our industry, may calculate Adjusted EBITDA differently, which reduces its usefulness as a comparative measure.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Because of these limitations, you should consider Adjusted EBITDA alongside
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following table reflects the reconciliation of net income (loss)
to Adjusted EBITDA for each of the periods indicated.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="font-size: 10pt">&#160;</td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="10" style="font: bold 10pt Times New Roman, Times, Serif; text-align: center; border-bottom: Black 1.5pt solid">For the Year Ended December 31,</td><td style="padding-bottom: 1.5pt; font: bold 10pt Times New Roman, Times, Serif">&#160;</td></tr>
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  </table><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt"><b>B.</b></span></td><td style="text-align: left"><span style="font-size: 10pt"><b>Liquidity and Capital Resources</b></span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><b><i>Cash flows and working capital</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We have historically funded our operations through existing working
capital, credit facilities, bank loans, return from investing activities, and equity financings. See Notes 8 and 9 to our consolidated
financial statements included elsewhere in this annual report for more information about the line of credit and long-term debt that we
obtain from financial institutions.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our cash and cash equivalents consist primarily of cash on deposit,
certificates of deposit, and money market accounts. Cash equivalents are all highly liquid investments with original maturities of three&#160;months
or fewer. Amounts receivable from payment processors are also considered cash equivalents as they are both short term and highly liquid
in nature and are typically converted to cash within three&#160;business days. Amounts due to us from payment processors that are classified
as cash and cash equivalents totaled $13.0&#160;million&#160;and $14.3&#160;million at December 31, 2022 and December&#160;31, 2021, respectively.
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&#160;months from the date of the filing of this annual report. Our cash and cash equivalents are
primarily denominated in U.S.&#160;dollars.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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. 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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We intend to finance our future working capital requirements and capital
expenditures from cash generated from operating activities, borrowings from our existing credit facilities, funds raised from financing
activities, and returns from investing activities. Our future capital requirements may, however, vary materially from those now planned
or anticipated. Changes in our operating plans, lower than anticipated net sales, increased expenses or other events, including those
described in &#8220;Risk Factors,&#8221; may cause us to seek additional debt or equity financing in the future. If our existing cash
is insufficient to meet our requirements, we may seek to issue debt or equity securities or obtain additional credit facilities. Financing
may not be available on acceptable terms, on a timely basis, or at all, and our failure to raise adequate capital when needed could negatively
impact our growth plans and our financial condition and results of operations. Issuance of additional equity securities, including convertible
debt securities, would dilute our earnings per share. 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.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><b><i>Historical Cash Flows</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following table sets forth our selected consolidated cash flow
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
    <td style="padding-bottom: 1.5pt">&#160;</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td>
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; text-indent: -10pt; padding-left: 10pt">Net cash used in investing activities</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  </table><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Operating activities</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Net cash provided by operating activities was $20.5&#160;million in
2022. Net loss was $57.4&#160;million for the period. The adjustments for non-cash expenses are primarily comprised of (i)&#160;$11.0&#160;million
of depreciation and amortization that was associated with property and equipment; (ii)&#160;$9.5&#160;million of provision for obsolete
and excess inventory; (iii)&#160;$33.9&#160;million of stock-based compensation; (iv)&#160;$2.3 million loss from impairment of equity
method investment; (v) $12.5 million from deferred income taxes and partially offset by (a) $1.7 million gain from sale of investment
and (b) $1.1 million change in fair value of warrant liabilities. The changes in operating assets and liabilities represented $10.2&#160;million
cash provided by (i)&#160;a decrease in inventory of $78.8&#160;million; (ii)&#160;a decrease in prepaid expenses of $0.9 million; (iii)
a decrease in other assets of $10.0 million, partially offset by (a) an increase in accounts receivable of $22.0 million, (b) a decrease
in accounts payable of $14.1 million; (c) a decrease in accrued liabilities and other liabilities of $34.4&#160;million; and (d) a decrease
in deferred revenue of $8.9&#160;million.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Net cash used in operating activities was $53.3&#160;million in 2021.
Net income was $36.3&#160;million for the period. The adjustments for non-cash expenses are primarily comprised of (i)&#160;$10.8&#160;million
of depreciation and amortization that was associated with property and equipment; (ii)&#160;$8.3&#160;million of provision for obsolete
and excess inventory; (iii)&#160;$6.3&#160;million of stock-based compensation; (iv)&#160;$7.4 million equity loss from equity method
investments; and partially offset by $12.7 million from deferred income taxes. The changes in operating assets and liabilities represented
$109.1&#160;million cash used in (i)&#160;an increase in inventory of $70.8&#160;million; (ii)&#160;an increase in other assets of $50.9&#160;million;
(iii) a decrease in accounts payable of $20.1 million; (iv) a decrease in deferred revenue of $7.4&#160;million; and (v) an increase in
prepaid expenses of $2.2&#160;million, partially offset by (a) an increase in accrued liabilities and other liabilities of $41.5&#160;million;
and (b) a decrease in accounts receivable of $0.8&#160;million.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Net cash provided by operating activities was $84.5&#160;million in
2020. Net income was $30.4 million for the period. The adjustments for non-cash expenses are primarily comprised of (i)&#160;$9.1&#160;million
of depreciation and amortization that was associated with property and equipment; (ii)&#160;$7.3&#160;million of bad debt expense, and
(iii)&#160;$4.2&#160;million of provision for obsolete and excess inventory. The changes in operating assets and liabilities represented
a $34.4 million increase in cash provided by (i)&#160;an increase in accounts payable of $76.3 million; (ii)&#160;an increase in accrued
liabilities and other liabilities of $44.6 million; and (iii)&#160;an increase in deferred revenue of $21.8&#160;million, partially offset
by (a)&#160;an increase in inventory of $76.2 million; (b) an increase in accounts receivable of $14.1&#160;million; (c)&#160;an increase
in other assets of $10.5 million; and (d) an increase in prepaid expenses of $7.5 million.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Investing activities</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Net cash used in investing activities was $3.8&#160;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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Net cash used in investing activities was $13.8&#160;million for the
year ended December 31, 2021, which was primarily attributable to the payments made to acquire property and equipment.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Net cash used in investing activities was $5.2&#160;million for the
year ended December&#160;31, 2020, which was primarily attributable to the payments made to acquire property and equipment of $6.2&#160;million
partially offset by the proceeds from insurance of $0.8&#160;million and disposal of fixed assets of $0.1&#160;million.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;<b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Financing activities</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Net cash provided by financing activities was $1.5&#160;million for
the year ended December 31, 2022, which was mainly due to (i)&#160;borrowings under line of credit of $46.2&#160;million; and (ii)&#160;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.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Net cash provided by financing activities was $12.7&#160;million for
the year ended December 31, 2021, which was mainly due to (i)&#160;cash received from common control asset transaction of $11.4 million;
and (ii)&#160;borrowings under line of credit of $0.8&#160;million.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Net cash used in financing activities was $1.7&#160;million for the
year ended December&#160;31, 2020, due to the repayment of our line of credit.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Capital Expenditures</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our capital expenditures are incurred primarily in connection with
purchases of property and equipment and leasehold improvements. Our capital expenditures were $9.2 million, $13.8&#160;million, and $6.2
million for the years ended December&#160;31, 2022, 2021, and 2020, respectively.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Credit Agreements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We entered into a credit agreement in August&#160;2021 with several
financing institutions that provided a revolving credit facility of up to $100&#160;million with a maturity date of August&#160;20, 2024.
Prior to August&#160;20, 2023 and subject to certain terms and conditions, the Maximum Revolving Advance Amount, as defined in the credit
agreement, could be increased up to $150.0&#160;million. The revolving credit facility includes a letter of credit sublimit of $30.0&#160;million,
which can be used to issue standby and trade letters of credit, and a $20.0&#160;million sublimit for swingline loans. In April 2023,
we amended the credit agreement in order to transition the benchmark rate for certain loans made under the credit agreement from LIBOR
to SOFR. In general, advances from this line of credit will be subject to interest at the Term SOFR Rate plus the Applicable Margin, as
defined in the credit agreement, so long as the Term SOFR Reference Rate or Term SOFR is offered, ascertainable, and not unlawful, or
the Alternate Base Rate (to be defined as the highest of the (a)&#160;the Base Rate in effect on such&#160;day, (b)&#160;the sum of the
Overnight Bank Funding Rate in effect on such&#160;day plus 0.50%, or (c)&#160;the daily Term SOFR Rate plus 1.0%) plus the Applicable
Margin. For Term SOFR Rate loans, we may select interest periods of one or three&#160;months. Interest on Term SOFR Rate loans shall be
payable at the end of the selected interest period. Interest on Alternate Base Rate loans is payable monthly. In the event of the permanent
or indefinite cessation of the Term SOFR Rate, the Benchmark Replacement will replace the Term SOFR Rate.&#160;If the Benchmark Replacement
is Daily Simple SOFR, all interest payments will be payable on a monthly basis. As of December 31, 2022 and December&#160;31, 2021, there
was no balance outstanding under this line of credit.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The line of credit is secured by certain of our U.S.&#160;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.
To maintain availability of funds under the loan agreement, we will pay on a quarterly basis, an unused commitment fee of 0.15% per annum
on the unused amount for the facility. The credit facility contains customary covenants, including covenants that limit or restrict our
ability to incur capital expenditures and lease payments, make certain investments and enter into certain related-party transactions.
The credit facility also requires us to maintain certain minimum financial ratios and maintain operation banking relationship with the
financial institutions. As of December 31, 2022 and December&#160;31, 2021, we were in compliance with all covenants related to the line
of credit.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt"><b>C.</b></span></td><td style="text-align: left"><span style="font-size: 10pt"><b>Research and Development, Patents
and Licenses, etc.</b></span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">See Item 4.B under the subheadings, &#8220;Technology&#8221; and &#8220;Intellectual
Property.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt"><b>D.</b></span></td><td style="text-align: left"><span style="font-size: 10pt"><b>Trend information</b></span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Other than as disclosed in this annual report, we are not aware of
any trends, uncertainties, demands, commitments or events for the current fiscal year that are reasonably likely to have a material effect
on our net revenues, income, profitability, liquidity or capital resources, or that caused the disclosed financial information to be not
necessarily indicative of future operating results or financial conditions.&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt"><b>E.</b></span></td><td style="text-align: left"><span style="font-size: 10pt"><b>Critical Accounting Estimates</b></span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our consolidated financial statements are prepared in accordance with
GAAP. The preparation of our financial statements requires us to make estimates and assumptions that affect the reported amounts of assets,
liabilities, net sales, costs and expenses, as well as the disclosure of contingent assets and liabilities and other related disclosures.
We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances,
the results of which form the basis for making judgments about carrying values of our assets and liabilities that are not readily apparent
from other sources. In many instances, we could have reasonably used different accounting estimates. Actual results could differ from
those estimates, and we include any revisions to our estimates in our results for the period in which the actual amounts become known.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We believe the critical accounting policies described below affect
the more significant judgments and estimates used in the preparation of our consolidated financial statements. 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:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><b><i>Incentives Earned from Vendors</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><b><i>Income Taxes</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company is subject to federal and state income taxes in the United&#160;States
and taxes in foreign jurisdictions. In accordance with ASC Topic&#160;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&#160;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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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 that the tax position no longer meets the more-likely-than-not threshold of being sustained. The Company accrues interest
and penalties related to unrecognized tax benefits in income tax expense.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Expense and Valuation of Shares of our Common Stock</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The measurement and recognition of compensation expense for all stock-based
payment awards made to employees, consultants and directors, including employee stock options and restricted stock, is based on estimated
fair value of the awards on the date of grant. The value of awards that are ultimately expected to vest is recognized as expense on a
straight-line basis over the requisite service periods in the consolidated statements of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">For detailed discussion on stock-based compensation, see Note&#160;14
to the consolidated financial statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Recent Accounting Pronouncements</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">For detailed discussion on recent accounting pronouncements, see Note&#160;3
to the consolidated financial statements of Newegg Commerce, Inc. included elsewhere in this annual report.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><div><a id="a_008"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Item 6. Directors, Senior Management and Employees </b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>A. Directors and Senior Management</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Set forth below is information concerning our directors, executive
officers and other key employees.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>MANAGEMENT</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Set forth below is information concerning our directors, executive
officers and other key employees as of the date of this annual report.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="font-weight: bold; border-bottom: Black 1.5pt solid">Name*</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Age</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Position(s)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 30%; text-align: left">Zhitao He</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: center">&#160;</td><td style="width: 10%; text-align: center">41</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 56%; text-align: left">Chairman and Director</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Fred Faching Chang</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="text-align: center">66</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">Vice Chairman and Director</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Yingmei Yang</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="text-align: center">52</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td>Director</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Fuya Zheng</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="text-align: center">56</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">Independent Director</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Gregory Moore</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="text-align: center">73</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">Independent Director</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Poi (Paul) Wu</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="text-align: center">52</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">Independent Director</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Anthony Chow</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="text-align: center">57</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">Chief Executive Officer and Director</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Robert Chang</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="text-align: center">55</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">Chief Financial Officer</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Jamie Spannos</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="text-align: center">45</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">Chief Operating Officer</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Montaque Hou</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="text-align: center">42</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">Chief Information Security Officer</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Michael Chen</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="text-align: center">38</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">Chief Legal Officer</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Christina Ching</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="text-align: center">55</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">Chief Accounting Officer</td></tr>
  </table><div>

</div><p style="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 27px"><span style="font-size: 10pt">*</span></td>
    <td><span style="font-size: 10pt">Except as otherwise indicated below, the business address of our directors and executive officers is 17560 Rowland Street, City of Industry, CA, United&#160;States 91748.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Mr. Zhitao He.</b> 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. He served as the Chief Executive Officer of Lianluo Smart Limited from April, 2020 to
August 2020. Mr. Zhitao He is also the Chairman of the Board of Hangzhou Lianluo, a China-listed company and parent of Newegg. Mr. He
successfully led Hangzhou Lianluo to list on China&#8217;s A share market (ticker: 002280). He was named one of the &#8220;10 Top Entrepreneurs
of Post-1980s&#8221; by Hurun Report and &#8220;Top Ten Entrepreneurial Leader of Listed Companies&#8221; by Securities Times. Under his
leadership, Hangzhou Lianluo&#160;has moved into the field of smart hardware, including the purchase of Newegg, investments in American
virtual reality (&#8220;VR&#8221;) device manufacturer Avegant and hardware corporation Razer, and promotion of the world&#8217;s biggest
VR Operating System OSVR in China together with Razer. This investment plan has allowed Hangzhou Lianluo to become a closed loop of &#8220;Software
and Hardware + Platform + Channels.&#8221; Mr. 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&#8217;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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Mr. Fred Faching Chang (or Mr. Fred Chang).</b> Mr. Chang currently
serves as the Vice Chairman of our board of directors. He has been a member of Newegg Inc.&#8217;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.&#8217;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. Chang was also Newegg Inc.&#8217;s Chief Executive Officer.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Ms. Yingmei Yang. </b>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. 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 was the Chief Financial Officer and Secretary of the Board of Beijing
Digit Horizon Technology Limited, the predecessor of Hangzhou Lianluo.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Mr. Fuya (Frank) Zheng.</b> Mr. Zheng was appointed as an independent
director in April 2020. Mr. Zheng has extensive experience in corporate finance and investment management. He has served as Chief Financial
Officer of X Financial since August 2020. He was a consultant of Yingde Gases Group Company (&#8220;Yingde Gases&#8221;), a leading industrial
gas supplier in China, from September 2017 to March 2020. Mr. Zheng was an independent director of Yingde Gases from September 2009 to
September 2017. From February 2018 until May 2019, Mr. Zheng was also an independent director of ChinaCache International Holdings Ltd.
(CCIHY). From January 2008 to November 2012, Mr. Zheng was Chief Financial Officer of Cogo Group, Inc., a then Nasdaq listed company that
provided customized module design solutions and manufactured electronic products in China. Mr. Zheng was also a director of the same company
from January 2005 to November 2012. Prior to that, Mr. Zheng was vice president of travel service at eLong, Inc., one of the leading online
travel service companies in China and listed on Nasdaq, where he was responsible for the overall operation of eLong Inc.&#8217;s travel
services. Mr. Zheng received a Bachelor of Business Administration majoring in accounting from City University of New York in 1994.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Mr. Gregory Moore. </b>Mr. Moore has been a member of our board
of directors since May 2021, and has been a member of Newegg Inc.&#8217;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&#8217; Controller, 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 &amp; Spirits International, a division of PepsiCola International. Before joining PepsiCo he was an Audit Manager at
Arthur Young &amp; 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. Moore holds a Bachelor&#8217;s degree in Business Administration from University of Texas
at Austin, and a Master of Business Administration from St. Johns University.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Mr. Poi (Paul) Wu. </b>Mr. Poi (Paul) Wu has been a member of our
board since May 2021, and has been a member of Newegg Inc.&#8217;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. 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&#8217;s TOM Group. Mr. Wu obtained his bachelor&#8217;s degree from the Department of Agricultural Economics
at Taiwan University, and obtained an MBA from RSM Rotterdam Business School in the Netherlands.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Mr. Anthony Chow. </b>Mr. Chow is the Global Chief Executive Officer
of Newegg. He sets the Company&#8217;s strategic direction and works closely with Newegg&#8217;s executives for consistent execution across
the organization. In addition to Mr. Chow&#8217;s role as Global CEO, he also serves on the Company&#8217;s board of directors. Mr. Chow&#8217;s
leadership has guided Newegg through some of the Company&#8217;s most transformative years. He first served as Vice President of Newegg
Inc.&#8217;s North American business from 2006 until 2008, before moving to Shanghai to oversee Newegg Inc.&#8217;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. Chow left
Newegg to become CEO of OTTO Group China, the Chinese subsidiary of Germany&#8217;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. Then in 2015, he was appointed Vice President
of Haier China, a global home appliance and consumer electronics manufacturer based in Qingdao, China. Upon rejoining Newegg Inc. in 2019,
Mr. Chow made sweeping changes to position the Company for continued success in the rapidly expanding e-commerce space. Consequently,
Newegg remains one of the leading tech e-commerce companies with strong market share in consumer sales, and a growing portfolio of services
for the Company&#8217;s vendor partners, Marketplace sellers and 3PL clients. Mr. Chow holds a Bachelor&#8217;s degree in Electrical &amp;
Electronics Engineering from the University of Toledo, and a Master of Business Administration from the UCLA Anderson School of Management.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Mr. Robert Chang. </b>Mr. Chang is the Chief Financial Officer of
Newegg. In this role, he is responsible for overseeing all aspects of the Company&#8217;s financial performance, including forecasting,
evaluation and reporting. Mr. Chang has served Newegg Inc. in various finance-related roles for more than two decades, first joining in
1999 and later being appointed to the CFO role in 2015. Prior to Newegg Inc., Mr. Chang spent five years as an Operational Analyst at
Taiwan YFY Paper Manufacturers. Mr. Chang holds a Bachelor&#8217;s degree in Economics from Soochow University, and a Master&#8217;s degree
in Finance from University of La Verne.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Mr. Jamie Spannos. </b>Mr. Spannos is the Global Chief Operating
Officer of Newegg. In this role, he is responsible for the strategic direction and development of Newegg&#8217;s operations as well as
executing the Company&#8217;s long term goals. Mr. Spannos also oversees Newegg Media Services, a separate Newegg business unit that provides
brand marketing services to other e-commerce companies. Prior to joining Newegg Inc. in 2018, Mr. Spannos was Senior Vice President of
North America Fulfillment and Logistics at FTD.com from 2017 to 2018, where he oversaw all FTD.com and sub-brand operations across all
drop-ship and internal distribution centers. Before his time at FTD.com, Mr. Spannos spent five years heading up distribution for Kraft
Heinz Company, managing the company&#8217;s robust network of 3PL and Kraft Heinz employees across all distribution locations. In that
role, he also played an instrumental part in providing strategic and executional direction in optimizing the company&#8217;s warehousing
infrastructure, in turn unifying several distribution partnership models related to a multitude of company mergers and divestitures. His
experience of more than 20 years across a broad range of business functions uniquely qualifies Mr. Spannos to continue to expand Newegg&#8217;s
operational excellence, positively impacting Newegg&#8217;s customers and the many businesses that rely on Newegg&#8217;s Media Services.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Mr. Montaque Hou. </b>Mr. Hou has served as Newegg&#8217;s
Chief Information Security Officer since December 2022.&#160; In this role, Mr. Hou has broad oversight over identifying and
mitigating cyber threats, developing security policies and procedures, and ensuring compliance with industry regulations and
standards.&#160; He also works closely with other executives and departments to ensure that security is integrated into all aspects
of the organization&#8217;s operations. &#160;From January 2016 to November 2022, he served as our Chief Technology Officer and was Chief
Technology Officer of Newegg Inc. from January 2016 to May 2021. In his prior role as Chief Technology Officer, he was responsible
for all technical aspects of the Newegg shopping experience, including the website, mobile app and other touchpoints including SMS
and email interaction. Mr. Hou&#8217;s global technology team designs, develops and deploys the technology that underpins site
design, customer service, Newegg&#8217;s Marketplace, resource planning, logistics and inventory management. The technical
development under Mr. Hou&#8217;s direction infuses data science, machine learning and artificial intelligence to enhance the
shopping experience with search personalization and product recommendations, as well as safeguards that deter fraudulent activity
and eliminate counterfeit product listings on Newegg&#8217;s Marketplace. Prior to Mr. Hou&#8217;s tenure as CTO, he held various
technical positions at Newegg, including Solutions Architect, Director of Technology Strategy and Chief Architecture Engineer. Mr.
Hou holds a Master of Science in analytical chemistry from Tongji University in Shanghai.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Mr. Michael Chen</b>. Mr. Chen has served as Newegg&#8217;s Chief
Legal Officer since October 2022. His responsibilities extend across all aspects of Newegg&#8217;s legal and corporate affairs, including
securities, corporate governance, commercial transactions, employment, litigation, intellectual property and data privacy. In addition,
Mr. Chen also maintains responsibility for Newegg&#8217;s risk management program. Mr. Chen has over a decade of legal experience advising
public and private companies on a wide variety of corporate matters. Prior to joining Newegg, Mr. Chen served as in-house counsel at Emerald
Holding, Inc. (NYSE: EEX), an NYSE-listed company in the trade show and live event industry, from May 2017 to October 2022. Before joining
Emerald Holding, Inc., he served as an attorney at top international law firms in New York and Hong Kong, where he specialized in securities
and capital markets transactions. Mr. Chen holds a Juris Doctor degree from Northwestern University Pritzker School of Law and a Bachelor&#8217;s
degree in International Political Economy from the University of California, Berkeley.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Ms. Christina S. Ching </b>has served as Newegg&#8217;s Chief Accounting
Officer since September 2022. From 2013 to 2022, Ms. Ching served as the Chief Financial Officer for North American and Asia regions for
Kriss USA Inc. a leading Swiss Defense Manufacture company. From 2004 to 2013, Ms. Ching served as Newegg&#160;Senior Director of Accounting
overseeing accounting department. From 2001 to 2004, she served as the Accounting Manager at GVison USA Inc.,&#160;a US division for Taiwan&#160;manufacturing
company specialized in liquid-crystal display (LCD) display supplied to Best Buy &amp; CompUSA. She holds a Bachelor&#8217;s degree of&#160;Science&#160;in
Accounting from University of Phoenix, Arizona.&#160;</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>B. Compensation</b>&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>2022 Compensation of Directors and Executive Officers</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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. Non-employee directors were entitled
to receive payment for serving as directors and may receive option grants or restricted stock units.&#160;&#160;&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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. 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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Discretionary Bonus and Profit Sharing Program</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Newegg&#8217;s CEO and other executive officers are eligible to participate
in the Company&#8217;s annual Discretionary Bonus Program and Profit Sharing Program. 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 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&#8217;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. Bonus awards under the Profit Sharing Program
start at 30% of base salary (60% for the CEO) based upon meeting the threshold level of performance and are subject to increase based
upon performance above threshold. Payments under both the Discretionary Bonus Program and the Profit Sharing Program are contingent upon
the executive remaining employed with the Company through the date bonuses are paid.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Stock Option Plans</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Newegg 2005 Incentive Award Plan</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In September 2005, the Newegg 2005 Incentive Award Plan was approved
and subsequently amended in January 2008, October 2009, December 2011 and September 2015. Under the Newegg 2005 Incentive Award Plan,
we may grant equity incentive awards to employees, directors, and consultants based on our common shares. A committee of our board of
directors determines the eligibility, types of equity awards, vesting schedules, and exercise prices for equity awards granted. Subject
to certain adjustments in the event of a change in capitalization or similar transaction, we may issue a maximum of 82,952,149 common
shares under the Newegg 2005 Incentive Award Plan. We issue new common shares from this authorized share pool to settle stock-based compensation
awards. The exercise price of options granted under the plan shall not be less than the fair value of our common shares as of the date
of grant. Options typically vest over a term of four years, and are typically exercisable for a period of 10 years after the date of grant,
except when granted to a holder who, at the time the option is granted, owns stock representing more than 10% of the voting power of all
classes of stock of Newegg or any subsidiaries, in which case, the term of the option shall be no more than five years from the date of
grant. 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.&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>2021 Equity Incentive Plan</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In November 2021, the Newegg 2021 Equity Incentive Plan was approved,
with 7,374,900 common shares reserved for issuance thereunder. In November 2021, all shares reserved under the 2021 Equity Incentive Plan
were granted to our executive officers and key employees in the form of restricted stock unit awards. These grants vest over four years,
with 25% vesting on the one-year anniversary of grant, and the remainder vesting monthly over the following three years, such that they
will be fully vested after four years. One half of the grants, or 3,687,450 RSUs, were granted to the Chief Executive Officer, Anthony
Chow. Our other executive officers received a combined total of 680,000 RSUs. The remaining 3,007,450 RSUs were granted or reserved for
252 other key employees or expected new hires.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In July 2022, the Board of Directors approved an amendment of the 2021
Plan to increase the maximum share pool from 7,374,900 to 16,374,900 shares. In August 2022, 5,560,780 performance-based vesting restricted
stock units (&#8220;PRSUs&#8221;) were granted to the Chief Executive Officer, Anthony Chow, vesting over four performance periods. The
vesting of each PRSU is based on financial performance tied to Budgeted GMV as defined in the grant agreement. The vesting of PRSUs is
determined at the end of each of the four-year performance periods. 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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Agreements with Executive Officers</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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. The employment is &#8220;at will&#8221; and can be terminated by us or each such executive
officer at any time and for any reason, with or without notice, with or without cause. If the executive is terminated by us without cause
or by the executive for good reason, then the executive is entitled to receive severance of 12 months&#8217; base salary and a prorated
bonus. If such termination is also made in conjunction with a change of control, then the severance amount will increase to 24 months&#8217;
base salary and 200% of the executive&#8217;s target bonus. The agreements also contain customary confidentiality, non-solicit and invention
assignment provisions.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On November 19, 2021, we entered into an employment agreement with
our Chief Executive Officer, Anthony Chow. The employment is &#8220;at will&#8221; and can be terminated by us or Mr. Chow at any time
and for any reason, with or without notice, with or without cause. Under the terms of the agreement, Mr. Chow is guaranteed a base salary
of $1.1 million per year and a target bonus of 160% to 200% of his base salary. The employment agreement has a four-year term, and guarantees
that Mr. Chow will receive the base salary component for the entire term, even if he is terminated during the term, unless he is terminated
for cause. If Mr. Chow&#8217;s employment is terminated by us without cause or by Mr. Chow for good reason, then he is entitled to receive
severance of 12 months&#8217; base salary and a bonus equal to the average of the prior three years&#8217; annual bonuses at the time
of termination (this severance amount is in addition to the remaining owed guaranteed base salary for the rest of term). In addition,
all unvested equity incentive awards that are outstanding and due to be vested within one year of his termination are subject to accelerated
vesting if he is terminated by us without cause or by Mr. Chow for good reason. If termination without cause or for good reason occurs
in the context of a change in control of Newegg, then the severance increases to 24 months&#8217; base salary (instead of 12 months&#8217;)
and all unvested equity incentive awards that are outstanding at the time of his termination (not just those that vest within one year)
are subject to accelerated vesting. The agreement also contains customary confidentiality, non-solicit and invention assignment provisions.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>C. Board</b>&#160;<b>Practices</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Board of Directors</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">A director may vote in respect of any contract or transaction in which
he or she is interested, provided, however that the nature of the interest of any director in any such contract or transaction shall be
disclosed by him or her at or prior to the consideration and vote on that matter. A general notice or disclosure to the directors or otherwise
contained in the minutes of a meeting or a written resolution of the directors or any committee thereof of the nature of a director&#8217;s
interest shall be sufficient disclosure and after such general notice it shall not be necessary to give special notice relating to any
particular transaction. A director may be counted for a quorum upon a motion in respect of any contract or arrangement which he or she
shall make with our company, or in which he or she is so interested and may vote on such motion. There are no membership qualifications
for directors. Further, there are no share ownership qualifications for directors unless so fixed by us in a general meeting.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Nasdaq Listing Rules generally require that a majority of an issuer&#8217;s
board of directors must consist of independent directors. However, the Nasdaq Listing Rules permit foreign private issuers like us to
follow &#8220;home country practice&#8221; in certain corporate governance matters. We rely on this &#8220;home country practice&#8221;
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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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. Fred Chang, acting as the &#8220;Minority
Representative,&#8221; shall be entitled to designate nominees to our Board in a number that is proportionate to the voting power of Digital
Grid and its affiliates, and our Legacy Shareholders, respectively.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Digital Grid has nominated Mr. Zhitao He, Ms. Yingmei Yang, Mr. Poi
(Paul) Wu, and Fuya (Frank) Zheng to serve as directors. Mr. Fred Chang has nominated Mr. Fred Chang, Mr. Gregory Moore and Mr. Anthony
Chow to serve as directors.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Duties of Directors</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Under British Virgin Islands law, our directors have duties to act
honestly, in good faith and with a view to our best interests. Our directors also have a duty to exercise the care, diligence and skills
that a reasonably prudent person would exercise in comparable circumstances. In fulfilling their duty of care to us, our directors must
oversee the Company, including our compliance with our Amended and Restated Memorandum and Articles of Association. We have the right
to seek damages if a duty owed by our directors is breached. The functions and powers of our board include, among others:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">appointing officers and determining the term of office of the officers;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">authorizing the payment of donations to religious, charitable, public or other bodies, clubs, funds or associations as deemed advisable;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">exercising the borrowing powers of the Company and mortgaging the property of the Company;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">executing checks, promissory notes and other negotiable instruments on behalf of the Company; and</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">maintaining or registering a register of mortgages, charges or other encumbrances of the Company.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Limitation of Director and Officer Liability</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">British Virgin Islands law does not limit the extent to which a company&#8217;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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Under our Amended and Restated Memorandum and Articles of Association,
we may indemnify our directors, officers and liquidators against all expenses, including legal fees, and against all judgments, fines
and amounts paid in settlement and reasonably incurred in connection with civil, criminal, administrative or investigative proceedings
to which they are party or are threatened to be made a party by reason of their acting as our director, officer or liquidator. To be entitled
to indemnification, these persons must have acted honestly and in good faith with a view to the best interest of the Company and, in the
case of criminal proceedings, they must have had no reasonable cause to believe their conduct was unlawful.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We have entered into indemnification agreements with our directors
and executive officers. These agreements require us to indemnify these individuals, to the fullest extent permitted by law, for certain
liabilities to which they may become subject as a result of their affiliation with us.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Insofar as indemnification for liabilities arising under the Securities
Act may be permitted for our directors or officers under the foregoing provisions, we have been informed that in the opinion of the SEC,
such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable as a matter of United
States law.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Involvement in Certain Legal Proceedings</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">On August 6, 2020, Hangzhou Lianluo and Mr. Zhitao
He received an investigation notice from the China Securities Regulatory Commission (&#8220;CSRC&#8221;) for alleged violation of laws
and regulations regarding information disclosures of Hangzhou Lianluo. Hangzhou Lianluo &#160;&#160;is a PRC company with shares listed
on the Shenzhen Stock Exchange and is a majority owner of Newegg through Digital Grid, a wholly-owned subsidiary. Mr. He is the Chairman
and Chief Executive Officer of Hangzhou Lianluo. Mr. He was the former Chairman and the former Chief Executive Officer of Lianluo Smart
Limited&#160;(the predecessor company of Newegg prior to the Merger) and is currently the chairman of our board.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">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. Zhitao He received a warning and was required to pay a fine of RMB 400,000.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Further, the shares of our common stock 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. 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. 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&#8217;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 loans are in default in a final, non-appealable judgment. On December 19, 2022, Digital Grid, BOC, Newegg, and Hangzhou Lianluo
entered into a supplemental agreement (the &#8220;Supplemental Agreement&#8221;) to agree upon procedures to temporarily remove BOC&#8217;s
lien on Digital Grid&#8217;s Newegg Common Shares to enable their sale and use of proceeds to repay BOC. Such sales of our common stock
could cause the market price of our common stock to drop significantly.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In addition, on April 11, 2023, Hangzhou Lianluo announced that the
Industrial and Commercial Bank of China (&#8220;ICBC&#8221;) filed a lawsuit against Hangzhou Lianluo in the Hangzhou Intermediate People&#8217;s
Court in China alleging that Hangzhou Lianluo failed to repay when due three separate loans, provided by ICBC to Hangzhou Lianluo, and
was in breach of the related loan agreements. 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.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Terms of Directors and Executive Officers</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Each of our directors holds office until a successor has been duly
elected and qualified unless the director was appointed by the Board, in which case such director holds office until the next annual meeting
of shareholders at which time such director is eligible for re-election. All of our executive officers are appointed by and serve at the
discretion of our board.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Qualification</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">There is currently no shareholding qualification for directors, although
a shareholding qualification for directors may be fixed by our shareholders by ordinary resolution.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Committees of the Board of Directors</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Currently, three committees have been established under the Board:
the audit committee, the compensation committee and the nominating committee. Each committee&#8217;s members and functions are described
below.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Audit Committee</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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 &#8220;independence&#8221; 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. 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. The audit committee is responsible for, among
other things:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">appointing the independent auditors and pre-approving all auditing and non-auditing services permitted to be performed by the independent auditors;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">reviewing with the independent auditors any audit problems or difficulties and management&#8217;s response;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">discussing the annual audited financial statements with management and the independent auditors;</span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">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;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">reviewing and approving all proposed related party transactions;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">meeting separately and periodically with management and the independent auditors; and</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 75; Value: 52 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Compensation Committee</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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. Our chief executive officer may not be present at any committee meeting during which his compensation is deliberated. The compensation
committee is responsible for, among other things:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Nominating and Corporate Governance Committee</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our nominating and corporate governance committee currently consists
of Mr. Gregory Moore, Mr. Poi (Paul) Wu, and Mr. Fuya (Frank) Zheng. Mr. Zheng is the chairperson of our nominating and corporate governance
committee. The nominating and corporate governance committee assists the Board in selecting individuals qualified to become our directors
and in determining the composition of the board and its committees. The nominating and corporate governance committee is responsible for,
among other things:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: left"><span style="font-size: 10pt">identifying and recommending
nominees for election or re-election to our Board or for appointment to fill any vacancy;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>D. Employees</b>&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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. The following table gives a breakdown
of our full-time employees as of December 31, 2022 by region.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">During the holiday season, we have historically added temporary workers
to augment our full-time work force. We believe we have a good working relationship with our employees and we have not experienced any
significant labor disputes.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>E. Share Ownership</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">For information regarding the share ownership of our directors and
executive officers, see Item 7 under the heading &#8220;Principal Shareholders.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 76; Value: 52 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->71<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><div><a id="a_009"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Item 7. Major Shareholders and Related Party Transactions</b>&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: -0.5in"><b>&#160;</b></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt"><b>A.</b></span></td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following table sets forth information with respect to the beneficial
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Beneficial ownership includes voting or investment power with respect
to the securities. Except as indicated below, and subject to applicable community property laws, the persons named in the table have sole
voting and investment power with respect to all common shares shown as beneficially owned by them. 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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The ownership information shown in the column titled &#8220;Percentage
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">134,897,509</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">33.5</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Fuya Zheng</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">*</span></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Gregory Moore</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">*</span></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Zhitao He<sup>(1)</sup></span></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">230,488,957</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">57.2</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Yingmei Yang<sup>(4)</sup></span></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">613,952</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">*</span></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Poi (Paul) Wu</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">*</span></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left">All Directors and Executive Officers as&#160;a Group (12 persons)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">379,017,159</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">94.0</td><td style="text-align: left">%</td></tr>
  </table><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left">*</td><td style="text-align: left">Less than 1% of total outstanding shares</td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">(1)</span></td><td style="text-align: left"><span style="font-size: 10pt">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. Zhitao He. All of those persons are affiliated with each
other and under the control of Mr. Zhitao He.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 77; Value: 52 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->72<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: left">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. 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. 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&#8217;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.&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: left">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">(2)</span></td><td style="text-align: left"><span style="font-size: 10pt">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)&#160;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. All of those persons are affiliated with each other and
under the control of Fred Chang.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: left">Tekhill USA, LLC previously pledged
32,713,520 Common Shares as collateral to Preferred Bank, securing a loan from Preferred Bank to Fred Chang with a principal amount of
$7.1 million. In early 2022, this loan was paid off and the pledge of common shares was released. Contemporaneously, 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.&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: left">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.25in"><span style="font-size: 10pt">(3)</span></td>
    <td>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">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.</p>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p></td></tr>
  <tr style="vertical-align: top">
    <td><span style="font-size: 10pt">(4)</span></td>
    <td style="text-align: left"><span style="font-size: 10pt">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.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Rights of Certain Principal Shareholders</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">See Item 10.B. &#8220;Memorandum and Articles of Association&#8221;
under the subheadings &#8220;Rights of Certain Principal Shareholders&#8221; and &#8220;Requirements of Board Approval on Certain Matters.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 78; Value: 52 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->73<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt"><b>B.</b></span></td><td style="text-align: left"><span style="font-size: 10pt"><b>Related Party Transactions</b></span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">For a description of our related party transactions, see &#8220;Related
Party Transactions&#8221; as discussed in Note&#160;18 of the consolidated financial statements to this annual report on Form 20-F.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt"><b>C.</b></span></td><td style="text-align: left"><span style="font-size: 10pt"><b>Interest of Experts and Counsel</b></span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left; text-indent: -0.25in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><div><a id="a_010"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Item 8. Financial Information</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><b>A.</b></td><td style="text-align: left"><b>Consolidated Statements and Other Financial Information</b></td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Refer to &#8220;Item 18. Financial Statements&#8221; for our Consolidated
Financial Statements as of December 31, 2022 and December 31, 2021 and for the years ended December 31, 2022, December 31, 2021 and December
31, 2020 and report of our independent registered public accounting firm included herein.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b>Legal or Arbitration Proceedings</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In December&#160;2014, an individual plaintiff sued our subsidiary,
<i>Newegg.com</i> Americas Inc. (&#8220;<b><i>Newegg.com </i>Americas</b>&#8221;), in Superior Court in Los Angeles County, California,
alleging that <i>Newegg.com</i> Americas had engaged in deceptive advertising practices and seeking to certify a class action. In 2016,
the trial court sustained <i>Newegg.com</i> Americas&#8217; demurrer to the plaintiff&#8217;s claims without leave to amend. The plaintiff
appealed, and in July&#160;2018 an appellate court reversed the decision of the trial court, thus allowing the case to proceed. The matter
is now pending in the trial court, with Newegg Inc. having been added as a defendant. We intend to vigorously defend ourselves and our
subsidiaries. Depending on the amount and timing, an unfavorable result could materially affect our business, consolidated results of
operations, financial position or cash flows.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In September 2021, two subsidiaries of the Company were served with
a complaint filed in the Superior Court for Los Angeles County, California, alleging various wage and hour violations and seeking to certify
a class action. In October 2021, a second complaint was filed as a representative action pursuant to the Private Attorneys General Act
of 2004 against the same two subsidiaries in the Superior Court for Los Angeles County, California, alleging various violations of the
California Labor Code. The Company intends to vigorously defend its subsidiaries in both matters. The outcome of these matters is uncertain.
Depending on the amount and timing, an unfavorable result in either matter could materially affect our business, consolidated results
of operations, financial position or cash flows.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">From time to time, we may be subject to legal proceedings, investigations
and claims incidental to the conduct of our business. Except as disclosed above, we are not currently a party to any legal proceeding
or investigation which, in the opinion of our management, is likely to have a material adverse effect on our business, financial condition
or results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b>Dividend Policy</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">To date, we have not paid any cash dividends on our shares. As a BVI
company, we may only declare and pay dividends if our directors are satisfied, on reasonable grounds, that immediately after the distribution
(i) the value of our assets will exceed our liabilities and (ii) we will be able to pay our debts as they fall due. We currently anticipate
that we will retain any available funds to finance the growth and operation of our business and we do not anticipate paying any cash dividends
in the foreseeable future. Additionally, our cash held in foreign countries may be subject to certain control limitations or repatriation
requirements, limiting our ability to use this cash to pay dividends.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><b>B.</b></td><td style="text-align: left"><b>Significant Changes</b></td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Except otherwise disclosed within this annual report on Form 20-F,
no significant change has occurred since December 31, 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 79; Value: 52 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->74<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><div><a id="a_011"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Item 9. The Offer and Listing</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt"><b>A.</b></span></td><td style="text-align: left"><span style="font-size: 10pt"><b>Offering and Listing Details</b></span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt"><b>B.</b></span></td><td style="text-align: left"><span style="font-size: 10pt"><b>Plan of Distribution</b></span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt"><b>C.</b></span></td><td style="text-align: left"><span style="font-size: 10pt"><b>Markets</b></span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our common shares are traded on the Nasdaq Capital Market (&#8220;Nasdaq&#8221;)
under the symbol &#8220;NEGG.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt"><b>D.</b></span></td><td style="text-align: left"><span style="font-size: 10pt"><b>Selling Shareholders</b></span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt"><b>E.</b></span></td><td style="text-align: left"><span style="font-size: 10pt"><b>Dilution</b></span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt"><b>F.</b></span></td><td style="text-align: left"><span style="font-size: 10pt"><b>Expenses of the Issue</b></span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_012"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Item 10. Additional Information&#160;</b>&#160;<b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt"><b>A.</b></span></td><td style="text-align: left"><span style="font-size: 10pt"><b>Share Capital</b></span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0in"><b>Description of Shares</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We are a company incorporated in the British Virgin Islands with limited
liability and our affairs are governed by our Amended and Restated Memorandum and Articles of Association, the Companies Act, the common
law of the British Virgin Islands, our corporate governance documents and rules and regulations of the stock exchange on which our common
shares are traded.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Rights and Obligations of Shareholders</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Each of common shares confers on its holder:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">the right to vote;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">the right to an equal share in any dividend paid by the Company in accordance with the Companies Act; and</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">the right to an equal share in the distribution of the surplus of the Company.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 80; Value: 52 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->75<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Voting Rights.</i> Holders of common shares shall at all times vote
together as one class on all resolutions submitted to a vote by the shareholders. Each common share is entitled to one (1) vote on all
matters subject to vote at general meetings of the Company.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Dividends. </i>The holders of shares are entitled to such dividends
as may be declared by the directors of the Company at such time and of such an amount as the directors think fit if they are satisfied,
on reasonable grounds, that immediately after the distribution, the value of Company assets exceeds the Company&#8217;s liabilities and
the Company will be able to pay its debts as they fall due.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Pre-emptive rights.</i> Except as set forth in the Amended Shareholders
Agreement, there are no pre-emptive rights applicable to the issue by the Company of new shares under either the Companies Act or our
Amended and Restated Memorandum and Articles of Association.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Warrants</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On April 28, 2016, the Company closed the sale of warrants to purchase
125,000 of our common shares to Hangzhou Lianluo pursuant to the terms of a certain securities purchase agreement. These warrants are
exercisable at any time for an exercise price of $17.60 per share, with no expiration date.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt"><b>B.</b></span></td><td style="text-align: left"><span style="font-size: 10pt"><b>Memorandum and Articles of
Association</b></span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We are incorporated in the British Virgin Islands and have been assigned
company number 553525 in the Register of Companies in the BVI. Our registered office is at the offices of Vistra Corporate Services Center,
Wickhams Cay II, Road Town, Tortola, VG1110, British Virgin Islands.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Objects of the Company</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Under our Amended and Restated Memorandum and Articles of Association,
the objects of our Company are unrestricted and we have the full power and authority to carry out any object not prohibited by the law
of the British Virgin Islands.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Amendment</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Clause 12.1 of our Amended and Restated Memorandum provides that the
Company may amend the Memorandum or the Articles of Association by Resolution of Shareholders or by Resolution of Directors, provided
that no amendment may be made by Resolution of Directors: (a) to restrict the rights or powers of the Shareholders to amend the Memorandum
or the Articles of Association; (b) to change the percentage of Shareholders required to pass a Resolution of Shareholders to amend the
Memorandum or the Articles of Association; (c) in circumstances where the Memorandum or the Articles of Association cannot be amended
by the Shareholders; and (d) provided that the Directors may not amend certain sections of the Amended and Restated Memorandum and Articles
of Association that would negatively affect existing shareholders.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Rights of Certain Principal Shareholders</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Appointment and Removal of the Directors</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Pursuant to the Amended and Restated Memorandum and Articles of Association
and subject to compliance with applicable laws and Nasdaq Listing Rules, the board of the Company shall consist of up to seven directors.
Initially, four of the directors shall be appointed by Digital Grid, and three of the directors shall be appointed by the Minority Representative.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">If the number of Shares or other Equity Interests (as defined in the
Amended and Restated Memorandum and Articles of Association) of the Company held by the Legacy Shareholders represents (i) more than two
sevenths (2/7) of the total voting power of all outstanding Shares or other Equity Interests of the Company, then the Minority Representative
shall be entitled to appoint and replace three directors, (ii) less than or equal to two sevenths (2/7) and more than one seventh (1/7)
of the total voting power of all outstanding Shares or other Equity Interests of the Company, then the Minority Representative shall be
entitled to appoint and replace two directors, (iii) less than or equal to one seventh (1/7) and more than five percent (5%) of the total
voting power of all outstanding Shares or other Equity Interests of the Company, then the Minority Representative shall be entitled to
appoint and replace one director, and (iv) less than or equal to five percent (5%) of the total voting power of all outstanding Shares
or other Equity Interests of the Company, then the Minority Representative shall no longer be entitled to appoint or replace any directors.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 81; Value: 52 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->76<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">If the number of Shares or other Equity Interests held by Digital Grid
or its affiliates represents (i) more than fifty percent (50%) of the total voting power of all outstanding Shares or other Equity Interests
of the Company, then Digital Grid shall be entitled to appoint and replace four directors, (ii) less than or equal to fifty percent (50%)
and more than two sevenths (2/7) of the total voting power of all outstanding Shares or other Equity Interests of the Company, then Digital
Grid shall be entitled to appoint and replace three directors, (iii) less than or equal to two sevenths (2/7) and more than one seventh
(1/7) of the total voting power of all outstanding Shares or other Equity Interests of the Company, then Digital Grid shall be entitled
to appoint and replace two directors, (iv) less than or equal to one seventh (1/7) and more than five percent (5%) of the total voting
power of all outstanding Shares or other Equity Interests of the Company, then Digital Grid shall be entitled to appoint and replace one
director, and (v) less than or equal to five percent (5%) of the total voting power of all outstanding Shares or other Equity Interests
of the Company, then Digital Grid shall no longer be entitled to appoint or replace any directors.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Any director positions which neither Digital Grid nor the Minority
Representative are entitled to appoint under the Amended and Restated Memorandum and Articles of Association shall be appointed by a majority
of the remaining directors, or by any other means allowed under the Amended and Restated Memorandum and Articles of Association and the
Companies Act.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">A director or member of a committee of the Board or the board of a
subsidiary may be removed from his or her position, with cause, by the majority of the shareholders or the majority of the Board; provided
that</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">i.</span></td><td style="text-align: left"><span style="font-size: 10pt">Any director or member of a
committee of the Board or the board of a subsidiary that is appointed or nominated by the Minority Representative shall be removed from
their position upon and only upon, the written request of the Minority Representative; and</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">ii.</span></td><td style="text-align: left"><span style="font-size: 10pt">Any director or member of a
committee of the Board or the board of a subsidiary that is appointed or nominated by Digital Grid shall be removed from their position
upon and only upon, the written request of Liaison.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Requirements of Board Approval on Certain Matters</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In addition, the Amended and Restated Memorandum and Articles of Association
also provides that, as long as the number of common shares held by Legacy Shareholders represents more than ten percent (10%) of the total
voting power of all outstanding common shares of the Company, the Company agrees not to take, or permit our subsidiaries to take, certain
actions, without the approval of the affirmative vote of not less than a majority of the number of votes represented by the directors,
which majority must include one of the directors designated by the Minority Representative as being the Primary Minority Board Appointee.
Such actions include the following:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">i.</span></td><td style="text-align: left"><span style="font-size: 10pt">initiate any liquidation, dissolution,
bankruptcy filing or similar action, recapitalization, share combination or division, restructuring or reorganization of the Company
or any of its subsidiaries;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">ii.</span></td><td style="text-align: left"><span style="font-size: 10pt">other than to the Company or
a wholly-owned subsidiary thereof, sell, license, transfer or otherwise dispose of (including through merger or consolidation) all or
substantially all of the assets or properties of the Company or any of its subsidiaries in any transaction or series of related transactions;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">iii.</span></td><td style="text-align: left"><span style="font-size: 10pt">agree to any merger, consolidation
or combination of the Company or any of its subsidiaries, or to a sale of all or substantially all of the assets of the Company in connection
with a Company Sale (as defined in the Amended and Restated Memorandum and Articles of Association);</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">iv.</span></td>
    <td><span style="font-size: 10pt">commence or undertake any Reorganization (as defined in the Amended and Restated Memorandum and Articles of Association);</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">v.</span></td>
    <td><span style="font-size: 10pt">issue, directly or indirectly, any equity interest of the Company or permit any of the subsidiaries to issue any equity interest other than, in each case, any Excluded Issuance (as defined in the Amended and Restated Memorandum and Articles of Association);</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">vi.</span></td>
    <td><span style="font-size: 10pt">materially alter or fundamentally change the nature of the business of the Company and its Subsidiaries;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">vii.</span></td>
    <td><span style="font-size: 10pt">amend, change, or waive any provision of, the memorandum and articles of association of the Company;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">viii.</span></td>
    <td><span style="font-size: 10pt">purchase or otherwise acquire all or any part of the assets or business of, or Equity Interests or other evidences of beneficial ownership of, invest in or participate in any joint venture, partnership or similar arrangement with, any Person (other than the Company or any of its subsidiaries), in each case in any transaction or series of related transactions involving a commitment in excess of $10,000,000;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->77<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">ix.</span></td>
    <td><span style="font-size: 10pt">other than to the Company or a wholly-owned subsidiary thereof, sell, license, transfer or otherwise dispose of (including through merger or consolidation) any assets or properties of the Company or any of its subsidiaries, in each case in any transaction or series of related transactions involving a commitment in excess of $10,000,000;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">x.</span></td>
    <td><span style="font-size: 10pt">other than loans to wholly-owned subsidiaries, (A) extend any credit or make any loans to any Person, (B) incur, assume, guarantee, endorse or otherwise become responsible for indebtedness, or (C) amend, modify or supplement in any material respect the agreements governing (or otherwise extend or refinance) existing indebtedness;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">xi.</span></td>
    <td><span style="font-size: 10pt">appoint or remove the Chief Executive Officer of the Company;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">xii.</span></td>
    <td><span style="font-size: 10pt">enter into any Affiliate Transactions (as defined in the Amended and Restated Memorandum and Articles of Association);</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">xiii.</span></td>
    <td><span style="font-size: 10pt">amend, change or waive any of the actions of the Company described in the Fifth Amended and Restated Articles of Association or the required voting threshold specified herein; and</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">xiv.</span></td>
    <td><span style="font-size: 10pt">agree or commit to do any of the foregoing, or delegate any of the foregoing to the Company or any of its subsidiaries or any officer or agent of the Company or subsidiary thereof.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The rights granted to the Principal Shareholders are in addition to
and not intended to limit in any way the rights that the Principal Shareholders or any of their affiliates may have to appoint, elect
or remove our directors under our Amended and Restated Memorandum and Articles of Association or laws of the British Virgin Islands.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Pre-emptive Rights of the Principal Shareholders</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Newegg, Digital Grid, the Principal Shareholders and we agreed to enter
into the Amended Shareholders Agreement, pursuant to which we agreed to assume all of the rights and obligations of Newegg under the original
Shareholders Agreement.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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
the &#8220;excluded issuance&#8221; as defined in the Amended Shareholders Agreement or common shares offered pursuant to a registration
statement filed with the SEC.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">For the purpose of the Amended Shareholders Agreement, the &#8220;excluded
issuance&#8221; means (i) any equity interests issued as share dividends, or pursuant to share splits, recapitalization or other similar
events that do not adversely affect the proportionate amount of the common shares held by the Principal Shareholders, and (ii) common
shares issuable pursuant to any stock option or any similar equity incentive plan of the Company approved by the Board; and (iii) equity
interests issued pursuant to acquisitions or strategic transactions approved by a majority of the disinterested directors of the Company
provided that any such issuance shall only be to an entity (or to the equity holders of an entity) which is, itself or through its subsidiaries,
an operating company or an owner of an asset in a business synergistic with the business of the Company and shall provide to the Company
additional benefits in addition to the investment of funds, but shall not include a transaction in which the Company is issuing equity
interests primarily for the purpose of raising capital or to an entity whose primary business is investing in securities.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company is required to give Principal Shareholders a notice stating
the price (or formula by which the price will be determined, which may refer to a future contingent event) and terms of issuance of new
securities and to remain the offer to issue the Principal Shareholders their Pro Rata Shares of such new securities (as defined below)
open until the 15th calendar day following the receipt of such notice. The Principal Shareholders shall deliver an exercise notice along
with payment to exercise their pre-emptive rights.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In the event that the Principal Shareholder fails to give an exercise
notice timely, or elects to purchase fewer than all of its Pro Rata Share of such new securities, then the Company shall send written
notice to any Principal Shareholder who has elected to purchase all of its Pro Rata Share of such new securities, who will then have the
right, by giving written notice to the Company within two business days upon receiving notice from the Company, to purchase its Pro Rata
Share of such unsubscribed portion, and such right shall continue to apply repeatedly and iteratively until all of such new securities
have been allocated to the Principal Shareholders or none of the Principal Shareholders have elected to participate in such further purchase.
If, at the end of such process, there are new securities that have not been subscribed for by the Principal Shareholders, the Company
may, for a period of time not to exceed 60 days, sell such unsubscribed new securities, on the same times to a third-party purchaser.
If, however, at the end of such 60-day period, the Company has not consummated a sale of any of such unsubscribed new securities, the
Company shall no longer be permitted to sell such new securities without again complying with these provisions of pre-emptive rights in
the Amended Shareholders Agreement.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Right of First Refusal of the Company and Principal Shareholders</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Pursuant to the Amended Shareholders Agreement, subject to compliance
with applicable laws and Nasdaq&#8217;s Listing Rules, if any Principal Shareholders or any of their affiliates, receives a bona fide
offer from any person other than its affiliate for any of the common shares such Principal Shareholders received in connection with the
Merger (the &#8220;ROFR Shares&#8221;), then the Company has a right of first refusal, but not the obligation, to elect to purchase all
(and not less than all) of the ROFR Shares, at the same price, and on the same terms and conditions offered by the purchaser (the &#8220;ROFR
Terms&#8221;). In the event the Company does not decide to purchase such ROFR Shares or decides to purchase for less than all of the ROFR
Shares, then each of the Principal Shareholders other than the selling Principal Shareholders shall have a right of first refusal to elect
to purchase all (and not less than all) of its Pro Rata Share of the ROFR Shares on the ROFR Terms. By amendment dated August 2022, the
Amended and Restated Shareholders Agreement was amended such that the Company&#8217;s right of first refusal would apply only to 80% of
the shares of the Company&#8217;s common shares subject to such ROFR Right collectively owned by each Principal Shareholder and its Affiliates.
For the purpose of this Amended Shareholders Agreement, &#8220;Pro Rata Share&#8221; means the percentage which corresponds to the ratio
which each selling Principal Shareholder&#8217;s &#8220;Percentage Interest&#8221; (which is calculated by dividing (i) the number of
the common shares owned by such Principal Shareholder, by (ii) total number of the then outstanding shares of the common shares held by
all Principal Shareholders) bears to the total Percentage Interests of all Principal Shareholders exercising their right of first refusal.
In the event that the ROFR Shares are in exchange for non-cash consideration, then such right of first refusal shall be exercisable based
on the fair market value determined in good faith by the board of such non-cash consideration. Such rights of first refusal may delay
or prevent us from raising other funding in the future and may have an adverse impact on the liquidity and market price of our common
shares.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Limitations on Right to Own Shares</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">British Virgin Islands law and our Amended and Restated Memorandum
and Articles of Association impose no limitations on the right of nonresident or foreign owners to hold or vote our securities. There
are no provisions in the Amended and Restated Memorandum and Articles of Association governing the ownership threshold above which shareholder
ownership must be disclosed.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Anti-Takeover Provisions</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Some provisions of our Amended and Restated Memorandum and Articles
of Association may discourage, delay or prevent a change of control of our Company or management, that shareholders may consider favorable,
including provisions that limit the ability of shareholders to requisition and convene general meetings of shareholders. Our Amended and
Restated Memorandum and Articles of Association allow our shareholders holding shares representing in aggregate not less than thirty percent
(30%) of our voting shares to requisition a special meeting of shareholders, in which case our directors are obliged to call such meeting
and to put the resolutions so requisitioned to a vote at such meeting.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">However, under British Virgin Islands law, our directors may only exercise
the rights and powers granted to them under our Amended and Restated Memorandum and Articles of Association for a proper purpose and for
what they believe in good faith to be in the best interests of our Company.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Register of Members</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company is required to keep a register of members containing (i)
the names and addresses of the shareholders, (ii) the number of each class and series of shares held by each shareholder, (iii) the date
on which the name of each shareholder was entered in the register of members, and (iv) the date on which any person ceased to be a shareholder.
A share is deemed to be issued when the name of the shareholder is entered in the register of members and the entry of the name of a person
in the register of members as a holder of a share is prima facie evidence that legal title in the share vests in that person.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Variation of Rights of Shareholders</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">If at any time the shares are divided into different classes, the rights
attached to any class may only be varied, whether or not the Company is in liquidation, by a resolution passed at a meeting by a majority
of the votes cast by those entitled to vote at a meeting of the holders of the issued shares in that class.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Meetings</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Any action required or permitted to be taken by the shareholders may
be effected at a duly called annual or special meeting of the shareholders entitled to vote on such action. An action that may be taken
by the shareholders at a meeting (other than the election of Directors) may also be taken by a resolution of shareholders consented to
in writing, without the need for any notice, but if any resolution of shareholders is adopted otherwise than by the unanimous written
consent of all shareholders, a copy of such resolution shall forthwith be sent to all shareholders not consenting to such resolution.
All meetings of shareholders (whether annual or special) will be held on such dates and at such places as may be fixed from time to time
by the directors. The Company is not required to hold an annual general meeting in any calendar year. However, where so determined by
the directors of the Company, an annual general meeting shall be held once in each calendar year at such date and time as may be determined
by the directors of the Company.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">At any meeting of shareholders, a quorum will be present if there are
one or more shareholders present in person or by proxy representing not less than 50% of the issued shares entitled to vote on the resolutions
to be considered at the meeting. The shareholders present at a duly called or held meeting of shareholders at which a quorum is present
may continue to transact business until adjournment notwithstanding the withdrawal of enough shareholders to leave less than a quorum,
if any action (other than adjournment) is approved by at least a majority of the shares required to constitute a quorum.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">A shareholder may be represented at a meeting of shareholders by a
proxy who may speak and vote on behalf of the shareholder. A shareholder will be deemed to be present at the meeting if he participates
by telephone or other electronic means and all shareholders participating in the meeting are able to hear each other.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Transfer of Shares</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Subject to the restrictions and conditions in our Amended and Restated
Memorandum and Articles of Association, as amended, and the Amended Shareholders Agreement, any shareholder may transfer all or any of
his or her shares by written instrument of transfer signed by the transferor and containing the name and address of the transferee. The
transfer of a share is effective when the name of the transferee is entered on the register of members of the Company.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Redemption of Shares</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company may purchase, redeem or otherwise acquire any of its own
shares for such consideration as the directors of the Company may determine if the directors are satisfied, on reasonable grounds, that
immediately after the acquisition the value of the Company&#8217;s assets will exceed its liabilities and the Company will be able to
pay its debts as they fall due. Shares that the Company purchases, redeems or otherwise acquires may be cancelled or held as treasury
shares except to the extent that such shares are in excess of 50% of the issued shares in which case, they shall be cancelled to the extent
of such excess, but they shall be available for reissue.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Differences Between the Law of Different Jurisdictions</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We were incorporated under, and are governed by, the laws of the BVI.
Set forth below is a summary of some of the differences between provisions of the Companies Act applicable to us and the laws application
to companies incorporated in Delaware and their shareholders.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Director&#8217;s Fiduciary Duties</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Under Delaware corporate law, a director of a Delaware corporation
has a fiduciary duty to the corporation and its shareholders. This duty has two components: the duty of care and the duty of loyalty.
The duty of care requires that a director act in good faith, with the care that an ordinarily prudent person would exercise under similar
circumstances. Under this duty, a director must inform himself of, and disclose to shareholders, all material information reasonably available
regarding a significant transaction. The duty of loyalty requires that a director act in a manner he reasonably believes to be in the
best interests of the corporation. He must not use his corporate position for personal gain or advantage. This duty prohibits self-dealing
by a director and mandates that the best interest of the corporation and its shareholders take precedence over any interest possessed
by a director, officer or controlling shareholder and not shared by the shareholders generally. In general, actions of a director are
presumed to have been made on an informed basis, in good faith and in the honest belief that the action taken was in the best interests
of the corporation. However, this presumption may be rebutted by evidence of a breach of one of the fiduciary duties. Should such evidence
be presented concerning a transaction by a director, a director must prove the procedural fairness of the transaction, and that the transaction
was of fair value to the corporation.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">BVI law provides that every director of a BVI company in exercising
his powers or performing his duties shall act honestly and in good faith and in what the director believes to be in the best interests
of the company. Additionally, the director shall exercise the care, diligence, and skill that a reasonable director would exercise in
the same circumstances, taking into account the nature of the company, the nature of the decision and the position of the director and
his responsibilities. In addition, BVI law provides that a director shall exercise his powers as a director for a proper purpose and shall
not act, or agree to the company acting, in a manner that contravenes the Companies Act or the memorandum of association or articles of
association of the company.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0"><b><i>Amendment of Governing Documents</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">Under Delaware corporate law, with very limited exceptions, a vote
of the shareholders is required to amend the certificate of incorporation. Under BVI law and our Amended and Restated Memorandum and Articles
of Association, we may amend the Amended and Restated Memorandum and Articles of Association by resolution of shareholders or by resolution
of directors, provided that no amendment may be made by resolution of directors: (a) to restrict the rights or powers of the shareholders
to amend the memorandum of association or the articles of association; (b) to change the percentage of shareholders required to pass a
resolution of shareholders to amend the memorandum of association or the articles of association; (c) in circumstances where the memorandum
of association or the articles of association cannot be amended by the shareholders; and (d) provided that the directors may not amend
certain sections of the Amended and Restated Memorandum and Articles of Association that would negatively affect existing shareholders.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0"><b><i>Written Consent of Directors</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">Under Delaware corporate law, directors may act by written consent
only on the basis of a unanimous vote. Under BVI law, directors&#8217; consents need only a majority of directors signing to take effect.
Under our Amended and Restated Memorandum and Articles of Association, directors may act by written consents of all directors.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0"><b><i>Written Consent of Shareholders</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">Under Delaware corporate law, unless otherwise provided in the certificate
of incorporation, any action to be taken at any annual or special meeting of shareholders of a corporation, may be taken by written consent
of the holders of outstanding stock having not less than the minimum number of votes that would be necessary to take such action at a
meeting. As permitted by BVI law, shareholders&#8217; consents need only shareholders representing a majority of votes of the shares entitled
to vote signing to take effect. Our Amended and Restated Memorandum and Articles of Association provide that an action that may be taken
by the shareholders at a meeting (other than the election of directors) may also be taken by a resolution of shareholders consented to
in writing, without the need for any notice, but if any resolution of shareholders is adopted otherwise than by the unanimous written
consent of all shareholders, a copy of such resolution shall forthwith be sent to all shareholders not consenting to such resolution.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0"><b><i>Shareholder Proposals</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">Under Delaware corporate law, a shareholder has the right to put any
proposal before the annual meeting of shareholders, provided it complies with the notice provisions in the governing documents. A special
meeting may be called by the board of directors or any other person authorized to do so in the governing documents, but shareholders may
be precluded from calling special meetings. BVI law and our Amended and Restated Memorandum and Articles of Association provide that our
directors shall call a meeting of the shareholders in respect of the matter for which the meeting is requested in writing by shareholders
entitled to exercise 30% or more of the voting rights.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0"><b><i>Sale of Assets</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">Under Delaware corporate law, a vote of the shareholders is required
to approve the sale of assets only when all or substantially all assets are being sold. In the BVI, shareholder approval is required when
more than 50% of a company&#8217;s total assets by value are being disposed of or sold.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Dissolution; Winding Up</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">Under Delaware corporate law, unless the board of directors approves
the proposal to dissolve, dissolution must be approved by shareholders holding 100% of the total voting power of the corporation. Only
if the dissolution is initiated by the board of directors may it be approved by a simple majority of the corporation&#8217;s outstanding
shares. Delaware corporate law allows a Delaware corporation to include in its certificate of incorporation a supermajority voting requirement
in connection with dissolutions initiated by the board. As permitted by BVI law and our Amended and Restated Memorandum and Articles of
Association, we may by a resolution of shareholders or, subject to the requirements under our Amended and Restated Memorandum and Articles
of Association, by resolution of directors appoint a voluntary liquidator to undertake the liquidation of the Company.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0"><b><i>Redemption of Shares</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">Under Delaware corporate law, any stock may be made subject to redemption
by the corporation at its option or at the option of the holders of such stock provided there remains outstanding shares with full voting
power. Such stock may be made redeemable for cash, property or rights, as specified in the certificate of incorporation or in the resolution
of the board of directors providing for the issue of such stock. As permitted by BVI law and our Amended and Restated Memorandum and Articles
of Association, we may purchase, redeem or otherwise acquire any of our own shares for such consideration as our directors may determine
if the directors are satisfied, on reasonable grounds, that immediately after the acquisition the value of our assets will exceed our
liabilities and we will be able to pay our debts as they fall due. Shares that the Company purchases, redeems or otherwise acquires may
be cancelled or held as treasury shares except to the extent that such shares are in excess of 50% of the issued shares in which case
they shall be cancelled to the extent of such excess but they shall be available for reissue.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0"><b><i>Variation of Rights of Shares</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">Under Delaware corporate law, a corporation may vary the rights of
a class of shares with the approval of a majority of the outstanding shares of such class, unless the certificate of incorporation provides
otherwise. As permitted by BVI law and our Amended and Restated Memorandum and Articles of Association, if at any time the shares are
divided into different classes, the rights attached to any class may only be varied, whether or not the Company is in liquidation, by
a resolution passed at a meeting by a majority of the votes cast by those entitled to vote at a meeting of the holders of the issued shares
in that class.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0"><b><i>Removal of Directors</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">Under Delaware corporate law, a director of a corporation with a classified
board may be removed only for cause with the approval of a majority of the outstanding shares entitled to vote, unless the certificate
provides otherwise. As permitted by BVI law and our Amended and Restated Memorandum and Articles of Association, a director or member
of a committee of the board or the board of a subsidiary may be removed from his or her position, with cause, by the majority of the shareholders
or the majority of the board; provided that (i) any director or member of a committee of the board or the board of a subsidiary that is
appointed or nominated by the minority representative shall be removed from their position upon and only upon, the written request of
the minority representative; and (ii) any director or member of a committee of the board or the board of a subsidiary that is appointed
or nominated by Digital Grid shall be removed from their position upon and only upon, the written request of Digital Grid.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0"><b><i>Mergers</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">Under Delaware corporate law, one or more constituent corporations
may merge into and become part of another constituent corporation in a process known as a merger. A Delaware corporation may merge with
a foreign corporation as long as the law of the foreign jurisdiction permits such a merger. To effect a merger under Delaware General
Corporation Law &#167;251, an agreement of merger must be properly adopted and the agreement of merger or a certificate of merger must
be filed with the Delaware Secretary of State. In order to be properly adopted, the agreement of merger must be adopted by the board of
directors of each constituent corporation by a resolution or unanimous written consent. In addition, the agreement of merger generally
must be approved at a meeting of shareholders of each constituent corporation by a majority of the outstanding stock of the corporation
entitled to vote, unless the certificate of incorporation provides for a supermajority vote. In general, the surviving corporation assumes
all of the assets and liabilities of the disappearing corporation or corporations as a result of the merger.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">Under the Companies Act, two or more companies may merge or consolidate
in accordance with the statutory provisions. A merger means the merging of two or more constituent companies into one of the constituent
companies, and a consolidation means the uniting of two or more constituent companies into a new company. In order to merge or consolidate,
the directors of each constituent company must approve a written plan of merger or consolidation which must be authorized by a resolution
of shareholders.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->82<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Shareholders not otherwise entitled to vote on the merger or consolidation
may still acquire the right to vote if the plan of merger or consolidation contains any provision which, if proposed as an amendment to
the memorandum association or articles of association, would entitle them to vote as a class or series on the proposed amendment. In any
event, all shareholders must be given a copy of the plan of merger or consolidation irrespective of whether they are entitled to vote
at the meeting or consent to the written resolution to approve the plan of merger or consolidation.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Inspection of Books and Records</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Under Delaware corporate law, any shareholder of a corporation may
for any proper purpose inspect or make copies of the corporation&#8217;s stock ledger, list of shareholders and other books and records.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Under the Companies Act, members of the general public, on payment
of a nominal fee, can obtain copies of the public records of a company available at the office of the Registrar which will include the
company&#8217;s certificate of incorporation, its memorandum and articles of association (with any amendments) and records of license
fees paid to date and will also disclose any articles of dissolution, articles of merger and a register of charges if the company has
elected to file such a register.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">A member of a company is entitled, on giving written notice to the
company, to inspect:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">a.</span></td><td style="text-align: left"><span style="font-size: 10pt">the memorandum and articles;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">b.</span></td>
    <td><span style="font-size: 10pt">the register of members;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">c.</span></td>
    <td><span style="font-size: 10pt">the register of directors; and</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">d.</span></td><td style="text-align: left"><span style="font-size: 10pt">the minutes of meetings and
resolutions of members and of those classes of members of which he is a member; and to make copies of or take extracts from the documents
and records referred to in (a) to (d) above.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Subject to our Amended and Restated Memorandum and Articles of Association,
the directors may, if they are satisfied that it would be contrary to the company&#8217;s interests to allow a member to inspect any document,
or part of a document, specified in (b), (c) or (d) above, refuse to permit the member to inspect the document or limit the inspection
of the document, including limiting the making of copies or the taking of extracts from the records.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Where a company fails or refuses to permit a member to inspect a document
or permits a member to inspect a document subject to limitations, that member may apply to the British Virgin Islands Court for an order
that he should be permitted to inspect the document or to inspect the document without limitation.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Transactions with Interested Shareholders</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Delaware corporate law contains a business combination statute applicable
to Delaware public corporations whereby, unless the corporation has specifically elected not to be governed by such statute by amendment
to its certificate of incorporation, it is prohibited from engaging in certain business combinations with an &#8220;interested shareholder&#8221;
for three years following the date that such person becomes an interested shareholder. An interested shareholder generally is a person
or group who or that owns or owned 15% or more of the target&#8217;s outstanding voting stock within the past three years. This has the
effect of limiting the ability of a potential acquirer to make a two-tiered bid for the target in which all shareholders would not be
treated equally. The statute does not apply if, among other things, prior to the date on which such shareholder becomes an interested
shareholder, the board of directors approves either the business combination or the transaction that resulted in the person becoming an
interested shareholder. This encourages any potential acquirer of a Delaware public corporation to negotiate the terms of any acquisition
transaction with the target&#8217;s board of directors.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">BVI law has no comparable provision.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Cumulative Voting</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Under Delaware corporate law, cumulative voting for elections of directors
is not permitted unless the company&#8217;s certificate of incorporation specifically provides for it. Cumulative voting potentially facilitates
the representation of minority shareholders on a board of directors since it permits the minority shareholder to cast all the votes to
which the shareholder is entitled on a single director, which increases the shareholder&#8217;s voting power with respect to electing
such director. There are no prohibitions to cumulative voting under the laws of the BVI, but our Amended and Restated Memorandum and Articles
of Association do not provide for cumulative voting.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">C.</span></td><td style="text-align: left"><span style="font-size: 10pt"><b>Material Contracts</b></span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Except as otherwise disclosed in this annual report (including
the Exhibits under Item 19), we are not currently, nor have we been for the past two years, party to any material contract, other
than contracts entered into in the ordinary course of business.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">D.</span></td><td style="text-align: left"><span style="font-size: 10pt"><b>Exchange Controls</b></span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>BVI Exchange Controls</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">There are no material exchange controls restrictions on payment of
dividends, interest or other payments to the holders of our common shares or on the conduct of our operations in the BVI, where we were
incorporated. There are no material BVI laws that impose any material exchange controls on us or that affect the payment of dividends,
interest or other payments to nonresident holders of our common shares. BVI law and our Amended and Restated Memorandum and Articles of
Association do not impose any material limitations on the right of non-residents or foreign owners to hold or vote our common shares.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">E.</span></td><td style="text-align: left"><span style="font-size: 10pt"><b>Taxation</b></span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>BVI, PRC AND U.S. FEDERAL INCOME TAX CONSIDERATIONS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>The following is a general summary of certain material BVI, PRC
and U.S. federal income tax considerations. The discussion is not intended to be, nor should it be construed as, legal or tax advice to
any particular shareholder or prospective shareholder. The discussion is based on laws and relevant interpretations thereof in effect
as of the date hereof, all of which are subject to change or different interpretations, possibly with retroactive effect.</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>BVI Taxation</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The BVI does not impose a withholding tax on dividends paid to holders
of our common shares, nor does the BVI levy any capital gains or income taxes on us. Further, a holder of our common shares who is not
a tax resident of the BVI is exempt from the BVI income tax on dividends paid with respect to the common shares. Holders of common shares
are not subject to the BVI income tax on gains realized on the sale or disposition of the common shares.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->84<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">Our common shares are not subject to transfer taxes, stamp duties or
similar charges in the BVI. However, as a company incorporated under the Companies Act, we are required to pay the BVI government an annual
license fee based on the number of shares we are authorized to issue.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">There is no income tax treaty or convention currently in effect between
the United States and the BVI.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0"><b><i>PRC Taxation</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">We are a holding company incorporated in the BVI, which directly holds
our equity interests in our PRC operating subsidiaries. The EIT Law and its implementation rules, both of which became effective as of
January 1, 2008, as amended on February 24, 2017, provide that a PRC enterprise is subject to a standard income tax rate of 25% and China-sourced
income of foreign enterprises, such as dividends paid by a PRC subsidiaries to its overseas parent, will normally be subject to PRC withholding
tax at a rate of 10%, unless there are applicable treaties between the overseas parent&#8217;s jurisdiction of incorporation and China
to reduce such rate.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The EIT Law also provides that enterprises organized under the laws
of jurisdictions outside China with their &#8220;de facto management bodies&#8221; located within China may be considered PRC resident
enterprises and therefore subject to PRC enterprise income tax at the rate of 25% on their worldwide income. Its implementation rules
further define the term &#8220;de facto management body&#8221; as the management body that exercises substantial and overall management
and control over the business, personnel, accounts and properties of an enterprise. We do not consider the Company to be a PRC resident
enterprise since our management team, which exercises substantial and overall management and control over the Company and its overseas
subsidiaries, is located in the United States. If the PRC tax authorities determine that our BVI holding company is a &#8220;resident
enterprise&#8221; for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could follow. Under the EIT Law
and its implementation regulations issued by the State Council, a 10% PRC withholding tax is applicable to dividends paid to investors
that are non-resident enterprises, which do not have an establishment or place of business in the PRC or which have such establishment
or place of business but the dividends are not effectively connected with such establishment or place of business, to the extent such
dividends are derived from sources within the PRC. In addition, any gain realized on the transfer of shares by such investors is also
subject to PRC tax at a rate of 10%, if such gain is regarded as income derived from sources within the PRC. If we are deemed a PRC resident
enterprise, dividends paid on our common shares, and any gain realized from the transfer of our common shares, may be treated as income
derived from sources within the PRC and may as a result be subject to PRC taxation. Furthermore, if we are deemed a PRC resident enterprise,
dividends paid to individual investors who are non-PRC residents and any gain realized on the transfer of common shares by such investors
may be subject to PRC tax at a current rate of 20% (which in the case of dividends may be withheld at source). Any PRC tax liability may
be reduced under applicable tax treaties or tax arrangements between China and other jurisdictions. If we or any of our subsidiaries established
outside China are considered a PRC resident enterprise, it is unclear whether holders of our common shares would be able to claim the
benefit of income tax treaties or agreements entered into between China and other countries or areas.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0"><b><i>U.S. Federal Income Taxation</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">We believe that we are an inverted corporation for U.S. federal tax
purposes. This means that, notwithstanding that we are a company incorporated in the BVI, we believe that we will be treated for all U.S.
federal tax purposes as if we are a U.S. corporation and that a holder of our common shares will be treated for all U.S. federal tax purposes
as holding the stock of a U.S. corporation.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0">The following discussion is a summary of certain U.S. federal income
tax considerations generally applicable to the ownership and disposition of our common shares but does not purport to be a complete analysis
of all potential tax effects. The effects of other U.S. federal tax laws, such as estate and gift tax laws, and any applicable state or
local tax laws are not discussed. This discussion is based on the Internal Revenue Code and U.S. Treasury Regulations promulgated thereunder,
judicial decisions, and published rulings and administrative pronouncements of the U.S. Internal Revenue Service, or the IRS, in each
case in effect as of the date hereof. These authorities may change or be subject to differing interpretations. Any such change or differing
interpretation may be applied retroactively in a manner that could adversely affect owners of our common shares. We have not sought and
will not seek any rulings from the IRS regarding the matters discussed below. There can be no assurance the IRS or a court will not take
a contrary position to that discussed below regarding the tax consequences of the ownership and disposition of our common shares.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 90; Value: 52 --><div>
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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">This discussion is limited to beneficial owners that hold our common
shares as a &#8220;capital asset&#8221; within the meaning of Section 1221(a) of the Code (generally, property held for investment). This
discussion does not address all U.S. federal income tax consequences, including the impact of the Medicare contribution tax on net investment
income. In addition, it does not address consequences relevant to certain types of investors subject to special rules, including, without
limitation:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">financial institutions or financial services entities;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">broker-dealers;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">governments or agencies or instrumentalities thereof;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">regulated investment companies;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">real estate investment trusts;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">expatriates or former long-term residents of the U.S.;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">persons that actually or constructively own five percent or more (by vote or value) of our shares;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">insurance companies;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">dealers or traders subject to a mark-to-market method of accounting with respect to the securities;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">persons holding the securities as part of a &#8220;straddle,&#8221; constructive sale, hedge, conversion or other integrated or similar transaction;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">persons that purchase or sell our securities as part of a wash sale for U.S. federal income tax purposes;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">U.S. holders (as defined below) whose functional currency is not the U.S. dollar;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">partnerships (or entities or arrangements classified as partnerships or other pass-through entities for U.S. federal income tax purposes) and any beneficial owners of such entities;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">tax-exempt entities;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">controlled foreign corporations;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">passive foreign investment companies; and</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">persons that acquired our securities as compensation or in connection with services.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">If you are a partnership or other pass-through entity (including an
entity or arrangement treated as a partnership or other pass-through entity for U.S. federal income tax purposes), the U.S. federal income
tax treatment of your partners, members or other beneficial owners will generally depend on the status of the partners, members or other
beneficial owners, your activities, and certain determinations made at the partner, member or other beneficial owner level. If you are
a partner, member or other beneficial owner of a partnership or other pass-through entity that acquires our securities, you are urged
to consult your tax advisor regarding the tax consequences of acquiring, owning and disposing of our securities.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>U.S. Holders</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">For purposes of this discussion, a &#8220;U.S. holder&#8221; is any
beneficial owner of our common shares that is:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">an individual who is a citizen or resident of the United States;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">a corporation (or other entity or arrangement taxable as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">an estate the income of which is includable in gross income for U.S. federal income tax purposes regardless of its source; or</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">a trust, if (i) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons (as defined in the Code) have authority to control all substantial decisions of the trust or (ii) it has a valid election in effect under Treasury regulations to be treated as a U.S. person.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Taxation of Distributions</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">If we pay distributions in cash or other property (other than certain
distributions of our common shares or rights to acquire our common shares) to U.S. holders of our common shares, such distributions generally
will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits,
as determined under U.S. federal income tax principles. Distributions in excess of current and accumulated earnings and profits will constitute
a return of capital that will be applied against and reduce (but not below zero) the U.S. holder&#8217;s adjusted tax basis in our common
shares. Any remaining excess will be treated as gain realized on the sale or other disposition of the common shares and will be treated
as described under &#8220;U.S. Holders &#8212; Sale, Taxable Exchange or Other Taxable Disposition of Our common shares&#8221; below.</p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Dividends we pay to a U.S. holder that is a taxable corporation generally
will qualify for the dividends received deduction if the requisite holding period is satisfied. With certain exceptions and provided certain
holding period requirements are met, dividends we pay to a non-corporate U.S. holder may constitute &#8220;qualified dividend income&#8221;
that will be subject to tax at the applicable tax rate accorded to long-term capital gains. If the holding period requirements are not
satisfied, then a corporation may not be able to qualify for the dividends received deduction and would have taxable income equal to the
entire dividend amount, and non-corporate holders may be subject to tax on such dividend at regular ordinary income tax rates instead
of the preferential rate that applies to qualified dividend income.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Sale, Taxable Exchange or Other Taxable Disposition of Our Common
Shares</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Subject to the discussion below under &#8220;U.S. Holders &#8212; Redemption
of Our Common Shares,&#8221; upon a sale, taxable exchange or other taxable disposition of our common shares, a U.S. holder generally
will recognize capital gain or loss in an amount equal to the difference between the amount realized and the U.S. holder&#8217;s adjusted
tax basis in such common shares. Any such capital gain or loss generally will be long-term capital gain or loss if the U.S. holder&#8217;s
holding period for the common shares so disposed of exceeds one year. Long-term capital gains recognized by non-corporate U.S. holders
currently will be eligible to be taxed at reduced rates. The deductibility of capital losses is subject to limitations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Redemption of Our Common Shares</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In the event that a U.S. holder&#8217;s common shares is redeemed or
if we purchase a U.S. holder&#8217;s common shares in an open market transaction (such open market purchase of common shares by us is
referred to as a &#8220;redemption&#8221; for the remainder of this discussion), the treatment of the transaction for U.S. federal income
tax purposes will depend on whether the redemption qualifies as a sale of the common shares under Section 302 of the Code. Under these
rules, the redemption generally will be treated as a sale of the common shares (rather than as a distribution) if the redemption (i) is
&#8220;substantially disproportionate&#8221; with respect to the U.S. holder, (ii) results in a &#8220;complete termination&#8221; of
the U.S. holder&#8217;s interest in us or (iii) is &#8220;not essentially equivalent to a dividend&#8221; with respect to the U.S. holder.
In determining whether any of these tests have been met, shares considered to be owned by the U.S. holder by reason of certain constructive
ownership rules set forth in the Code, as well as shares actually owned, must generally be taken into account. Because the determination
as to whether any of the alternative tests of Section 302 of the Code is satisfied with respect to any particular holder of the stock
will depend upon the facts and circumstances as of the time the determination is made, U.S. holders should consult their tax advisors
to determine such tax treatment.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">If the redemption qualifies as a sale of common shares, the U.S. holder
will be treated as described under &#8220;U.S. Holders &#8212; Sale, Taxable Exchange or Other Taxable Disposition of Our Common Shares&#8221;
above. If the redemption does not qualify as a sale of our common shares, the U.S. holder will be treated as receiving a distribution
with the tax consequences described above under &#8220;U.S. Holders &#8212; Taxation of Distributions.&#8221; The amount of the distribution
would be measured by the amount of cash and the fair market value of any property received by the U.S. holder and any remaining tax basis
of the U.S. holder in the redeemed common shares would be added to the U.S. holder&#8217;s adjusted tax basis in its remaining common
shares. If the U.S. holder has no remaining common shares, such basis may, under certain circumstances, be transferred to a related person
or it may be lost entirely.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Information Reporting and Backup Withholding</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In general, information reporting requirements may apply to dividends
paid to a U.S. holder and to the proceeds of the sale, taxable exchange or other taxable disposition of our common shares unless the U.S.
holder is an exempt recipient. Backup withholding may apply to such payments if the U.S. holder fails to provide a taxpayer identification
number, a certification of exempt status or has been notified by the IRS that it is subject to backup withholding (and such notification
has not been withdrawn).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Backup withholding is not an additional tax. Any amounts withheld under
the backup withholding rules will be allowed as a credit against a U.S. holder&#8217;s U.S. federal income tax liability and may entitle
such holder to a refund, provided the required information is timely furnished to the IRS.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Non-U.S. Holders</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">For purposes of this discussion, a Non-U.S. holder is any beneficial
owner of our common shares that is neither a &#8220;U.S. person&#8221; nor an entity or arrangement treated as a partnership for U.S.
federal income tax purposes.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 92; Value: 52 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->87<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Taxation of Distributions</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">If we pay distributions in cash or other property (other than certain
distributions of our common shares or rights to acquire our common shares) to Non-U.S. holders of our common shares, such distributions
generally will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and
profits, as determined under U.S. federal income tax principles. Distributions in excess of current and accumulated earnings and profits
will constitute a return of capital that will be applied against and reduce (but not below zero) the Non-U.S. holder&#8217;s adjusted
tax basis in our common shares. Any remaining excess will be treated as gain realized on the sale or other disposition of the common shares
and will be treated as described under &#8220;Non-U.S. Holders &#8212; Sale, Taxable Exchange or Other Taxable Disposition of Our Common
Shares.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Subject to the discussions below on effectively connected income, dividends
paid to a Non-U.S. holder of our common shares will be subject to U.S. federal withholding tax at a rate of 30% of the gross amount of
the dividends (or such lower rate specified by an applicable income tax treaty, provided the Non-U.S. holder furnishes a valid IRS Form
W-8BEN or W-8BEN-E (or other applicable documentation) certifying qualification for the lower treaty rate). A Non-U.S. holder that does
not timely furnish the required documentation, but that qualifies for a reduced treaty rate, may obtain a refund of any excess amounts
withheld by timely filing an appropriate claim for refund with the IRS.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">If dividends paid to a Non-U.S. holder are effectively connected with
the Non-U.S. holder&#8217;s conduct of a trade or business within the United States (and, if required by an applicable income tax treaty,
the Non-U.S. holder maintains a permanent establishment in the United States to which such dividends are attributable), the Non-U.S. holder
will be exempt from the U.S. federal withholding tax described above. To claim the exemption, the Non-U.S. holder generally must furnish
to the applicable withholding agent a valid IRS Form W-8ECI, certifying that the dividends are effectively connected with the Non-U.S.
holder&#8217;s conduct of a trade or business within the United States.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Any such effectively connected dividends will be subject to U.S. federal
income tax on a net basis at the regular graduated rates. A Non-U.S. holder that is a corporation also may be subject to a branch profits
tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty) on such effectively connected dividends, as adjusted
for certain items.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Non-U.S. holders should consult their tax advisors regarding any applicable
tax treaties that may provide for different rules.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Sale, Taxable Exchange or Other Taxable Disposition of Our Common
Shares</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Subject to the discussion below under &#8220;Non-U.S. Holders &#8212;
Redemption of Our Common Shares,&#8221; a Non-U.S. holder will not be subject to U.S. federal income tax on any gain realized upon the
sale, taxable exchange or other taxable disposition of our common shares unless:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">the gain is effectively connected with the Non-U.S. holder&#8217;s conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, the Non-U.S. holder maintains a permanent establishment in the United States to which such gain is attributable);</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">the Non-U.S. holder is a nonresident alien individual present in the United States for 183 days or more during the taxable year of the disposition and certain other requirements are met; or</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">our common shares constitute a U.S. real property interest, or USRPI, by reason of our status as a U.S. real property holding corporation, or USRPHC, for U.S. federal income tax purposes.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Gain described in the first bullet point above generally will be subject
to U.S. federal income tax on a net income basis at the regular graduated rates. A Non-U.S. holder that is a corporation also may be subject
to a branch profits tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty) on such effectively connected
gain, as adjusted for certain items.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Gain described in the second bullet point above will be subject to
U.S. federal income tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty), which may be offset by U.S.
source capital losses of the Non-U.S. holder, provided the Non-U.S. holder has timely filed U.S. federal income tax returns with respect
to such losses.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->88<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">With respect to the third bullet point above, we believe we currently
are not, and do not anticipate becoming, a USRPHC. Because the determination of whether we are a USRPHC depends, however, on the fair
market value of our USRPIs relative to the fair market value of our non-U.S. real property interests and our other business assets, there
can be no assurance we currently are not a USRPHC or will not become one in the future. Even if we are or were to become a USRPHC, gain
arising from the sale or other taxable disposition by a Non-U.S. holder of our common shares will not be subject to U.S. federal income
tax if our common shares is &#8220;regularly traded,&#8221; as defined by applicable Treasury Regulations, on an established securities
market, and such Non-U.S. holder owned, actually and constructively, 5% or less of our common shares throughout the shorter of the five-year
period ending on the date of the sale or other taxable disposition and the Non-U.S. holder&#8217;s holding period.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Non-U.S. holders should consult their tax advisors regarding potentially
applicable income tax treaties that may provide for different rules.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Redemption of Our Common Shares</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The characterization for U.S. federal income tax purposes of the redemption
of a Non-U.S. holder&#8217;s common shares generally will correspond to the U.S. federal income tax characterization of such a redemption
of a U.S. holder&#8217;s common shares, as described under &#8220;U.S. Holders &#8212; Redemption of Our common shares&#8221; above, and
the consequences of the redemption to the Non-U.S. holder will be as described above under &#8220;Non-U.S. Holders &#8212; Taxation of
Distributions&#8221; and &#8220;Non-U.S. Holders &#8212; Sale, Taxable Exchange or Other Taxable Disposition of Our common shares,&#8221;
as applicable. Because it may not be certain at the time a Non-U.S. holder is redeemed whether such Non-U.S. holder&#8217;s redemption
will be treated as a sale of shares or a distribution constituting a dividend, and because such determination will depend in part on a
Non-U.S. holder&#8217;s particular circumstances, we or the applicable withholding agent may not be able to determine whether (or to what
extent) a Non-U.S. holder is treated as receiving a dividend for U.S. federal income tax purposes. Therefore, we or the applicable withholding
agent may withhold tax at a rate of 30% on the gross amount of any consideration paid to a Non-U.S. holder in redemption of such Non-U.S.
holder&#8217;s common shares unless special procedures are available to Non-U.S. holders to certify that they are entitled to exemptions
from, or reductions in, such withholding tax. However, there can be no assurance that such special certification procedures will be available.
A Non-U.S. holder generally may obtain a refund of any such excess amounts withheld by timely filing an appropriate claim for refund with
the IRS. Non-U.S. holders should consult their tax advisors regarding the application of the foregoing rules in light of their particular
facts and circumstances.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Information Reporting and Backup Withholding</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Payments of dividends on our common shares will not be subject to backup
withholding, provided the applicable withholding agent does not have actual knowledge or reason to know the Non-U.S. holder is a United
States person and the Non-U.S. holder either certifies its non-U.S. status, such as by furnishing a valid IRS Form W-8BEN, W-8BEN-E or
W-8ECI, or otherwise establishes an exemption. However, information returns are required to be filed with the IRS in connection with any
dividends on our common shares paid to the Non-U.S. holder, regardless of whether any tax was actually withheld. In addition, proceeds
of the sale, taxable exchange or other taxable disposition of our common shares within the United States or conducted through certain
U.S.-related brokers generally will not be subject to backup withholding or information reporting, if the applicable withholding agent
receives the certification described above and does not have actual knowledge or reason to know that such Non-U.S. holder is a United
States person, or the Non-U.S. holder otherwise establishes an exemption. Proceeds of a disposition of our common shares conducted through
a non-U.S. office of a non-U.S. broker generally will not be subject to backup withholding or information reporting.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Copies of information returns that are filed with the IRS may also
be made available under the provisions of an applicable treaty or agreement to the tax authorities of the country in which the Non-U.S.
holder resides or is established.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Backup withholding is not an additional tax. Any amounts withheld under
the backup withholding rules may be allowed as a refund or a credit against a Non-U.S. holder&#8217;s U.S. federal income tax liability,
provided the required information is timely furnished to the IRS.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">All Non-U.S. holders should consult their tax advisors regarding the
application of information reporting and backup withholding to them.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->89<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>FATCA Withholding Taxes</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Sections 1471 through 1474 of the Code and the Treasury Regulations
and administrative guidance promulgated thereunder (commonly referred to as the &#8220;Foreign Account Tax Compliance Act&#8221; or &#8220;FATCA&#8221;)
generally impose withholding of 30% on payments of dividends (including constructive dividends) on our common shares to &#8220;foreign
financial institutions&#8221; (which is broadly defined for this purpose and in general includes investment vehicles) and certain other
non-U.S. entities unless various U.S. information reporting and due diligence requirements (generally relating to ownership by U.S. persons
of interests in or accounts with those entities) have been satisfied by, or an exemption applies to, the payee (typically certified as
to by the delivery of a properly completed IRS Form W-8BEN-E). The IRS has issued proposed regulations (on which taxpayers may rely until
final regulations are issued) that provide that these withholding requirements would generally not apply to gross proceeds from sales
or other dispositions of our common shares. However, there can be no assurance that final Treasury regulations will provide the same exceptions
from FATCA withholding as the proposed Treasury regulations. Foreign financial institutions located in jurisdictions that have an intergovernmental
agreement with the United States governing FATCA may be subject to different rules. Under certain circumstances, a Non-U.S. holder might
be eligible for refunds or credits of such withholding taxes, and a Non-U.S. holder might be required to file a U.S. federal income tax
return to claim such refunds or credits. Similarly, dividends in respect of our common shares held by an investor that is a non-financial
non-U.S. entity that does not qualify under certain exceptions will generally be subject to withholding at a rate of 30%, unless such
entity either (1) certifies to us or the applicable withholding agent that such entity does not have any &#8220;substantial United States
owners&#8221; or (2) provides certain information regarding the entity&#8217;s &#8220;substantial United States owners,&#8221; which will
in turn be provided to the U.S. Department of Treasury. Prospective investors should consult their tax advisors regarding the effects
of FATCA on their investment in our common shares.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt"><b>F.</b></span></td><td style="text-align: left"><span style="font-size: 10pt"><b>Dividends and Paying Agents</b></span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt"><b>G.</b></span></td><td style="text-align: left"><span style="font-size: 10pt"><b>Statement by Experts</b></span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt"><b>H.</b></span></td><td style="text-align: left"><span style="font-size: 10pt"><b>Documents on Display</b></span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The SEC maintains an Internet site that contains reports, proxy and
information statements, and other information regarding issuers that file electronically with the SEC, including the Company, at http://www.sec.gov.
The address of the SEC&#8217;s website is provided solely for information purposes and is not intended to be an active link.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We also make our periodic reports as well as other information filed
with or furnished to the SEC available through our website, at www.Newegg.com, as soon as reasonably practicable after those reports and
other information are electronically filed with or furnished to the SEC. The information on our website is not incorporated by reference
in this document.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt"><b>I.</b></span></td><td style="text-align: left"><span style="font-size: 10pt"><b>Subsidiary information</b></span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><b>J.</b></td><td style="text-align: left"><b>Annual Report to Security Holders</b></td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_013"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Item 11. Quantitative and Qualitative Disclosures About Market Risk</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We do not use financial instruments for speculative trading purposes,
and do not hold any derivative financial instruments that could expose us to significant market risk. Our primary market risk exposures
are changes in interest rates and foreign currency fluctuations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Interest rate risk</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our main interest rate exposure relates to long-term borrowings that
we obtain from banks and financial institutions to meet our working capital expenditure requirements. We also have interest-bearing assets,
including cash and cash equivalents, restricted cash and loans to affiliates. We manage our interest rate exposure with a focus on reducing
our overall cost of debt and exposure to changes in interest rates. As of December 31, 2022 and 2021, we had outstanding long-term borrowings
in the aggregate amount of $1.7&#160;million and $2.1 million, respectively, with the majority of our long-term borrowings having floating
interest rates.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->90<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We have not used derivative financial instruments to hedge the interest
rate risk. We have not been exposed to material risks due to changes in market interest rates. However, we cannot provide assurance that
we will not be exposed to material risks due to changes in market interest rates in the future.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Foreign currency risk</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We have currency fluctuation exposure arising from both sales and purchases
denominated in foreign currencies. Significant changes in exchange rates between foreign currencies in which we transact business and
the U.S. dollar may adversely affect our results of operations and financial condition. Historically, we have not entered into any hedging
activities, and, to the extent that we continue not to do so in the future, we may be vulnerable to the effects of currency exchange-rate
fluctuations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We expect our exposure to foreign currency risk will increase as we
increase our operations and sales in Canada and other countries and regions. Although the effect of currency fluctuations on our financial
statements has not been material in the past, there can be no assurance that the effect of currency fluctuations will not be material
in the future. For the years ended December 31, 2022, 2021, and 2020, we recorded foreign exchange gain of $0.9 million, loss of $3.3
million, and loss of $0.7 million, respectively. Based on the balance of our foreign-denominated cash and cash equivalents as of December
31, 2022, 2021, and 2020, an assumed 10% negative currency movement would not have a material impact.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">To date, we have not entered into any hedging transactions in an effort
to reduce our exposure to foreign currency exchange risk.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><div><a id="a_014"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Item 12. Description of Securities Other than Equity Securities</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->91<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><div><a id="a_015"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>PART II</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><div><a id="a_016"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Item 13. Defaults, Dividend Arrearages and Delinquencies</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">None.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><div><a id="a_017"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Item 14. Material Modifications to the Rights of Security Holders
and Use of Proceeds</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">See &#8220;Item 10. Additional Information&#8212;B. Memorandum and
Articles of Association&#8212; Rights of Certain Principal Shareholders&#8221; for a description of the rights of securities holders,
which remain unchanged.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><div><a id="a_018"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Item 15. Controls and Procedures</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Evaluation of Disclosure Controls and Procedures</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Management, with the participation of our Chief
Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31,
2022. The term &#8220;disclosure controls and procedures,&#8221; as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange
Act of 1934, as amended (the &#8220;Exchange Act&#8221;), means controls and other procedures of a company that are designed to ensure
that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the SEC&#8217;s rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that
it files or submits under the Exchange Act is accumulated and communicated to the company&#8217;s management, including its principal
executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">Based on the evaluation performed as of December 31, 2022, as a result
of the material weaknesses in internal control over financial reporting that are described below in Management&#8217;s Report on Internal Control
Over Financial Reporting, our Chief Executive Officer and Chief Financial Officer determined that our disclosure controls and procedures
were not effective as of such date.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Management&#8217;s Annual Report on Internal Control Over Financial
Reporting </b></p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><span>Management
is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange
Act Rules 13a-15(f) and 15d-15(f). A company&#8217;s internal control over financial reporting is a process designed by, or under the
supervision of, its Chief Executive Officer and Chief Financial Officer, and effected by such company&#8217;s board of directors, management
and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures
that:</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span>&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: left"><span>pertain to the maintenance
of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company&#894;</span></td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"></p><div>



</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: left"><span>provide reasonable
assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations
of management and directors of the company&#894; and</span></td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"></p><div>



</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: left"><span>provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company&#8217;s assets that
could have a material effect on the financial statements.</span></td>
</tr></table><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span>Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may deteriorate.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span>&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 97; Value: 52 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->92<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><span>Management,
with the participation of our Chief Executive Officer and Chief Financial Officer, has conducted an evaluation of the effectiveness of
our internal control over financial reporting as of December 31, 2022, based on the framework set forth in Internal Control-Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). While progress was made towards
remediating material weaknesses over the course of the year, based on the assessment, management has concluded that the Company did not
maintain effective internal control over financial reporting as of December 31, 2022 due to the material weaknesses described below.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span>&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">A material weakness is a deficiency, or a combination
of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement
of our annual or interim financial statements will not be prevented or detected on a timely basis. Notwithstanding the material weaknesses
in our internal control over financial reporting, we have concluded that the consolidated financial statements included in this annual
report on Form 20-F fairly present, in all material respects, our financial position, results of operations and cash flows for the periods
presented in conformity with accounting principles generally accepted in the United States of America.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><span style="text-decoration:underline">Material Weaknesses</span></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Control Activities and Information &amp; Communication</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The material weaknesses below impacted internal
controls within the revenue, inventory, financial reporting &amp; close, payroll, accounts payable, fixed assets, enterprise incentives,
stock compensation, treasury, and tax business cycles.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">Management
did not maintain effective general controls over information systems that support the financial reporting process. Specifically, management
did not design and maintain effective (i) program change management and program development controls for financial systems relevant to
our financial reporting and (ii) logical user access controls, including user access reviews, to ensure appropriate segregation of duties
and adequate restrictions of users, including those with privileged access.</span></td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"></p><div>



</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">Management
did not implement controls to address relevant risks in certain business processes.</span></td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"></p><div>



</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">Management
did not implement and operate review controls with a sufficient precision level or threshold of investigation to detect material misstatements
within its financial statements.</span></td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"></p><div>



</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">Management
did not retain documentation to sufficiently evidence that certain review procedures were performed.</span></td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin-top: 0pt; margin-bottom: 0pt"></p><div>



</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">Management
did not implement and operate controls over the completeness and accuracy of certain reports and underlying data used in the operation
of certain controls within its financial reporting process.</span></td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="text-decoration:underline">Remediation of Previously Reported Material Weakness in Internal
Control over Financial Reporting</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">As previously disclosed in our Annual Report on
Form 20-F for the year ended December 31, 2021, a material weakness in our internal controls existed as of December 31, 2021 relating
to Control Environment and Risk Assessment. During the year ended December 31, 2022, we implemented the following remedial actions that
addressed this material weakness:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">Hired
qualified resources including a Chief Accounting Officer, a Chief Legal Officer, a Director of Human Resources, and a VP of Internal
Audit to oversee risk assessment procedures and remedial actions over internal controls.</span></td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"></p><div>



</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">Contracted
with a qualified firm to support management&#8217;s remedial actions related to internal control, internal audit and technical accounting.</span></td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"></p><div>



</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: justify"><p style="margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">Conducted internal control trainings for business process owners and
control owners.</p></td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"></p><div>



</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">Enhanced
controls over review and approval of technical memorandums related to accounting areas in revenue recognition and leases.</span></td>
</tr></table><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">During 2022, management continued to make progress
towards remediating prior year material weaknesses and enhancing internal controls including the following:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">Continued
to enhance controls around segregations of duties over the IT function including segregations of development and production environments
and organizational segregations for developers and IT operational roles.</span></td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"></p><div>



</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">Continued
to enhance controls around program change management and system development controls over key financial systems.</span></td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"></p><div>



</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">Continued
to enhance controls around logical user access controls, including system enforced preventative controls and periodic user access reviews.</span></td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"></p><div>



</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif">Continued
to enhance controls around system administrators.</span></td>
</tr></table><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"> </p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">Continued
to enhance controls around automated completeness and accuracy testing over several key reports as a year-end control.</span></td>
</tr></table><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"></p><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 98; Value: 52 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->93<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Changes in Internal Control Over Financial Reporting.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Except as described above, there were no changes in our internal control
over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during the period covered by this annual
report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.</p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><div><a id="a_019"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Item 16. [Reserved]</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><div><a id="a_020"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">

</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Item 16A. Audit Committee Financial Expert</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our board of directors has determined that each director appointed
to the audit committee is financially literate and is independent as defined under Nasdaq Listing Rules. Our board also has determined
that Mr. Gregory 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. Refer to &#8220;Item 6 Directors, Senior Management and Employees&#8221; for further detail
on each of their backgrounds.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><div><a id="a_021"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Item 16B. Code of Ethics</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We have adopted a Code of Business Conduct and Ethics, which is posted
on our website at www.newegg.com/corporate/about, that applies to all employees and each of officers, including our Chief Executive Officer,
Chief Financial Officer and Chief Accounting Officer. Written copies of the Code of Business Conduct and Ethics are available free of
charge upon written request to us at the address on the first page of this annual report. If we make any substantive amendments to the
code of ethics or grant any waivers, including any implicit waiver, from a provision of these codes to our chief executive officer or
chief financial officer, we will disclose the nature of such amendment or waiver on our website.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><div><a id="a_022"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Item 16C. Principal Accountant Fees and Services </b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our principal accountants for the years ended December 31, 2022 and
December 31, 2021 were BDO USA, LLP (&#8220;BDO USA&#8221;). We incurred the following fees from BDO USA for professional services for
the years ended December 31, 2022 and 2021, respectively:&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31, <br/> 2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 76%; text-align: left">Audit Fees</td><td style="width: 1%">&#160;</td>
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    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">1,209</td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 4pt">Total fees</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">1,708</td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
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  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#8220;Audit fees&#8221; are the aggregate fees earned by BDO USA for
the audit of our consolidated annual financial statements, reviews of interim financial statements and attestation services that are provided
in connection with statutory and regulatory filings or engagements. The audit fees for the year ended December 31, 2021 include one off
fees related to the IPO and Merger.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#8220;Tax fees&#8221; are the aggregate fees charged by BDO USA for
professional services rendered for tax compliance activities.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#8220;Audit-related fees&#8221; are fees charged by the BDO USA for
assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and are
not reported under &#8220;Audit fees.&#8221; This category comprises fees for agreed-upon procedures engagements and other attestation
services subject to regulatory requirements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#8220;All other fees&#8221; are fees billed in each of the last two
fiscal years for products and services provided by BDO USA, other than the services reported in the aforementioned categories in this
section.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The policy of our audit committee or our board of directors is to pre-approve
all audit and non-audit services provided by our principal accountant, including audit services, audit-related services, and other services
as described above. &#160;&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><div><a id="a_023"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Item 16D. Exemptions from the Listing Standards for Audit Committees</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><div><a id="a_024"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Item 16E. Purchases of Equity Securities by the Issuer and Affiliated
Purchasers</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">None.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 99; Value: 52 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->94<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><div><a id="a_025"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Item 16F. Change in Registrant&#8217;s Certifying Accountant</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><div><a id="a_026"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Item 16G. Corporate Governance</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Newegg Commerce, Inc. (previously known as &#8220;Lianluo Smart Limited&#8221;)
was incorporated as an international business company under the International Business Companies Act, 1984, in the British Virgin Islands
on July 22, 2003.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We are a foreign private issuer within the meaning of the rules under
the Exchange Act. As such we are exempt from certain provisions of the securities rules and regulations in the United States that are
applicable to U.S. domestic issuers. As a foreign private issuer, the information we are required to file with or furnish to the SEC will
be less extensive and less timely compared to that required to be filed with the SEC by U.S. domestic issuers. In addition, as a company
incorporated in the British Virgin Islands, we are permitted to adopt certain home country practices in relation to corporate governance
matters that differ significantly from the Nasdaq Listing Rules. We rely on home country practice to be exempted from some of Nasdaq&#8217;s
corporate governance requirements. For instance, unlike the requirements of Nasdaq, we are not required, under the BVI Business Companies
Act, 2004, as amended (the &#8220;Companies Act&#8221;), to have our board consist of a majority of independent directors, nor are we
required to have a compensation committee or a nominating and corporate governance committee consisting entirely of independent directors
or have regular executive sessions with only independent directors each year. These practices may afford less protection to shareholders
than they would enjoy if we complied fully with the Nasdaq Listing Rules.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><div><a id="a_027"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Item 16H. Mine Safety Disclosure</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><div><a id="a_028"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Item 16I. Disclosure Regarding Foreign Jurisdictions that Prevent
Inspections</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 100; Value: 52 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->95<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_029"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>PART III</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><div><a id="a_030"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Item 17. Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We have responded to Item 18 in lieu of responding to this item.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><div><a id="a_031"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Item 18. Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULE</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td style="width: 89%; padding-bottom: 1.5pt">&#160;</td> <td style="width: 1%; padding-bottom: 1.5pt">&#160;</td> <td style="border-bottom: Black 1.5pt solid; width: 10%; text-align: center"><span style="font-size: 10pt"><b>Page</b></span></td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="padding-left: 9pt; text-indent: -9pt"><a href="#f_001"><span style="font-size: 10pt">REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (BDO USA, LLP; LOS ANGELES, CALIFORNIA; PCAOB ID #<ix:nonNumeric contextRef="c0" name="dei:AuditorFirmId">243</ix:nonNumeric>)</span></a></td> <td>&#160;</td> <td style="text-align: center"><span style="font-size: 10pt">F-2</span></td></tr> <tr style="vertical-align: bottom; "> <td style="padding-left: 9pt; text-indent: -9pt"><a href="#f_002"><span style="font-size: 10pt">CONSOLIDATED BALANCE SHEETS</span></a></td> <td>&#160;</td> <td style="text-align: center"><span style="font-size: 10pt">F-3</span></td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="padding-left: 9pt; text-indent: -9pt"><a href="#f_003"><span style="font-size: 10pt">CONSOLIDATED STATEMENTS OF OPERATIONS</span></a></td> <td>&#160;</td> <td style="text-align: center"><span style="font-size: 10pt">F-4</span></td></tr> <tr style="vertical-align: bottom; "> <td style="padding-left: 9pt; text-indent: -9pt"><a href="#f_004"><span style="font-size: 10pt">CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)</span></a></td> <td>&#160;</td> <td style="text-align: center"><span style="font-size: 10pt">F-5</span></td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="padding-left: 9pt; text-indent: -9pt"><a href="#f_005"><span style="font-size: 10pt">CONSOLIDATED STATEMENTS OF STOCKHOLDERS&#8217; EQUITY</span></a></td> <td>&#160;</td> <td style="text-align: center"><span style="font-size: 10pt">F-6</span></td></tr> <tr style="vertical-align: bottom; "> <td style="padding-left: 9pt; text-indent: -9pt"><a href="#f_006"><span style="font-size: 10pt">CONSOLIDATED STATEMENTS OF CASH FLOWS</span></a></td> <td>&#160;</td> <td style="text-align: center"><span style="font-size: 10pt">F-7</span></td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="padding-left: 9pt; text-indent: -9pt"><a href="#f_007"><span style="font-size: 10pt">NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</span></a></td> <td>&#160;</td> <td style="text-align: center"><span style="font-size: 10pt">F-8</span></td></tr> </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 101; Options: NewSection; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->1<!-- Field: /Sequence --></p></div><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-size: 7pt"><b>&#160;</b></span></p><div>

</div><div><a id="f_001"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Report of Independent Registered Public Accounting
Firm</b></p><div>

</div><p style="font: 7pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-size: 7pt"><b>&#160;</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b>Report of Independent Registered Public Accounting
Firm</b></p><div>

</div><p style="font: 7pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">Stockholders and Board of Directors</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">Newegg Commerce, Inc.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0in">City of Industry, California</p><div>

</div><p style="font: 7pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0in"><b>Opinion on the Consolidated
Financial Statements </b></p><div>

</div><p style="font: 7pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0in">We have audited the accompanying
consolidated balance sheets of Newegg Commerce, Inc. and subsidiaries (the &#8220;Company&#8221;) as of December 31, 2022 and 2021, the
related consolidated statements of operations, comprehensive income (loss), stockholders&#8217; equity, and cash flows for the three years
in the period ended December 31, 2022, and the related notes (collectively referred to as the &#8220;consolidated financial statements&#8221;).
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company
at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December
31, 2022<b>,</b> in conformity with accounting principles generally accepted in the United States of America.</p><div>

</div><p style="font: 7pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0in"><b>Basis for Opinion</b></p><div>

</div><p style="font: 7pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0in">These consolidated financial
statements are the responsibility of the Company&#8217;s management. Our responsibility is to express an opinion on the Company&#8217;s
consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (&#8220;PCAOB&#8221;) and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.</p><div>

</div><p style="font: 7pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">We conducted our audits in accordance with the
standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about 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&#8217;s
internal control over financial reporting. Accordingly, we express no such opinion.</p><div>

</div><p style="font: 7pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">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.</p><div>

</div><p style="font: 7pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b>Critical Audit Matter</b></p><div>

</div><p style="font: 7pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">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.</p><div>

</div><p style="font: 7pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b><i>Vendor Incentive Receivables</i></b></p><div>

</div><p style="font: 7pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">As described in Note 3 to the consolidated financial
statements, the Company&#8217;s vendor incentive receivables totaled $63.6 million as of December 31, 2022. 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.</p><div>

</div><p style="font: 7pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0.5in; margin: 0pt 0; text-align: left">We identified management&#8217;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 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 conditions of vendor agreements.</p><div>

</div><p style="font: 7pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">The primary procedures we performed to address
this critical audit matter included:</p><div>

</div><p style="font: 7pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">Evaluating management&#8217;s accounting policies
and practices including the reasonableness of management&#8217;s judgments and assumptions relating to the Company&#8217;s accounting
for vendor incentive receivables.</span></td></tr></table><div>

</div><p style="font: 7pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-size: 10pt; font-family: Times New Roman, Times, Serif">&#9679;</span></td><td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif">Testing a sample of vendor agreements and underlying
relevant supporting documents to evaluate the appropriateness of management&#8217;s recording vendor incentive receivables including assessment
of various terms and conditions in these agreements. </span></td></tr></table><div>

</div><p style="font: 7pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">/s/ <ix:nonNumeric contextRef="c0" name="dei:AuditorName">BDO USA, LLP</ix:nonNumeric></p><div>

</div><p style="font: 7pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">We have served as the Company&#8217;s auditor
since 2019.</p><div>

</div><p style="font: 7pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><ix:nonNumeric contextRef="c0" name="dei:AuditorLocation">Los Angeles, California</ix:nonNumeric></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif">April 27,
2023</span></p><div>

</div><p style="font: 6pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><!-- Field: Page; Sequence: 102; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->2<!-- Field: /Sequence --></p></div><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><div><a id="f_002"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NEWEGG COMMERCE, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Consolidated Balance Sheets</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>December&#160;31, 2022 and 2021</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands, except par value)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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    <td>&#160;</td>
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    <td>&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td>
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    <td>&#160;</td>
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    <td>&#160;</td>
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    <td>&#160;</td>
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    <td>&#160;</td>
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    <td>&#160;</td>
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    <td>&#160;</td>
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    <td>&#160;</td>
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    <td>&#160;</td>
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    <td>&#160;</td>
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    <td>&#160;</td>
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    <td>&#160;</td>
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    <td>&#160;</td></tr>
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    <td>&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td>
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    <td>&#160;</td>
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    <td>&#160;</td>
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    <td style="border-bottom: black 4.5pt double"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">$</span></td>
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    <td>&#160;</td>
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    <td>&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">$</span></td>
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  <tr style="vertical-align: bottom; background-color: #CCEEFF">
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    <td>&#160;</td>
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    <td>&#160;</td>
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    <td>&#160;</td>
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    <td>&#160;</td>
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    <td>&#160;</td>
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    <td>&#160;</td>
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    <td>&#160;</td>
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    <td>&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td>
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    <td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: #CCEEFF">
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    <td>&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td>
    <td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: #CCEEFF">
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    <td>&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td>&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: #CCEEFF">
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    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonFraction contextRef="c2" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:AccumulatedOtherComprehensiveIncomeLossNetOfTax" scale="3" unitRef="usd">1,114</ix:nonFraction></span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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    <td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: #CCEEFF">
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    <td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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    <td>&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">See accompanying notes to consolidated financial
statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>


</div><!-- Field: Page; Sequence: 103; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->3<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="f_003"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NEWEGG COMMERCE, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Consolidated Statements of Operations</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Years ended December&#160;31, 2022, 2021 and
2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands, except per share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
    <td style="padding-bottom: 1.5pt">Cost of sales</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Gross profit</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-bottom: 1.5pt">Selling, general, and administrative expenses</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Income (loss) from operations</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Interest income</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Interest expense</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:InterestExpense" scale="3" unitRef="usd">685</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Other income, net</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:OtherIncome" scale="3" unitRef="usd">5,280</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Impairment of equity method investment</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:EquityMethodInvestmentOtherThanTemporaryImpairment" scale="3" unitRef="usd">2,281</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-4">&#8212;</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-5">&#8212;</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Income (loss) from equity method investment</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-6">&#8212;</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Gain from sales of investment</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:GainLossOnInvestments" scale="3" unitRef="usd">1,669</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-7">&#8212;</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-8">&#8212;</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Gain from disposal of a subsidiary</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-9">&#8212;</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:GainOrLossOnSaleOfStockInSubsidiary" scale="3" unitRef="usd">2,043</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-10">&#8212;</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt">Change in fair value of warrants liabilities</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:GainLossOnDerivativeInstrumentsNetPretax" scale="3" unitRef="usd">1,063</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:GainLossOnDerivativeInstrumentsNetPretax" scale="3" unitRef="usd">61</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-11">&#8212;</div></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-bottom: 1.5pt">Income (loss) before provision for income taxes</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:IncomeLossAttributableToParent" scale="3" sign="-" unitRef="usd">43,328</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:IncomeLossAttributableToParent" scale="3" unitRef="usd">30,467</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:IncomeLossAttributableToParent" scale="3" unitRef="usd">32,367</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt">Provision for (benefit from)&#160;income taxes</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="negg:ProvisionForbenefitFromIncomeTaxes" scale="3" unitRef="usd">14,101</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="negg:ProvisionForbenefitFromIncomeTaxes" scale="3" sign="-" unitRef="usd">5,795</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="negg:ProvisionForbenefitFromIncomeTaxes" scale="3" unitRef="usd">1,941</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-bottom: 1.5pt">Net income (loss)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:ProfitLoss" scale="3" sign="-" unitRef="usd">57,429</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:ProfitLoss" scale="3" unitRef="usd">36,262</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:ProfitLoss" scale="3" unitRef="usd">30,426</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-bottom: 4pt">Basic earnings (loss) per share</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">(<ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:EarningsPerShareBasic" scale="0" sign="-" unitRef="usdPershares">0.15</ix:nonFraction></td><td style="padding-bottom: 4pt; text-align: left">)</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c4" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:EarningsPerShareBasic" scale="0" unitRef="usdPershares">0.10</ix:nonFraction></td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c5" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:EarningsPerShareBasic" scale="0" unitRef="usdPershares">0.08</ix:nonFraction></td><td style="padding-bottom: 4pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="padding-bottom: 1.5pt">Diluted earnings (loss) per share</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:EarningsPerShareDiluted" scale="0" sign="-" unitRef="usdPershares">0.15</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c4" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:EarningsPerShareDiluted" scale="0" unitRef="usdPershares">0.08</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c5" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:EarningsPerShareDiluted" scale="0" unitRef="usdPershares">0.08</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -9pt; padding-left: 9pt">Weighted average shares used in computation of earnings (loss) per share:</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">See accompanying notes to consolidated financial
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>


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</div><div><a id="f_004"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NEWEGG COMMERCE, INC. </b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Consolidated Statements of Comprehensive Income
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Years ended December&#160;31, 2022, 2021 and
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">See accompanying notes to consolidated financial
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>


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</div><div><a id="f_005"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NEWEGG COMMERCE, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Consolidated Statements of Stockholders&#8217;
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>


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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-26">&#8212;</div></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 9pt">Balance at December 31, 2020</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Net income</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-28">&#8212;</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Other comprehensive income</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-31">&#8212;</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-32">&#8212;</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -9pt; padding-left: 9pt">Exercise of vested options</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c23" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:StockIssuedDuringPeriodValueStockOptionsExercised" scale="3" unitRef="usd">31</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c24" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:StockIssuedDuringPeriodValueStockOptionsExercised" scale="3" unitRef="usd">239</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-34">&#8212;</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-35">&#8212;</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:StockIssuedDuringPeriodValueStockOptionsExercised" scale="3" unitRef="usd">270</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Recapitalization transaction, net</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c24" decimals="-3" format="ixt:num-dot-decimal" name="negg:RecapitalizationTransactionNet" scale="3" unitRef="usd">8,324</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-36">&#8212;</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-37">&#8212;</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="negg:RecapitalizationTransactionNet" scale="3" unitRef="usd">8,430</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -9pt; padding-left: 9pt">Exercise of warrants</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c23" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:StockIssuedDuringPeriodSharesOther" scale="3" unitRef="shares">119</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c23" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:StockAndWarrantsIssuedDuringPeriodValuePreferredStockAndWarrants" scale="3" unitRef="usd">3</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c24" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:StockAndWarrantsIssuedDuringPeriodValuePreferredStockAndWarrants" scale="3" unitRef="usd">535</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-38">&#8212;</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-39">&#8212;</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:StockAndWarrantsIssuedDuringPeriodValuePreferredStockAndWarrants" scale="3" unitRef="usd">538</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Interest on notes receivable</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-40">&#8212;</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-41">&#8212;</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c25" decimals="-3" format="ixt:num-dot-decimal" name="negg:InterestOnNotesReceivable" scale="3" sign="-" unitRef="usd">3</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-42">&#8212;</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="negg:InterestOnNotesReceivable" scale="3" sign="-" unitRef="usd">3</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 9pt">Stock-based compensation</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">&#8212;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-43">&#8212;</div></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c24" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:ShareBasedCompensation" scale="3" unitRef="usd">6,285</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-44">&#8212;</div></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-45">&#8212;</div></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">&#8212;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:ShareBasedCompensation" scale="3" unitRef="usd">6,285</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="padding-bottom: 4pt; text-indent: -9pt; padding-left: 9pt">Balance at December 31, 2021</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c28" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:SharesOutstanding" scale="3" unitRef="shares">369,719</ix:nonFraction></td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c28" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:StockholdersEquity" scale="3" unitRef="usd">8,078</ix:nonFraction></td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c29" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:StockholdersEquity" scale="3" unitRef="usd">197,613</ix:nonFraction></td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">(<ix:nonFraction contextRef="c30" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:StockholdersEquity" scale="3" sign="-" unitRef="usd">15,189</ix:nonFraction></td><td style="padding-bottom: 4pt; text-align: left">)</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c31" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:StockholdersEquity" scale="3" unitRef="usd">6,060</ix:nonFraction></td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">(<ix:nonFraction contextRef="c32" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:StockholdersEquity" scale="3" sign="-" unitRef="usd">14,280</ix:nonFraction></td><td style="padding-bottom: 4pt; text-align: left">)</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c3" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:StockholdersEquity" scale="3" unitRef="usd">182,282</ix:nonFraction></td><td style="padding-bottom: 4pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Net loss</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-47">&#8212;</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">&#8212;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">See accompanying notes to consolidated financial
statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>


</div><!-- Field: Page; Sequence: 106; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->6<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="f_006"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NEWEGG COMMERCE, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Consolidated Statements of Cash Flows</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Years ended December&#160;31, 2022, 2021 and
2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In thousands)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td>&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td></tr>
  <tr style="vertical-align: bottom">
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    <td>&#160;</td>
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    <td>&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td>
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    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td>
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    <td>&#160;</td>
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    <td>&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: #CCEEFF">
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    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="negg:RecoveryOfRelatedPartyReceivable" scale="3" unitRef="usd">50</ix:nonFraction></span></td>
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    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(<ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="negg:RecoveryOfRelatedPartyReceivable" scale="3" unitRef="usd">335</ix:nonFraction></span></td>
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    <td>&#160;</td>
    <td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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    <td>&#160;</td>
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    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: #CCEEFF">
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    <td>&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td>&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-55; font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8212;</span></td>
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  <tr style="vertical-align: bottom; background-color: #CCEEFF">
    <td style="padding-left: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Loss (income) from equity method investment</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:UnrealizedGainLossOnInvestments" scale="3" sign="-" unitRef="usd">7,374</ix:nonFraction></span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:UnrealizedGainLossOnInvestments" scale="3" unitRef="usd">3,197</ix:nonFraction></span></td>
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  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Gain from sales of investment</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:GainOnSaleOfInvestments" scale="3" unitRef="usd">1,669</ix:nonFraction></span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">)</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-57; font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8212;</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-58; font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8212;</span></td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: #CCEEFF">
    <td style="padding-left: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Change in fair value of warrant liabilities</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:ProvisionForOtherLosses" scale="3" sign="-" unitRef="usd">1,063</ix:nonFraction></span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">)</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(<ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:ProvisionForOtherLosses" scale="3" sign="-" unitRef="usd">61</ix:nonFraction></span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">)</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-59; font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8212;</span></td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td>&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:GainLossOnDispositionOfIntangibleAssets" scale="3" sign="-" unitRef="usd">246</ix:nonFraction></span></td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: #CCEEFF">
    <td style="padding-left: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Gain from disposal of subsidiary</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(<ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="negg:GainFromDisposalOfSubsidiary" scale="3" unitRef="usd">2,043</ix:nonFraction></span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">)</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-61; font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8212;</span></td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Unrealized loss on marketable securities</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="negg:UnrealizedgainLossOnMarketableSecurities" scale="3" sign="-" unitRef="usd">101</ix:nonFraction></span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-62; font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8212;</span></td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: #CCEEFF">
    <td style="padding-left: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Deferred income taxes</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DeferredIncomeTaxExpenseBenefit" scale="3" unitRef="usd">12,499</ix:nonFraction></span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(<ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DeferredIncomeTaxExpenseBenefit" scale="3" sign="-" unitRef="usd">12,698</ix:nonFraction></span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">)</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DeferredIncomeTaxExpenseBenefit" scale="3" unitRef="usd">372</ix:nonFraction></span></td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Changes in operating assets and liabilities:</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: #CCEEFF">
    <td style="padding-left: 27pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Accounts receivable</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="negg:ProvisionForAccountsReceivable" scale="3" sign="-" unitRef="usd">21,969</ix:nonFraction></span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">)</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="negg:ProvisionForAccountsReceivable" scale="3" unitRef="usd">788</ix:nonFraction></span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="negg:ProvisionForAccountsReceivable" scale="3" sign="-" unitRef="usd">14,054</ix:nonFraction></span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">)</span></td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 27pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Inventories</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInInventories" scale="3" sign="-" unitRef="usd">78,766</ix:nonFraction></span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(<ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInInventories" scale="3" unitRef="usd">70,830</ix:nonFraction></span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">)</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInInventories" scale="3" unitRef="usd">76,240</ix:nonFraction></span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">)</span></td></tr>
  <tr style="vertical-align: bottom; background-color: #CCEEFF">
    <td style="padding-left: 27pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Prepaid expenses</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInPrepaidExpense" scale="3" sign="-" unitRef="usd">905</ix:nonFraction></span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(<ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInPrepaidExpense" scale="3" unitRef="usd">2,152</ix:nonFraction></span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">)</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInPrepaidExpense" scale="3" unitRef="usd">7,516</ix:nonFraction></span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">)</span></td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 27pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Other assets</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInOtherCurrentAssets" scale="3" sign="-" unitRef="usd">9,982</ix:nonFraction></span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(<ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInOtherCurrentAssets" scale="3" unitRef="usd">50,919</ix:nonFraction></span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">)</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInOtherCurrentAssets" scale="3" unitRef="usd">10,532</ix:nonFraction></span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">)</span></td></tr>
  <tr style="vertical-align: bottom; background-color: #CCEEFF">
    <td style="padding-left: 27pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Accounts payable</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInAccountsPayable" scale="3" sign="-" unitRef="usd">14,063</ix:nonFraction></span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">)</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(<ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInAccountsPayable" scale="3" sign="-" unitRef="usd">20,072</ix:nonFraction></span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">)</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInAccountsPayable" scale="3" unitRef="usd">76,337</ix:nonFraction></span></td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 27pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Accrued liabilities and other liabilities</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInAccruedLiabilitiesAndOtherOperatingLiabilities" scale="3" sign="-" unitRef="usd">34,449</ix:nonFraction></span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">)</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInAccruedLiabilitiesAndOtherOperatingLiabilities" scale="3" unitRef="usd">41,547</ix:nonFraction></span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: #CCEEFF">
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    <td>&#160;</td>
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    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(<ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInDeferredRevenue" scale="3" sign="-" unitRef="usd">7,443</ix:nonFraction></span></td>
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    <td>&#160;</td>
    <td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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    <td>&#160;</td>
    <td style="border-bottom: black 1.5pt solid">&#160;</td>
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    <td>&#160;</td>
    <td>&#160;</td>
    <td style="border-bottom: black 1.5pt solid">&#160;</td>
    <td style="border-bottom: black 1.5pt solid; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(<ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseDueFromAffiliates" scale="3" unitRef="usd">3</ix:nonFraction></span></td>
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    <td>&#160;</td>
    <td style="border-bottom: black 1.5pt solid">&#160;</td>
    <td style="border-bottom: black 1.5pt solid; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseDueFromAffiliates" scale="3" unitRef="usd">2</ix:nonFraction></span></td>
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  <tr style="vertical-align: bottom; background-color: #CCEEFF">
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    <td>&#160;</td>
    <td style="border-bottom: black 1.5pt solid">&#160;</td>
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    <td>&#160;</td>
    <td>&#160;</td>
    <td style="border-bottom: black 1.5pt solid">&#160;</td>
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    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">)</span></td>
    <td>&#160;</td>
    <td style="border-bottom: black 1.5pt solid">&#160;</td>
    <td style="border-bottom: black 1.5pt solid; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:NetCashProvidedByUsedInOperatingActivities" scale="3" unitRef="usd">84,512</ix:nonFraction></span></td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: #CCEEFF">
    <td style="padding-left: 9pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Insurance settlement proceeds</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-64; font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8212;</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-65; font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8212;</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromInsuranceSettlementInvestingActivities" scale="3" unitRef="usd">788</ix:nonFraction></span></td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 9pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Payments to acquire property and equipment</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:PaymentsToAcquirePropertyPlantAndEquipment" scale="3" unitRef="usd">9,190</ix:nonFraction></span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">)</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(<ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:PaymentsToAcquirePropertyPlantAndEquipment" scale="3" unitRef="usd">13,839</ix:nonFraction></span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">)</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:PaymentsToAcquirePropertyPlantAndEquipment" scale="3" unitRef="usd">6,156</ix:nonFraction></span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">)</span></td></tr>
  <tr style="vertical-align: bottom; background-color: #CCEEFF">
    <td style="padding-left: 9pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Proceeds on disposal of property and equipment</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromSaleOfPropertyPlantAndEquipment" scale="3" unitRef="usd">1</ix:nonFraction></span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromSaleOfPropertyPlantAndEquipment" scale="3" unitRef="usd">1</ix:nonFraction></span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromSaleOfPropertyPlantAndEquipment" scale="3" unitRef="usd">132</ix:nonFraction></span></td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 9pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Proceeds from sale of investment</span></td>
    <td>&#160;</td>
    <td style="border-bottom: black 1.5pt solid">&#160;</td>
    <td style="border-bottom: black 1.5pt solid; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="negg:SaleOfEquityMethodInvestment" scale="3" sign="-" unitRef="usd">5,419</ix:nonFraction></span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="border-bottom: black 1.5pt solid">&#160;</td>
    <td style="border-bottom: black 1.5pt solid; text-align: right"><span style="-sec-ix-hidden: hidden-fact-66; font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8212;</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="border-bottom: black 1.5pt solid">&#160;</td>
    <td style="border-bottom: black 1.5pt solid; text-align: right"><span style="-sec-ix-hidden: hidden-fact-67; font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8212;</span></td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: #CCEEFF">
    <td style="padding-left: 0.5in; text-indent: -9pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Net cash used in investing activities</span></td>
    <td>&#160;</td>
    <td style="border-bottom: black 1.5pt solid">&#160;</td>
    <td style="border-bottom: black 1.5pt solid; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:NetCashProvidedByUsedInInvestingActivities" scale="3" sign="-" unitRef="usd">3,770</ix:nonFraction></span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">)</span></td>
    <td>&#160;</td>
    <td style="border-bottom: black 1.5pt solid">&#160;</td>
    <td style="border-bottom: black 1.5pt solid; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(<ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:NetCashProvidedByUsedInInvestingActivities" scale="3" sign="-" unitRef="usd">13,838</ix:nonFraction></span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">)</span></td>
    <td>&#160;</td>
    <td style="border-bottom: black 1.5pt solid">&#160;</td>
    <td style="border-bottom: black 1.5pt solid; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:NetCashProvidedByUsedInInvestingActivities" scale="3" sign="-" unitRef="usd">5,236</ix:nonFraction></span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">)</span></td></tr>
  <tr style="vertical-align: bottom; ">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Cash flows from financing activities:</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: #CCEEFF">
    <td style="padding-left: 9pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Borrowings under line of credit</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromLinesOfCredit" scale="3" unitRef="usd">46,188</ix:nonFraction></span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromLinesOfCredit" scale="3" unitRef="usd">787</ix:nonFraction></span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromLinesOfCredit" scale="3" unitRef="usd">20,000</ix:nonFraction></span></td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 9pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Repayments under line of credit</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfLinesOfCredit" scale="3" unitRef="usd">45,742</ix:nonFraction></span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">)</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-68; font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8212;</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfLinesOfCredit" scale="3" unitRef="usd">21,467</ix:nonFraction></span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">)</span></td></tr>
  <tr style="vertical-align: bottom; background-color: #CCEEFF">
    <td style="padding-left: 9pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Repayments of long-term debt</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfLongTermDebt" scale="3" unitRef="usd">274</ix:nonFraction></span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">)</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(<ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfLongTermDebt" scale="3" unitRef="usd">285</ix:nonFraction></span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">)</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(<ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfLongTermDebt" scale="3" unitRef="usd">265</ix:nonFraction></span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">)</span></td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 9pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Cash received from common control asset transaction</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-69; font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8212;</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromIssuanceOfCommonStock" scale="3" unitRef="usd">11,426</ix:nonFraction></span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-70; font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8212;</span></td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: #CCEEFF">
    <td style="padding-left: 9pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Proceeds from exercise of warrants</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-71; font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8212;</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromWarrantExercises" scale="3" unitRef="usd">538</ix:nonFraction></span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-72; font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8212;</span></td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 9pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Proceeds from exercise of stock options</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromStockOptionsExercised" scale="3" unitRef="usd">2,890</ix:nonFraction></span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromStockOptionsExercised" scale="3" unitRef="usd">270</ix:nonFraction></span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-73; font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8212;</span></td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: #CCEEFF">
    <td style="padding-left: 9pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Payments for employee taxes related to stock compensation</span></td>
    <td>&#160;</td>
    <td style="border-bottom: black 1.5pt solid">&#160;</td>
    <td style="border-bottom: black 1.5pt solid; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:PaymentsRelatedToTaxWithholdingForShareBasedCompensation" scale="3" unitRef="usd">1,514</ix:nonFraction></span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">)</span></td>
    <td>&#160;</td>
    <td style="border-bottom: black 1.5pt solid">&#160;</td>
    <td style="border-bottom: black 1.5pt solid; text-align: right"><span style="-sec-ix-hidden: hidden-fact-74; font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8212;</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="border-bottom: black 1.5pt solid">&#160;</td>
    <td style="border-bottom: black 1.5pt solid; text-align: right"><span style="-sec-ix-hidden: hidden-fact-75; font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8212;</span></td>
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    <td>&#160;</td>
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    <td>&#160;</td>
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    <td>&#160;</td>
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    <td>&#160;</td>
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    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">See accompanying notes to consolidated financial
statements.&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>


</div><!-- Field: Page; Sequence: 107; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->7<!-- Field: /Sequence --></p></div><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="f_007"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NEWEGG COMMERCE, INC.<br/>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left; text-indent: -0.25in">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_1" escape="true" name="us-gaap:OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left">1.</td><td style="text-align: left"><b>Organization and Description of Business</b></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt; text-align: left">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_2" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">Newegg Commerce, Inc. (&#8220;Newegg&#8221; or the &#8220;Company&#8221;)
(previously known as &#8220;Lianluo Smart Limited&#8221; or &#8220;LLIT&#8221;) was incorporated as an international business company
under the International Business Companies Act, 1984, in the British Virgin Islands on July&#160;22, 2003.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_3" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">Newegg is an electronics-focused e-retailer that offers
customers a comprehensive selection of the latest consumer electronics products, detailed product descriptions and images, &#8220;how-to&#8221;
information, and customer reviews via its websites. The Company&#8217;s strategic focus is based on three key areas: (1)&#160;providing
a differentiated and superior online shopping experience, (2)&#160;offering reliable and timely product fulfillment, and (3)&#160;delivering
superior customer service.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_4" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">Newegg Inc. was incorporated as Newegg Computers in the
state of California on February&#160;4, 2000. In June&#160;2005, Newegg Inc. was incorporated in the state of Delaware. On September&#160;29,
2005, Newegg Computers was merged into Newegg Inc. under Delaware law with Newegg Inc. being the surviving company.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_5" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">In August&#160;2016, Newegg Inc. entered into a share purchase
agreement (the&#160;&#8220;Purchase Agreement&#8221;) with Hangzhou Liaison Interactive Information Technology Co., Ltd, (&#8220;Hangzhou
Lianluo&#8221;), a publicly traded company in China. The transaction was completed on March&#160;30, 2017. Pursuant to the Purchase Agreement,
Hangzhou Lianluo purchased <ix:nonFraction contextRef="c43" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:SharesIssued" scale="0" unitRef="shares">490,706</ix:nonFraction>&#160;shares of Newegg Inc.&#8217;s Class&#160;A Common Stock and <ix:nonFraction contextRef="c44" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:SharesIssued" scale="0" unitRef="shares">12,782,546</ix:nonFraction>&#160;shares of Newegg Inc.&#8217;s
Series&#160;A convertible Preferred Stock from existing shareholders for a total consideration of $<ix:nonFraction contextRef="c45" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:StockholdersEquityOther" scale="6" unitRef="usd">91.9</ix:nonFraction> million. Additionally, Newegg
Inc. issued, and Hangzhou Lianluo purchased, <ix:nonFraction contextRef="c46" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:SharesIssued" scale="0" unitRef="shares">24,870,027</ix:nonFraction>&#160;shares of Newegg Inc.&#8217;s Series&#160;AA Convertible Preferred Stock
for a total consideration of $<ix:nonFraction contextRef="c47" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:StockholdersEquityOther" scale="6" unitRef="usd">172.2</ix:nonFraction> million. Upon the close of this transaction, Hangzhou Lianluo, through Digital Grid (Hong&#160;Kong)
Technology Co., Limited (&#8220;Digital Grid&#8221;), a fully-owned subsidiary of Hangzhou Lianluo, became the majority owner of Newegg
Inc.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_6" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">On May&#160;19, 2021, the Company closed the merger with
Newegg Inc. contemplated by the Agreement and Plan of Merger dated October&#160;23, 2020, by and among LLIT, Lightning Delaware Sub, Inc.
(&#8220;Merger Sub&#8221;), a Delaware corporation and wholly owned subsidiary of the Company, and Newegg Inc. As the consideration for
the merger, the Company issued to all the stockholders of Newegg Inc. an aggregate of <ix:nonFraction contextRef="c48" decimals="0" format="ixt:num-dot-decimal" name="negg:AggregateCommonShares" scale="0" unitRef="shares">363,325,542</ix:nonFraction> common shares. Each issued and outstanding
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</div><div>

</div><ix:continuation continuedAt="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_7" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">On May&#160;19, 2021, the Company disposed all of LLIT&#8217;s
legacy business contemplated by that certain Equity Transfer Agreement dated October&#160;23, 2020, by and among LLIT, its wholly owned
subsidiary, Lianluo Connection Medical Wearable Device Technology (Beijing) Co., Ltd (&#8220;Lianluo Connection&#8221;), and Beijing Fenjin
Times Development Co., Ltd. (&#8220;Beijing Fenjin&#8221;). The Company sold all of its equity interests in Lianluo Connection to Beijing
Fenjin immediately following completion of the merger for a purchase price of RMB <ix:nonFraction contextRef="c48" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:SupplementalDeferredPurchasePrice" scale="0" unitRef="cny">0</ix:nonFraction>.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">In May&#160;2021, the Company changed its name from Lianluo
Smart Limited to Newegg Commerce, Inc., and on May&#160;20, 2021 changed its Nasdaq stock ticker from LLIT to NEGG.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_1" escape="true" name="us-gaap:BusinessDescriptionAndBasisOfPresentationTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left">2.</td><td style="text-align: left"><b>Basis of Presentation</b></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_2" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">The merger is accounted for as a transfer of assets under
common control in accordance with generally accepted accounting principles in the United&#160;States of America (&#8220;U.S.&#160;GAAP&#8221;).
Under this method of accounting, LLIT did not meet the definition of a business as of the close of the transaction and was considered
a group of assets. Newegg Inc. was deemed to be the receiving entity in the common control transaction, consequently, the transaction
is treated similar to a recapitalization of Newegg Inc. Accordingly, the consolidated assets, liabilities and results of operations of
Newegg Inc. became the historical financial statements. The assets and liabilities of LLIT were combined with Newegg Inc. using its carryover
basis on the transfer date. The carrying value of the net assets received by Newegg on May&#160;19, 2021 was approximately $<ix:nonFraction contextRef="c49" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:AssetsNet" scale="6" unitRef="usd">8.4</ix:nonFraction> million.
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</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt; text-align: left"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt; text-align: left">&#160;</p><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_3" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">The recapitalization of the number of shares of capital
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</div><div>

</div><ix:continuation id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">On the date of the transfer, the Company subsequently disposed
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is included in the Company&#8217;s consolidated statements of operations for the year ended December&#160;31, 2021.&#160;&#160;</p></ix:continuation><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_1" escape="true" name="us-gaap:BasisOfPresentationAndSignificantAccountingPoliciesTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left">3.</td><td style="text-align: left"><b>Summary of Significant Accounting Policies</b></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&#160;</p></ix:nonNumeric><div>

</div><div>

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</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_3" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_2"><ix:continuation id="_BasisOfAccountingPolicyPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">The accompanying consolidated financial statements are prepared
in accordance with U.S. GAAP and include the accounts of all consolidated subsidiaries. All intercompany balances and transactions have
been eliminated in consolidation.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_4" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_3"><ix:nonNumeric contextRef="c0" continuedAt="_UseOfEstimates-c0_cont_1" escape="true" name="us-gaap:UseOfEstimates"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in"><b>b. <i>Use of Estimates</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_5" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_4"><ix:continuation id="_UseOfEstimates-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">The preparation of the Company&#8217;s consolidated financial
statements in conformity with U.S.&#160;GAAP requires management to make estimates and assumptions that affect amounts reported in the
consolidated financial statements and accompanying notes. Estimates are used for, but not limited to, revenue recognition, incentives
earned from vendors, allowance for credit losses, investment valuation, valuation allowance for deferred tax assets, and stock-based compensation.
Actual results could differ from such estimates.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt">&#160;&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

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</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_7" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_6"><ix:continuation id="_PriorPeriodReclassificationAdjustmentDescription-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">Certain prior period amounts have been reclassified to conform
to the current period presentation.&#160;&#160;</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt"><b><i>&#160;</i></b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_8" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_7"><ix:nonNumeric contextRef="c0" continuedAt="_CashAndCashEquivalentsPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:CashAndCashEquivalentsPolicyTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in"><b><i>d. Cash and Cash Equivalents</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_9" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_8"><ix:continuation id="_CashAndCashEquivalentsPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">Cash and cash equivalents consist primarily of cash on deposit,
certificates of deposit, and money market accounts. Cash equivalents are all highly liquid investments with original maturities of three&#160;months
or less. The Company maintains its cash in bank deposits which, at times, may exceed federally insured limits. The Company has not experienced
any losses in such accounts. The Company believes it is not exposed to any significant credit risk of cash and cash equivalents. Amounts
receivable from credit card processors are also considered cash equivalents as they are both short term and highly liquid in nature and
are typically converted to cash within three&#160;business days. Amounts due to the Company from credit card processors that are classified
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</div><div>

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</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_11" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_10"><ix:continuation continuedAt="_CashAndCashEquivalentsRestrictedCashAndCashEquivalentsPolicy-c0_cont_2" id="_CashAndCashEquivalentsRestrictedCashAndCashEquivalentsPolicy-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">Restricted cash includes amounts deposited in commercial
bank time deposits and money market accounts to collateralize the Company&#8217;s deposit obligations. The Company considers restricted
cash related to obligations classified as current liabilities to be current assets and restricted cash related to obligations classified
as long-term liabilities as noncurrent assets. At December&#160;31, 2022 and 2021, the Company had $<ix:nonFraction contextRef="c2" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:RestrictedCashEquivalents" scale="6" unitRef="usd">0.9</ix:nonFraction> million and $<ix:nonFraction contextRef="c3" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:RestrictedCashEquivalents" scale="6" unitRef="usd">4.3</ix:nonFraction> million, respectively,
in restricted cash, primarily related to collateralization required pursuant to a lease agreement, the restricted cash account required
under the Company&#8217;s health insurance plan, and funds held in third-party escrow account associated with the merger. The restricted
cash balance is classified as a current asset in the consolidated balance sheets.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt"></p><div>

</div><!-- Field: Page; Sequence: 109; Value: 1 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt">&#160;</p><div>

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statements of cash flows (in thousands):</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: left">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_14" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_13"><ix:nonNumeric contextRef="c0" continuedAt="_TradeAndOtherAccountsReceivablePolicy-c0_cont_1" escape="true" name="us-gaap:TradeAndOtherAccountsReceivablePolicy"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left"><b><i>f. Accounts Receivable</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: left">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_15" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_14"><ix:continuation id="_TradeAndOtherAccountsReceivablePolicy-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">Accounts receivable consist primarily of vendor receivables,
which do not bear interest, and represent amounts due for marketing development funds, cooperative advertising, price protection and other
incentive programs offered to the Company by certain vendors. Accounts receivable also include receivables from business customers generally,
on 30-day to 60-day credit terms. On January&#160;1, 2020, the Company adopted Accounting Standards Update (&#8220;ASU&#8221;)&#160;2016-13
(as amended through March&#160;2020), Financial Instruments&#160;&#8212;&#160;Credit Losses (Topic&#160;326): Measurement of Credit Losses
on Financial Instruments. The Company estimates the provision for credit losses based on historical experience, current conditions, and
reasonable and supportable forecasts. Accounts receivables are written off when deemed uncollectible. Recoveries of accounts receivable
previously written off are recorded when received. Amounts receivable from business customers were $<ix:nonFraction contextRef="c50" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:AccountsReceivableSale" scale="6" unitRef="usd">19.4</ix:nonFraction> million and $<ix:nonFraction contextRef="c51" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:AccountsReceivableSale" scale="6" unitRef="usd">17.6</ix:nonFraction> million, net
of allowances of $<ix:nonFraction contextRef="c52" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:AccountsAndOtherReceivablesNetCurrent" scale="6" unitRef="usd">1.0</ix:nonFraction> million and $<ix:nonFraction contextRef="c53" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:AccountsAndOtherReceivablesNetCurrent" scale="6" unitRef="usd">1.9</ix:nonFraction> million, at December&#160;31, 2022 and 2021, respectively. See further discussion of amounts receivable
related to vendor incentive programs under Incentives Earned from Vendors below.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_16" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_15"><ix:nonNumeric contextRef="c0" continuedAt="_InventoryPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:InventoryPolicyTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in"><b><i>g. Inventories</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: left">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_17" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_16"><ix:continuation id="_InventoryPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">Inventories, consisting of products available for sale, are
accounted for using the first-in, first-out (FIFO) method and are valued at the lower of cost and net realizable value. In-bound freight-related
costs are included as part of the cost of merchandise held for resale. In addition, certain vendor payments are deducted from the cost
of merchandise held for resale. The Company records an inventory provision for refurbished, slow-moving, or obsolete inventories based
on historical experience and assumptions of future demand for product. These allowances are released when the related inventory is sold
or disposed of. Amounts of inventory allowances were $<ix:nonFraction contextRef="c2" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:InventoryNetOfAllowancesCustomerAdvancesAndProgressBillings" scale="6" unitRef="usd">5.5</ix:nonFraction> million and $<ix:nonFraction contextRef="c3" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:InventoryNetOfAllowancesCustomerAdvancesAndProgressBillings" scale="6" unitRef="usd">6.8</ix:nonFraction> million, as of December&#160;31, 2022 and 2021, respectively.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt"><b><i>&#160;</i></b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_18" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_17"><ix:nonNumeric contextRef="c0" continuedAt="_PropertyPlantAndEquipmentPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:PropertyPlantAndEquipmentPolicyTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in"><b><i>h. Property and Equipment</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_19" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_18"><ix:continuation continuedAt="_PropertyPlantAndEquipmentPolicyTextBlock-c0_cont_2" id="_PropertyPlantAndEquipmentPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">Property and equipment are stated at cost, less accumulated
amortization and depreciation computed using the straight-line method over the estimated useful life of each asset. Leasehold improvements
are amortized over the lesser of the remaining lease term or the estimated useful life of the assets. Expenditures for repair and maintenance
costs are expensed as incurred, and expenditures for major renewals and improvements are capitalized. Costs incurred during the application
development stage of internal-use software and website development are capitalized and included in property and equipment. When assets
are retired or otherwise disposed of, the cost and accumulated depreciation or amortization are removed from the accounts, and any gain
or loss is reflected in the Company&#8217;s consolidated statements of operations. The useful lives for depreciable assets are as follows:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: left">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_20" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_19"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:PropertyPlantAndEquipmentTextBlock"><ix:continuation id="_PropertyPlantAndEquipmentPolicyTextBlock-c0_cont_2"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Machinery and equipment</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Computer and software</td><td>&#160;</td>
    <td style="text-align: center"><ix:nonNumeric contextRef="c62" format="ixt-sec:duryear" name="us-gaap:PropertyPlantAndEquipmentUsefulLife">3</ix:nonNumeric>&#160;&#8211;&#160;<ix:nonNumeric contextRef="c63" format="ixt-sec:duryear" name="us-gaap:PropertyPlantAndEquipmentUsefulLife">5</ix:nonNumeric>&#160;years</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Leasehold improvements</td><td>&#160;</td>
    <td style="text-align: center">Lesser of lease term or <ix:nonNumeric contextRef="c64" format="ixt-sec:duryear" name="us-gaap:PropertyPlantAndEquipmentUsefulLife">10</ix:nonNumeric>&#160;years</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Capitalized software</td><td>&#160;</td>
    <td style="text-align: center"><ix:nonNumeric contextRef="c65" format="ixt-sec:duryear" name="us-gaap:PropertyPlantAndEquipmentUsefulLife">3</ix:nonNumeric>&#160;&#8211;&#160;<ix:nonNumeric contextRef="c66" format="ixt-sec:duryear" name="us-gaap:PropertyPlantAndEquipmentUsefulLife">5</ix:nonNumeric>&#160;years</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Furniture and fixtures</td><td>&#160;</td>
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: left"><b><i>&#160;</i></b></p></ix:continuation></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: left"></p><div>

</div><!-- Field: Page; Sequence: 110; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->10<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: left"><b><i>&#160;</i></b></p><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_21" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_20"><ix:nonNumeric contextRef="c0" continuedAt="_LesseeLeasesPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:LesseeLeasesPolicyTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left"><b><i>i. Leases</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: left">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_22" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_21"><ix:continuation id="_LesseeLeasesPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">The Company defines lease agreements at their inception as
either operating or finance leases depending on certain defined criteria. Certain lease agreements may entitle the Company to receive
rent holidays, other incentives, or periodic payment increases over the lease term. Accordingly, rent expense under operating leases is
recognized on the straight-line basis over the original lease term, inclusive of predetermined minimum rent escalations or modifications
and rent holidays.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt"><b><i>&#160;</i></b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_23" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_22"><ix:nonNumeric contextRef="c0" continuedAt="_ImpairmentOrDisposalOfLongLivedAssetsPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:ImpairmentOrDisposalOfLongLivedAssetsPolicyTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in"><b><i>j. Impairment of Long-Lived Assets</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_24" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_23"><ix:continuation id="_ImpairmentOrDisposalOfLongLivedAssetsPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">The Company evaluates the recoverability of long-lived assets
for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The impairment
test consists of two steps. The first step compares the carrying amount of the asset to the sum of expected undiscounted future cash flows.
If the sum of expected undiscounted future cash flows exceeds the carrying amount of the asset, no impairment is taken. If the sum of
expected undiscounted future cash flows is less than the carrying amount of the asset, a second step is warranted and an impairment loss
is measured as the amount by which the carrying amount of the asset exceeds its fair value calculated using the present value of estimated
net future cash flows. There have been no impairment losses recognized by the Company for the years ended December&#160;31, 2022, 2021&#160;and
2020.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt"><b><i>&#160;</i></b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_25" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_24"><ix:nonNumeric contextRef="c0" continuedAt="_InvestmentPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:InvestmentPolicyTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in"><b><i>k. Investments</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_26" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_25"><ix:continuation continuedAt="_InvestmentPolicyTextBlock-c0_cont_2" id="_InvestmentPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">Investments are accounted for using the equity method if
the investment provides the Company the ability to exercise significant influence, but not control, over an investee. Significant influence
is generally deemed to exist if the Company has an ownership interest in the voting stock of the investee between <ix:nonFraction contextRef="c54" decimals="2" format="ixt:num-dot-decimal" name="negg:VotingStockOfTheInvestee" scale="-2" unitRef="pure">20</ix:nonFraction>% and <ix:nonFraction contextRef="c55" decimals="2" format="ixt:num-dot-decimal" name="negg:VotingStockOfTheInvestee" scale="-2" unitRef="pure">50</ix:nonFraction>%, although
other factors are considered in determining whether the equity method is appropriate. Also, investments in limited partnerships of more
than <ix:nonFraction contextRef="c54" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:InvestmentOwnedPercentOfNetAssets" scale="-2" unitRef="pure">3</ix:nonFraction>% to <ix:nonFraction contextRef="c55" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:InvestmentOwnedPercentOfNetAssets" scale="-2" unitRef="pure">5</ix:nonFraction>% are generally viewed as more than minor and are accounted for using the equity method.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: left">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_27" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_26"><ix:continuation continuedAt="_InvestmentPolicyTextBlock-c0_cont_3" id="_InvestmentPolicyTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">The investments for which the Company is not able to exercise
significant influence over the investee and which do not have readily determinable fair values were accounted for under the cost method
prior to the adoption of ASU&#160;2016-01 <i>Financial Instruments-Overall (Subtopic&#160;825-10): Recognition and Measurement of Financial
Assets and Financial Liabilities</i>. Subsequent to the adoption of this standard as of January&#160;1, 2018, the Company has elected
the measurement alternative to measure such investments at cost, less any impairment, plus or minus changes resulting from observable
price changes in orderly transactions for the identical or a similar investment of the same issuer.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_28" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_27"><ix:continuation id="_InvestmentPolicyTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">Equity investments, except for those accounted under ASU
2016-01 equity method, are measured at fair value, and any changes in fair value are recognized in earnings. For equity investments measured
at fair value with changes in fair value recorded in earnings, the Company does not assess whether those securities are impaired.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in"><b><i>&#160;</i></b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_29" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_28"><ix:nonNumeric contextRef="c0" continuedAt="_FairValueOfFinancialInstrumentsPolicy-c0_cont_1" escape="true" name="us-gaap:FairValueOfFinancialInstrumentsPolicy"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in"><b><i>l. Fair Value of Financial Instruments</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_30" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_29"><ix:continuation continuedAt="_FairValueOfFinancialInstrumentsPolicy-c0_cont_2" id="_FairValueOfFinancialInstrumentsPolicy-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">Fair value is defined as the price that would be received
to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase
the comparability of fair value measures, a three-tier fair value hierarchy prioritizes the inputs used in measuring fair value. These
tiers include Level&#160;1, defined as observable inputs such as quoted prices in active markets; Level&#160;2, defined as inputs other
than quoted prices in active markets that are either directly or indirectly observable; and Level&#160;3, defined as unobservable inputs
in which little or no market data exist, therefore, requiring the Company to develop its own assumptions to determine the best estimate
of fair value.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt"></p><div>

</div><!-- Field: Page; Sequence: 111; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->11<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt">&#160;</p><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_31" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_30"><ix:continuation id="_FairValueOfFinancialInstrumentsPolicy-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">The carrying amounts of cash and cash equivalents, accounts
receivable, accounts payable, and accrued and other liabilities approximate fair value because of the short maturity of these instruments.
The carrying amounts of long-term debt and line of credit at December&#160;31, 2022 and 2021 approximate fair value because the interest
rate approximates the current market interest rate. The fair value of these financial instruments was determined using level 2 input.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt"><b><i>&#160;</i></b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_32" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_31"><ix:nonNumeric contextRef="c0" continuedAt="_DerivativesPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:DerivativesPolicyTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in"><b><i>m. Warrant Liability</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_33" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_32"><ix:continuation id="_DerivativesPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">For warrants that are not indexed to the Company&#8217;s
stock, the Company records the fair value of the issued warrants as a liability at each balance sheet date and records changes in the
estimated fair value as a non-cash gain or loss in the consolidated statement of income and comprehensive income. The warrant liability
is recognized in the balance sheet at the fair value (level 3). The fair value of these warrants has been determined using the Black-Scholes
pricing model. The Black-Scholes pricing model provides for assumptions regarding volatility, call and put features and risk-free interest
rates within the total period to maturity (see Note 13 - Warrants).</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_34" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_33"><ix:nonNumeric contextRef="c0" continuedAt="_ComprehensiveIncomePolicyPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:ComprehensiveIncomePolicyPolicyTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in"><b><i>n. Accumulated Other Comprehensive Income (Loss)</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_35" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_34"><ix:continuation id="_ComprehensiveIncomePolicyPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">Comprehensive income (loss) consists of net income (loss)
and adjustments to stockholders&#8217; equity for foreign currency translation adjustments. Accumulated other comprehensive income (loss)
consists entirely of foreign currency translation adjustments. The tax impact is not material to the consolidated financial statements.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in"><b><i>&#160;</i></b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_36" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_35"><ix:nonNumeric contextRef="c0" continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:RevenueRecognitionPolicyTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in"><b><i>o. Revenue Recognition</i></b>&#160;&#160;</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_37" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_36"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_2" id="_RevenueRecognitionPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">Revenue is recognized when control of a promised product
or service transfers to a customer, in an amount that reflects the consideration to which the Company expects to be entitled in exchange
for transferring that product or service. Revenue is recognized net of sales taxes and discounts. The Company primarily generates revenue
through product and extended warranty sales on its platforms, through fees earned for facilitating marketplace transactions, and services
rendered through its Newegg Partner Services (&#8220;NPS&#8221;).</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_38" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_37"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_3" id="_RevenueRecognitionPolicyTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">The Company recognizes revenue on product sales at a point
in time to customers when control of the product passes to the customer upon delivery to the customer or when service is provided. The
Company fulfills orders with its owned inventory or with inventory sourced through its suppliers. The vast majority of the Company&#8217;s
product sales are fulfilled from its owned inventory. The amount recognized in revenue represents the expected consideration to be received
in exchange for such goods or services. For orders fulfilled with inventory sourced through the Company&#8217;s suppliers, and where the
products are shipped directly by the Company&#8217;s supplier to the Company&#8217;s customer, the Company evaluates the criteria outlined
in ASC&#160;606-10-55, <i>Principal versus Agent Considerations</i>, in determining whether revenue should be recognized on a gross or
net basis. The Company determined that it is the principal in these transactions as it controls the specific good before it is transferred
to the customer. The Company is the entity responsible for fulfilling the promise to provide the specified good to the customer and takes
responsibility for the acceptability of the goods, assumes inventory risk before the specified good has been transferred to the customer
or after transfer of control to the customer, has discretion in establishing the price, and selects the suppliers of products sold. The
Company accounts for product sales under these arrangements on a gross basis upon receipt of the product by the customer. Product sales
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</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_39" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_38"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_4" id="_RevenueRecognitionPolicyTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">The Company generally requires payment by credit card upon
placement of an order, and to a limited extent, grants credit to business customers, typically on 30-day to 60-day terms. Shipping and
handling is considered a fulfillment activity, as it takes place before the customer obtains controls of the good. Amounts billed to customers
for shipping and handling are included in net sales upon completion of the performance obligation.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_40" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_39"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_5" id="_RevenueRecognitionPolicyTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">The Company&#8217;s product sales contracts include terms
that could cause variability in the transaction price such as sales returns and credit card chargebacks. As such, the transaction price
for product sales includes estimates of variable consideration to the extent it is probable that a significant reversal of revenue recognized
will not occur. Sales are reported net of estimated returns and allowances and credit card chargebacks, based on historical experience.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt"></p><div>

</div><!-- Field: Page; Sequence: 112; Value: 1 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt">&#160;</p><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_41" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_40"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_6" id="_RevenueRecognitionPolicyTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">The Company also earns fees for facilitating marketplace
transactions and extended warranty sales on its platforms. For marketplace transactions, the Company&#8217;s websites host third-party
sellers and the Company also provides the payment processing function. The Company recognizes revenue upon sale of products made available
through its marketplace store. The Company is not the principal in this arrangement and does not control the specific goods sold to the
customer. The Company reports the net amount earned as commissions, which are determined using a fixed percentage of the sales price or
fixed reimbursement amount. The Company also offers extended warranty programs for various products on behalf of an unrelated third party.
The Company reports the net amount earned as revenue at the time of sale, as it is not the principal in this arrangement and does not
control the specific goods sold to the customer.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_42" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_41"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_7" id="_RevenueRecognitionPolicyTextBlock-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">The Company offers its customers the opportunity to purchase
goods and services on its websites using deferred financing promotional programs provided by a third-party financing company. These programs
include an option to make no payments for a period of six, twelve, eighteen or twenty-four&#160;months. The third-party financing company
makes all decisions to extend credit to the customer under a separate agreement with the customer, owns all such receivables from the
customer, assumes all risk of collection, and has no recourse to the Company in the event the customer does not pay. The third-party financing
company pays the Company for the purchase price on behalf of the customer, less certain transaction fees. Accordingly, sales generated
through these programs are not reflected in the Company&#8217;s receivables once payment is received from the third-party financing company.
The transaction fee paid by the Company to the third-party financing company is recognized as a reduction of revenue. These transaction
fees for the&#160;years ended December&#160;31, 2022, 2021 and 2020 were immaterial.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_43" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_42"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_8" id="_RevenueRecognitionPolicyTextBlock-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">To the extent that the Company sells its products on third-party
platforms, the Company incurs incremental contract acquisition costs in the form of sales commissions paid to the platforms. The commissions
are generally determined based on the sales price and an agreed-upon commission rate. The Company elects the practical expedient under
Accounting Standards Update No.&#160;2014-09 <i>Revenue From Contracts with Customers (Topic&#160;606)</i> to recognize sales commission
as an expense as incurred, as the amortization period of the asset that the Company otherwise would have recognized is less than <ix:nonNumeric contextRef="c0" format="ixt-sec:durwordsen" name="us-gaap:RegulatoryAssetAmortizationPeriod">one year</ix:nonNumeric>.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_44" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_43"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_9" id="_RevenueRecognitionPolicyTextBlock-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">The Company offers e-commerce solutions to its vendors and
sellers through its Newegg Partner Services. Part of the services include third-party logistics (3PL), Shipped-by-Newegg (SBN), shipping
label service (SLS), staffing, and media services. The fees we earn from these arrangements are recognized when the services are rendered.
For 3PL, SBN, and SLS, the revenues are recognized upon the shipment of the product to its end consumer, and upon processing of a returned
item for the client. For staffing, revenues are recognized based on when an employee is dispatched to a client, hours are accumulated
by the dispatched employees&#8217; timecard, or when a direct hire placement is made. For media services, revenues are recognized when
the applicable commercial or editorial creative content is delivered.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_45" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_44"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_10" id="_RevenueRecognitionPolicyTextBlock-c0_cont_9"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">The Company has two types of contractual liabilities: (1)&#160;amounts
collected, or amounts invoiced and due, related to product sales where receipt of the product by the customer has not yet occurred or
revenue cannot be recognized. Such amounts are recorded in the consolidated balance sheets as deferred revenue and are recognized when
the applicable revenue recognition criteria have been satisfied. For all of the product sales, the Company ships a large volume of packages
through multiple carriers. Actual delivery dates may not always be available and as such, the Company estimates delivery dates as needed
based on historical data. (2)&#160;unredeemed gift cards, which are initially recorded as deferred revenue and are recognized in the period
they are redeemed. Subject to governmental agencies&#8217; escheat requirements, certain gift cards not expected to be redeemed, also
known as &#8220;breakage,&#8221; are recognized as revenue based on the historical redemption pattern. These gift cards breakage revenue
for the&#160;years ended December&#160;31, 2022, 2021, and 2020 were immaterial.&#160;</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_46" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_45"><ix:continuation id="_RevenueRecognitionPolicyTextBlock-c0_cont_10"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">Deferred revenue totaled $<ix:nonFraction contextRef="c2" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:DeferredRevenue" scale="6" unitRef="usd">31.0</ix:nonFraction> million and $<ix:nonFraction contextRef="c3" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:DeferredRevenue" scale="6" unitRef="usd">39.8</ix:nonFraction> million
at December&#160;31, 2022 and 2021, respectively. During the year ended December&#160;31, 2022, the Company recognized $<ix:nonFraction contextRef="c0" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:DeferredRevenueRevenueRecognized1" scale="6" unitRef="usd">36.6</ix:nonFraction> million of
net revenue included in deferred revenue at December&#160;31, 2021. During the year ended December&#160;31, 2021, the Company recognized
$<ix:nonFraction contextRef="c4" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:DeferredRevenueRevenueRecognized1" scale="6" unitRef="usd">43.7</ix:nonFraction> million of net revenue included in deferred revenue at December&#160;31, 2020.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt"><b><i>&#160;</i></b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt"></p><div>

</div><!-- Field: Page; Sequence: 113; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->13<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt"><b><i>&#160;</i></b></p><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_47" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_46"><ix:nonNumeric contextRef="c0" continuedAt="_CostOfSalesPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:CostOfSalesPolicyTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in"><b><i>p. Cost of Sales</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_48" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_47"><ix:continuation id="_CostOfSalesPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">The Company&#8217;s cost of sales represents the purchase
price of the products it sells to its customers, offset by incentives earned from vendors, including marketing development funds and other
vendor incentive programs. See further discussion of vendor payments under Incentives Earned from Vendors below. Cost of sales also includes
freight-in and freight-out costs and charges related to refurbished, slow-moving, or obsolete inventory.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt"><b><i>&#160;</i></b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_49" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_48"><ix:nonNumeric contextRef="c0" continuedAt="negg_ShippingAndHandlingPolicyTextBlock-c0_cont_1" escape="true" name="negg:ShippingAndHandlingPolicyTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in"><b><i>q. Shipping and Handling</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_50" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_49"><ix:continuation continuedAt="negg_ShippingAndHandlingPolicyTextBlock-c0_cont_2" id="negg_ShippingAndHandlingPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">The Company records revenue for shipping and handling billed
to its customers. Shipping and handling revenue totaled approximately $<ix:nonFraction contextRef="c0" decimals="-5" format="ixt:num-dot-decimal" name="negg:ShippingAndHandlingRevenue" scale="6" unitRef="usd">15.3</ix:nonFraction> million, $<ix:nonFraction contextRef="c4" decimals="-5" format="ixt:num-dot-decimal" name="negg:ShippingAndHandlingRevenue" scale="6" unitRef="usd">25.3</ix:nonFraction> million and $<ix:nonFraction contextRef="c5" decimals="-5" format="ixt:num-dot-decimal" name="negg:ShippingAndHandlingRevenue" scale="6" unitRef="usd">33.7</ix:nonFraction> million for the&#160;years
ended December&#160;31, 2022, 2021 and 2020, respectively.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_51" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_50"><ix:continuation id="negg_ShippingAndHandlingPolicyTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">The related shipping and handling costs are included in cost
of sales. Shipping and handling costs totaled approximately $<ix:nonFraction contextRef="c0" decimals="-5" format="ixt:num-dot-decimal" name="negg:ShippingAndHandlingCosts" scale="6" unitRef="usd">49.2</ix:nonFraction> million, $<ix:nonFraction contextRef="c4" decimals="-5" format="ixt:num-dot-decimal" name="negg:ShippingAndHandlingCosts" scale="6" unitRef="usd">64.7</ix:nonFraction> million and $<ix:nonFraction contextRef="c5" decimals="-5" format="ixt:num-dot-decimal" name="negg:ShippingAndHandlingCosts" scale="6" unitRef="usd">80.1</ix:nonFraction> million for the&#160;years ended December&#160;31,
2022, 2021 and 2020, respectively.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt"><b><i>&#160;</i></b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_52" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_51"><ix:nonNumeric contextRef="c0" continuedAt="negg_IncentivesEarnedFromVendorsPolicyTextBlock-c0_cont_1" escape="true" name="negg:IncentivesEarnedFromVendorsPolicyTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in"><b><i>r. Incentives Earned from Vendors</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_53" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_52"><ix:continuation continuedAt="negg_IncentivesEarnedFromVendorsPolicyTextBlock-c0_cont_2" id="negg_IncentivesEarnedFromVendorsPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">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
for certain cooperative advertising, and price protection agreements. 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 the Company 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.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_54" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_53"><ix:continuation id="negg_IncentivesEarnedFromVendorsPolicyTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">The Company reduced cost of sales by $<ix:nonFraction contextRef="c0" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:CostOfRevenue" scale="6" unitRef="usd">224.3</ix:nonFraction> million, $<ix:nonFraction contextRef="c4" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:CostOfRevenue" scale="6" unitRef="usd">140.0</ix:nonFraction>
million and $<ix:nonFraction contextRef="c5" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:CostOfRevenue" scale="6" unitRef="usd">135.8</ix:nonFraction> million for the&#160;years ended December&#160;31, 2022, 2021 and 2020, respectively, for these vendor incentive programs.
Reductions to advertising and promotional expenses related to direct reimbursements for costs incurred in advertising vendors&#8217; products
totaled $<ix:nonFraction contextRef="c0" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:MarketingAndAdvertisingExpense" scale="6" unitRef="usd">1.3</ix:nonFraction> million, $<ix:nonFraction contextRef="c4" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:MarketingAndAdvertisingExpense" scale="6" unitRef="usd">1.5</ix:nonFraction> million and $<ix:nonFraction contextRef="c5" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:MarketingAndAdvertisingExpense" scale="6" unitRef="usd">1.1</ix:nonFraction> million for the&#160;years ended December&#160;31, 2022, 2021 and 2020, respectively. Amounts
receivable related to vendor incentive programs were $<ix:nonFraction contextRef="c0" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:AccountsReceivableSale" scale="6" unitRef="usd">63.6</ix:nonFraction> million and $<ix:nonFraction contextRef="c4" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:AccountsReceivableSale" scale="6" unitRef="usd">41.5</ix:nonFraction> million, net of allowances of $<ix:nonFraction contextRef="c2" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:AccountsAndOtherReceivablesNetCurrent" scale="6" unitRef="usd">0.6</ix:nonFraction> million and $<ix:nonFraction contextRef="c3" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:AccountsAndOtherReceivablesNetCurrent" scale="6" unitRef="usd">0.6</ix:nonFraction> million,
at December&#160;31, 2022 and 2021, respectively. Amounts due to the Company are included in accounts receivable in the consolidated balance
sheets.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt"><b><i>&#160;</i></b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_55" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_54"><ix:nonNumeric contextRef="c0" continuedAt="_SellingGeneralAndAdministrativeExpensesPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:SellingGeneralAndAdministrativeExpensesPolicyTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in"><b><i>s. Selling, General, and Administrative Expenses</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_56" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_55"><ix:continuation continuedAt="_SellingGeneralAndAdministrativeExpensesPolicyTextBlock-c0_cont_2" id="_SellingGeneralAndAdministrativeExpensesPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">Selling, general, and administrative expenses primarily consist
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amortization, professional fees, litigation costs, rent expense, information technology expenses, warehouse costs, office expenses, and
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</div><div>

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</div><div>

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</div><div>

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</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt"><b><i>&#160;</i></b></p><div>

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</div><div>

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fair value of the awards on the date of grant. The value of awards that are ultimately expected to vest is recognized as expense on a
straight-line basis over the requisite service periods in the consolidated statements of operations. See Note&#160;14 &#8212; Stock-Based
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</div><div>

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</div><div>

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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&#160;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.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

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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 <ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:EffectiveIncomeTaxRateReconciliationDeductionsMedicarePrescriptionDrugBenefit" scale="-2" unitRef="pure">50</ix:nonFraction>% likelihood of being realized upon the ultimate settlement with a taxing authority. The Company reverses a previously
recognized tax benefit if it determines that the tax position no longer meets the more-likely-than-not threshold of being sustained. The
Company accrues interest and penalties related to unrecognized tax benefits in income tax expense.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt"><b><i>&#160;</i></b></p></ix:continuation></ix:continuation><div>

</div><div>

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</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_66" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_65"><ix:continuation continuedAt="_ConcentrationRiskCreditRisk-c0_cont_2" id="_ConcentrationRiskCreditRisk-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">The Company maintains its cash and cash equivalents in bank
deposit accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts and
does not believe it is exposed to any significant credit risk from cash and cash equivalents.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

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</div><div>

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purchases from four vendors, three vendors and one vendor, respectively, exceeded <ix:nonFraction contextRef="c2" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:InvestmentSoldNotYetPurchasedPercentOfNetAssets" scale="-2" unitRef="pure">10</ix:nonFraction>% of total purchases. The majority of products that
the Company sells are available through multiple channels.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

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advertising and promotional programs and receivables due from business customers with credit terms. As of December&#160;31, 2022, receivables
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</div><div>

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</div><div>

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where the local currency is the functional currency are translated into U.S.&#160;dollars using exchange rates in effect at the balance
sheet date for assets and liabilities and average exchange rates during the year for revenues and expenses. Any gain or loss on currency
translation is included in stockholders&#8217; equity as accumulated other comprehensive income.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt"><b><i>&#160;</i></b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt"><b><i>&#160;</i></b></p><div>

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</div><div>

</div><ix:continuation id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_72"><ix:continuation id="_NewAccountingPronouncementsPolicyPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">In March 2020, the FASB issued ASU 2020-04&#160;<i>Reference
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by subsequent ASUs (collectively, &#8220;ASU 2020-04&#8221; and &#8220;ASU 2022-06&#8221;), which provides practical expedients for contract
modifications and certain hedging relationships associated with the transition from reference rates that are expected to be discontinued.
This guidance is applicable for borrowing instruments, which use LIBOR as a reference rate, and is available through December 31, 2024.
The Company is currently evaluating this ASU and does not expect its adoption to have a material impact on its consolidated financial
statements.</p></ix:continuation></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_FairValueDisclosuresTextBlock-c0_cont_1" escape="true" name="us-gaap:FairValueDisclosuresTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
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</div><div>

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are measured at fair value on a recurring basis include cash and cash equivalents, and restricted cash. The carrying amounts of cash and
cash equivalents and restricted cash approximate their fair value.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt">&#160;</p></ix:continuation><div>

</div><div>

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fair value on a non-recurring basis when impairment is identified include equity method investment and investment in equity securities
without readily determinable fair value not accounted for under the equity method. The fair values of these investments are determined
based on valuation techniques using the best information available, and may include quoted market prices, market comparables, and discounted
cash flow projections. An impairment charge is recorded when the cost of the investment exceeds its fair value. This is considered a Level
3 fair value measurement. See Note&#160;6 &#8212; Investment for further information regarding the fair value measurement of these investments.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt">&#160;</p></ix:continuation><div>

</div><div>

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from affiliate (see Note&#160;18 &#8212; Related Party Transactions), line of credit and long-term debt are carried at cost with fair
value disclosed, if required. The fair value of the amounts outstanding under the line of credit and long-term debt with a floating interest
rate approximates the carrying value primarily due to the variable nature of the interest rate of the instruments, which is considered
a Level&#160;2 fair value measurement. The fair value of the amounts outstanding under notes receivable from affiliate, loans from affiliate,
and line of credit with a fixed interest rate is estimated based on the discounted amount of the contractual future cash flows using an
appropriate discount rate. This is considered a Level&#160;3 fair value measurement.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

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</div><div>

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</div><div>

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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  </table></ix:nonNumeric></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->16<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_PropertyPlantAndEquipmentDisclosureTextBlock-c0_cont_1" escape="true" name="us-gaap:PropertyPlantAndEquipmentDisclosureTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><b>5.</b></td><td style="text-align: left"><b>Property and Equipment, Net</b></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt; text-align: left">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_PropertyPlantAndEquipmentDisclosureTextBlock-c0_cont_2" id="_PropertyPlantAndEquipmentDisclosureTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">Property and equipment, net consisted of the following (in
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</div><div>

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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Leasehold improvements</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Capitalized software</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c89" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:PropertyPlantAndEquipmentGross" scale="3" unitRef="usd">28,784</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c90" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:PropertyPlantAndEquipmentGross" scale="3" unitRef="usd">17,031</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Furniture and fixtures</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c91" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:PropertyPlantAndEquipmentGross" scale="3" unitRef="usd">3,812</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-bottom: 1.5pt">Construction in progress(1)</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><div>

</div><ix:continuation continuedAt="_PropertyPlantAndEquipmentDisclosureTextBlock-c0_cont_4" id="_PropertyPlantAndEquipmentDisclosureTextBlock-c0_cont_3"><ix:continuation id="_ScheduleOfPublicUtilityPropertyPlantAndEquipmentTextBlock-c0_cont_1"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">(1)</span></td><td style="text-align: left"><ix:footnote id="ix_0_footnote" xml:lang="en-US"><span style="font-size: 10pt">Property construction-in-progress
is stated at cost and not depreciated. The property would be transferred to its respective account within property, plant and equipment
upon completion.</span></ix:footnote></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt">&#160;</p></ix:continuation></ix:continuation><div>
</div><div>

</div><ix:continuation id="_PropertyPlantAndEquipmentDisclosureTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">Depreciation and amortization expense associated with property
and equipment was $<ix:nonFraction contextRef="c0" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:DepreciationAndAmortization" scale="6" unitRef="usd">11.0</ix:nonFraction> million, $<ix:nonFraction contextRef="c4" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:DepreciationAndAmortization" scale="6" unitRef="usd">10.8</ix:nonFraction> million and $<ix:nonFraction contextRef="c5" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:DepreciationAndAmortization" scale="6" unitRef="usd">9.1</ix:nonFraction> million for the&#160;years ended December&#160;31, 2022, 2021 and 2020, respectively.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_InvestmentTextBlock-c0_cont_1" escape="true" name="us-gaap:InvestmentTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><b>6.</b></td><td style="text-align: left"><b>Investment</b></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_InvestmentTextBlock-c0_cont_2" id="_InvestmentTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">On April&#160;17, 2018, the Company entered into an agreement
to acquire an equity interest in Mountain Capital Fund L.P. (&#8220;Mountain&#8221;) from Pegasus View Global Ltd., an international business
company incorporated in the Republic of Seychelles (&#8220;Pegasus&#8221;), which is a related party. Mountain is an exempted limited
partnership registered under the partnership law in the Cayman Islands and primarily engages in investing. The Company&#8217;s equity
interest in Mountain was limited to <ix:nonFraction contextRef="c95" decimals="2" format="ixt:num-dot-decimal" name="negg:MountainsInvestmentPercentage" scale="-2" unitRef="pure">50</ix:nonFraction>% of Mountain&#8217;s investment in One97 Communications Limited and PayTM E-Commerce Private Limited
(collectively, the &#8220;Mountain Investment&#8221;). In addition to the $<ix:nonFraction contextRef="c96" decimals="-5" format="ixt:num-dot-decimal" name="negg:InitialInvestment" scale="6" unitRef="usd">43.0</ix:nonFraction> million initial investment made during 2018, the purchase
price in this transaction included a contingent consideration of up to $<ix:nonFraction contextRef="c97" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:AssetAcquisitionContingentConsiderationLiability" scale="6" unitRef="usd">7.0</ix:nonFraction> million upon satisfaction of certain conditions described
in the purchase agreement. This contingent consideration of $<ix:nonFraction contextRef="c98" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:AssetAcquisitionContingentConsiderationLiability" scale="6" unitRef="usd">7.0</ix:nonFraction> million was paid in April&#160;2019. The Company evaluated the Mountain
Investment under the variable interest model and the voting interest model and concluded that Mountain Capital Fund L.P. is not a variable
interest entity and no consolidation is needed under either the variable interest model or the voting interest model. <ix:nonNumeric contextRef="c96" name="negg:ContingentConsiderationDescription">The Company recorded
an estimate of contingent consideration payable of $7.0 million as of the acquisition date.</ix:nonNumeric> The Company accounted for the Mountain Investment
under the equity method. During the year 2019, Mountain sold a portion of its investment in One97 Communications Limited (&#8220;One97&#8221;)
to various third-party buyers, which resulted in the Company&#8217;s disposal of all of its investment in One97.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_InvestmentTextBlock-c0_cont_3" id="_InvestmentTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">As of December&#160;31, 2021, the carrying value of the
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</div><div>

</div><ix:continuation continuedAt="_InvestmentTextBlock-c0_cont_4" id="_InvestmentTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">In December 2022, the Company was informed that Mountain
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in exchange for approximately $<ix:nonFraction contextRef="c0" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:RelatedPartyCosts" scale="6" unitRef="usd">0.7</ix:nonFraction> million. Mountain and the unrelated third party buyer entered into a share purchase agreement on December
29, 2022. The Company reached a mutual understanding with Mountain that the Company does not expect to receive any proceeds as part of
the final sale and dissolution of Mountain as of December 31, 2022. The Company then reviewed the investment in Mountain and determined
an impairment existed as of December 31, 2022 and wrote off the full remaining balance of $<ix:nonFraction contextRef="c0" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:ImpairmentOfLeasehold" scale="6" unitRef="usd">2.3</ix:nonFraction> million.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt">&#160;&#160;</p></ix:continuation><div>

</div><div>

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Preferred shares in Bitmain Technologies Holding Company, a privately-held company incorporated in the Cayman Islands, for a total consideration
of $<ix:nonFraction contextRef="c100" decimals="-5" format="ixt:num-dot-decimal" name="negg:ContingentConsideration" scale="6" unitRef="usd">15.0</ix:nonFraction> million. Bitmain Technologies Holding Company and its subsidiaries (together &#8220;Bitmain&#8221;) primarily design and sell
cryptocurrency mining hardware, operate cryptocurrency mining pools, and provide mining farm services. As this represents an investment
in equity securities without readily determinable fair values, the Company elected the measurement alternative under ASU&#160;2016-01
to measure this investment at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions
for the identical or a similar investment of the same issuer.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&#160;</p></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"></p><div>

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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&#160;</p><div>

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held by the Company&#8217;s subsidiary, Newegg Tech Corporation at $<ix:nonFraction contextRef="c101" decimals="8" format="ixt:num-dot-decimal" name="negg:StockRepurchasedPerShare" scale="0" unitRef="usdPershares">0.48605796</ix:nonFraction> per share in accordance with Bitmain&#8217;s articles of
association. The Company reviewed the transaction and concluded that the transaction is not an orderly transaction, and the Company would
continue to account for the investment in Bitmain at cost. As a result of the redemption, the Company recognized a gain on sale of investment
of $<ix:nonFraction contextRef="c101" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:GainLossOnSaleOfInvestments" scale="6" unitRef="usd">1.7</ix:nonFraction> million in June 2022. The proceeds were received in July 2022.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt; text-align: left">&#160;&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_InvestmentTextBlock-c0_cont_7" id="_InvestmentTextBlock-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">The Company reviewed the investment in Bitmain for impairment
as of December&#160;31, 2022 and 2021, respectively, by evaluating if events or circumstances have occurred that may have a significant
adverse effect on the fair value of the investment. The Company concluded there were no impairment indicators as of December&#160;31,
2022 and 2021. In the absence of observable price changes in orderly transactions for the identical or a similar investment of the same
issuer during the&#160;years ended December&#160;31, 2022 and 2021, the carrying value of the investment remained at $<ix:nonFraction contextRef="c2" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:Investments" scale="6" unitRef="usd">11.3</ix:nonFraction> million and
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</div><div>

</div><ix:continuation id="_InvestmentTextBlock-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">There was no impairment loss on Bitmain cost method investment
for the&#160;years ended December&#160;31, 2022, 2021 and 2020.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><b>&#160;</b></p><div>

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<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><b>7.</b></td><td style="text-align: left"><b>Accrued Liabilities</b></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&#160;</p></ix:nonNumeric><div>

</div><div>

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</div><div>

</div><ix:continuation id="_AccountsPayableAccruedLiabilitiesAndOtherLiabilitiesDisclosureCurrentTextBlock-c0_cont_2"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfAccountsPayableAndAccruedLiabilitiesTableTextBlock"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt; text-align: left"><b>&#160;</b></p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="negg_LineOfCreditTextBlock-c0_cont_1" escape="true" name="negg:LineOfCreditTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><b>8.</b></td><td style="text-align: left"><b>Line of Credit</b></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt; text-align: left">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="negg_LineOfCreditTextBlock-c0_cont_2" id="negg_LineOfCreditTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">In July 2018, the Company entered into a credit agreement
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2021</ix:nonNumeric>. Prior to July&#160;27, 2020 and subject to certain terms and conditions, the Maximum Revolving Advance Amount, as defined in the
loan agreement, could be increased up to $<ix:nonFraction contextRef="c103" decimals="-5" format="ixt:num-dot-decimal" name="negg:LoanAgreementIncreased" scale="6" unitRef="usd">140.0</ix:nonFraction> million. The revolving credit facility included a letter of credit sublimit of $<ix:nonFraction contextRef="c102" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:OtherLoansPayableCurrent" scale="6" unitRef="usd">25.0</ix:nonFraction> million,
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line of credit were subject to interest at LIBOR plus the Applicable Margin, as defined in the loan agreement, or the Alternate Base Rate
(defined as the highest of the financial institution&#8217;s prime rate, the Overnight Bank Funding Rate plus <ix:nonFraction contextRef="c102" decimals="4" format="ixt:num-dot-decimal" name="negg:BankFundingRate" scale="-2" unitRef="pure">0.50</ix:nonFraction>%, or the daily LIBOR
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on LIBOR loans were payable at the end of the selected interest period. Interest on Alternate Base Rate loans was payable monthly. The
line of credit was guaranteed by certain of the Company&#8217;s U.S.&#160;subsidiaries and was collateralized by certain of the assets
of the Company. Such assets included all receivables, equipment and fixtures, general intangibles, inventory, subsidiary stock, securities,
property, and financial assets, contract rights, and ledger sheets, as defined in the loan agreement. To maintain availability of funds
under the loan agreement, the Company paid on a quarterly basis, an unused commitment fee of either <ix:nonFraction contextRef="c103" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:LineOfCreditFacilityUnusedCapacityCommitmentFeePercentage" scale="-2" unitRef="pure">0.25</ix:nonFraction>% of the difference between the
amount available and the amount outstanding under the facility if the difference was less than one-third of the Maximum Revolving Advance
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to or greater than one-third of the Maximum Revolving Advance Amount.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&#160;</p></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"></p><div>

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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&#160;</p><div>

</div><ix:continuation continuedAt="negg_LineOfCreditTextBlock-c0_cont_3" id="negg_LineOfCreditTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">The credit facility contains customary covenants, including
covenants that limit or restrict the Company&#8217;s ability to incur capital expenditures and lease payments, make certain investment,
enter into certain related-party transactions, and pay dividends. That credit facility also requires the Company to maintain certain minimum
financial ratios and maintain an operational banking relationship with the financial institutions.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22.5pt; text-align: left">&#160;&#160;&#160;&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="negg_LineOfCreditTextBlock-c0_cont_4" id="negg_LineOfCreditTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">The Company entered into a credit agreement in August&#160;2021 with
several financing institutions that provided a revolving credit facility of up to $<ix:nonFraction contextRef="c105" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:LinesOfCreditFairValueDisclosure" scale="6" unitRef="usd">100</ix:nonFraction>&#160;million with a maturity date of <ix:nonNumeric contextRef="c105" format="ixt:date-monthname-day-year-en" name="us-gaap:LongTermDebtMaturityDate">August&#160;20,
2024</ix:nonNumeric>. Prior to August&#160;20, 2023 and subject to certain terms and conditions, the Maximum Revolving Advance Amount, as defined in the
credit agreement, could be increased up to $<ix:nonFraction contextRef="c106" decimals="-5" format="ixt:num-dot-decimal" name="negg:LoanAgreementIncreased" scale="6" unitRef="usd">150.0</ix:nonFraction>&#160;million. The revolving credit facility includes a letter of credit sublimit of
$<ix:nonFraction contextRef="c105" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:OtherLoansPayableCurrent" scale="6" unitRef="usd">30.0</ix:nonFraction>&#160;million, which can be used to issue standby and trade letters of credit, and a $<ix:nonFraction contextRef="c107" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:OtherLoansPayableCurrent" scale="6" unitRef="usd">20.0</ix:nonFraction>&#160;million sublimit for swingline loans.
In April 2023, the Company amended the credit agreement in order to transition the benchmark rate for certain loans made under the credit
agreement from LIBOR to SOFR (as defined in the credit agreement). In general, advances from this line of credit will be subject to interest
at the Term SOFR Rate plus the Applicable Margin, as defined in the credit agreement, so long as the Term SOFR Reference Rate or Term
SOFR is offered, ascertainable, and not unlawful, or the Alternate Base Rate (to be defined as the highest of the (a)&#160;the Base Rate
in effect on such&#160;day, (b)&#160;the sum of the Overnight Bank Funding Rate in effect on such&#160;day plus <ix:nonFraction contextRef="c105" decimals="4" format="ixt:num-dot-decimal" name="negg:BankFundingRate" scale="-2" unitRef="pure">0.50</ix:nonFraction>%, or (c)&#160;the
daily Term SOFR Rate plus <ix:nonFraction contextRef="c105" decimals="3" format="ixt:num-dot-decimal" name="us-gaap:DebtInstrumentInterestRateStatedPercentage" scale="-2" unitRef="pure">1.0</ix:nonFraction>%) plus the Applicable Margin. For Term SOFR Rate loans, we may select interest periods of one or three&#160;months.
Interest on Term SOFR Rate loans shall be payable at the end of the selected interest period. Interest on Alternate Base Rate loans is
payable monthly. In the event of the permanent or indefinite cessation of the Term SOFR Rate, the Benchmark Replacement will replace the
Term SOFR Rate.&#160;If the Benchmark Replacement is Daily Simple SOFR, all interest payments will be payable on a monthly basis.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22.5pt">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="negg_LineOfCreditTextBlock-c0_cont_5" id="negg_LineOfCreditTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">The new line of credit is secured by certain of the Company&#8217;s
subsidiaries and is collateralized by certain of the of the assets of the Company. Such assets include all receivables, equipment and
fixtures, general intangibles, inventory, subsidiary stock, securities, property, and financial assets, contract rights, and ledger sheets,
as defined in the credit agreement. To maintain availability of funds under the credit agreement, the Company will pay on a quarterly
basis, an unused commitment fee of <ix:nonFraction contextRef="c0" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:LineOfCreditFacilityUnusedCapacityCommitmentFeePercentage" scale="-2" unitRef="pure">0.15</ix:nonFraction>% per annum on the unused amount for the facility. The new credit facility contains customary covenants,
including covenants that limit or restrict the Company&#8217;s ability to incur capital expenditures and lease payments, make certain
investments, and enter into certain related-party transactions. The credit facility also requires the Company to maintain certain minimum
financial ratios and maintain an operational banking relationship with the financial institutions.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22.5pt">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="negg_LineOfCreditTextBlock-c0_cont_6" id="negg_LineOfCreditTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">As of December&#160;31, 2022 and 2021, there was no balance
outstanding under this line of credit, and the Company was in compliance with all covenants related to the line of credit. As of December
31, 2022, Newegg has outstanding letters of credit of $<ix:nonFraction contextRef="c2" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:LettersOfCreditOutstandingAmount" scale="6" unitRef="usd">2.0</ix:nonFraction> million from the $<ix:nonFraction contextRef="c2" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:FinancingReceivableRevolving" scale="6" unitRef="usd">100</ix:nonFraction> million revolving line of credit.&#160;</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="negg_LineOfCreditTextBlock-c0_cont_7" id="negg_LineOfCreditTextBlock-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">In July 2015, the Company entered into a credit agreement
with a financial institution that provided for a revolving credit facility of up to $<ix:nonFraction contextRef="c108" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:LinesOfCreditFairValueDisclosure" scale="6" unitRef="usd">5.0</ix:nonFraction> million (<ix:nonFraction contextRef="c108" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:LinesOfCreditFairValueDisclosure" scale="6" unitRef="twd">150.0</ix:nonFraction> million New Taiwan Dollar) with
a maturity date of no later than August&#160;26, 2016. The Company extended the maturity date of this credit agreement to <ix:nonNumeric contextRef="c108" format="ixt:date-monthname-day-year-en" name="us-gaap:LongTermDebtMaturityDate">December&#160;15,
2023</ix:nonNumeric>. Advances from this line of credit are subject to interest at a floating interest rate of the one-year savings account plus <ix:nonFraction contextRef="c108" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:FederalHomeLoanBankAdvancesBranchOfFHLBBankInterestRate" scale="-2" unitRef="pure">0.78</ix:nonFraction>%
not to be lower than <ix:nonFraction contextRef="c108" decimals="4" format="ixt:num-dot-decimal" name="negg:SavingsAccountPlus" scale="-2" unitRef="pure">1.62</ix:nonFraction>% per annum. The interest rate was equivalent to <ix:nonFraction contextRef="c2" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:InvestmentInterestRate" scale="-2" unitRef="pure">2.12</ix:nonFraction>% as of December&#160;31, 2022. The line of credit is guaranteed
by one of the Company&#8217;s China subsidiaries and is collateralized by a real estate asset of that subsidiary. As of December&#160;31,
2022 and 2021, there was $<ix:nonFraction contextRef="c109" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:LettersOfCreditOutstandingAmount" scale="6" unitRef="usd">4.9</ix:nonFraction> million and $<ix:nonFraction contextRef="c110" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:LettersOfCreditOutstandingAmount" scale="6" unitRef="usd">5.4</ix:nonFraction> million outstanding under this line of credit, respectively.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22.5pt">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation id="negg_LineOfCreditTextBlock-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">In June 2021, a subsidiary of the Company entered into a credit agreement
with a financial institution that provided for a revolving credit facility of up to $<ix:nonFraction contextRef="c111" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:LineOfCreditFacilityPeriodicPayment" scale="6" unitRef="usd">0.8</ix:nonFraction> million (<ix:nonFraction contextRef="c111" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:LineOfCreditFacilityPeriodicPayment" scale="6" unitRef="cny">5.0</ix:nonFraction> million Chinese Yuan) with a maturity
date of <ix:nonNumeric contextRef="c112" format="ixt:date-monthname-day-year-en" name="us-gaap:DebtSecuritiesHeldToMaturityCreditQualityIndicatorDateUpdated">June&#160;15, 2022</ix:nonNumeric>. Advances from this line of credit are subject to interest at a fixed interest rate of one-year Loan Prime
Rate (LPR) plus <ix:nonFraction contextRef="c111" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:LineOfCreditFacilityCommitmentFeePercentage" scale="-2" unitRef="pure">0.50</ix:nonFraction>%. In June 2022, the Company paid off the outstanding balance under this line of credit and entered into a new credit
agreement with the same financial institution that provided for a revolving credit facility of up to approximately $<ix:nonFraction contextRef="c101" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:LineOfCreditFacilityPeriodicPayment" scale="6" unitRef="usd">1.2</ix:nonFraction> million (<ix:nonFraction contextRef="c101" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:LineOfCreditFacilityPeriodicPayment" scale="6" unitRef="cny">8.0</ix:nonFraction> million
Chinese Yuan) with a maturity date of June 22, 2023. Advances from this line of credit are subject to interest at a fixed rate of one-year
Loan Prime Rate plus <ix:nonFraction contextRef="c101" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:LineOfCreditFacilityCommitmentFeePercentage" scale="-2" unitRef="pure">0.30</ix:nonFraction>%. The interest rate was equivalent to <ix:nonFraction contextRef="c2" decimals="3" format="ixt:num-dot-decimal" name="us-gaap:LineOfCreditFacilityInterestRateAtPeriodEnd" scale="-2" unitRef="pure">4.0</ix:nonFraction>% and <ix:nonFraction contextRef="c3" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:LineOfCreditFacilityInterestRateAtPeriodEnd" scale="-2" unitRef="pure">4.35</ix:nonFraction>% as of December 31, 2022 and 2021, respectively. As of December&#160;31,
2022 and 2021, there was $<ix:nonFraction contextRef="c0" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:LineOfCreditFacilityAverageOutstandingAmount" scale="6" unitRef="usd">1.2</ix:nonFraction> million and $<ix:nonFraction contextRef="c4" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:LineOfCreditFacilityAverageOutstandingAmount" scale="6" unitRef="usd">0.8</ix:nonFraction> million outstanding under this line of credit, respectively.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->19<!-- Field: /Sequence --></p></div><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_LongTermDebtTextBlock-c0_cont_1" escape="true" name="us-gaap:LongTermDebtTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><b>9.</b></td><td style="text-align: left"><b>Long-Term Debt</b></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_LongTermDebtTextBlock-c0_cont_2" id="_LongTermDebtTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">The Company has entered into various loans with financial
institutions. Long-term debt consisted of the following (in thousands):</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt; text-align: left">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_LongTermDebtTextBlock-c0_cont_3" id="_LongTermDebtTextBlock-c0_cont_2"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfDebtTableTextBlock"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="6" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">December&#160;31,</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2021</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 76%; text-align: left">Term Loan</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right"><ix:nonFraction contextRef="c2" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:LongTermDebt" scale="3" unitRef="usd">1,673</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right"><ix:nonFraction contextRef="c3" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:LongTermDebt" scale="3" unitRef="usd">2,136</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c2" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:LongTermDebtAndCapitalLeaseObligationsCurrent" scale="3" unitRef="usd">269</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c3" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:LongTermDebtAndCapitalLeaseObligationsCurrent" scale="3" unitRef="usd">293</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 4pt">Long-term debt less current portion</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c2" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DebtInstrumentCarryingAmount" scale="3" unitRef="usd">1,404</ix:nonFraction></td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c3" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DebtInstrumentCarryingAmount" scale="3" unitRef="usd">1,843</ix:nonFraction></td><td style="padding-bottom: 4pt; text-align: left">&#160;</td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt; text-align: left">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_LongTermDebtTextBlock-c0_cont_4" id="_LongTermDebtTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: left"><span style="text-decoration:underline">Term Loan</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt; text-align: left">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_LongTermDebtTextBlock-c0_cont_5" id="_LongTermDebtTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><ix:nonNumeric contextRef="c0" name="negg:TermLoanDescription">In 2013, the Company entered into a term loan agreement
with a financial institution for $4.1 million with a maturity date of November&#160;26, 2028 (the &#8220;Term Loan&#8221;).</ix:nonNumeric> The Term Loan
bears a floating interest rate of the one-year savings account plus <ix:nonFraction contextRef="c113" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:DebtInstrumentInterestRateDuringPeriod" scale="-2" unitRef="pure">0.43</ix:nonFraction>% per annum in the first two&#160;years and a floating interest
rate of the one-year savings account plus <ix:nonFraction contextRef="c114" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:DebtInstrumentInterestRateDuringPeriod" scale="-2" unitRef="pure">0.61</ix:nonFraction>% per annum for the remaining of the term, not to be lower than <ix:nonFraction contextRef="c115" decimals="3" format="ixt:num-dot-decimal" name="us-gaap:DebtInstrumentInterestRateDuringPeriod" scale="-2" unitRef="pure">1.8</ix:nonFraction>% during the entire term.
The interest rate was equivalent to <ix:nonFraction contextRef="c0" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:DebtInstrumentInterestRateDuringPeriod" scale="-2" unitRef="pure">1.95</ix:nonFraction>% as of December&#160;31, 2022. The Term Loan is collateralized by a first position security interest
in a floor of an office building owned by the Company in Taiwan.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt; text-align: left">&#160;&#160;&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_LongTermDebtTextBlock-c0_cont_6" id="_LongTermDebtTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">Aggregate maturities of long-term debt, excluding unamortized
debt issuance costs, were as follows (in thousands) as of December&#160;31, 2022:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt; text-align: left">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation id="_LongTermDebtTextBlock-c0_cont_6"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfMaturitiesOfLongTermDebtTableTextBlock"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 88%; text-align: left">2023</td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">2024</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c2" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:LongTermDebtMaturitiesRepaymentsOfPrincipalInYearThree" scale="3" unitRef="usd">275</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">2025</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c2" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:LongTermDebtMaturitiesRepaymentsOfPrincipalInYearFour" scale="3" unitRef="usd">280</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">2026</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c2" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:LongTermDebtMaturitiesRepaymentsOfPrincipalInYearFive" scale="3" unitRef="usd">286</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">2027</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c2" decimals="-3" format="ixt:num-dot-decimal" name="negg:LongTermDebtMaturitiesRepaymentsOfPrincipalInYearSix" scale="3" unitRef="usd">291</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-bottom: 1.5pt">Thereafter</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c2" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:LongTermDebtMaturitiesRepaymentsOfPrincipalAfterYearFive" scale="3" unitRef="usd">272</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 4pt">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c2" decimals="-3" format="ixt:num-dot-decimal" name="negg:TotalLongTermDebt" scale="3" unitRef="usd">1,673</ix:nonFraction></td><td style="padding-bottom: 4pt; text-align: left">&#160;</td></tr>
  </table></ix:nonNumeric></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b>&#160;</b></p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_LesseeOperatingLeasesTextBlock-c0_cont_1" escape="true" name="us-gaap:LesseeOperatingLeasesTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><b>10.</b></td><td style="text-align: left"><b>Lease Obligations</b></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt; text-align: left"><i>&#160;</i></p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_LesseeOperatingLeasesTextBlock-c0_cont_2" id="_LesseeOperatingLeasesTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: left"><i>Operating Leases</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt; text-align: left">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_LesseeOperatingLeasesTextBlock-c0_cont_3" id="_LesseeOperatingLeasesTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">The Company leases certain office and warehouse facilities
and warehouse equipment under various noncancelable operating leases. The Company is also committed under the terms of certain of these
operating lease agreements to pay property taxes, insurance, utilities, and maintenance costs.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_LesseeOperatingLeasesTextBlock-c0_cont_4" id="_LesseeOperatingLeasesTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">Most of the Company&#8217;s leases do not provide an implicit
rate that can be readily determined. Therefore, the Company uses a discount rate based on its incremental borrowing rate, which is determined
using its credit rating and information available as of the commencement date. The Company&#8217;s operating lease agreements may include
options to extend the lease term. The Company made an accounting policy election to exclude options that are not reasonably certain of
exercise when determining the term of the borrowing in the assessment of the incremental borrowing rate. Additionally, the Company also
made an accounting policy election to not separate lease and non-lease components of a contract, and to recognize the lease payments under
short-term leases as an expense on a straight-line basis over the lease term without recognizing the lease liability and the right of
use (&#8220;ROU&#8221;) lease asset.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt">&#160;</p></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt">&#160;</p><div>

</div><ix:continuation continuedAt="_LesseeOperatingLeasesTextBlock-c0_cont_5" id="_LesseeOperatingLeasesTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">The Company evaluates whether its contractual arrangements
contain leases at the inception of such arrangements. Specifically, the Company considers whether it can control the underlying asset
and have the right to obtain substantially all of the economic benefits or outputs from the assets. Substantially all of its leases are
long-term operating leases with fixed payment terms. The Company does not have significant financing leases. Its ROU operating lease assets
represent the right to use an underlying asset for the lease term, and its operating lease liabilities represent the obligation to make
lease payments. ROU operating lease assets are recorded in other noncurrent assets in the consolidated balance sheet. Operating lease
liabilities are recorded in other current liabilities or other noncurrent liabilities in the consolidated balance sheets based on their
contractual due dates.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_LesseeOperatingLeasesTextBlock-c0_cont_6" id="_LesseeOperatingLeasesTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">The Company&#8217;s operating lease liability is recognized
as of the lease commencement date at the present value of the lease payments over the lease term. The Company&#8217;s ROU operating lease
asset is recognized as of the lease commencement date at the amount of the corresponding lease liability, adjusted for prepaid lease payments,
lease incentives received, and initial direct costs incurred. The Company evaluates its ROU lease assets for impairment consistent with
its impairment of long-lived assets policy. See Note&#160;3 &#8212;&#160;Summary of Significant Accounting Policies.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_LesseeOperatingLeasesTextBlock-c0_cont_7" id="_LesseeOperatingLeasesTextBlock-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">Operating lease expense is recognized on a straight-line
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2022, 2021 and 2020. The Company has made an accounting policy election by underlying asset class to not apply the recognition requirements
of ASC&#160;842 to short-term leases. As a result, certain leases with a term of 12&#160;months or less are not recorded on the balance
sheet and expense is recognized on a straight-line basis over the lease term. Cash payments made for operating leases totale<span>d
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</div><div>

</div><ix:continuation continuedAt="_LesseeOperatingLeasesTextBlock-c0_cont_8" id="_LesseeOperatingLeasesTextBlock-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">In January 2023, the Company extended one of its operating
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</div><div>

</div><ix:continuation continuedAt="_LesseeOperatingLeasesTextBlock-c0_cont_9" id="_LesseeOperatingLeasesTextBlock-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">The Company has certain sublease arrangements for some of
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immaterial.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt; text-align: left">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_LesseeOperatingLeasesTextBlock-c0_cont_10" id="_LesseeOperatingLeasesTextBlock-c0_cont_9"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">The following table summarizes the future minimum rental
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</div><div>

</div><ix:continuation id="_LesseeOperatingLeasesTextBlock-c0_cont_10"><ix:nonNumeric contextRef="c0" escape="true" name="negg:ScheduleOfFutureMinimumRentalPaymentsUnderNoncancelableOperatingLeaseArrangementsTableTextBlock"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">2024</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  </table></ix:nonNumeric></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 121; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->21<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><b>11.</b></td><td style="text-align: left"><b>Income Taxes</b></td>
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</div><div>

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</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_3" id="_IncomeTaxDisclosureTextBlock-c0_cont_2"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfComponentsOfIncomeTaxExpenseBenefitTableTextBlock"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
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    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td></tr>
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; ">
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    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="negg:ProvisionForbenefitsFromIncomeTaxes" scale="3" unitRef="usd">14,101</ix:nonFraction></td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">(<ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="negg:ProvisionForbenefitsFromIncomeTaxes" scale="3" sign="-" unitRef="usd">5,795</ix:nonFraction></td><td style="padding-bottom: 4pt; text-align: left">)</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="negg:ProvisionForbenefitsFromIncomeTaxes" scale="3" unitRef="usd">1,941</ix:nonFraction></td><td style="padding-bottom: 4pt; text-align: left">&#160;</td></tr>
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</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_4" id="_IncomeTaxDisclosureTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">Income (loss) before provision for income taxes consisted
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</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_5" id="_IncomeTaxDisclosureTextBlock-c0_cont_4"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfIncomeBeforeIncomeTaxDomesticAndForeignTableTextBlock"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right"><ix:nonFraction contextRef="c128" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:IncomeLossAttributableToParent" scale="3" unitRef="usd">17,018</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-bottom: 4pt; padding-left: 9pt">Total</td><td style="padding-bottom: 4pt">&#160;</td>
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</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_6" id="_IncomeTaxDisclosureTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">Deferred income taxes reflect the tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax
purposes. The 2017 tax reform act amended Internal Revenue Code Section 174, effective for amounts paid or incurred for research and experimentation
expenses in tax years beginning after December 31, 2021.&#160; Prior to this change taxpayers could elect to expense these costs in the
year incurred or amortize these them over <ix:nonNumeric contextRef="c0" format="ixt-sec:duryear" name="negg:AmortizePeriod">5</ix:nonNumeric> years. &#160;Under the law as amended research and experimental expenses are capitalized and
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174 costs for fiscal year 2022 in the amount of <ix:nonFraction contextRef="c0" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:AdjustmentForAmortization" scale="6" unitRef="usd">2.6</ix:nonFraction>M, net of current year amortization. The Company&#8217;s deferred income tax assets
and liabilities consisted of the following (in thousands):</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt; text-align: left">&#160;</p></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_7" id="_IncomeTaxDisclosureTextBlock-c0_cont_6"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfDeferredTaxAssetsAndLiabilitiesTableTextBlock"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
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    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td></tr>
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    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right"><ix:nonFraction contextRef="c2" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:AccountsNotesAndLoansReceivableNetCurrent" scale="3" unitRef="usd">5,123</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 9pt">Inventories</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c2" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DeferredTaxAssetsInventory" scale="3" unitRef="usd">2,807</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-left: 9pt">Lease liabilities</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c2" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DeferredTaxLiabilitiesPrepaidExpenses" scale="3" unitRef="usd">864</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 4pt; padding-left: 0.25in">Net deferred tax assets</td><td style="padding-bottom: 4pt">&#160;</td>
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</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt; text-align: left"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt; text-align: left">&#160;</p><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_8" id="_IncomeTaxDisclosureTextBlock-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">In accordance with ASC&#160;740, <i>Income Taxes</i>, the
Company evaluates whether a valuation allowance should be established against the net deferred tax assets based upon the consideration
of all available evidence and using a &#8220;more-likely than-not&#8221; standard. Significant weight is given to evidence that can be
objectively verified. The determination to record a valuation allowance is based on the recent history of cumulative losses and losses
expected in the near future.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_9" id="_IncomeTaxDisclosureTextBlock-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">The Company&#8217;s U.S.&#160;federal consolidated filing
group includes certain international entities. Based upon results of operations for the&#160;years ended December&#160;31, 2022, 2021
and 2020, it is determined that it is not more likely than not that the Company will realize the benefit from the U.S.&#160;federal net
deferred tax assets. As a result, the Company has recorded a valuation allowance against its net deferred tax assets for the year ended
December 31, 2022 for its U.S. operations. The Company maintains valuation allowances against certain non-US loss corporations. Total
valuation allowance against U.S. and non-U.S. deferred tax assets was $<ix:nonFraction contextRef="c2" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:DeferredTaxAssetsOther" scale="6" unitRef="usd">24.1</ix:nonFraction>&#160;million and $<ix:nonFraction contextRef="c3" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:DeferredTaxAssetsOther" scale="6" unitRef="usd">5.5</ix:nonFraction>&#160;million as of December&#160;31,
2022 and 2021, respectively.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_10" id="_IncomeTaxDisclosureTextBlock-c0_cont_9"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">At December&#160;31, 2022, the Company has net
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available to reduce future taxable income. On March&#160;27, 2020, the Coronavirus Aid, Relief, and Economic Security Act
(&#8220;CARES Act&#8221;) was enacted into law in response to the COVID-19 pandemic. The CARES Act temporarily suspends the <ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="negg:IncomeTaxEffectsAllocatedDirectlyToEquityCumulativeEffectOfChangeInAccountingPrinciples" scale="-2" unitRef="pure">80</ix:nonFraction>% of
taxable income limitation on the use of NOLs for tax&#160;years beginning before January&#160;1, 2021, thereby permitting corporate
taxpayers to use NOLs to fully offset taxable income in these&#160;years regardless of the year in which the NOL arose. As a result,
the Company can fully utilize the remaining cumulative federal NOL for tax&#160;years before January&#160;1, 2021, and then will be
limited to <ix:nonFraction contextRef="c123" decimals="2" format="ixt:num-dot-decimal" name="negg:IncomeTaxEffectsAllocatedDirectlyToEquityCumulativeEffectOfChangeInAccountingPrincipleAfterwards" scale="-2" unitRef="pure">80</ix:nonFraction>% of taxable income afterwards. The state NOL carryforwards begin to expire in 2028. The Company has $<ix:nonFraction contextRef="c124" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:DeferredTaxAssetsOperatingLossCarryforwardsStateAndLocal" scale="6" unitRef="usd">4.6</ix:nonFraction>&#160;million
of NOL carryforwards in China as of December&#160;31, 2022. The Company has $<ix:nonFraction contextRef="c125" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:DeferredTaxAssetsOperatingLossCarryforwardsStateAndLocal" scale="6" unitRef="usd">10.0</ix:nonFraction>&#160;million of NOL carryforwards in Taiwan, which
will begin to expire in 2024. The Company has $<ix:nonFraction contextRef="c126" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:DeferredTaxAssetsOperatingLossCarryforwardsStateAndLocal" scale="6" unitRef="usd">2.3</ix:nonFraction>&#160;million NOLs in Hong&#160;Kong with indefinite carryforward. A valuation
allowance was recorded on the NOLs in China, Taiwan, and Hong&#160;Kong. The Company has not provided for deferred income taxes on
undistributed earnings of its foreign subsidiaries, as these amounts are considered indefinitely reinvested outside the
United&#160;States. It is not practicable to determine the estimated income tax liability that might apply if these earnings were to
be repatriated.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt; text-align: left">&#160;&#160;&#160;</p></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_11" id="_IncomeTaxDisclosureTextBlock-c0_cont_10"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">A reconciliation of the U.S.&#160;federal statutory tax
rate to the Company&#8217;s effective tax rate is as follows:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt; text-align: left">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_12" id="_IncomeTaxDisclosureTextBlock-c0_cont_11"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfEffectiveIncomeTaxRateReconciliationTableTextBlock"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right"><ix:nonFraction contextRef="c0" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:EffectiveIncomeTaxRateReconciliationAtFederalStatutoryIncomeTaxRate" scale="-2" unitRef="pure">21.00</ix:nonFraction></td><td style="width: 1%; text-align: left">%</td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Permanent items:</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Change in valuation allowance &#8211; U.S. States</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c136" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:EffectiveIncomeTaxRateReconciliationChangeInDeferredTaxAssetsValuationAllowance" scale="-2" sign="-" unitRef="pure">11.17</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Change in uncertainty in income taxes (&#8220;FIN48&#8221;)</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="padding-bottom: 1.5pt">Other</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c0" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:EffectiveIncomeTaxRateReconciliationPriorYearIncomeTaxes" scale="-2" sign="-" unitRef="pure">0.01</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 4pt; padding-left: 9pt">Effective tax rate</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; text-align: right">(<ix:nonFraction contextRef="c0" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:EffectiveIncomeTaxRateContinuingOperations" scale="-2" sign="-" unitRef="pure">32.08</ix:nonFraction></td><td style="padding-bottom: 4pt; text-align: left">)%</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; text-align: right">(<ix:nonFraction contextRef="c4" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:EffectiveIncomeTaxRateContinuingOperations" scale="-2" sign="-" unitRef="pure">19.02</ix:nonFraction></td><td style="padding-bottom: 4pt; text-align: left">)%</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c5" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:EffectiveIncomeTaxRateContinuingOperations" scale="-2" unitRef="pure">6.00</ix:nonFraction></td><td style="padding-bottom: 4pt; text-align: left">%</td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt; text-align: left">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt; text-align: left"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt; text-align: left">&#160;</p><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_13" id="_IncomeTaxDisclosureTextBlock-c0_cont_12"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">The significant items that caused the effective tax rate
change related to recording of the U.S. portion of the valuation allowance and equity compensation.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt"><b><i>&#160;</i></b></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_14" id="_IncomeTaxDisclosureTextBlock-c0_cont_13"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><b><i>Uncertain Tax Positions</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_15" id="_IncomeTaxDisclosureTextBlock-c0_cont_14"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">As of the end of fiscal year 2022, the total liability for
income tax associated with unrecognized tax benefits was $<ix:nonFraction contextRef="c2" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:UnrecognizedTaxBenefitsIncomeTaxPenaltiesAndInterestAccrued" scale="6" unitRef="usd">1.6</ix:nonFraction> million. The Company&#8217;s effective tax rate will be affected by any
portion of this liability we may recognize. The Company does not believe it is reasonably possible that any of the uncertain tax benefits
will be recognized in the next 12&#160;months. As such, all uncertain tax positions, including accrued interest, have been classified
as long-term taxes payable on the consolidated balance sheets.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_16" id="_IncomeTaxDisclosureTextBlock-c0_cont_15"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">A reconciliation of the beginning and ending amounts of
uncertain tax positions is as follows (in thousands):</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt; text-align: left">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_17" id="_IncomeTaxDisclosureTextBlock-c0_cont_16"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfUnrecognizedTaxBenefitsRollForwardTableTextBlock"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 76%; text-align: left">Beginning balance</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right"><ix:nonFraction contextRef="c3" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:UnrecognizedTaxBenefits" scale="3" unitRef="usd">1,563</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-left: 9pt">Additions based on tax positions related to the prior year</td><td>&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:UnrecognizedTaxBenefitsIncreasesResultingFromCurrentPeriodTaxPositions" scale="3" unitRef="usd">43</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c4" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:UnrecognizedTaxBenefitsIncreasesResultingFromCurrentPeriodTaxPositions" scale="3" unitRef="usd">713</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 9pt">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="padding-bottom: 4pt">Ending balance</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c2" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:UnrecognizedTaxBenefits" scale="3" unitRef="usd">1,606</ix:nonFraction></td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c3" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:UnrecognizedTaxBenefits" scale="3" unitRef="usd">1,563</ix:nonFraction></td><td style="padding-bottom: 4pt; text-align: left">&#160;</td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt; text-align: left">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_18" id="_IncomeTaxDisclosureTextBlock-c0_cont_17"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">The Company&#8217;s continuing practice is to recognize
interest and penalties related to unrecognized tax benefits as tax expense. As of December&#160;31, 2022 and 2021, interest and penalties
related to uncertain tax positions were not material.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation id="_IncomeTaxDisclosureTextBlock-c0_cont_18"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">The Company files a consolidated federal income tax return
in the United&#160;States, as well as combined and separate U.S.&#160;state income tax returns. Certain subsidiaries of the Company are
<span style="font-family: Times New Roman, Times, Serif">subject to income tax </span>in China, Taiwan, Hong&#160;Kong, and Canada. The
Company is still subject to examination for federal income tax returns for the&#160;years 2014 through 2021, for certain U.S.&#160;state
income tax returns for the&#160;years&#160;2009 through 2021, and for certain foreign income tax returns for the&#160;years 2012 through
2021. The Company is currently under examination by the Internal Revenue Service for the&#160;years 2012 through 2014 and by the California
Franchise Tax Board for the&#160;years 2007 through 2012. The California Franchise Tax Board examination is related to amended tax returns
filed for the&#160;years under exam. No additional reserve was accrued in 2022 based on the current audit status.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b>&#160;</b>&#160;&#160;<b>&#160;</b></p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_PreferredStockTextBlock-c0_cont_1" escape="true" name="us-gaap:PreferredStockTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><b>12.</b></td><td style="text-align: left"><b>Common Stock</b></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt; text-align: left">&#160;</p></ix:nonNumeric><div>

</div><div>

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stock with a par value of $<ix:nonFraction contextRef="c2" decimals="6" format="ixt:num-dot-decimal" name="negg:CommonStockParValue" scale="0" unitRef="usdPershares">0.021848</ix:nonFraction>. <ix:nonNumeric contextRef="c0" name="us-gaap:CommonStockVotingRights">Each share of common stock is entitled to one vote.</ix:nonNumeric> At December&#160;31, 2022 and 2021, the number
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</div><div>

</div><ix:continuation id="_PreferredStockTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">No Common Stock dividend was declared by the Company&#8217;s
Board of Directors for the&#160;years ended December&#160;31, 2022, 2021 and 2020.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 124; Value: 1 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="negg_WarrantsTextBlock-c0_cont_1" escape="true" name="negg:WarrantsTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><b>13.</b></td><td style="text-align: left"><b>Warrants</b></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="negg_WarrantsTextBlock-c0_cont_2" id="negg_WarrantsTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">On April&#160;28, 2016, LLIT signed a Share Purchase Agreement
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in earnings in each reporting period.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22.5pt">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="negg_WarrantsTextBlock-c0_cont_3" id="negg_WarrantsTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">There was a total of <ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="negg:WarrantIssued" scale="0" unitRef="shares"><ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="negg:WarrantOutstanding" scale="0" unitRef="shares">125,000</ix:nonFraction></ix:nonFraction> warrants issued and outstanding
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</div><div>

</div><ix:continuation continuedAt="negg_WarrantsTextBlock-c0_cont_4" id="negg_WarrantsTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">The fair value of the outstanding warrants was calculated
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</div><div>


</div><ix:continuation continuedAt="negg_WarrantsTextBlock-c0_cont_5" id="negg_WarrantsTextBlock-c0_cont_4"><ix:nonNumeric contextRef="c0" escape="true" name="negg:ScheduleOfWarrantsTableTextBlock"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22.5pt">&#160;</p></ix:nonNumeric></ix:continuation><div>


</div><div>

</div><ix:continuation continuedAt="negg_WarrantsTextBlock-c0_cont_6" id="negg_WarrantsTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">The following is a reconciliation of the beginning and ending
balances of warrants liability measured at fair value on a recurring basis using Level 3 inputs (in thousands):</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22.5pt">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="negg_WarrantsTextBlock-c0_cont_7" id="negg_WarrantsTextBlock-c0_cont_6"><ix:nonNumeric contextRef="c0" continuedAt="negg_ScheduleOfWarrantActivityTableTextBlock-c0_cont_1" escape="true" name="negg:ScheduleOfWarrantActivityTableTextBlock"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c141" decimals="-3" format="ixt:num-dot-decimal" name="negg:FairValueOfIssuedWarrants" scale="3" sign="-" unitRef="usd">61</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="border-bottom: Black 4pt double; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c3" decimals="-3" format="ixt:num-dot-decimal" name="negg:WarrantsAndRightsOutstandingFairValue" scale="3" unitRef="usd">1,091</ix:nonFraction></td><td style="padding-bottom: 4pt; text-align: left">&#160;</td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22.5pt"><b>&#160;</b></p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation id="negg_WarrantsTextBlock-c0_cont_7"><ix:continuation id="negg_ScheduleOfWarrantActivityTableTextBlock-c0_cont_1"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left; padding-bottom: 1.5pt">Fair value change of the issued warrants included in earnings</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  </table></ix:continuation></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22.5pt">&#160;</p><div>

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<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><b>14.</b></td><td style="text-align: left"><b>Stock-Based Compensation</b></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_2" id="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><span style="text-decoration:underline">Legacy Newegg Inc. Stock Based Compensation</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22.5pt">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_3" id="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">Newegg Inc.&#8217;s stock-based compensation includes stock
option awards issued under Newegg Inc.&#8217;s employee incentive plan, as further discussed below. There was no income tax benefit recognized
in the consolidated statements of income for stock-based compensation arrangements in any of the periods presented.&#160;</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22.5pt">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_4" id="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">The exercise prices of stock options and restricted stock
granted were determined contemporaneously by the Newegg Inc.&#8217;s Board of Directors based on the estimated fair value of the underlying
Class&#160;A Common Stock and Series&#160;A convertible Preferred Stock. The Newegg Inc. Class&#160;A Common Stock and Series&#160;A convertible
Preferred Stock valuations were based on a combination of the income approach and two market approaches, which were used to estimate the
total enterprise value of Newegg Inc. The income approach quantifies the present value of the future cash flows that management expects
to achieve from continuing operations. These future cash flows are discounted to their present values using a rate corresponding to Newegg
Inc.&#8217;s estimated weighted average cost of capital. Newegg Inc.&#8217;s weighted average cost of capital is calculated by weighting
the required return on interest-bearing debt and common equity capital in proportion to their estimated percentages in Newegg Inc.&#8217;s
capital structure. The market approach considers multiples of financial metrics based on acquisition values or quoted trading prices of
comparable public companies. An implied multiple of key financial metrics based on the trading and transaction values of publicly traded
peers is applied to Newegg Inc.&#8217;s similar metrics in order to derive an indication of value. A marketability discount is then applied
to reflect the fact that Newegg Inc.&#8217;s Class&#160;A Common Stock and Series&#160;A convertible Preferred Stock are not traded on
a public exchange. The amount of the discount varies based on management&#8217;s expectation of effecting a public offering of Newegg
Inc.&#8217;s Class&#160;A Common Stock within the ensuing 12&#160;months. The enterprise value indications from the income approach and
market approaches were used to estimate the fair value of Newegg Inc.&#8217;s Class&#160;A Common Stock and Series&#160;A convertible
Preferred Stock in the context of Newegg Inc.&#8217;s capital structure as of each valuation date. Each valuation was based on certain
estimates and assumptions. If different estimates and assumptions had been used, these valuations could have been different.&#160;&#160;</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22.5pt">&#160;</p></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22.5pt"></p><div>

</div><!-- Field: Page; Sequence: 125; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->25<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22.5pt">&#160;</p><div>

</div><ix:continuation continuedAt="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_5" id="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">At the close of the merger, the holders of Legacy Newegg
Inc. stock options continue to hold such options, and such options remain subject to the same vesting, exercise and other terms and conditions.
The holders of Legacy Newegg Inc. options, as applicable, may exercise their options to purchase a number of shares of the Company&#8217;s
Class A Common Stock equal to the number of shares of Legacy Newegg Inc. common stock subject to such Legacy Newegg Inc. options multiplied
by the conversion ratio at an exercise price per share divided by the conversion ratio.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt"><i>&#160;</i></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_6" id="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in"><i>2005 Incentive Award Plan:</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_7" id="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">On September&#160;22, 2005, the Board of Directors approved
Newegg Inc.&#8217;s 2005 Equity Incentive Plan, which was amended in January&#160;2008, October&#160;2009, December&#160;2011 and September&#160;2015
(the&#160;&#8220;Incentive Award Plan&#8221;). Under the Incentive Award Plan, the Company may grant equity incentive awards to employees,
directors, and consultants based on Newegg Inc.&#8217;s Class&#160;A Common Stock. A committee of the Board of Directors of Newegg Inc.
determines the eligibility, types of equity awards, vesting schedules, and exercise prices for equity awards granted. Subject to certain
adjustments in the event of a change in capitalization or similar transaction, Newegg Inc. may issue a maximum of <ix:nonFraction contextRef="c142" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:EmployeeStockOwnershipPlanESOPSharesInESOP" scale="0" unitRef="shares">82,952,149</ix:nonFraction>&#160;&#160;&#160;shares
of its Class&#160;A Common Stock under the Incentive Award Plan. Newegg Inc. issues new shares of Class&#160;A Common Stock from its authorized
share pool to settle stock-based compensation awards. The exercise price of options granted under the plan shall not be less than the
fair value of the Newegg Inc.&#8217;s Class&#160;A Common Stock as of the date of grant. Options typically vest over the term of <ix:nonNumeric contextRef="c143" continuedAt="negg_VestedInPeriod-c143_cont_1" format="ixt-sec:durwordsen" name="negg:VestedInPeriod">four</ix:nonNumeric>&#160;years,
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case, the term of the option shall be no more than <span style="-sec-ix-hidden: hidden-fact-93">five</span>&#160;years from the date of grant. In September&#160;2015, the Incentive Award
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_8" id="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">The fair value of each option award granted under the Incentive
Award Plan is estimated using the Black-Scholes option pricing model on the date of grant. This model requires the input of highly complex
and subjective variables. These variables include, but are not limited to, the expected stock price volatility over the expected life
of the awards and actual and projected employee stock option exercise behavior with the following inputs: risk-free interest rate, expected
stock price volatility, forfeiture rate, expected term, dividend yield and weighted average grant date fair value.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: left">&#160;&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_9" id="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">The risk-free interest rate is based on the currently available
rate on a U.S.&#160;Treasury zero-coupon issue with a remaining term equal to the expected term of the option converted into a continuously
compounded rate. The expected volatility of stock options is based on a review of the historical volatility and the implied volatility
of a peer group of publicly traded companies comparable to the Company. In evaluating comparability, the Company considered factors such
as industry, stage of life cycle, and size. After the adoption of Accounting Standards Update No.&#160;2016-09 <i>Compensation-Stock Compensation
(Topic&#160;718): Improvements to Employee Share-Based Payment Accounting </i>as of January&#160;1, 2017, the Company elected to recognize
the effect of awards for which the requisite service is not rendered when the award is forfeited. The expected term assumption used by
the Company reflects the application of the simplified method set out in Securities and Exchange Commission Staff Accounting Bulletin
No.&#160;110, Shared-Based Payment. The simplified method defines the expected term of an option as the average of the contractual term
of the options and the weighted average vesting period for all option tranches. The dividend yield reflects the Company&#8217;s dividend
rate on the date of grant. During the years ended December&#160;31, 2022 and 2021, Newegg Inc. did not grant any stock options representing
the right to purchase Newegg Inc. Common Stock.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt"><i>&#160;</i></p></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><ix:continuation continuedAt="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_10" id="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_9"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">The following table summarizes the activity for all stock
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</div><div>

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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_12" id="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_11"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in"><span>During the year ended
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2022. </span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_13" id="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_12"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">During the year ended December&#160;31, 2021, stock options
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_14" id="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_13"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in"><span>During the&#160;years
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_15" id="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_14"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">As of December&#160;31, 2022 and 2021, there were $<ix:nonFraction contextRef="c2" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:EmployeeServiceShareBasedCompensationNonvestedAwardsTotalCompensationCostNotYetRecognized" scale="6" unitRef="usd">4.6</ix:nonFraction> million
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_16" id="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_15"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: left"><span style="text-decoration:underline">Newegg Commerce, Inc. Stock Based
Compensation</span>&#160;&#160;</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 45pt; text-align: left"><i>&#160;</i></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_17" id="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_16"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left"><i>2021 Equity Incentive Plan</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 45pt">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_18" id="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_17"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">On November&#160;26, 2021, the Board of Directors approved
the Company&#8217;s 2021 Equity Incentive Plan (the &#8220;2021 Plan&#8221;). Under the 2021 Plan, the Company may grant equity incentive
awards to employees, directors, and consultants based on the Company&#8217;s Common Stock. A committee of the Board of Directors of the
Company determines the eligibility, types of equity awards, vesting schedules, and exercise prices for equity awards granted. Subject
to certain adjustments in the event of a change in control or similar transaction, the Company may issue a maximum of <ix:nonFraction contextRef="c148" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CommonUnitIssued" scale="0" unitRef="shares">7,374,900</ix:nonFraction> of its
Common Stock under the 2021 Plan. The Company issues new shares of its Common Stock from its authorized share pool to settle stock-based
compensation awards.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p><div>

</div><ix:continuation continuedAt="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_19" id="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_18"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">On July 21, 2022, the Board of Directors approved the amendment
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_20" id="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_19"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">The following table summarizes the activity for all restricted
stock units granted:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_21" id="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_20"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfShareBasedCompensationRestrictedStockUnitsAwardActivityTableTextBlock"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>Unvested at January 1, 2020</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>Vested</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c155" decimals="INF" format="ixt:num-dot-decimal" name="us-gaap:ShareBasedCompensationArrangementByShareBasedPaymentAwardNonOptionEquityInstrumentsForfeituresAndExpirations" scale="0" unitRef="shares">1,675,007</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_22" id="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_21"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">During the years ended December 31, 2022 and 2021, the Company
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awards and are measured at fair value based upon the grant date price of the Company&#8217;s common stock. Compensation expense is recognized
on a straight-line basis over the requisite service period of <ix:nonNumeric contextRef="c0" format="ixt-sec:durwordsen" name="us-gaap:DeferredCompensationArrangementWithIndividualRequisiteServicePeriod1">four years</ix:nonNumeric>.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_23" id="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_22"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">On August 13, 2022 the Company issued <ix:nonFraction contextRef="c151" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:SharebasedCompensationArrangementBySharebasedPaymentAwardOptionsVestedNumberOfShares" scale="0" unitRef="shares">5,560,780</ix:nonFraction> performance-based
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date, and a separate requisite service period. The PRSUs are accounted for as equity awards and are measured at fair value based upon
the grant date price of the Company&#8217;s common stock. The vesting of each PRSU is based on financial performance tied to GMV. The
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actual results and performance goals may be adjusted by the Compensation Committee from time to time in its sole discretion.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_24" id="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_23"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">During the&#160;years ended December&#160;31, 2022 and 2021,
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</div><div>

</div><ix:continuation id="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_24"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">As of December&#160;31, 2022, there was $<ix:nonFraction contextRef="c2" decimals="-5" format="ixt:num-dot-decimal" name="negg:UnrecognizedCompensationCostsRelatedToRestrictedStockUnits" scale="6" unitRef="usd">82.9</ix:nonFraction> million unrecognized
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b>&#160;</b></p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_EarningsPerShareTextBlock-c0_cont_1" escape="true" name="us-gaap:EarningsPerShareTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><b>15.</b></td><td style="text-align: left"><b>Net Income (Loss) per Share</b></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt; text-align: left">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_EarningsPerShareTextBlock-c0_cont_2" id="_EarningsPerShareTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">Basic earnings per share of Common Stock is calculated by
dividing net income available to holders of Common stock by the weighted average number of shares of Common Stock outstanding for the
period. The diluted earnings per share of Common Stock calculation assumes the issuance of all dilutive potential common shares outstanding.
Dilutive potential Common Stock consists of incremental shares of Class&#160;A Common Stock issuable upon the exercise of the stock options.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt; text-align: left">&#160;&#160;</p></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt; text-align: left"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt; text-align: left">&#160;</p><div>

</div><ix:continuation continuedAt="_EarningsPerShareTextBlock-c0_cont_3" id="_EarningsPerShareTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">The following table summarizes the calculation of basic
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</div><div>

</div><ix:continuation continuedAt="_EarningsPerShareTextBlock-c0_cont_4" id="_EarningsPerShareTextBlock-c0_cont_3"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfEarningsPerShareBasicAndDilutedTableTextBlock"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><div>

</div><ix:continuation continuedAt="_EarningsPerShareTextBlock-c0_cont_5" id="_EarningsPerShareTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">The following shares were excluded from the calculation
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</div><div>

</div><ix:continuation id="_EarningsPerShareTextBlock-c0_cont_5"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfEarningsPerShareDilutedByCommonClassTextBlock"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  </table></ix:nonNumeric></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_1" escape="true" name="us-gaap:CommitmentsAndContingenciesDisclosureTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><b>16.</b></td><td style="text-align: left"><b>Commitments and Contingencies</b></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt; text-align: left">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_2" id="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">From time to time, the Company is a party to various lawsuits,
claims, and other legal proceedings that arise in the ordinary course of business. The Company discloses contingencies deemed to be reasonably
possible and accrues loss contingencies when, in consultation with legal advisors, it is concluded that a loss is probable and reasonably
estimable.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_3" id="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">In December&#160;2014, an individual plaintiff sued our
subsidiary, <i>Newegg.com</i> Americas Inc. (&#8220;<b><i>Newegg.com </i>Americas</b>&#8221;), in Superior Court in Los Angeles County,
California, alleging that <i>Newegg.com</i> Americas had engaged in deceptive advertising practices and seeking to certify a class action.
In 2016, the trial court sustained <i>Newegg.com</i> Americas&#8217; demurrer to the plaintiff&#8217;s claims without leave to amend.
The plaintiff appealed, and in July&#160;2018 an appellate court reversed the decision of the trial court, thus allowing the case to proceed.
The matter is now pending in the trial court, with Newegg Inc. having been added as a defendant. We intend to vigorously defend ourselves
and our subsidiaries. Depending on the amount and timing, an unfavorable result could materially affect our business, consolidated results
of operations, financial position or cash flows.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_4" id="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">In September 2021, two subsidiaries of the Company were
served with a complaint filed in the Superior Court for Los Angeles County, California, alleging various wage and hour violations and
seeking to certify a class action. In October 2021, a second complaint was filed as a representative action pursuant to the Private Attorneys
General Act of 2004 against the same two subsidiaries in the Superior Court for Los Angeles County, California, alleging various violations
of the California Labor Code. The Company intends to vigorously defend its subsidiaries in both matters. The outcome of these matters
is uncertain. Depending on the amount and timing, an unfavorable result in either matter could materially affect our business, consolidated
results of operations, financial position or cash flows.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation id="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">In addition to the legal proceedings mentioned above, from
time to time, the Company may become involved in legal proceedings arising in the ordinary course of business. There can be no assurance
with respect to the outcome of any legal proceeding. The outcome of the litigation described above, the other pending lawsuits filed against
the Company and other claims, including those that may be made in the future, may be adverse to the Company, and the monetary liability
and other negative operational or financial impact may be material to the Company&#8217;s consolidated results of operations, financial
position, and cash flows.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b>&#160;</b></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_DefinedBenefitPlanTextBlock-c0_cont_1" escape="true" name="us-gaap:DefinedBenefitPlanTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><b>17.</b></td><td style="text-align: left"><b>Employee Benefit Plan</b></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt; text-align: left">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation id="_DefinedBenefitPlanTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">The Company maintains a 401(k)&#160;defined-contribution
plan for the benefit of its eligible employees. All full-time domestic employees who are at least 18 years of age are eligible to participate
in the plan. Eligible employees may elect to contribute up to <ix:nonFraction contextRef="c2" decimals="2" format="ixt:num-dot-decimal" name="negg:PercentageOfEligibleEmployeesCompensation" scale="-2" unitRef="pure">100</ix:nonFraction>% of their eligible compensation. The Company&#8217;s matching contributions
are made at the discretion of the Company&#8217;s Board of Directors. In addition, the Company may make a profit-sharing contribution
at the sole discretion of the Board of Directors. Total contributions by the Company for each of the&#160;years ended December&#160;31,
2022, 2021 and 2020 were $<ix:nonFraction contextRef="c0" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:DefinedBenefitPlanBenefitObligationContributionsByPlanParticipant" scale="6" unitRef="usd">1.6</ix:nonFraction> million, $<ix:nonFraction contextRef="c4" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:DefinedBenefitPlanBenefitObligationContributionsByPlanParticipant" scale="6" unitRef="usd">1.9</ix:nonFraction> million and $<ix:nonFraction contextRef="c5" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:DefinedBenefitPlanBenefitObligationContributionsByPlanParticipant" scale="6" unitRef="usd">1.7</ix:nonFraction> million, respectively. Contributions made by the Company are immediately
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_1" escape="true" name="us-gaap:RelatedPartyTransactionsDisclosureTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><b>18.</b></td><td style="text-align: left"><b>Related Party Transactions</b></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_2" id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><span style="text-decoration:underline">Loans to Affiliate</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_3" id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">On December&#160;17, 2019, the Company loaned $<ix:nonFraction contextRef="c157" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:LoansPayableToBank" scale="6" unitRef="usd">15.0</ix:nonFraction> million
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</div><div>

</div><ix:continuation continuedAt="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_4" id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">During the&#160;years ended December&#160;31, 2022, 2021
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interest income in the consolidated statement of operations. As of December&#160;31, 2022 and 2021, the amount of interest receivable
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</div><div>

</div><ix:continuation continuedAt="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_5" id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><span style="text-decoration:underline">Sales to Related Parties</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt">&#160;</p></ix:continuation><div>

</div><div>

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ended December&#160;31, 2022, 2021 and 2020 were immaterial.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">As of&#160;December&#160;31, 2022 and 2021,&#160;amount
due to related parties was immaterial.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 19.5pt; text-align: left; text-indent: -0.25in"><b>&#160;</b></p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_SegmentReportingDisclosureTextBlock-c0_cont_1" escape="true" name="us-gaap:SegmentReportingDisclosureTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>19. Segment Information</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt; text-align: left">&#160;</p></ix:nonNumeric><div>

</div><div>

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chief operating decision maker (&#8220;CODM&#8221;), reviews financial information presented on a consolidated basis. There are no segment
managers who are held accountable for operations, operating results and plans for levels or components below the consolidated unit level.
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</div><div>

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</div><div>

</div><ix:continuation continuedAt="_SegmentReportingDisclosureTextBlock-c0_cont_4" id="_SegmentReportingDisclosureTextBlock-c0_cont_3"><ix:nonNumeric contextRef="c0" escape="true" name="negg:ScheduleOfNetSalesFromExternalCustomersTableTextBlock"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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</div><div>

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</div><div>

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  <tr style="vertical-align: bottom; ">
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</div><div>

</div><ix:continuation continuedAt="_SegmentReportingDisclosureTextBlock-c0_cont_8" id="_SegmentReportingDisclosureTextBlock-c0_cont_7"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">(1)</span></td><td style="text-align: left"><span style="font-size: 10pt">Includes all first-party product
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</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_SegmentReportingDisclosureTextBlock-c0_cont_9" id="_SegmentReportingDisclosureTextBlock-c0_cont_8"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">(2)</span></td><td style="text-align: left"><span style="font-size: 10pt">Includes all the commission revenues
earned from sales made by sellers on its websites.</span></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_SegmentReportingDisclosureTextBlock-c0_cont_10" id="_SegmentReportingDisclosureTextBlock-c0_cont_9"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">(3)</span></td><td style="text-align: left"><span style="font-size: 10pt">Includes all revenue recognized
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services.</span></td>
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</div><div>

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</div><div>

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  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2021</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 76%; text-align: left">United&#160;States</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right"><ix:nonFraction contextRef="c198" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:PropertyPlantAndEquipmentNet" scale="3" unitRef="usd">21,637</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right"><ix:nonFraction contextRef="c199" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:PropertyPlantAndEquipmentNet" scale="3" unitRef="usd">23,178</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-bottom: 1.5pt">Rest of world</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="padding-bottom: 4pt; padding-left: 9pt">Total</td><td style="padding-bottom: 4pt">&#160;</td>
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  </table></ix:nonNumeric></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_SubsequentEventsTextBlock-c0_cont_1" escape="true" name="us-gaap:SubsequentEventsTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><b>20.</b></td><td style="text-align: left"><b>Subsequent Events</b></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_SubsequentEventsTextBlock-c0_cont_2" id="_SubsequentEventsTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in">On April 21, 2023 (the &#8220;Effective Date&#8221;), Newegg
Inc. entered into a purchase and sale agreement (the &#8220;Agreement&#8221;) to purchase a commercial office building located in Diamond
Bar, California for a purchase price of twenty-three million dollars ($<ix:nonFraction contextRef="c204" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:SupplementalDeferredPurchasePrice" scale="0" unitRef="usd">23,000,000</ix:nonFraction>).&#160; As part of the Agreement, Newegg Inc. will pay
an initial deposit of six hundred ninety thousand dollars ($<ix:nonFraction contextRef="c205" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DepositAssets" scale="0" unitRef="usd">690,000</ix:nonFraction>) (the &#8220;Initial Deposit&#8221;) and an additional deposit of
fifty thousand dollars ($<ix:nonFraction contextRef="c205" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:SecurityDeposit" scale="0" unitRef="usd">50,000</ix:nonFraction>) (the &#8220;Additional Deposit&#8221;) within three business days of the Effective Date.&#160; The purchase
is subject to a thirty-day inspection period (the &#8220;Inspection Period&#8221;), and closing is expected to occur fifteen days after
the expiration of the inspection period, subject to certain extension rights.&#160; The Initial Deposit is refundable if Newegg Inc. elects
to terminate the Agreement prior to the expiration of the Inspection Period.&#160; The Additional Deposit is non-refundable, except in
the event of certain events of default by Seller.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation id="_SubsequentEventsTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in">The Company intends to fund the purchase price through a combination
of cash on hand and borrowings under our revolving credit facility.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&#160;&#160;</p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->31<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><b>&#160;</b></p><div>

</div><div><a id="a_032"></a></div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"> <b>Item 19. Exhibits</b></p><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: bottom">
    <td style="border-bottom: black 1.5pt solid; width: 9%; text-align: left"><span style="font-size: 10pt"><b>Exhibit<br/>
Number</b></span></td>
    <td style="width: 1%; padding-bottom: 1.5pt">&#160;</td>
    <td style="width: 90%; border-bottom: black 1.5pt solid; text-align: center"><span style="font-size: 10pt"><b>Description of Documents</b></span></td></tr>
  <tr style="background-color: rgb(204,238,255)">
    <td style="vertical-align: top"><span style="font-size: 10pt">1.1</span></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom"><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1474627/000121390021059362/ff12021ex3-1_newegg.htm">Amended and Restated Memorandum and Articles of Association (incorporated by reference to the Company&#8217;s Registration Statement on Form F-1/A, filed December 10, 2021).</a></span></td></tr>
  <tr>
    <td style="vertical-align: top"><span style="font-size: 10pt">1.2</span></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom"><span style="font-size: 10pt"><a href="https://www.sec.gov/Archives/edgar/data/1474627/000121390021059362/ff12021ex4-2_newegg.htm">Amended and Restated Newegg Inc. Shareholders Agreement (incorporated by reference to the Company&#8217;s Registration Statement on Form F-1/A, filed December 10, 2021).</a></span></td></tr>
  <tr style="background-color: rgb(204,238,255)">
    <td style="vertical-align: top"><span style="font-size: 10pt">1.3</span></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom"><span style="font-size: 10pt"><a href="https://www.sec.gov/Archives/edgar/data/1474627/000121390022022083/ea158996ex1-1_neweggcom.htm">First Amendment to the Amended and Restated Newegg Inc. Shareholders Agreement (incorporated by reference to the Company&#8217;s Report on Form 6-K filed on April 28, 2022).</a></span></td></tr>
  <tr>
    <td style="vertical-align: top"><span style="font-size: 10pt">1.4</span></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom"><span style="font-size: 10pt"><a href="https://www.sec.gov/Archives/edgar/data/1474627/000121390022053473/ea165316ex99-3_newegg.htm">Second Amendment to the Amended and Restated Newegg Inc. Shareholders Agreement (incorporated by reference to the Company&#8217;s Report on Form 6-K filed on September 2, 2022).</a></span></td></tr>
  <tr style="background-color: rgb(204,238,255)">
    <td style="vertical-align: top"><span style="font-size: 10pt">2.1</span></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom"><a href="http://www.sec.gov/Archives/edgar/data/1474627/000121390022022346/f20f2021ex2-1_newegg.htm"><span style="font-size: 10pt">Description of Securities (incorporated by reference to the Company&#8217;s Annual Report on Form 20-F filed on April 28, 2022).</span></a></td></tr>
  <tr>
    <td style="vertical-align: top"><span style="font-size: 10pt">2.2</span></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom"><a href="f20f2022ex2-2_newegg.htm"><span style="font-size: 10pt">Form of Indemnification Agreement between the Registrant and its directors and executive officers</span></a></td></tr>
  <tr style="background-color: rgb(204,238,255)">
    <td style="vertical-align: top"><span style="font-size: 10pt">4.1</span></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom"><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1474627/000121390020033122/ea127429ex2-1_lianluo.htm">Form of Merger Agreement, by and among LLIT, Lightning Delaware Sub, Inc., and Newegg (incorporated by reference to the Company&#8217;s Registration Statement on Form F-1, filed October 26, 2020).</a></span></td></tr>
  <tr>
    <td style="vertical-align: top"><span style="font-size: 10pt">4.2</span></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom"><span style="font-size: 10pt"><a href="https://www.sec.gov/Archives/edgar/data/1474627/000121390021059362/ff12021ex2-2_newegg.htm">Form of Disposition Agreement, by and between LLIT and Beijing Fenjin Times Technology Development Co., Ltd. (incorporated by reference to the Company&#8217;s Registration Statement on Form F-1/A, filed December 10, 2021).</a></span></td></tr>
  <tr style="background-color: rgb(204,238,255)">
    <td style="vertical-align: top"><span style="font-size: 10pt">4.3</span></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom"><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1474627/000121390020033122/ea127429ex10-4_lianluo.htm">Newegg&#8217;s 2005 Incentive Plan, as Amended (incorporated by reference to the Company&#8217;s Registration Statement on Form F-1, filed October 26, 2020).</a></span></td></tr>
  <tr>
    <td style="vertical-align: top"><span style="font-size: 10pt">4.5</span></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom"><span style="font-size: 10pt"><a href="https://www.sec.gov/Archives/edgar/data/1474627/000121390021059362/ff12021ex10-3_newegg.htm">Employment Agreement by and between Anthony Chow and Newegg Commerce, Inc. (incorporated by reference to the Company&#8217;s Registration Statement on Form F-1/A, filed December 10, 2021).</a></span></td></tr>
  <tr style="background-color: rgb(204,238,255)">
    <td style="vertical-align: top"><span style="font-size: 10pt">4.6</span></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom"><a href="f20f2022ex4-6_newegg.htm"><span style="font-size: 10pt">Form of Employment Agreement by and between Newegg Commerce, Inc. and certain of its executive officers</span></a></td></tr><tr>
    <td style="vertical-align: top"><span style="font-size: 10pt">4.7</span></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom"><span style="font-size: 10pt"><a href="https://www.sec.gov/Archives/edgar/data/1474627/000121390021045332/ea146533ex10-1_neweggcomme.htm">Revolving Credit and Security Agreement, by and among East West Bank, the Lender Parties thereto, Newegg and Newegg&#8217;s subsidiaries (incorporated by reference to the Company&#8217;s Report on Form 6-K filed August 27, 2021).</a></span></td></tr>
  <tr style="background-color: rgb(204,238,255)">
    <td style="vertical-align: top"><span style="font-size: 10pt">4.8</span></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom"><a href="f20f2022ex4-8_newegg.htm"><span style="font-size: 10pt">First Amendment to Revolving Credit and Security Agreement, by and among East West Bank, the Lender Parties thereto, Newegg and Newegg&#8217;s subsidiaries</span></a></td></tr>
  <tr>
    <td style="vertical-align: top"><span style="font-size: 10pt">4.9</span></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom"><span style="font-size: 10pt"><a href="https://www.sec.gov/Archives/edgar/data/1474627/000121390021045332/ea146533ex10-6_neweggcomme.htm">Pledge Agreement, by and among East West Bank, Newegg and Newegg&#8217;s subsidiaries (incorporated by reference to the Company&#8217;s Report on Form 6-K filed August 27, 2021).</a></span></td></tr>
  <tr style="background-color: rgb(204,238,255)">
    <td style="vertical-align: top"><span style="font-size: 10pt">4.10</span></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom"><span style="font-size: 10pt"><a href="https://www.sec.gov/Archives/edgar/data/1474627/000121390021045332/ea146533ex10-7_neweggcomme.htm">Pledge and Security Agreement, by and among East West Bank, Newegg Tech, Inc. and ChiefValue.com, Inc. (incorporated by reference to the Company&#8217;s Report on Form 6-K filed August 27, 2021).</a></span></td></tr>
  <tr>
    <td style="vertical-align: top"><span style="font-size: 10pt">4.11</span></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom"><span style="font-size: 10pt"><a href="https://www.sec.gov/Archives/edgar/data/1474627/000121390021045332/ea146533ex10-8_neweggcomme.htm">Guaranty and Suretyship Agreement, by and among East West Bank, Newegg Tech, Inc., ChiefValue, Inc. and NuTrend Automotive, Inc. (incorporated by reference to the Company&#8217;s Report on Form 6-K filed August 27, 2021).</a></span></td></tr>
  <tr style="background-color: rgb(204,238,255)">
    <td style="vertical-align: top"><span style="font-size: 10pt">4.12</span></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom"><span style="font-size: 10pt"><a href="https://www.sec.gov/Archives/edgar/data/1474627/000121390021045332/ea146533ex10-9_neweggcomme.htm">Intercompany Subordination Agreement, by and East West Bank, Newegg and Newegg&#8217;s subsidiaries (incorporated by reference to the Company&#8217;s Report on Form 6-K filed August 27, 2021).</a></span></td></tr>
  <tr>
    <td style="vertical-align: top"><span style="font-size: 10pt">4.13</span></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom"><span style="font-size: 10pt"><a href="https://www.sec.gov/Archives/edgar/data/1474627/000121390021059362/ff12021ex10-13_newegg.htm">Letter Agreement, between East West Bank and Newegg (incorporated by reference to the Company&#8217;s Registration Statement on Form F-1/A, filed December 10, 2021).</a></span></td></tr>
  <tr style="background-color: rgb(204,238,255)">
    <td style="vertical-align: top"><span style="font-size: 10pt">4.14</span></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom"><span style="font-size: 10pt"><a href="https://www.sec.gov/Archives/edgar/data/1474627/000121390021062202/ea151437ex99-2_neweggcom.htm">Newegg Commerce, Inc. 2021 Equity Incentive Plan (incorporated by reference to the Company&#8217;s Report&#160; on Form 6-K, filed November 29, 2021).</a></span></td></tr>
  <tr>
    <td style="vertical-align: top"><span style="font-size: 10pt">4.15</span></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom"><a href="http://www.sec.gov/Archives/edgar/data/1474627/000121390022022346/f20f2021ex4-17_newegg.htm"><span style="font-size: 10pt">Supplemental Agreement dated April 22, 2022 between Digital Grid, Bank of China Limited Zhejiang Branch, Newegg Inc., Newegg Commerce, Inc., and Hangzhou Lianluo (incorporated by reference to the Company&#8217;s Annual Report on Form 20-F filed on April 28, 2022).</span></a></td></tr>
  <tr style="background-color: rgb(204,238,255)">
    <td style="vertical-align: top"><span style="font-size: 10pt">4.16</span></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom"><a href="f20f2022ex4-16_newegg.htm"><span style="font-size: 10pt">Amended and Restated Supplemental Agreement dated December 2022 between Digital Grid, Bank of China Limited Zhejiang Branch, Newegg Inc., Newegg Commerce, Inc., and Hangzhou Lianluo.</span></a></td></tr>
  <tr>
    <td style="vertical-align: top"><span style="font-size: 10pt">4.17</span></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom"><a href="f20f2022ex4-17_newegg.htm"><span style="font-size: 10pt">Purchase and Sale Agreement by and between BSP Senita Gateway Center, LLC and Newegg Inc.</span></a></td></tr>
  <tr style="background-color: rgb(204,238,255)">
    <td style="vertical-align: top"><span style="font-size: 10pt">8.1</span></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom"><a href="f20f2022ex8-1_newegg.htm"><span style="font-size: 10pt">List of Significant Subsidiaries.</span></a></td></tr>
  <tr>
    <td style="vertical-align: top"><span style="font-size: 10pt">12.1</span></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom"><a href="f20f2022ex12-1_newegg.htm"><span style="font-size: 10pt">Certification of Chief Executive Officer, pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.</span></a></td></tr>
  <tr style="background-color: rgb(204,238,255)">
    <td style="vertical-align: top"><span style="font-size: 10pt">12.2</span></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom"><a href="f20f2022ex12-2_newegg.htm"><span style="font-size: 10pt">Certification of Chief Financial Officer, pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.</span></a></td></tr>
  <tr>
    <td style="vertical-align: top"><span style="font-size: 10pt">13.1</span></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom"><a href="f20f2022ex13-1_newegg.htm"><span style="font-size: 10pt">Certification of Chief Executive Officer, pursuant to 18 U.S.C. Section 1350.</span></a></td></tr>
  <tr style="background-color: rgb(204,238,255)">
    <td style="vertical-align: top"><span style="font-size: 10pt">13.2</span></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom"><a href="f20f2022ex13-2_newegg.htm"><span style="font-size: 10pt">Certification of Chief Financial Officer, pursuant to 18 U.S.C. Section 1350.</span></a></td></tr>
  <tr>
    <td style="vertical-align: top"><span style="font-size: 10pt">15.1</span></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom"><a href="f20f2022ex15-1_newegg.htm"><span style="font-size: 10pt">Consent of Independent Registered Public Accounting Firm.</span></a></td></tr>
  <tr style="background-color: rgb(204,238,255)">
    <td style="vertical-align: top"><span style="font-size: 10pt">101.INS</span></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom"><span style="font-size: 10pt">Inline XBRL Instance Document.</span></td></tr>
  <tr>
    <td style="vertical-align: top"><span style="font-size: 10pt">101.SCH</span></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom"><span style="font-size: 10pt">Inline XBRL Schema Document.</span></td></tr>
  <tr style="background-color: rgb(204,238,255)">
    <td style="vertical-align: top"><span style="font-size: 10pt">101.CAL</span></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom"><span style="font-size: 10pt">Inline XBRL Calculation Linkbase Document.</span></td></tr>
  <tr>
    <td style="vertical-align: top"><span style="font-size: 10pt">101.DEF</span></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom"><span style="font-size: 10pt">Inline XBRL Definition Linkbase Document.</span></td></tr>
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</div><div><a id="a_033"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Signature</b></p><div>

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</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The registrant hereby certifies that it meets all
of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its
behalf.</p><div>

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    <td style="width: 60%"><span style="font-size: 10pt">Date:&#160;April 27, 2023</span></td>
    <td style="width: 40%"><span style="font-size: 10pt"><b>NEWEGG COMMERCE, INC.</b></span></td></tr>
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{"company-data": {"conformed-name": "Newegg Commerce, Inc.", "cik": "0001474627", "assigned-sic": "5990", "irs-number": "000000000", "state-of-incorporation": "D8"}, "filing-values": {"form-type": "20-F", "act": "34", "file-number": "001-34661", "film-number": "23858287"}, "business-address": {"street1": "17560 ROWLAND STREET", "city": "CITY OF INDUSTRY", "state": "CA", "zip": "91748", "phone": "(8610)8860-9850"}, "mail-address": {"street1": "17560 ROWLAND STREET", "city": "CITY OF INDUSTRY", "state": "CA", "zip": "91748"}, "former-company": [{"former-conformed-name": "Lianluo Smart Ltd", "date-changed": "20161118"}, {"former-conformed-name": "Dehaier Medical Systems Ltd", "date-changed": "20091015"}]}
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
20-F
(Mark One)
☐
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended
December 31
,
2022
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
☐
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report
For the transition period from
__
to
__
Commission file number
001-34661
Newegg Commerce, Inc.
(Exact name of registrant as specified in its charter)
British Virgin Islands
(Jurisdiction of incorporation or organization)
Newegg Commerce, Inc.
17560 Rowland Street
City of Industry
,
CA
91748
(Address of principal executive offices)
Robert Chang
Chief Financial Officer
Newegg Commerce, Inc.
17560 Rowland Street
City of Industry
,
CA
91748
Telephone:
(626)
271-9700
(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b)
of the Act.
Title of each class
Trading Symbols
Name of each exchange on which registered
Common Shares, par value $0.021848
NEGG
The
Nasdaq
Capital Market
Securities registered or to be registered pursuant
to Section 12(g) of the Act. None.
Securities for which there is a reporting obligation
pursuant to Section 15(d) of the Act. None.
Indicate the number of outstanding shares of each
of the issuer's classes of capital or common stock as of the close of the period covered by the annual report.
As of December 31, 2022, there were
376,660,069
shares of the registrant's Common Shares outstanding.
Indicate by check mark if the registrant is a well-known seasoned issuer,
as defined in Rule 405 of the Securities Act.
☐
Yes
☒
No
If this report is an annual or transition report, indicate by check
mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
☐
Yes
☒
No
Note – Checking the box above will not relieve any registrant
required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
☒
Yes
☐
No
Indicate by check mark whether the registrant has submitted electronically
every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit such files).
☒
Yes
☐
No
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of "large accelerated filer,"
"accelerated filer," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☐
Non-accelerated filer
☒
Accelerated filer
☐
Emerging growth company
☐
If an emerging growth company that prepares its financial statements
in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.
☐
†
The term "new or revised financial accounting standard"
refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on
and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section
404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
☐
If securities are registered
pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing
reflect the correction of an error to previously issued financial statements.
☐
Indicate by check mark
whether any of those error corrections are restatements that required a recovery analysis of incentive based compensation received by
any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b).
☐
Indicate by check mark which basis of accounting the registrant has
used to prepare the financial statements included in this filing:
U.S. GAAP
☒
International Financial Reporting Standards as issued by the International Accounting Standards Board
☐
Other
☐
If "Other" has been checked in response to the previous
question, indicate by check mark which financial statement item the registrant has elected to follow.
☐
Item 17
☐
Item 18
If this is an annual report, indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act).
☐
Yes
☒
No
Background and Certain Defined Terms
As used in this annual report, unless otherwise specified, the terms
"we," "our," "us," the "Company" and "Newegg" refer to the registrant, Newegg
Commerce, Inc. (previously known as "Lianluo Smart Limited" or "LLIT").
References to the "Merger" refer to the merger of Newegg
Inc. with Lianluo Smart Limited, which subsequently changed its name to Newegg Commerce, Inc.
Hangzhou Liaison Interactive Information Technology Co., Limited ("Hangzhou
Lianluo"), is a publicly traded company in China and a majority owner of Newegg Commerce, Inc. through a wholly-owned subsidiary,
Digital Grid (Hong Kong) Technology Co., Limited ("Digital Grid").
TABLE OF CONTENTS
Page
PART I
1
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
1
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
1
ITEM 3. KEY INFORMATION
1
ITEM 4. INFORMATION ON THE COMPANY
32
ITEM 4A. UNRESOLVED STAFF COMMENTS
49
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
49
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
62
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
72
ITEM 8. FINANCIAL INFORMATION
74
ITEM 9. THE OFFER AND LISTING
75
ITEM 10. ADDITIONAL INFORMATION
75
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
90
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
91
PART II
92
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
92
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
92
ITEM 15. CONTROLS AND PROCEDURES
92
ITEM 16. [RESERVED]
94
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
94
ITEM 16B. CODE OF ETHICS
94
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
94
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
94
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
94
ITEM 16F. CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT
95
ITEM 16G. CORPORATE GOVERNANCE
95
ITEM 16H. MINE SAFETY DISCLOSURE
95
ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
95
PART III
F-1
ITEM 17. FINANCIAL STATEMENTS
F-1
ITEM 18. FINANCIAL STATEMENTS
F-1
ITEM 19. EXHIBITS
96
SIGNATURES
97
i
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This annual report contains forward-looking statements that reflect
our current expectations and views of future events, all of which are subject to risks and uncertainties. Forward-looking statements give
our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly
to historical or current facts. You can find many (but not all) of these statements by the use of words such as "approximates,"
"believes," "hopes," "expects," "anticipates," "estimates," "projects,"
"intends," "plans," "will," "would," "should," "could," "may"
or other similar expressions in this annual report. These statements are likely to address our growth strategy, financial results and
product and development programs. You must carefully consider any such statements and should understand that many factors could cause
actual results to differ from our forward-looking statements. These factors may include inaccurate assumptions and a broad variety of
other risks and uncertainties, including some that are known and some that are not. No forward-looking statement can be guaranteed and
actual future results may vary materially. Factors that could cause actual results to differ from those discussed in the forward-looking
statements include, but are not limited to:
●
future financial and operating
results, including revenues, income, expenditures, cash balances and other financial items;
●
our ability to execute our growth and expansion, or manage our contraction,
including our ability to meet our goals;
●
current and future economic
and political conditions;
●
our ability to compete in an
industry with low barriers to entry;
●
our capital requirements and
our ability to raise any additional financing which we may require;
●
our ability to attract customers,
and further enhance our brand recognition;
●
our ability to hire and retain
qualified management personnel and key employees in order to enable us to develop our business;
●
trends and competition in the
e-commerce industry;
●
uncertainty about the ongoing impact of the COVID-19 pandemic on the
Company's operations, the demand for the Company's products, supply chains, and economic activity in general;
●
inflationary pressures and other macroeconomic factors that have affected
and may continue to affect our business and financial condition; and
●
other assumptions described
in this annual report underlying or relating to any forward-looking statements.
We describe material risks, uncertainties and assumptions that could
affect our business, including our financial condition and results of operations, under "Risk Factors." We base our forward-looking
statements on our management's beliefs and assumptions based on information available to our management at the time the statements
are made. We caution you that actual outcomes and results may, and are likely to, differ materially from what is expressed, implied or
forecast by our forward-looking statements. Accordingly, you should be careful about relying on any forward-looking statements. Except
as required under the federal securities laws, we do not have any intention or obligation to update publicly any forward-looking statements
after the distribution of this annual report, whether as a result of new information, future events, changes in assumptions, or otherwise.
ii
PART I
Item 1. Identity of Directors, Senior Management and Advisers
Not applicable.
Item 2. Offer Statistics and Expected Timetable
Not applicable.
Item 3. Key Information
A. [Reserved]
B. Capitalization and Indebtedness
Not applicable.
C. Reasons for the Offer and Use of Proceeds
Not applicable.
D. Risk Factors
An investment in the Company's securities
involves a high degree of risk. You should carefully consider the risks and uncertainties described below together with the other information
set forth in this annual report. If any of the following risks or uncertainties actually occurs, our business, financial position and
results of operations could be materially and adversely affected. In such case, the trading price of our securities could decline and
you may lose all or part of your investment. Our business, financial condition, prospects, results of operations or cash flows could also
be harmed by risks and uncertainties not currently known to us or that we currently do not believe are material. We cannot assure you
that any of the events discussed in the risk factors below will not occur. The risks described below are organized by risk type and are
not listed in order of their priority to us.
Summary of Factors That May Affect Our Future
Results
The following summarizes the principal factors
that make an investment in the Company speculative or risky. This summary should be read in conjunction with the remainder of this "Risk
Factors" section and should not be relied upon as an exhaustive summary of the material risks facing our business. The occurrence
of any of these risks could harm our business, financial condition, and results of operations or cause our actual results to differ materially
from those contained in forward-looking statements we have made in this annual report. 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. Zhitao He and 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.
Risks Relating to Our Business
Global macroeconomic conditions and the effect of economic pressures
and other business factors on discretionary consumer spending and consumer preferences may have a material adverse effect on our business,
results of operations and financial condition.
Uncertainties in global macroeconomic conditions that are beyond our
control have in the past impacted our business and may in the future materially adversely affect our business, results of operations,
financial condition and stock price. These adverse economic conditions include inflation, slower growth or recession, new or increased
tariffs and other changes to fiscal and monetary policy, higher interest rates, high unemployment, decreased consumer confidence in the
economy, armed hostilities, foreign currency exchange rate fluctuations, conditions affecting the retail environment for products we sell,
and other matters that influence consumer spending and preferences.
In addition, consumer confidence and spending can be materially adversely
affected in response to financial market volatility, negative financial news, conditions in the real estate and mortgage markets, including
home equity loans and consumer credit, changes in net worth based on market changes and uncertainty, energy shortages and cost increases,
labor and healthcare costs, government actions and general uncertainty regarding the overall future economic environment. Some consumers
view a substantial portion of the products we offer as discretionary items rather than necessities. As a result, our operating results
are sensitive to changes in macroeconomic conditions that impact consumer spending, including discretionary spending. Declines in
consumer spending have resulted, and in the future may result, in decreased demand for our products and services which may have an adverse
effect on our results of operations.
4
A downturn in the economic environment can also lead to financial instability;
increased credit and collectability risk on our receivables; the failure of important partners, including suppliers, logistics providers,
and financial institutions; limitations on our ability to issue new debt; reduced liquidity and declines in the fair value of our financial
instruments. These and other economic factors can materially adversely affect our business, results of operations, financial condition
and stock price.
The ongoing impact of COVID-19, and any
future outbreaks or public health emergencies, may adversely affect our business and financial results.
The COVID-19 pandemic and the various responses to it negatively impacted
the global economy, disrupted consumer spending and global supply chains and created significant volatility and disruption of financial
markets. Authorities across the United States and the globe implemented varying degrees of restriction on social and commercial activity.
While certain of these restrictions have been lifted and phased re-openings occurred in some regions, some restrictions continued through
fiscal 2022 in certain regions or to certain extents, and other regions have seen a resurgence of COVID-19 cases resulting in reinstitution
or expansion of such measures.
We have at times seen increased demand for our products and services
during the pandemic that has contributed to increased sales and market share. However, the course of the outbreak and its effects on consumer
buying habits remains uncertain, and a prolonged global economic slowdown and increased unemployment could have a material adverse impact
on economic conditions, which in turn could lead to a reduced demand for our products and services.
As a consequence of the COVID-19 outbreak, we
have experienced occasional supply constraints, primarily in the form of delays in shipment of inventory. We have also experienced increases
in the cost of certain products, as well as a decrease in promotions by some manufacturers. While we have so far considered such events
to be relatively minor and temporary, continued supply chain disruptions could lead to delayed receipt of, or shortages in, inventory
and higher costs.
Further, COVID-19 has impacted, and may continue
to impact, the supply chain of our brand partners and Marketplace sellers, and our ability to timely fulfill orders and deliver such orders
to our customers, particularly as a result of mandatory shutdowns in different countries and cities to mitigate the spread of the virus.
Although we cannot estimate the length or severity of the long-term
effects of the COVID-19 outbreak at this time, any additional waves of increased infections or emergence of new strains of the virus may
have an adverse effect on the results of our future operations. The full impact of COVID-19 on our operations remains uncertain and potentially
widespread, including potential impacts on:
●
our ability to successfully forecast sales and execute our long-term growth strategy during these uncertain times;
●
the build-up of excess inventory as a result of lower consumer demand;
●
supply chain disruptions experienced by brand partners and Marketplace sellers, resulting from closed factories, reduced workforces, scarcity of raw materials, and scrutiny or embargoing of goods produced in infected areas, along with increased freight costs for us;
●
our ability to access capital sources and maintain compliance with our credit facilities, as well as the ability of our key customers, suppliers, and vendors to do the same in regard to their own obligations;
●
our ability to collect outstanding receivables from our customers;
●
our ability to attend and participate in industry and trade shows; and
●
diversion of management and employee attention and resources from key business activities and risk management outside of COVID-19 response efforts, including cybersecurity and maintenance of internal controls, with resulting potential loss of employee productivity.
The impact of the COVID-19 pandemic continues to evolve and therefore,
there can be no assurance that these potential negative impacts will not materialize, and these and other impacts of COVID-19 may adversely
affect our future business, financial condition, cash flow, liquidity and results of operations.
5
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. 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. In addition, key manufacturers and vendors, for instance, may be less likely to offer us favorable terms or authorization to carry
their products if we sell products of theirs, purchased on the "gray market." We currently do not have any insurance to cover
the types of claims that could be asserted in such litigation or in legal or administrative actions initiated by customers of such products,
or by government agencies. If a claim were brought against us successfully, it could expose us to significant liability, which could have
a material adverse effect on our business and operations.
Our business faces intense domestic and
international competition.
The e-commerce market is intensely competitive
with limited barriers to entry. Our current and potential competitors include retailers, manufacturers and distributors that offer a wide
range of similar product categories and companies that provide Direct-to-Consumer ("D2C") platform services, fulfillment and
logistics services and other e-commerce related services. It is expected that the competition in this market will intensify in the future
as companies develop new business models and enhanced technologies, new competitors enter the market, competitors forge new business combinations
or alliances, and established companies in other market segments expand to become competitive with our business.
Many of our current and potential online and brick-and-mortar
competitors have larger bases of customers or third-party sellers, better brand recognition and greater financial, marketing, technical,
management and other resources than we do. In addition, some of our competitors have used and may continue to use aggressive pricing or
promotional strategies, may have stronger supplier relationships with more favorable terms and inventory allocation and may devote substantially
greater resources to their online platforms and system development than we do. Increased competition may result in reduced operating margins,
reduced profitability, loss of market share and diminished brand recognition for Newegg.
We compete with online retailers such as Amazon
and traditional retailers like Best Buy and Walmart, who sell through brick-and-mortar stores and their online websites. In addition,
we also face competition in the international markets in which we participate or may enter in the future. Certain other competitors in
countries where we operate are subsidiaries of e-commerce competitors in the United States with established local operations and brands
and with greater experience and resources than we have. In other countries that we may enter, there may be incumbent online and multi-channel
online or brick-and-mortar competitors presently selling Information Technology/Consumer Electronic ("IT/CE") products. These
incumbents may have advantages that could impede our expansion and growth in these markets.
We could also experience significant competitive
pressure if any of our manufacturers or distributors were to initiate or expand their own online or brick-and-mortar retail operations.
Because our manufacturers and distributors have access to merchandise at a lower cost than we do, they could sell products at lower prices
and maintain a higher gross margin on their product sales than we can, and they may have the ability to directly connect with buyers at
relatively low cost. This could result in our current and potential buyers deciding to purchase directly from these manufacturers and
distributors instead of from Newegg. Increased competition from any manufacturer or distributor capable of maintaining high sales volumes
and acquiring products at lower prices than we can, could significantly reduce our market share and adversely impact 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.
6
A decline in demand for IT/CE products could
adversely affect our operating results.
We and our Marketplace sellers primarily sell
IT/CE products that are often discretionary purchases rather than necessities for consumers. Consequently, our results of operations tend
to be sensitive to changes in macroeconomic conditions and their impact on consumer spending. 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.
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.
Additionally, it is expected that some of our
future growth should be driven by product releases or upgrades that may occur in the near future. If such product releases do not occur
or do not drive sales of IT/CE products to the extent expected, our future sales may be less than predicted, negatively impacting our
net sales and net income.
If we are unable to provide a satisfactory
customer experience, our reputation would be harmed and we could lose customers.
The success of our business depends largely on
our ability to provide a superior customer experience to maintain and grow our customer base and keep our customers highly engaged on
our online platforms, which in turn depends on a variety of factors. These include our ability to continue to maintain a wide range of
product offerings with attractive pricing, provide timely and reliable order fulfillment and provide high-quality customer support and
service. If our customers are not satisfied with our platforms, products or services, or our online platforms are severely interrupted
or otherwise fail to meet our customers' requests, our reputation could be adversely affected.
As an e-commerce company, we have limited ability
to allow buyers to touch, test and feel products, personally interact with sales and customer service representatives, and receive or
return products without waiting or paying for the products to be shipped, like brick-and-mortar retailers or online retailers that have
brick-and-mortar operations do. Therefore, it is important that we continue to improve our online platforms, including efforts to encourage
the creation of more high-quality and useful user-generated content, such as reviews and commentary, on the products we and our Marketplace
sellers offer. If we do not continue to make investments in the development of our online platforms and customer service operations and,
as a result, or due to other reasons, fail to provide a high-quality customer experience, we may lose customers, which could adversely
impact our operating results.
We currently operate customer service centers
in California and Texas, focusing on serving North American buyers. To enhance our service capabilities and maintain increased access,
Newegg operates an Asia-based multilingual customer service center that is available seven days a week, via email and instant messaging.
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. 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. 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.
We have incorporated open source software code
into some of our internal software and systems and expect to continue to use this open source software in the future. The licenses applicable
to open source software typically require that the source code subject to the license be made available to the public and that any modifications
or derivative works to open source software continue to be licensed under open source licenses. From time to time, we may face intellectual
property infringement claims from third parties, demands for the release or license of the open source software or derivative works that
we developed using such software (which could include our proprietary source code) or claims that otherwise seek to enforce the terms
of the applicable open source license. These claims could result in litigation and could require us to purchase a costly license, publicly
release the affected portions of our source code, be limited in the licensing of our technologies or cease offering the implicated solutions
unless and until we can re-engineer them to avoid infringement or change the use of the implicated open source software. In addition to
risks related to license requirements, use of certain open source software can lead to greater risks than use of third-party commercial
software, as open source licensors generally do not provide warranties, indemnities or other contractual protections with respect to the
software (for example, non-infringement or functionality). Our use of open source software may also present additional security risks
because the source code for open source software is publicly available, which may make it easier for hackers and other third parties to
determine how to breach our websites, mobile apps and systems that rely on open source software. Any of these risks could be difficult
to eliminate or manage and, if not addressed, could have a material adverse effect on our business, financial condition and results of
operations.
We and our Marketplace sellers' pricing
strategy may not meet customers' price expectations or result in profitability.
Demand for our products is generally highly sensitive
to price. Our pricing strategies have had, and may continue to have, a significant impact on our net sales and net income. We often offer
discounted prices, free or discounted shipping or bundled products as a means of attracting customers and encouraging repeat purchases.
Such offers and discounts may reduce our margins. Moreover, our competitors' pricing and marketing strategies are beyond our control
and can significantly impact the results of our pricing strategies. If we fail to meet our customers' price expectations in any
given period, or if our competitors decide to engage in aggressive pricing strategies, our business and results of operations would suffer.
In addition, under applicable federal and state
unfair competition laws, including the California Consumer Legal Remedies Act, and U.S. Federal Trade Commission regulations, we are required
to accurately identify product offerings, not make misleading claims on our platforms, and use qualifying disclosures where and when appropriate.
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. 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. While the trial court had sustained without leave to amend our demurrer to such lawsuit,
in July 2018, a California appellate panel reversed the trial court's judgment and reinstated the action against us. This matter
is still pending as of the date of this annual report. There can be no assurance that we will be able to prevail in the foregoing action
or that we will be able to settle the dispute on terms favorable to us. Any adverse outcome of the foregoing class action or 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. 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 success depends on our ability to successfully
receive and fulfill orders and to promptly deliver such orders to our customers. We could lose existing customers or fail to attract new
customers, potentially resulting in a decline in net sales, if our online platforms are inaccessible or if our transaction processing
systems, order fulfillment processes or network infrastructure are not operational or performing to our customers' satisfaction.
Any internet network interruptions, latency or
problems with our online platforms' availability could prevent customers from accessing, browsing and placing orders on our online
platforms, and impact our ability to fulfill orders or bill customers, which may cause customer dissatisfaction and damage our reputation
and brand. We have experienced brief computer system interruptions in the past and believe that others will occur from time to time in
the future. Our systems and operations potentially are vulnerable to damage or interruption from a number of sources, including the following:
●
natural disaster or other catastrophic event such as earthquake, fire, power loss or interruption, telecommunications failure, hurricane, volcanic eruption, flood or terrorist attack. For example, our headquarters and the majority of our infrastructure, including some of our servers, are located in Southern California, a seismically active region. 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. Any disruption in our network access or co-location services, which are the services that house some of our servers and provide internet access to them, provided by these third-party providers or any failure of these third-party vendors to handle existing or higher volumes of use could significantly harm our business. Any financial or other difficulties these vendors face could also adversely affect our business; and
●
incidents of fraud.
We have not yet created sufficient redundancy for our information technology
systems and data, and we do not presently maintain backup copies of all of its data. Newegg has a limited disaster recovery plan in effect
and may not have sufficient insurance for losses that may occur from natural disasters, catastrophic events or the resulting business
interruption. Any substantial damage to, or disruption of, our technology infrastructure could cause interruptions or delays, loss of
data, or reduced system availability, which could have a material adverse effect on our business, financial condition and results of operations.
We may be unable to accurately project the rate
or timing of traffic flow, including any traffic increases, or successfully and cost-effectively upgrade our systems and infrastructure
in a timely manner to accommodate higher traffic levels on our online platforms. If the volume of traffic on our online platforms or the
number of purchases made by our customers increases substantially, we may experience unanticipated system disruptions, slower response
times, reduced levels of customer service and impaired quality and delays in reporting accurate financial information. 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. 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. In particular, our systems may experience interruptions during upgrades, and
the new technologies or infrastructures may not be fully integrated with the existing systems on a timely basis, or at all. 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.
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.
We rely on a limited number of third-party payment
solutions to process deposits and withdrawals made by users of our Marketplace. If any third-party payment solution terminates its relationship
with Newegg or refuses to renew its agreement with Newegg on commercially reasonable terms, we would need to find an alternate payment
solution, and may not be able to secure similar terms or replace such payment solution in an acceptable time frame. Further, the software
and services provided by our third-party payment solutions may not meet our expectations, contain errors or vulnerabilities, be compromised
or experience outages. Any of these risks could cause us to lose our ability to accept online payments or other payment transactions or
make timely payments to users of our Marketplace, any of which could make our Marketplace less trustworthy and convenient and adversely
affect our ability to attract and retain our users.
Nearly all of our users' payments are made
by credit card, debit card or through other third-party payment services, which subjects Newegg to certain regulations and to the risk
of fraud. We may in the future offer new payment options to users that may be subject to additional regulations and risks. We are also
subject to a number of other laws and regulations relating to the payments we accept from our users, including with respect to money laundering,
money transfers, privacy and information security. If we fail to comply with applicable rules and regulations, we may be subject to civil
or criminal penalties, fines and/or higher transaction fees and may lose our ability to accept online payments or other payment card transactions,
which could make our Marketplace less convenient and attractive to our users. If any of these events were to occur, our business, financial
condition and results of operations could be adversely affected.
Additionally, card organizations, including Visa,
require Newegg to comply with payment card network operating rules, which are set and interpreted by the payment card networks. The payment
card networks could adopt new operating rules or interpret or reinterpret existing rules in ways that might prohibit us from providing
certain offerings to some users, be costly to implement or difficult to follow. We have agreed to reimburse our payment processors for
fines, penalties or assessments that are assessed by card organizations if we or the users on our Marketplace violate these rules, and
as a result we may be subject to fines, penalties or assessments assessed by card organizations against us from time to time. Any of the
foregoing risks could adversely affect our business, financial condition and results of operations.
The loss of key employees or the failure
to attract or retain qualified personnel can have a material adverse effect on our ability to run our business.
The loss of any of our current executives, key
employees or key advisors, or the failure to attract, integrate, motivate and retain additional key employees, can have a material adverse
effect on our business. Competition for well-qualified and skilled employees has been increasingly intense, and our future success also
depends on our continuing ability to attract, develop, motivate and retain highly qualified and skilled employees, including, in particular,
software engineers, data scientists and technology and fulfillment professionals. Although we have employment agreements with our executive
officers, all of our executive officers are employed "at-will" and could terminate their employment at any time. If we lose
one or more of our executive officers or other key employees, our ability to implement our business strategy successfully can be seriously
harmed. Furthermore, replacing executive officers or other key employees with other highly skilled and qualified candidates has been and
may continue to be difficult, taking an extended period of time. Recruiting skilled personnel is highly competitive. The increased availability
of flexible or remote work arrangements, accelerated by the COVID-19 pandemic, has both intensified and expanded competition for qualified
personnel. There can be no assurance that we will continue to attract and retain the personnel needed for our business. The failure to
attract or retain qualified personnel could have a material adverse effect on our business.
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A significant inadvertent disclosure or
breach of confidential or personal information we hold could be detrimental to our business, reputation and results of operations.
Our business requires the storage, transmission
and utilization of data, including personal information, much of which must be maintained on a confidential basis. These activities have
made, and may in the future make, us a target of cyber-attacks by third parties seeking unauthorized access to the data we maintain, including
our customer data, or to disrupt our ability to provide service. As a result of the types and volume of personal data on our systems,
we believe that we are a particularly attractive target for such breaches and attacks. For example, in 2018, Newegg suffered an intrusion
of a portion of its network, as a result of which access was gained to a limited amount of credit card information.
In recent years, the frequency, severity and sophistication
of cyber-attacks, computer malware, viruses, social engineering, and other intentional misconduct by computer hackers has significantly
increased, and government agencies and security experts have warned about the growing risks of hackers, cyber criminals and other potential
attackers targeting information technology systems. Such third parties could attempt to gain entry to our systems for the purpose of stealing
data or disrupting the systems. In addition, our security measures may also be breached due to employee error, malfeasance, system errors
or vulnerabilities, including vulnerabilities of our vendors, suppliers, their products, or otherwise. Third parties may also attempt
to fraudulently induce employees or customers into disclosing sensitive information such as usernames, passwords or other information
to gain access to our customers' data or our data, including intellectual property and other confidential business information.
While we have implemented security measures designed
to protect against security breaches, these measures could fail or may be insufficient, particularly as techniques used to sabotage or
obtain unauthorized access to systems change frequently and generally are not recognized until launched against a target, resulting in
the unauthorized disclosure, modification, misuse, destruction, or loss of our or our customers' data or other sensitive information.
Any failure to prevent or mitigate security breaches and improper access to or disclosure of the data we maintain, including personal
information, could result in litigation, indemnity obligations, regulatory enforcement actions, investigations, fines, penalties, mitigation
and remediation costs, disputes, reputational harm, diversion of management's attention, and other liabilities and damage to our
business.
We believe we have taken appropriate measures
to protect our systems from intrusion, but we cannot be certain that advances in criminal capabilities, discovery of new vulnerabilities
in our systems and attempts to exploit those vulnerabilities, physical system or facility break-ins and data thefts or other developments
will not compromise or breach the technology protecting our systems and the information we possess.
We may incur significant costs in protecting against
or remediating cyber-attacks. Any security breach could result in operational disruptions that impair our ability to meet our customers'
requirements, which could result in decreased revenue. Also, whether there is an actual or a perceived breach of our security, our reputation
could suffer irreparable harm, causing our current and prospective customers to reject our products and services in the future, deterring
data suppliers from supplying us data or customers from uploading their data on our platform, or changing consumer behaviors and use of
our technology. Further, we could be forced to expend significant resources in response to a security breach, including those expended
in notifying individuals and providing mitigating services, repairing system damage, increasing cybersecurity protection costs by deploying
additional personnel and protection technologies, and litigating and resolving legal claims or governmental inquiries and investigations,
all of which could divert the attention of our management and key personnel away from our business operations. Federal, state and foreign
governments continue to consider and implement laws and regulations addressing data privacy, cybersecurity, and data protection laws,
which include provisions relating to breaches. In any event, a significant security breach could materially harm our business, operating
results and financial condition.
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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. 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.
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. Additionally,
we compete not only for customers and Marketplace sellers, but also for favorable product allocations and cooperative advertising support
from our vendors. If we fail to maintain favorable recognition of our brand, we may not be successful in maintaining and strengthening
our relationships with vendors in existing and new product categories or in maintaining existing offerings and sourcing new products at
competitive prices and with adequate levels of inventory.
Adverse publicity about Newegg may arise from
time to time. Negative comments about our online platforms, the products and services offered by us and our Marketplace sellers or our
management may appear in internet postings and other media sources from time to time, and there is no assurance that other types of negative
publicity of a more serious nature will not arise in the future. For example, if our customer service representatives fail to satisfy
the individual needs of the customers, the customers may become disgruntled and disseminate negative comments about our customer service.
In addition, our Marketplace sellers and brand partners may also be subject to negative publicity for various reasons, such as customers'
complaints about the quality of their products and related services or other public relations incidents, which may adversely affect the
sales of their products through Newegg and indirectly affect our reputation. Moreover, negative publicity about other online retailers
or the e-commerce industry in general may arise from time to time and cause customers to lose confidence in the products and services
Newegg offers. Any such negative publicity, regardless of veracity, may have a material adverse effect on our business, reputation and
financial condition.
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. 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. If we are unable to successfully
manage the effects of inflation, our business, operating results, cash flows and financial condition may be adversely affected. In addition,
inflation may amplify or exacerbate many of the other risks discussed in this "Risk Factors" section.
We identified material weaknesses in our internal control over
financial reporting and may identify additional material weaknesses in the future or otherwise fail to maintain an effective system of
internal controls, which could result in material misstatements of our consolidated financial statements or cause us to fail to meet our
periodic reporting obligations.
We have identified material weaknesses in our internal control over
financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting
such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented
or detected on a timely basis. We have concluded that material weaknesses arose because we did not have effective internal controls in
place with respect to the Control Activities and Information & Communication components of the Committee of Sponsoring Organizations
of the Treadway Commission (COSO) internal control framework.
For a description of the identified material weaknesses, see Item 15,
"Controls and Procedures." In connection with management's identification of these material weaknesses, management has
concluded that our disclosure controls and procedures were not effective as of December 31, 2022 and 2021.
As further described in Item 15 "Controls and Procedures,"
we have undertaken steps to improve our internal control over financial reporting. We expect that we will need to improve existing procedures
and controls, and implement new ones, to remediate the material weaknesses. We may not be successful in making the improvements necessary
to remediate the material weaknesses identified by management or be able to do so in a timely manner. Any inability to remediate the material
weaknesses effectively or in a timely manner, or the identification of any new material weaknesses in the future, could limit our ability
to prevent or detect a misstatement of our accounts or disclosures and could result in a material misstatement of our annual or interim
financial statements. In such case, we may be unable to maintain compliance with securities law requirements regarding timely filing of
periodic reports in addition to applicable stock exchange listing requirements, investors may lose confidence in our financial reporting
and the price of our common stock may decline as a result.
We are, or may become, subject to risks
associated with our international operations, principally in Canada, which may harm our business.
Newegg began operations on our Canadian retail
website, www.newegg.ca, in October 2008. We also have a physical presence in China and Taiwan. 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.
Any one of the foregoing factors could cause our
business, financial condition and results of operations to suffer.
Any future expansion into new product categories,
services, technologies and geographic regions may subject us to additional business, legal, financial and competitive risks.
Any future expansion into new product categories,
services, technologies and regions, such as our expansion into Canada and our third-party service offerings under Newegg Partner Services
("NPS"), is subject to risk. In directing our focus into new areas, we face numerous risks and challenges, including alienating
our core customer base, facing new competitors, having the increased need to develop new strategic relationships and straining our management,
personnel, operations, systems, technical performance, financial resources, and internal financial control and reporting functions. There
is no assurance that our strategy will result in increased net sales or net income. Furthermore, growth into new business areas may require
changes to our existing business model and cost structure, modifications to our infrastructure, and exposure to new regulatory and legal
risks related to operating in new jurisdictions, any of which may require expertise in areas in which we have little or no experience.
These risks may pose a material adverse risk to our business, financial condition and results of operations.
Any interruption in our fulfillment operations
may have an adverse impact on our business.
Our ability to process and fulfill orders accurately
and provide high-quality customer service depends on the smooth operation of our fulfillment infrastructure, including our warehouses
and order processing centers. If we do not optimize and operate our fulfillment infrastructure successfully and efficiently, it could
result in excess or insufficient fulfillment capacity, an increase in costs or impairment charges and a reduction in our gross profit
margin, or harm our business in other ways. If we do not have sufficient fulfillment capacity or experience a problem fulfilling orders
in a timely manner or if certain products are out of stock, our customers may experience delays in receiving their orders, which could
harm our reputation and our relationship with our customers.
Our fulfillment infrastructure may be vulnerable
to damage caused by fire, floods, power outages, telecommunications failures, break-ins, earthquakes, human error and other events. For
example, our warehouse located in Indianapolis experienced a significant fire in January 2019, causing damage to our inventory. In addition,
in May 2022, our warehouse located in Toronto, Canada experienced a break-in and theft of approximately $3.4 million of inventory. Our
fulfillment infrastructure and processes may also contain undetected errors or design flaws that may cause our fulfillment operations
to fail and materially impact our business and results of operations. If, for example, any of our warehouses were rendered incapable of
operations, we may be unable to fulfill any orders in areas that rely on that warehouse. While we maintain property and business interruption
insurance to protect against losses of this nature, we cannot guarantee that such insurance will be available in the future at terms and
rates acceptable to us, nor can we guarantee that any related insurance claims will be paid out in a timely manner, or at all. The occurrence
of any of the foregoing risks could have a material adverse effect on our business, prospects, financial condition and results of operations.
We rely on a limited number of third-party
courier service providers to deliver our products, and their failure to provide high-quality courier services in a timely manner, if
at all, to our customers may negatively impact the procurement experience of our customers, damage our market reputation and materially
and adversely affect our business and results of operations.
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. Interruptions to or failures in these couriers' shipping services could prevent the timely or successful delivery
of our products. These interruptions may be due to unforeseen events that are beyond our control or the control of these third-party
couriers, such as inclement weather, natural disasters or labor unrest. 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.
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.
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.
Actual or threatened war, terrorist activities, political unrest, civil strife, and other geopolitical uncertainty could have a similar
adverse effect on our business, financial condition, and results of operations. It is difficult to assess the likelihood of such threat
and any potential impact at this time. 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. If we fail to maintain strong vendor relationships or if our vendors are otherwise unable
to supply products that meet our standards in a timely manner, our net sales and net income could suffer.
Our contracts or arrangements with vendors generally
do not guarantee the availability of merchandise or provide for the continuation of particular pricing or other practices. Our vendors
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. In most cases, our relationships with our vendors do not restrict them from selling
their products through our competitors. Newegg competes with other retailers for favorable product allocations and vendor incentives from
product manufacturers and distributors, including but not limited to marketing dollars and volume-based sales incentive programs. Some
of our competitors could enter into exclusive or favorable distribution arrangements for certain products with our vendors, which would
deny us complete or partial access to those products and marketing and promotional resources. In addition, some vendors whose products
are offered on our online platforms also sell their products directly to customers. If we are unable to develop and maintain relationships
with vendors that permit us to obtain sufficient quantities of desirable merchandise on favorable terms, our business, financial condition
and results of operations could be adversely impacted.
Our relationship with any particular vendor is
dependent on our sales of products manufactured or distributed by that vendor. For certain products, we do not currently, and in the future
may not be able to, meet the sales volumes or other requirements necessary to receive favorable treatment from the manufacturer of that
product. As a result, we may not receive favorable pricing, vendor incentives or other considerations from those vendors. During times
of short supply for highly desirable products, we may not receive adequate, or any, allocation of a popular product, leading to lost sales
and customer dissatisfaction.
Certain products help create and maintain customer
loyalty to the Newegg brand. Failing to maintain an adequate supply of these products could damage our ability to retain customers. We
currently do not carry the full product portfolio of, and in some cases do not carry any products of, certain well-known brands. As a
result, consumers who are searching for those brands may not be able to purchase products from us or purchase them at the most favorable
prices, leading to potentially reduced net sales and net income.
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. 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.
Our vendors' financial performance, liquidity
and access to capital may be materially adversely affected by many factors, including, but not limited to: general economic factors, such
as a continued slowdown in the U.S. or global economy or an uncertain economic outlook; political or financial instability; merchandise
quality issues; product safety concerns; trade restrictions; work stoppages; tariffs; international trade war; foreign currency exchange
rates; transportation capacity and costs; inflation; or outbreak of pandemics. 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.
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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.
Our success depends on our ability to attract visitors to our online
platforms and convert them into customers in a cost-effective manner. We rely on search engines, social media, shopping comparison sites
and other affiliate networks to provide content, advertising banners and other links that direct visitors to our online platforms. 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. 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. 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. We also
sometimes pay these third parties to include or highlight our websites in their search results. If 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.
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. If we are unable to attract visitors to our websites and mobile
apps and convert them into customers cost-effectively, our business and financial results may be harmed.
Because many of the products that we sell
are manufactured abroad, we may face delays, increased cost or quality control deficiencies in the importation of these products, which
could reduce our net sales and profitability.
Many of the products that we purchase for direct
sale on our online platforms are manufactured in countries outside the United States. These imported products subject us to the risk of
changes in import duties or quotas, new restrictions on imports, work stoppages, delays in shipment, freight cost increases, product cost
increases due to foreign currency fluctuations or revaluations and economic uncertainties (including the imposition of antidumping or
countervailing duty orders, safeguards, remedies or compensation and retaliation due to illegal foreign trade practices) and instability
in the political and economic environments of the countries in which the manufacturers of these products operate. If any of these or other
factors were to cause a disruption of trade from these countries, we may be unable to obtain sufficient quantities of these imported products
to satisfy our requirements or our cost of obtaining such products may increase. Historically, instability in the political and economic
environments of the countries in which our suppliers operate has not had a material adverse effect on our operations. However, the effect
that future changes in economic or political conditions in the foreign countries where our supplying manufacturers are located may have
on our operations cannot be predicted. Potential disruptions or delays in supply due to economic or political conditions in foreign countries
could adversely affect our results of operations unless and until alternative supply arrangements are made.
We are partially dependent on third parties to perform a number
of our e-commerce functions. 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. We have no effective means to ensure that these third parties will
continue to perform these services to our satisfaction, in a manner satisfactory to our customers or on commercially reasonable terms.
Our customers may become dissatisfied and cancel their orders or decline to make future purchases if these third parties fail to deliver
products on a timely basis. 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 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. We assume inventory damage, theft, obsolescence, and
price erosion risks for our inventory. These risks are especially significant as most of the merchandise sold on our online platforms
is characterized by rapid technological change, obsolescence and price erosion. 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. We also periodically take advantage of cost savings associated with certain opportunistic bulk inventory purchases offered by
our vendors. These bulk purchases increase our exposure to inventory obsolescence. Our success depends on our ability to sell our inventory
rapidly, purchase inventory at attractive prices relative to our resale value and manage customer returns and the shrinkage resulting
from theft, loss, and misrecording of inventory. If we are unsuccessful in any of these areas, we may be forced to write down or write
off substantial amounts of inventory, or sell it at a discount or loss, which could materially and adversely impact our business, financial
condition and results of operations.
We depend on our demand forecasts for various
kinds of products to make purchase decisions and to manage our inventory. We are exposed to inventory risks as a result of seasonality,
new product launches, rapid changes in product cycles and pricing, defective merchandise, changes in consumer demand, tastes and spending
patterns, and other factors. While we endeavor to accurately predict these trends and avoid overstocking or understocking products we
sell, the demand for products can change significantly between the time inventory is ordered and the date of sale, and we may be unable
to sell products in sufficient quantities as we expect. Furthermore, we may in the future open additional warehouses and duplicate part
of the inventory for our direct sales business that is stored at our current warehouses to increase our overall fulfillment efficiency
as we grow our business, which will also increase the inventory risks our direct sales business faces. Failure to effectively manage our
inventory risk could have a material adverse effect on our business, financial condition and results of operations.
We have incurred net losses in the past and may experience losses
in the future.
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. Our ability to achieve and maintain
profitability will depend in large part on our ability to, among other things, source and sell higher margin products, grow and diversify
our supplier base, and optimize our cost structure. We may not be able to achieve any of the above. If we grow and expand our business,
our operating expenses may increase further. As a result of the foregoing, we may incur net losses in the future.
If we fail to adopt new technologies or adapt our websites, mobile
apps and systems to changing customer requirements or emerging industry standards, our business may be materially and adversely affected.
To remain competitive, we must continue to enhance and improve the
responsiveness, functionality and features of our online platforms, including our websites and mobile apps. The internet and the e-commerce
industry are characterized by rapid technological evolution, such as emerging artificial intelligence ("AI") and machine learning
technologies, frequent introductions of new products and services embodying new technologies and the emergence of new industry standards
and practices, and changes in customer requirements and preferences, any of which could render our existing technologies and systems obsolete.
We may be required to devote substantial resources to developing proprietary technologies or license technologies, enhancing our existing
websites and mobile apps, developing new services and technology such as AI and machine learning that address the increasingly sophisticated
and varied needs of our current and prospective customers and adapting to technological advances and emerging industry and regulatory
standards and practices in a cost-effective and timely manner. The development of proprietary technology entails significant technical
and business risks. There can be no assurance that our efforts to develop proprietary technologies will succeed or that any technology
licenses will be available on commercially reasonable terms. Substantial investments will be required to remain technologically competitive,
and our failure to do so may harm our business and results of operations.
16
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. While the early part of the COVID-19 pandemic resulted in increased
cash and accounts payable balances and faster inventory turnaround times due to an increased demand in our products, we have seen that
trend reverse in 2022 with reduced consumer demand and a more challenging macroeconomic environment. 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. This manifests itself in a variety of ways: the emergence of
new products and categories, the often rapid maturation of categories, cannibalization of categories, changing price points and product
replacement and upgrade cycles.
This rapid pace of change can be hard to predict and manage, and there
is no guarantee we can effectively do so all the time. If we fail to interpret, predict and react to these changes in a timely and effective
manner, the consequences can include: failure to offer the products and services that our customers want; excess inventory, which may
require heavy discounting or liquidation; inability to secure adequate access to brands or products for which consumer demand exceeds
supply; delays in adapting our merchandising, marketing or supply chain capabilities to accommodate changes in product trends; and damage
to our brand and reputation. In addition, consumer preferences may be influenced even further as the social and economic environment navigates
through the post-pandemic environment. These and other similar factors could have a material adverse impact on our revenue and profitability.
The successful operation of our business
depends upon the performance, reliability and security of the internet infrastructure in the countries where we operate.
Our business depends on the performance, reliability
and security of the telecommunications and internet infrastructure in the countries where we operate. We have several servers located
in China that provide development, testing and quality control services. Almost all access to the internet in China is maintained through
state-owned telecommunication operators under the administrative control and regulatory supervision of the Ministry of Industry and Information
Technology of the People's Republic of China. In addition, the national networks in China are connected to the internet through
state-owned international gateways, which are the only channels through which a domestic user can connect to the internet outside China.
We may face similar or other limitations in other countries in which we operate. 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.
The failure of telecommunications network operators
to provide Newegg with the requisite bandwidth could also interfere with the speed and availability of our websites and mobile apps. If
the prices that we pay for telecommunications and internet services rise significantly, our net income could be adversely affected. In
addition, if internet access fees or other charges to internet users increase, our user traffic may decrease, which in turn may significantly
decrease our revenues.
17
If we are unable to manage our growth or
execute our strategies effectively, our business and prospects may be materially and adversely affected.
Our success depends upon our ability to manage
the growth of our operations effectively. We anticipate expanding further as we pursue our growth strategies. Our expansion increases
the complexity of our business and places a significant strain on our management, operations, technical systems, financial resources and
internal control over financial reporting functions. Our current and planned personnel, systems, procedures and controls may not be adequate
to support and effectively manage our future operations, especially as we employ personnel in several geographic locations. In addition,
our growth will require us to improve our operational and financial systems, procedures and controls, successfully manage international
operations and hire additional personnel. These efforts may not be successful, and we may be unable to improve our systems, procedures
and controls in a timely manner.
Delays or problems associated with any of these
initiatives could harm our business and operating results. These initiatives will also cause our operating expenses to increase. If we
fail to accurately estimate and assess our growth or fail to increase net sales to match our increased operating expenses, our financial
condition and results of operations could suffer.
An adverse change in  our vendor payment
terms and conditions may have a material adverse effect on our business, financial condition and results of operations.
We purchase our inventory from vendors on trade
accounts typically requiring payment between 30 and 60 days after the date the inventory is shipped to us. As of December 31, 2022, our
accounts payable balance was $207.1 million with 50 days of payables outstanding. Our accounts payable balances as of December 31, 2022
represented 38.2% of our liabilities and shareholders' equity. An adverse change in our vendors' payment terms and conditions
would significantly increase our working capital requirements and have a material adverse effect on our business, financial condition
and results of operations.
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. To the extent these new procedures and policies have not
changed historical behaviors that might be inconsistent with the rules and practices regulating a U.S. public company, we could be at
risk of violation or poor reporting as a public company. If our directors or executive officers inadvertently fail to identify, review
or disclose a new relationship or arrangement causing the Company to fail to properly disclose any related party transaction or in the
event that we fail to comply with SEC reporting and internal controls and procedures, we may be subject to securities laws violations
that may result in additional compliance costs or costs associated with SEC judgments or fines, both of which will increase our costs
and negatively affect our potential profitability and our ability to conduct our business. The public reporting requirements and controls
are new for our management since completion of the Merger in May 2021 and may require us to obtain outside assistance from legal, accounting
or other professionals that will increase our costs of doing business.
18
We and certain of our subsidiaries are parties
to a revolving credit agreement, which contains a number of covenants that may restrict our current and future operations and could adversely
affect our ability to execute business needs.
We and certain of our subsidiaries have entered
into certain credit agreements with financial institutions which contains a number of covenants that limit our ability and our subsidiaries'
ability to, among other things, incur indebtedness, create liens, make investments, merge with other companies, dispose of our assets,
prepay other indebtedness and make other distributions. 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. In addition, complying with these covenants may make it more difficult to successfully
execute our business strategy, invest in our growth strategy and compete against companies who are not subject to such restrictions. The
credit agreement also contains financial covenants that require us to maintain certain minimum financial ratios and maintain an operating
banking relationship with the financial institutions. Although we are currently in compliance with the financial covenants, we cannot
guarantee that we will continue to be able to generate sufficient cash flow or sales to meet the financial covenants or pay the principal
or interest under the credit agreements.
If we are unable to comply with our payment requirements,
the financial institutions may accelerate our obligations under the credit agreement and foreclose upon the collateral, or we may be forced
to sell assets, restructure our indebtedness or seek additional equity capital, which would dilute shareholders' interests. If we
fail to comply with any covenant it could result in an event of default under the agreement and the lenders could make the entire debt
immediately due and payable. If this occurs, we might not be able to repay the debt or borrow sufficient funds to refinance it. Even if
new financing is available, it may not be on terms that are acceptable to us. See "Note 8 - Line of Credit" to our consolidated
financial statements for more information.
Our international sales and operations require access to international
markets and are subject to applicable laws relating to trade, export and import controls and economic sanctions, the violation of which
could adversely affect our operations.
Newegg must comply with all applicable U.S. export and import laws
and regulations. Such laws and regulations include, but are not limited to, the Export Administration Act and the Export Administration
Regulations. Newegg must also comply with U.S. sanctions laws and regulations, which are primarily administered by the U.S. Department
of Treasury's Office of Foreign Assets Control, as well as other U.S. government agencies. U.S. sanctions generally prohibit transactions
by U.S. persons, including us, involving sanctioned countries, entities and persons, without U.S. government authorization (which will
rarely be granted). Non-U.S. subsidiaries of U.S. companies are required to comply with U.S. sanctions against Cuba and Iran.
Violations of U.S. laws and regulations relating to trade, export and
import controls and economic sanctions could result in significant civil and/or criminal penalties on us or on our foreign subsidiaries,
including fines, prohibitions on exporting and importing, prohibitions on receiving government contracts or other government assistance
and other trade-related restrictions. U.S. enforcement of such laws and regulations continues to increase.
We must also comply with applicable foreign laws relating to trade,
export and import controls and economic sanctions. We may not be aware of all of such laws applicable in the markets in which we do business,
which subjects us to the risk of potential violations.
We may need additional capital and failure to raise additional
capital on terms favorable to us, or at all, could limit our ability to grow our business and develop or enhance our service offerings
to respond to market demand or competitive challenges.
We believe that our current cash, cash flow from operations and borrowings
are sufficient to meet our anticipated cash needs for at least the next 12 months. We may, however, require additional cash resources
due to changed business conditions or other future developments, including any investments or acquisitions we may decide to pursue. If
these resources are insufficient to satisfy our cash requirements, we may seek to sell additional equity or debt securities, or draw from
or refinance our credit facilities. The sale of additional equity securities could result in dilution to our shareholders. The incurrence
of indebtedness would result in increased debt service obligations and could require us to agree to operating and financing covenants
that would restrict our operations. 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.
In addition, adverse developments that affect financial institutions,
or concerns about such developments, have in the past and may in the future lead to market-wide liquidity problems and disruptions in
the financial services industry. For example, in March 2023, the closure of Silicon Valley Bank and Signature Bank destabilized many financial
institutions and created uncertainty across the industry. Although we did not have any funds in Silicon Valley Bank or
Signature Bank, future defaults or other similar destabilizing events could impact the credit markets and adversely impact our ability
to access our capital and to obtain debt financing on favorable terms.
Financing may not be available
in amounts or on terms acceptable to us, if at all. 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. Any of these types of proceedings can have an adverse effect on us because of legal
costs, disruption of our operations, diversion of management resources, negative publicity, and other factors. The outcomes of these matters
are inherently unpredictable and subject to significant uncertainties. Determining legal reserves or possible losses from such matters
involves judgment and may not reflect the full range of uncertainties and unpredictable outcomes. Until the final resolution of such matters,
we may be exposed to losses in excess of the amount recorded, and such amounts could be material. Should any of our estimates and assumptions
change or prove to have been incorrect, it could have a material effect on our business or results of operations.
We may not be able to adequately protect
our intellectual property rights.
We rely on trademark and copyright law, trade
secret protection and confidentiality or licensing agreements with employees, buyers, third-party sellers, brand partners and others to
protect our proprietary rights. These steps may be inadequate, agreements may be violated or there may be inadequate remedies for a violation
of such agreements. Our competitors may independently develop equivalent proprietary information and rights or may otherwise gain access
to our trade secrets or proprietary information, which could affect our ability to compete in the market. 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. We have registered and common law trademark rights in the United States and certain foreign jurisdictions,
as well as pending trademark applications for a number of marks and associated domain names. Such pending applications are not certain
to be approved, and even if we obtain approval for such pending applications, the resulting registrations may not adequately cover our
trademarks or protect us against infringement or dilution by others. Effective trademark, service mark, copyright, patent and trade secret
protection may not be available in every country or jurisdiction in which our products may be made available online, which may cause our
business and operating results to suffer. In addition, we may be unable to acquire or protect relevant domain names in the United States
and in other countries. 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.
Third parties have, and likely will in the future,
assert allegations and claims of intellectual property infringement against us on the items or their descriptions listed on our websites
and mobile apps. Any such claims, disputes or litigation, even if resolved in our favor or not true, could be time-consuming and costly
to defend, and could divert our management's efforts from growing our business. We have intellectual property complaint and take-down
procedures in place to address communications alleging that items listed on online platforms, including the Newegg Marketplace, infringe
third-party copyrights, trademarks or other intellectual property rights. We follow these procedures to review complaints and relevant
facts to determine the appropriate action, which may include removal of the item from our online platforms and, in certain cases, discontinuing
our relationship with a Marketplace seller or brand partner who violates our policies. However, these rules and procedures may not effectively
reduce or eliminate our liability. In particular, Newegg may be subject to civil or criminal liability for activities carried out, including
products listed, by sellers or brands on our online platforms.
If any third parties prevail in their intellectual
property rights claims against Newegg, we may be required to pay significant licensing fees, damages and attorney's fees, and may
even be liable for punitive damages if Newegg is found to have willfully infringed third parties' proprietary rights. We may have
to stop using certain technology or solutions and need to develop or acquire alternative, non-infringing technology or solutions, which
could require significant time and resources. We could even be required to obtain a license to use certain technologies, although such
licenses may not be available on reasonable terms or at all, which may result in substantial payments and royalties and significantly
increase our operating expenses. If we cannot develop non-infringing technology or license the appropriate technology at commercially
reasonable rates, an intellectual property claim successfully asserted against us could cause significant business interruptions in our
operations, which could restrict our ability to compete effectively and have a material adverse effect on our financial condition and
results of operations.
Newegg may be subject to product liability
claims, which could be costly and time-consuming to defend.
The majority of the products sold on our online
platforms are manufactured by third parties, and some of them may be defectively designed or manufactured. If any product we sell were
to cause physical injury or injury to property, an injured party could bring claims against us as the retailer of the product. Furthermore,
we also offer computer systems, IT components, peripherals, household appliances and other goods under our private labels, Rosewill and
ABS, on our platforms or through other e-commerce platforms, such as eBay, which could potentially create more exposure for Newegg with
respect to product liability than if we had simply acted as a retailer of third-party products. Our insurance coverage may not be adequate
against such product liability claims. If a successful claim were brought against Newegg in excess of our insurance coverage, it could
adversely affect our financial condition and results of operations. 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.
In the ordinary course of business, Newegg is subject to tax examinations
by various governmental tax authorities. The global and diverse nature of our business means that there could be additional examinations
by governmental tax authorities and the resolution of ongoing and other probable audits which could impose a future risk to the results
of our business. For example, in February 2018, we received from the Commonwealth of Massachusetts Department of Revenue a notice of intent
to assess sales and use taxes relating to a prior tax period, which subsequently resulted in an assessment of approximately $0.3 million,
plus penalties and interest. In May 2020, we received from the Commonwealth of Massachusetts Department of Revenue another notice of assessment
for sales and use taxes for additional prior tax periods in the amount of a total assessment of $2.7 million, including penalties and
interest. We appealed these assessments, and ultimately prevailed. 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.
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. The U.S. government has adopted changes, and may adopt further changes, to trade policy and in some cases, to renegotiate,
or potentially terminate, certain existing bilateral or multi-lateral trade agreements. 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. 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. 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"). The USTR announced
in June and July 2018 two additional supplemental lists of products that are subject to tariffs if the goods imported into the United
States originate in China, which increased the cost of these imported products. These supplemental lists issued by the USTR added an additional
25% tariff on certain semiconductor equipment and parts originating in China that are sold by Newegg or used in our business in the United
States. In August 2018, the second list was made effective with a 25% tariff and in September 2018 the third list ("List 3")
was made effective with a 10% tariff, increasing to 25% in May 2019. A fourth list was proposed by USTR in May 2019 for all remaining
items originating in China. A portion of the fourth list ("List 4a"), was made effective September 1, 2019, with an additional
tariff of 15%, reduced to 7.5% on February 14, 2020. The remainder of the fourth list ("List 4b") was scheduled to have an
additional tariff of 15% go into effect on December 15, 2019; however, on December 13, 2019, the tariffs for List 4b were suspended after
the U.S. announced it would enter into a trade agreement with China (the "Phase 1 Agreement"). A Phase 2 Agreement has not
been announced as of the date of this annual report. On April 1, 2022, the U.S. Court of International Trade upheld the List 3 and List
4a tariffs and rejected arguments brought by plaintiff importers that the tariffs exceeded the authority of the USTR to impose. Certain
procedural issues with the tariffs were remanded to USTR to reconsider. It is expected that this litigation, which only covers tariffs
imposed on goods originating from China, will continue into 2023. In May 2022, the USTR began the statutory four-year review of the Section
301 actions taken against China. The agency determined that two separate actions had been taken as part of the investigation (the first
and second list), and that they had been subsequently modified by imposing additional duties on supplemental lists of products (List 3
and List 4a), as well as by temporarily removing or suspending duties on some of them through exclusions. The USTR announced that the
first step of this review process would be to notify representatives of domestic industries that benefit from the trade actions (as modified)
of their possible termination, and to offer them the opportunity to request their continuation. The USTR announced in September 2022 that
it had received several such requests and that as a result, it would keep the actions in place—subject to possible further modifications—and
proceed with the second phase of the review process.
Any increase in the cost of importing goods and
parts could decrease our margins, reduce the competitiveness of our products, or inhibit our ability to sell products or purchase necessary
parts, which could have a material adverse effect on our business results, results of operations, or financial condition.
22
On April 28, 2020 the U.S. Department of Commerce issued new rules
that (1) expand the definition of military end use and (2) eliminate the applicability of certain license exceptions for exports to countries
on Country Group D of Supplement No. 1 to part 740 of the Export Administration Regulations. These changes expand export license requirements
for U.S. companies to sell certain items to companies in China that have operations that could support military end uses, even if the
items sold by the U.S. companies are for civilian end use and they reduce the applicability of license exceptions for exports to those
countries listed on Country Group D, including China. Additionally, amendments have been made to General Prohibition Three (Foreign-Produced
Direct Product Rule) and the Entity List, the most recent of which were effective August 17, 2020. These amendments expand the restrictions
on the sale of goods manufactured outside the United States that are produced using certain controlled U.S. technology or software to
companies on the U.S. Entity List, and regulate the use of U.S.-origin semiconductor manufacturing equipment that produces semiconductor
devices for companies on the U.S. Entity List. The rule changes for export controls may reduce or impair our ability to sell products
internationally, which could in turn decrease the demand for our products and have a material adverse effect on our revenues and profitability.
At this time, the rule changes are not anticipated to impact the Company's sales of non-U.S. products; however, any unpredicted
rule changes could adversely affect our business results, operations, or financial condition.
Changes in U.S. trade policy could result in one
or more U.S. trading partners adopting responsive trade policy making it more difficult or costly for us to export our products to those
countries. As indicated above, these measures could also 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. To the extent that trade tariffs and other restrictions imposed by the U.S. increase the price of semiconductor
equipment and related parts imported into the U.S., the cost of our materials may be adversely affected and the demand from customers
for products and services may be diminished, which could adversely affect our revenues and profitability. See "— Newegg's
Business Model" for more information about direct sales and marketplace.
We cannot predict future trade policy, the terms
of any renegotiated trade agreements or additional imposed tariffs and their impact on our business. 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.
Changes in U.S. social, political, regulatory
and economic conditions or in laws and policies governing foreign trade, manufacturing, development and investment in the territories
and countries where we currently develop and sell products, and any negative sentiments towards the United States as a result of such
changes, could adversely affect our business. In addition, negative sentiments towards the United States among non-U.S. customers and
among non-U.S. employees or prospective employees could adversely affect sales or hiring and retention, respectively.
Employment laws in some of the countries
in which we operate are relatively stringent.
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. In some of the countries in which we operate, employment laws may grant significant job protection to employees, including
rights on termination of employment and setting maximum number of hours and days per week that a particular employee is permitted to work.
In addition, in certain countries in which we operate, Newegg is or may be required to consult and seek the advice of employee representatives
and/or unions. These laws, coupled with the requirement to consult with any relevant employee representatives and unions, could impact
our ability to react to market changes and the needs of our business.
Our ability to use our net operating loss
carryforwards and certain other tax attributes may be limited and could adversely impact our business, financial condition and operating
results.
Under Sections 382 and 383 of the Code, if a corporation
undergoes an "ownership change," the corporation's ability to use its pre-change net operating loss carryforwards and
other pre-change tax attributes to offset its post-change income and taxes may be limited. In general, an "ownership change"
occurs if there is a cumulative change in our ownership by one or more "5% shareholders" (as defined under U.S. income tax
laws) that exceeds 50 percentage points over a rolling three-year period. Similar rules apply under state tax laws. We believe it is possible
that we may experience an ownership change in the future as a result of shifts in our stock ownership, some of which are outside our control,
in which case we may be limited in our ability to use our net operating loss carryforwards and other tax assets to reduce taxes owed on
the net taxable income that we earn. 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.
We believe that we are an inverted corporation for U.S. federal tax
purposes. 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.
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 shares of our common stock 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. 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. 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. The court has ruled that the loans
are in default in a final, non-appealable judgment. On December 19, 2022, Digital Grid, BOC, Newegg, and Hangzhou Lianluo entered into
a supplemental agreement (the "Supplemental Agreement") to agree upon procedures to temporarily remove BOC's lien on
Digital Grid's Newegg Common Shares to enable their sale and use of proceeds to repay BOC.
In addition, on April 11, 2023, the Industrial and Commercial Bank
of China ("ICBC") filed a lawsuit against Hangzhou Lianluo in the Hangzhou Intermediate People's Court in China alleging
that Hangzhou Lianluo failed to repay when due three separate loans, provided by ICBC to Hangzhou Lianluo, and was in breach of the related
loan agreements. 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.
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.
Sales of the Common Shares owned or pledged by Digital Grid or Hangzhou
Lianluo, including for the payment of financial or settlement obligations to BOC or ICBC, could cause the market price of the Common Shares
to drop significantly.
BOC could sell, or force Digital Grid to sell, some or all of its shares
while the BOC loans remain delinquent.  Digital Grid could also choose to voluntarily sell some or all of its shares at any time
to satisfy the BOC or ICBC loans.  Any such sale or attempted sale could:
●
Occur at a discount to our public trading price and over a short time period;
●
Result in a change of control of us to the buyer of such shares; or
●
Result in litigation over the ownership and title to those shares.
Each of these risks could cause our share price to fall significantly
and is described further below.
●
BOC could attempt to foreclose upon and sell Digital Grid's shares in Newegg at any time.  Any such sale could be done quickly and without regard for maximizing the sale price, other than to enable BOC to recover the amount of indebtedness owed to it by Hangzhou Lianluo.  In such a case, the sale price would likely be significantly less than the public trading price of our shares, which would likely cause our share price to fall significantly.
●
If Digital Grid sold some or all of its shares, its ownership percentage in Newegg could drop below 50%, causing it to lose control of our board of directors, leading to a potential change in control of the Company.  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.  The shareholders agreement gives a right of first refusal in favor of the Company, and a right of second refusal in favor of the pre-merger Newegg Inc. shareholders (which primarily includes Mr. Fred Chang), to purchase some or all of the shares being transferred, subject to certain exemptions. See "Item 10. Additional Information – B. Memorandum and Articles of Association –
Rights of Certain Principal Shareholders
–
Right of First Refusal of the Company and Principal Shareholders
" for additional detail. The shareholders agreement may not be recognized or enforceable in China's courts, because the agreement is governed by the laws of the British Virgin Islands, and China courts generally do not recognize court decisions from that jurisdiction.  As a result, BOC or Digital Grid could try to sell some or all of Digital Grid's shares without complying with those agreements.  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.
The market price of our common shares has fluctuated,
and may continue to fluctuate, widely, due to many factors, some of which may be beyond our control. 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.
Stock markets in general and our share price in particular have recently
experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those
companies and our company. For example, on March 28, 2022, our common shares experienced an intra-day trading high of $8.48 per share
and a low of $5.01 per share. In addition, from March 1, 2022 to April 29, 2022, the closing price of our common shares on Nasdaq ranged
from as low as $4.14 to as high as $8.48 and daily trading volume ranged from approximately 143,800 to 39,024,100 shares. During this
time, we have not experienced any material changes in our financial condition or results of operations that would explain such price volatility
or trading volume. These broad market fluctuations may adversely affect the trading price of our common shares. In particular, a large
proportion of our common shares has been and may continue to be traded by short sellers which has put and may continue to put pressure
on the supply and demand for our common shares, further influencing volatility in its market price. 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. 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. Fred Chang control approximately
59.3% and 34.6%, respectively, of the voting power of our issued and outstanding common shares, and 93.9%, collectively, as of December
31, 2022. Additionally, Mr. Zhitao He and Mr. Fred Chang, both of whom serve as our directors, will be able to exercise substantial influence
over our business and operations. They may also have a conflict of interest with our other shareholders. Where such a conflict exists,
our other shareholders will be dependent upon Mr. He, Mr. 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. Moreover,
such concentration of voting power could have the effect of delaying, deterring, or preventing a change of control or other business combination,
which may, in turn, have an adverse effect on the market price of our shares or prevent our shareholders from realizing a premium over
the then-prevailing market price for their shares.
We are a "controlled company"
within the meaning of the Nasdaq Listing Rules and, as a result, qualify for exemptions from certain corporate governance requirements.
You will not have the same protections afforded to shareholders of companies that are subject to such requirements.
Mr. Zhitao He, through Hangzhou Lianluo, Hyperfinite
Galaxy Holding Limited, and Digital Grid, controls a majority of the voting power of our outstanding common shares. As a result, we are
a "controlled company" within the meaning of Nasdaq's corporate governance standards. Under these rules, a company of
which more than 50% of the voting power is held by an individual, group or another company is a "controlled company." For
so long as we remain a controlled company under this definition, we are permitted to elect to rely on certain exemptions from corporate
governance rules, including:
●
an exemption from the rule
that a majority of our board must be independent directors;
●
an exemption from the rule
that the compensation of our chief executive officer must be determined or recommended solely by independent directors; and
●
an exemption from the rule
that our director nominees must be selected or recommended solely by independent directors.
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.
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 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. The number of directors that Digital Grid and the Minority Representative are entitled to appoint
will decrease proportionately with the decrease of the respective voting power of Digital Grid and the Legacy Shareholders. Any director
positions which neither Digital Grid nor the Minority Representative is entitled to appoint shall be appointed by the remaining directors,
or by any other means allowed under the Amended and Restated Memorandum and Articles of Association.
The Amended and Restated Memorandum and Articles
of Association limit your ability to appoint or elect persons for service on our board and may discourage proxy contests for the election
of directors and purchases of substantial blocks of shares by making it more difficult for a potential acquirer to gain control of our
board.
Certain provisions of Newegg's Amended
Shareholders Agreement 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.
We are party to an amended and restated shareholders
agreement (the "Amended Shareholders Agreement") with Digital Grid, Mr. 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.
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. If any Principal Shareholder receives
a bona fide offer from any person other than its affiliate to acquire any of the Principal Shareholder's common shares (the "ROFR
Shares"), then the Company has a right of first refusal, but not the obligation, to elect to purchase all (and not less than all)
of the ROFR Shares, at the same price, and on the same terms and conditions offered by the purchaser (the "ROFR Terms"). In
the event the Company does not decide to purchase all such ROFR Shares, then each of the Principal Shareholders other than the selling
Principal Shareholder shall have a right of first refusal to elect to purchase all (and not less than all) of its Pro Rata Share of the
ROFR Shares on the ROFR Terms; provided, however, that notwithstanding anything to the contrary, twenty percent (20%) of Company common
shares collectively held by each Principal Shareholder and its affiliates, calculated as of May 19, 2021, that are subject to any ROFR
Rights shall be exempt from any ROFR Rights. For the purpose of the Amended Shareholders Agreement, "Pro Rata Share" means
the percentage which corresponds to the ratio which each selling Principal Shareholder's "Percentage Interest" (which
is calculated by dividing (i) the number of the common shares owned by such Principal Shareholder, by (ii) total number of the then outstanding
shares of the common shares held by all Principal Shareholders) bears to the total Percentage Interests of all Principal Shareholders
exercising their right of first refusal. In the event that the ROFR Shares are in exchange for non-cash consideration, then such right
of first refusal shall be exercisable based on the fair market value determined in good faith by the board of such non-cash consideration.
We may be subject to 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.
In the past, shareholders of a public company
often brought securities class action suits following periods of instability in the market price of a company's securities. 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.
Any such class action suit, whether or not successful, could harm our reputation and restrict our ability to raise capital in the future.
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.
Our common shares are traded and listed on Nasdaq under the symbol
"NEGG." However, there is no assurance that we will be able to continue to maintain compliance with Nasdaq continued listing
requirements. The Nasdaq Listing Rules require, among other things, that listed securities maintain a minimum bid price of $1.00 per share
(the "Minimum Bid Price Requirement"), and failure to meet the Minimum Bid Price Requirement within specified compliance periods
following receipt of a deficiency notice may result in delisting. 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. As a result, selling our common shares could
be more difficult because smaller quantities of shares would likely be bought and sold, transactions could be delayed, and security analysts'
coverage of us may not arise. In addition, in the event our common shares are delisted, broker dealers would bear certain regulatory burdens
which may discourage broker dealers from effecting transactions in our common shares and further limit the liquidity of our shares. These
factors could result in lower prices and larger spreads in the bid and ask prices for our common shares. 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.
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.
From time to time, we and our directors and officers may be involved
in investigations or other forms of regulatory or governmental inquiry covering a range of possible issues including but not limited to
securities laws compliance.  See "Item 6.C. Board Practices – Involvement in Certain Legal Proceedings" for a discussion
of current legal proceedings.
These inquiries or investigations could lead to administrative, civil
or criminal proceedings involving us and could result in fines, penalties, restitution, other types of sanctions, or the need for us to
undertake remedial actions, or to alter our business, financial or accounting practices. Our practice is to cooperate fully with regulatory
and governmental inquiries and investigations.
Legal proceedings, inquiries and regulatory investigations are often
unpredictable, and it is possible that the ultimate resolution of any such matters, if unfavorable, may be material to our results of
operations in any future period, depending, in part, upon the size of the loss or liability imposed and the operating results for the
period, and could have a material adverse effect on our business. In addition, regardless of the ultimate outcome of any such legal proceeding,
inquiry or investigation, any such matter could cause us to incur additional expenses, which could be significant, and possibly material,
to our results of operations in any future period.
Any of these factors may result in large and sudden changes in the
volume and price at which the common shares will trade.
Shareholders of a public company often bring securities class action
suits against the company following periods of instability in the market price of that company's securities. 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. Any such class
action suit, whether or not successful, could harm our reputation and restrict our ability to raise capital in the future. 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.
27
If securities or industry analysts do not
publish research or reports about our business, or if they adversely change their recommendations regarding the common shares, the market
price for the common shares and trading volume could decline.
The trading market for the common shares could
be influenced by research or reports that industry or securities analysts may publish about our business in the future. Currently we have
one security analyst covering our company. If any additional analysts cover us in the future and downgrade the common shares, the market
price for the common shares would likely decline. If no additional analysts initiate coverage of us or fail to regularly publish reports
on us, we could lose visibility in the financial markets, which in turn could cause the market price or trading volume for the common
shares to decline.
Techniques employed by short sellers may
drive down the market price of our common shares.
Short selling is the practice of selling securities
that the seller does not own but rather has borrowed from a third party with the intention of buying identical securities back at a later
date to return to the lender. The short seller hopes to profit from a decline in the value of the securities between the sale of the borrowed
securities and the purchase of the replacement shares, as the short seller expects to pay less in that purchase than it received in the
sale. As it is in the short seller's interest for the price of the security to decline, many short sellers publish, or arrange for
the publication of, negative opinions and allegations regarding the relevant issuer and its business prospects in order to create negative
market momentum and generate profits for themselves after selling a security short. These short attacks appear to have, in the past, led
to selling of our shares in the market. If we were to become the subject of any unfavorable allegations, whether such allegations are
proven to be true or untrue, we could have to expend a significant amount of resources to investigate such allegations and/or defend ourselves.
We may not be able to defend against any such short seller attacks and may be constrained in the manner in which we can proceed against
the relevant short seller by principles of freedom of speech, applicable state law or issues of commercial confidentiality.
28
Investors may have difficulty enforcing
judgments against us, our directors and management.
We are incorporated under the laws of the BVI
and many of our directors reside outside the United States. Moreover, many of these persons do not have significant assets in the United
States. As a result, it may be difficult or impossible to effect service of process within the United States upon these persons, or to
recover against us or them on judgments of U.S. courts, including judgments predicated upon the civil liability provisions of the U.S.
federal securities laws.
The courts of the BVI would not automatically
enforce judgments of U.S. courts obtained in actions against us or our directors and officers, or some of the experts named herein, predicated
upon the civil liability provisions of the U.S. federal securities laws, or entertain actions brought in the BVI against us or such persons
predicated solely upon U.S. federal securities laws. Further, there is no treaty in effect between the United States and the BVI providing
for the enforcement of judgments of U.S. courts in civil and commercial matters, and there are grounds upon which BVI courts may decline
to enforce the judgments of U.S. courts. Some remedies available under the laws of U.S. jurisdictions, including remedies available under
the U.S. federal securities laws, may not be allowed in the BVI courts if contrary to public policy in the BVI. Because judgments of U.S.
courts are not automatically enforceable in the BVI, it may be difficult for you to recover against us or our directors and officers based
upon such judgments.
In addition, under PRC law, a foreign judgment, which does not otherwise
violate basic legal principles, state sovereignty, safety or social public interest, may be recognized and enforced by a PRC court, based
either on treaties between China and the country where the judgment is made or on principles of reciprocity between jurisdictions. As
currently there exists no treaty or other form of reciprocity between China and the United States or the BVI governing the recognition
and enforcement of judgments, including those predicated upon the liability provisions of the U.S. federal securities laws, there is uncertainty
whether and on what basis a PRC court would enforce judgments rendered by courts in the United States or the BVI. In addition, Taiwan
does not have treaties providing for the reciprocal recognition and enforcement of judgments of courts with the United States and the
BVI. Therefore, recognition and enforcement in Taiwan of judgement of United States and BVI courts in relation to any matter not subject
to a binding arbitration provision would need to be enforced in accordance with common law principles.
Certain types of class or derivative actions
generally available under U.S. law may not be available as a result of the fact that we are incorporated in the BVI. As a result, the
rights of shareholders may be limited.
Shareholders of BVI companies may not have standing
to initiate a shareholder derivative action in a court of the United States. The BVI courts are also unlikely to recognize or enforce
against us judgments of courts in the United States based on certain liability provisions of U.S. securities law or to impose liabilities
against us, in original actions brought in the BVI, based on certain liability provisions of U.S. securities laws that are penal in nature.
You may have more difficulty protecting
your interests than you would as a shareholder of a U.S. corporation.
Our corporate affairs will be governed by the
provisions of our memorandum and articles of association, as amended and restated from time to time, and by the provisions of applicable
BVI law. The rights of shareholders and the fiduciary responsibilities of our directors and officers under BVI law are not as clearly
established as they would be under statutes or judicial precedents in some jurisdictions in the United States, and some states (such as
Delaware) have more fully developed and judicially interpreted bodies of corporate law.
These rights and responsibilities are to a large
extent governed by the Companies Act and the common law of the BVI. The common law of the BVI is derived in part from judicial precedent
in the BVI as well as from English common law, which has persuasive, but not binding, authority on a court in the BVI. 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.
There may be less publicly available information
about us than is regularly published by or about U.S. issuers. Also, the BVI regulations governing the securities of BVI companies may
not be as extensive as those in effect in the United States, and the BVI law and regulations regarding corporate governance matters may
not be as protective of our shareholders as state corporation laws 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.
Under the laws of the BVI there is limited statutory
protection of our shareholders other than the provisions of the Companies Act dealing with shareholder remedies. The principal protections
under BVI statutory law are derivative actions, actions brought by one or more shareholders for relief from unfair prejudice, oppression
and unfair discrimination and/or to enforce the Companies Act or the memorandum and articles of association. Shareholders are entitled
to have the affairs of the company conducted in accordance with the Companies Act and the memorandum and articles of association, and
are entitled to payment of the fair value of their respective shares upon dissenting from certain enumerated corporate transactions.
There are common law rights for the protection
of shareholders that may be invoked, largely dependent on English company law, since the common law of the BVI is limited. Under the general
rule pursuant to English company law known as the rule in Foss v. Harbottle, a court will generally refuse to interfere with the management
of a company at the insistence of a minority of its shareholders who express dissatisfaction with the conduct of the company's affairs
by the majority or the board of directors. However, every shareholder is entitled to seek to have the affairs of the company conducted
properly according to law and the constitutional documents of the company. As such, if those who control the company have persistently
disregarded the requirements of company law or the provisions of the company's memorandum and articles of association, then the
courts may grant relief. Generally, the areas in which the courts will intervene are the following: (i) a company is acting or proposing
to act illegally or beyond the scope of its authority; (ii) the act complained of, although not beyond the scope of the authority, could
only be effected if duly authorized by more than the number of votes which have actually been obtained; (iii) the individual rights of
the plaintiff shareholder have been infringed or are about to be infringed; or (iv) those who control the company are perpetrating a "fraud
on the minority."
These rights may be more limited than the rights
afforded to our shareholders under the laws of states in the United States.
Under the Companies Act, members of the general
public, on payment of a nominal fee, can obtain copies of the public records of a company available at the office of the Registrar which
will include the company's certificate of incorporation, its memorandum and articles of association (with any amendments) and records
of license fees paid to date and will also disclose any articles of dissolution, articles of merger and a register of charges if the company
has elected to file such a register.
A member of a company is entitled, on giving written
notice to the company, to inspect:
a.
the memorandum and articles;
b.
the register of members;
c.
the register of directors; and
d.
the minutes of meetings and resolutions of members and of those classes of members of which he is a member; and to make copies of or take extracts from the documents and records referred to in (a) to (d) above.
Subject to the memorandum and articles of association,
the directors may, if they are satisfied that it would be contrary to the company's interests to allow a member to inspect any document,
or part of a document, specified in (b), (c) or (d) above, refuse to permit the member to inspect the document or limit the inspection
of the document, including limiting the making of copies or the taking of extracts from the records. Where a company fails or refuses
to permit a member to inspect a document or permits a member to inspect a document subject to limitations, that member may apply to the
BVI Court for an order that he or she should be permitted to inspect the document or to inspect the document without limitation.
This may make it more difficult for you to obtain
the information needed to establish any facts necessary for a shareholder motion or to solicit proxies from other shareholders in connection
with a proxy contest.
30
As a result of all of the above, our public shareholders
may have more difficulty in protecting their interests in the face of actions taken by our management, members of the Board or controlling
shareholders than they would as public shareholders of a company incorporated in the United States. For a discussion of significant differences
between the provisions of the Companies Act and the laws applicable to companies incorporated in the United States and their shareholders,
see "Description of Shares — Differences between the Law of Different Jurisdictions."
Because we do not expect to pay dividends
in the foreseeable future, you must rely on a price appreciation of the common shares for a return on your investment.
We currently intend to retain most, if not all,
of our funds and any future earnings to fund the development and growth of our business. As a result, we do not expect to pay any cash
dividends in the foreseeable future. Therefore, you should not rely on an investment in the common shares as a source for any future dividend
income.
Our Board has complete discretion as to whether
to distribute dividends, subject to certain requirements of BVI law. In addition, our shareholders may by ordinary resolution declare
a dividend, but no dividend may exceed the amount recommended by our directors. Under BVI law, a BVI company may pay a dividend out of
either profit or share premium account, provided that in no circumstances may a dividend be paid if this would result in the company being
unable to pay its debts as they fall due in the ordinary course of business. Even if our Board decides to declare and pay dividends, the
timing, amount and form of future dividends, if any, will depend on our future results of operations and cash flow, our capital requirements
and surplus, the amount of distributions, if any, received by us from our subsidiaries, our financial condition, contractual restrictions,
and other factors deemed relevant by our Board. Accordingly, the return on your investment in the common shares will likely depend entirely
upon any future price appreciation of the common shares. There is no guarantee that the common shares will appreciate in value or even
maintain the price at which you purchased the common shares. You may not realize a return on your investment in the common shares and
you may even lose your entire investment in the common shares. Additionally, because we are a holding company, our ability to pay dividends
on our common shares may be limited by restrictions on the ability of our subsidiaries to pay dividends or make distributions to us, including
restrictions that are imposed under the terms of the agreements governing our subsidiaries' loan and credit facilities. There is
no assurance that future dividends will be paid, and if dividends are paid, there is no assurance with respect to the amount of such dividend.
As a company incorporated in the British
Virgin Islands, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly
from Nasdaq's corporate governance listing standards. These practices may afford less protection to shareholders than they would
enjoy if we complied fully with Nasdaq's corporate governance listing standards.
As a BVI company listed on Nasdaq, we are subject
to Nasdaq's corporate governance listing standards. However, Nasdaq rules permit a foreign private issuer like us to follow the
corporate governance practices of its home country. Certain provision in the Companies Act relating to corporate governance in the BVI,
which is our home country, may differ significantly from Nasdaq's corporate governance listing standards. We intend to follow the
relevant provisions in the Companies Act in lieu of the following corporate governance requirements of Nasdaq that listed companies must
have for as long as we qualify as a foreign private issuer: (i) a majority of independent directors; (ii) a nominating/corporate governance
committee composed entirely of independent directors; and (iii) a compensation committee composed entirely of independent directors.  To
the extent we choose to follow home country practice in the future, our shareholders may be afforded less protection than they otherwise
would enjoy under Nasdaq's corporate governance listing standards applicable to U.S. domestic issuers.
In addition, in September 2018, California's
Senate Bill 826 was signed into law. Senate Bill 826 generally requires public companies with principal executive offices in California
to have a minimum number of females on its board of directors. As of December 31, 2019, each public company with principal executive offices
in California was required to have at least one female on its board of directors. As of December 31, 2021, each public company was required
to have at least two females on its board of directors if the company has at least five directors, and at least three females on its board
of directors if the company has at least six directors. However, on May 13, 2022, the Superior Court of the State of California for the
County of Los Angeles held in Crest v. Padilla, Case No. 19STCV27561, that such minimum female board member requirement violates the Equal
Protection Clause of the California Constitution. The case is currently being appealed by the State of California, and we intend to monitor
legislative developments accordingly.
31
Our board of directors currently includes one
female director. There is uncertainty as to whether this law applies to foreign private issuers with their principal executive offices
in California, like us. If the law is deemed to apply to foreign private issuers, we may be deemed out of compliance. An initial violation
of Senate Bill 826 can result in a fine from the California Secretary of State in the amount of $100,000, with each subsequent violation
resulting in a fine of $300,000. We cannot assure you that we can recruit, attract and/or retain qualified members of the board and meet
gender requirements under California law, which may expose us to financial penalties and adversely affect our reputation.
We are a foreign private issuer within the
meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions applicable to U.S. domestic public companies.
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.
We are and will continue to be required to file
an annual report on Form 20-F within four months of the end of each fiscal year. In addition, we intend to publish our results on a semi-annual
basis as press releases, distributed pursuant to the rules and regulations of Nasdaq. Press releases relating to financial results and
material events will also be furnished to the SEC on Form 6-K. However, the information we are required to file with or furnish to the
SEC will be less extensive and less timely compared to that required to be filed with the SEC by U.S. domestic issuers. As a result, you
may not be afforded the same protections or information that would be made available to you were you investing in a U.S. domestic issuer.
Item 4. Information on the Company
A.
History and Development of
the Company
Newegg Commerce, Inc. (previously known as "Lianluo Smart Limited")
was incorporated as an international business company under the International Business Companies Act, 1984, in the British Virgin Islands
on July 22, 2003. The Company's registered office is located at 17560 Rowland Street, City of Industry, CA 91748 and its telephone
number is (626) 271-9700, and its website address is www.Newegg.com. The address of the Company's registered agent is Vistra License
Holdings (BVI) Limited, Vistra Corporate Services Centre, Wickhams Cay II, Road Town, Tortola, VG1110, British Virgin Islands. The SEC
maintains an internet site that contains reports, proxy information, and other information regarding issuers that file electronically
with the SEC at www.sec.gov.
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. 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. We offer brands and sellers a wide range of options to sell through our platform, as
well as services that we offer to help make their online businesses more efficient and effective. Our Direct offering allows brands to
sell directly to us and we manage the inventory and transaction directly with our consumers. Our Marketplace offering allows brands to
leverage our platform, buyer audience and e-commerce solutions in order to generate sales on the Newegg platform.
B.
Business Overview
The Newegg Ecosystem
Founded in 2001, we have developed a technology-focused e-commerce
ecosystem that enables all of our participants to discover, engage and transact with each other. We take pride in connecting customers
to a wide and increasing selection of technology products and a large range of brands, sellers, suppliers, manufacturers, distributors
and third-party service providers.
32
We have developed a powerful online marketplace that delivers value
to consumers, brands and sellers in the technology products sector. Our new product and service introductions are aimed at continually
improving our value proposition to these key constituents of our ecosystem and marketplace. For consumers, on the demand side, we provide
access to a vast, yet curated selection of technology products sourced globally. On the supply side, we create value for brand partners,
Marketplace sellers and suppliers by connecting them to one of the largest audiences of technology product consumers online. Additionally,
our platforms offer a comprehensive suite of e-commerce solutions, including product listing, fulfillment, marketing, customer service
and other value-added tools and services.
Key Ecosystem Participants and How We Create Value for Them
There are three key participants of our ecosystem: customers, Marketplace
sellers, and brand partners.
Customers
We have built a large, highly engaged and loyal customer base. 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.
We believe that we offer the following compelling value propositions
to our customers:
●
Wide range of technology-focused
products. 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. Our extensive product offerings enable us to meet the diverse needs of a group of sophisticated
customers, which is difficult for brick-and-mortar retailers to match due to shelf space constraints.
●
Data-driven shopping experience.
o
Content-rich, user-friendly
interface. Our platforms are user-friendly and easy to navigate, with features enabling customers to easily discover new products and
trends, such as intelligent product recommendations and curated, personalized content supported by data and analytics. 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 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. Leveraging our reliable
                                                                                                                                       logistics network and infrastructure, we are able to maintain a high level of shipping accuracy and reliability and timely delivery.
                                                                                                                                       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.
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●
Vibrant community of tech-savvy
customers. While expanding our range of product offerings, we continue to maintain a large and vibrant community of tech-savvy customers,
providing inspiration for visitors to discover new technology trends and products and valuable decision-making intelligence typically
not found at traditional retailers. 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 are
able to offer competitive pricing across a broad range of categories because of our scale, strong supplier and Marketplace seller relationships,
and our ability to maintain a cost-efficient infrastructure. Our experienced product management team leverages data to cost-effectively
match demand with supply, minimize inventory and reduce infrastructure costs associated with brick-and-mortar retailers. We are also
able to find optimized pricing points by leveraging our data and analytics capabilities and by monitoring our major competitors'
pricing trends.
o
Flexible payment options. We
accept a variety of payment options and have sought to add new payment methods to cater to the needs of our customers. 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. 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.
We are a business enabler for our Newegg Marketplace sellers in many
ways. We believe that our Marketplace sellers choose to partner with us not just because we offer a large online sales channel, but also
because we deliver the following additional value:
●
Scaled access to technology-focused
consumers. 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. In addition
to consumers, our Newegg Marketplace also provides smaller vendors and retailers with access to profitable B2B opportunities that would
otherwise be difficult to reach due to the challenges associated with providing specialized support for business' purchasing needs.
●
Access to premium e-commerce
solutions. Sellers generally face high barriers entering the e-commerce market, including logistics and scalable economics. Our Marketplace
addresses these challenges by providing sellers with a comprehensive suite of e-commerce solutions, including an API-enabled portal,
on-site promotions, a curated marketing program, and fulfillment and delivery services. Particularly, we provide Marketplace sellers
with valuable data insights, which help them to market their products more effectively, generate additional traffic and increase conversion.
●
Human touch. Our Marketplace
is a key component of our ecosystem. Since we launched our Marketplace model in 2010, we have carefully nurtured our relationships with
Marketplace sellers and have invested in their success, which we believe drives our continued growth in the long run. For example, we
assign dedicated account managers to qualified sellers to help them tackle the variety of challenges associated with operating a virtual
storefront.
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Brand Partners
We are a trusted partner and a go-to channel for many leading technology
product brands and are increasingly establishing partnerships with brands in a growing number of adjacent product categories. 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.
We provide the following benefits for our brand partners:
●
Access to a targeted customer base. Enabling brands to cost-effectively reach target audiences, our existing, loyal customer base is highly valued by companies targeting ready-to-buy, tech-savvy customers as well as foreign brands seeking to sell products and build brand awareness in the markets we serve.
●
Comprehensive and cost-efficient distribution channel. Leveraging Newegg's customer-friendly online platforms, established logistics network and infrastructure and extensive e-commerce experience and expertise, we offer to our brand partners comprehensive and cost-efficient distribution channels and comprehensive supply chain capabilities, including marketing, warehousing, fulfillment and customer service.
●
Brand building and promotion solutions. We offer our brand partners solutions and support to run special promotions and targeted marketing and brand-building campaigns through our platforms utilizing data and interactive media in ways that cannot be achieved through traditional media. See "— Our Business Models — Marketing Services."
●
Data insights. We collect insights from our customers' interactions on the platform using our data and analytics capabilities. We use these insights, coupled with customer feedback and our knowledge of the e-commerce market, to facilitate our brand partners' product and marketing decision-making.
Our Business Models
Our primary business model is to help customers find and purchase their
desired products through our platforms. From a customer base and target audience perspective, we categorize our business model into B2C
and B2B operations. We strive to offer a compelling online shopping experience, reliable and timely order fulfilment and superior customer
service across our B2C and B2B operations through our Direct sales, Marketplace and NPS platforms.
The following chart sets forth our business models:
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, 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. 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. 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.
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.
Our B2B customers span across a range of verticals, including healthcare
providers, K-12 and higher educational institutions, government agencies, and businesses of all sizes, and our B2B operations have been
focused on providing specialized support for their industry- and business-specific needs.
Currently, while we position NeweggBusiness.com as our dedicated B2B
website, a significant number of our B2B customers also shop via our account managers, or on our flagship retail platform, Newegg.com.
See "— Our Platforms — B2B Platforms" for more information about these platforms.
How We Deliver Our Service
We sell products to our B2C and B2B businesses through direct sales
and Marketplace.
We believe that the integration of our direct sales and Marketplace
operations has created a virtuous, self-reinforcing cycle. Our Marketplace is built on the success of our direct sales business, and we
believe that many sellers are attracted to our Marketplace by our direct sales credentials. On the other hand, as we continue to source
new products and recruit quality sellers, the choices available to customers also should increase, generating momentum for our growth.
We believe that this self-reinforcement, coupled with our reliable logistics network, has made it a top online destination for IT/CE products.
Direct Sales
We acquire products directly from our partners that consist of manufacturers,
distributors and wholesalers, and sell them directly to our B2C and B2B customers. For our direct sales, we generally source the products,
take inventory risk, process customer payments, prepare packages for shipment and delivery, and provide customer service and support.
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. The success of our direct sales business depends largely upon our ability to secure
a broad selection of products from suppliers at competitive costs. Since the commencement of our operations, we have sought and cultivated
deep, longstanding relationships with some of the biggest IT brands in the world and many of the largest, most important IT distributors.
We continuously seek to build similar relationships with suppliers in new and emerging categories and geographies. Due to our strong supplier
relationships and our purchasing volume, we are able to obtain favorable pricing, early allocation of new products, preferential allocation
of products in shortage, and funding for product promotion and cooperative marketing. We also enjoy exclusive arrangements with certain
suppliers where we are able to offer highly demanded products exclusively on our platforms. 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. 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. We also charge membership fees for the additional value-added services and
tools that we provide to sellers based on their enrollment.
Our Marketplace operations consist of the Newegg Marketplace that launched
in 2010, the Newegg B2B Marketplace, and the Newegg Canada Marketplace that launched in 2014. 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. 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.
While we encourage Marketplace sellers to offer the most attractive
prices, they have the flexibility to price the products sold through our Marketplace. Due to our partnership, unique customer base, scale
and large visitor traffic, some of the Marketplace sellers also set aside exclusive offers, promotion, and product supplies for us and
offer some of the best offers tailored specifically to our customers. We have a rigorous process in place to assess our Marketplace sellers.
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 also require third-party sellers to meet our strict standards
and protocols in terms of product authenticity, customer service, and delivery and fulfillment so that customers are confident that they
receive the same level of buying experience and customer service that they expect when buying directly from us. 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. 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, 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.
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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. Leveraging our scale, brand and global
footprint, we seek to enter into exclusive agreements with selected suppliers and third-party distributors for some or all of their products
with favorable terms.
We deploy a flexible sourcing model, utilizing different distribution
channels when economically and logistically beneficial while maintaining our reseller authorizations and relationships with our brand
partners. As we increase in scale in new or emerging product categories, we endeavor to increase our purchases directly from manufacturers
and, where appropriate, to become an authorized reseller, which we believe provides improved product pricing and better access to preferred
product allocation.
Our technology savvy customer base, our online marketing and merchandising
expertise and our ability to quickly and efficiently launch new products make us the go-to channel for many manufacturers and distributors.
We are particularly strong in the components categories where we are one of the largest channels online or offline and we continue to
gain significant traction with suppliers in other categories, such as desktop PCs, laptops, and input/output devices.
We maintain extensive and longstanding relationships with many of the
biggest technology product brands and distributors globally. We employ a team of merchandising professionals specifically trained to cultivate
and manage relationships with large international IT brands, such as AMD, Asus, Intel, Lenovo, Microsoft, MSI, Nvidia, and Samsung. 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. 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. We offer our private label products both
across our platforms and on other e-commerce platforms, such as Walmart, Amazon, and eBay.
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.
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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 began to offer Shipped by Newegg, a comprehensive suite of warehousing and fulfillment services, to our Marketplace sellers in 2013.
Enrolled Newegg Marketplace sellers deliver their products to one of our fulfillment centers, and we handle the fulfillment of orders
placed in the sellers' online stores and charge service fees based on the size of the products and the shipping methods requested.
●
Newegg Logistics. We launched
Newegg Logistics in 2014, a division dedicated to providing end-to-end e-commerce logistics and supply chain solutions covering warehousing,
inventory management, order processing, packing, and shipping, designed to reduce inventory costs and streamline supply chain efficiencies,
to our business partners, manufacturers, whole-sellers, Marketplace sellers and B2B clients. We provide our clients recommendations based
on their supply chain strategy and roadmap. To address our clients' concerns in managing customer returns, we customize a cost-effective
reverse logistics solution catered to their businesses. Our solutions range from small parcel delivery to Less Than Truckload, heavy
freight, and all the way up to intermodal transport and cross-border shipping, with easy access to road, rail, water, and air transport.
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. Clients such as vendor partners utilize these services as a one-stop shop
solution for all their business needs.
Marketing Services
In 2020 we began rolling out the first of our marketing services for
Newegg Marketplace sellers. We offer flexible marketing packages consisting of advertising sales, event organization and other marketing
campaigns to our brand partners. We help brands reach a potential audience by leveraging our online portals, marketing affiliates and
promotional emails. We help our brand partners and Marketplace sellers design marketing activities with highly effective cost of sales.
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.
Our Platforms
Our websites and mobile applications, which we refer to as the "Newegg
platforms," are the foundation of our ecosystem. 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.
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B2C Platforms
●
Newegg.com. 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. 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. 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. Currently, nearly half of orders on Newegg.ca are fulfilled
from our warehouses. We also deliver to our Canadian customers via Shipped by Newegg or other third-party shipping companies. Orders
for merchandise offered by Canada-based Marketplace sellers are fulfilled locally by such sellers in Canada as well.
●
Newegg Global. 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. 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. 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. 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. Over the years, we have built NeweggBusiness.com into a dedicated B2B e-commerce platform offering
a full range of IT, office and industrial products and solutions with a wide customer base ranging from government agencies, healthcare
institutions, and education institutions to other businesses of all sizes. 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. For
details of Newegg's 3PL services, see "— Our Business Models — Supply Chain Third-party (3PL) Services."
Logistics and Fulfillment
We have a reliable logistics network and infrastructure designed to
prioritize timely and accurate shipment of large quantities of orders. 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.
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.
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Our logistics and fulfillment infrastructure and capabilities include:
●
Warehouses. 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 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 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 ship
certain products to customers directly from vendors and distributors who meet our quality fulfillment standards without going through
our warehouses, a practice which we refer to as virtual fulfillment. Virtual fulfillment is fully utilized to broaden our product assortment
and avoid loss of sales when SKUs are out of stock. 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. Customers
can track the shipping status of their purchases through links to our email and/or our websites and mobile applications. Our inventory
management and tracking also have redundant capabilities to enable each facility, if necessary, to fulfill most of our direct orders.
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. When we order product from a supplier, we track the receipt
of the merchandise and can "material optimize," or direct, the inventory to a specific warehouse to match customer demand
in a geographical area; when a purchase order is received, we match the order to our inventory and distribute a specific order fulfillment
assignment to one or more warehouses for processing. 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. For example, in 2019, in collaboration with UPS,
we introduced an option allowing customers to pick up the products they purchase at a nearby UPS location instead of having them delivered
at their own addresses. This is a safe and convenient shipping option and reduces the waiting time customers would otherwise experience
between the time an order is placed and when their products are received.
41
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 currently operate customer service centers in California and Texas, focusing
on serving North American buyers. To enhance our service capabilities and maintain increased access, Newegg operates an Asia-based customer
service center that is available seven days a week, via email and instant messaging. Our customer service representatives are available
by phone, live-chat, chatbot or email. 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. With that in mind, we closely monitor the performance of our Marketplace sellers to monitor compliance
with Newegg Marketplace rules, have a reliable logistics network, provide customers with quality customer support, ship orders on time,
and respond to customer queries in a timely fashion. We have adopted a zero-tolerance policy on counterfeit products and have rules in
place to take down allegedly counterfeit or pirated products and disqualify sellers selling counterfeit or pirated products. For more
information, see "Risk Factors — Risks Related to Newegg's Business — Our reputation and business may be harmed
if we or our Marketplace sellers sell pirated, counterfeit, illegal or "gray market" items."
●
Newegg Marketplace Guarantee
service. We also offer a special customer service program, Newegg Marketplace Guarantee, for Marketplace orders. With Newegg Marketplace
Guarantee, if a Marketplace seller fails to reimburse the customer for products that are damaged, defective, not received by customer,
or materially different from what was displayed on our platform by that seller, the customer can submit a claim directly to us and may
be eligible for reimbursement of the purchase price of any product they purchase from a Newegg Marketplace seller.
●
Return policy. 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.
From a customer service perspective, in addition to customers, we broadly
define our customers to also include our Marketplace sellers, from whom we earn commissions, and purchasers of our 3PL services and other
ancillary e-commerce solutions and services. See "— The Newegg Ecosystem — Key Ecosystem Participants and How We Create
Value for Them — Marketplace Sellers" and "— Our Business Models — Supply Chain Third-party (3PL) Services"
for more information about our engagement with these customers.
Payment
We provide our customers with the flexibility to choose from a number
of traditional online payment options, along with certain alternative payment solutions that are popular with our predominantly technology-enthusiast
customers.
●
B2C payment options. We offer various mainstream online payment options
to customers on our B2C platform, including credit cards, debit cards and prepaid gift cards. We offer customers the opportunity to pay
for items purchased on our platforms with the Newegg Store Credit Card, a private-label credit card that Newegg launched in partnership
with Synchrony Financial, a U.S. consumer financial services company. Newegg Store Credit Card has a revolving credit line and offers
numerous attractive financing options, which we believe improves customer loyalty and purchase frequency and results in increased sales.
We also allow customers to use Bitcoin, Bitcoin cash, and other cryptocurrencies to pay for purchases made on our platforms through our
third-party payment service provider, BitPay, who converts and settles all transactions to U.S. dollars in real time. 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 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. 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.
42
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. We are focused on continuing
to enhance our brand awareness through a variety of online and offline marketing and brand promotion activities, while leveraging technology
to drive scalability and sustainability and eventually achieve optimal return on investment and highly effective cost of traffic as well
as sales.
Referral
We benefit significantly from word-of-mouth referrals and positive
product reviews, and we believe our reputation as a one-stop–technology shop has led to strong word-of-mouth promotion, especially
among the technology-savvy. We have efficient customer acquisition strategies, because the majority of our web traffic is free. 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%.
Online Marketing
We conduct the majority of our marketing efforts online through targeted
marketing via affiliates, search engines, promotional emails, social media traffic, targeting and personalization, and online promotion
campaigns.
●
Paid search engine marketing.
Search engine marketing is an important driver of our traffic and customer acquisition. 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. 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. 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. 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. Our Customer
Relationship Management Marketing Team runs various and highly diversified marketing programs through personalization and segmentation
on multiple channels including website, email, social, paid search engine, and more. Based on customers' onsite behavioral data
and purchase history data, we are able to identify prospective customers (that is, visitors sharing similar shopping patterns with current
Newegg customers) as well as existing customers and display our brand and product advertising ads to them when they are on social media
or Google search or other affiliate sites.
●
Other online marketing channels.
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.
We are beginning to selectively participate in live events in the wake
of the COVID-19 pandemic, with a focus on the health and safety of our employees and event attendees.
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. Our technology strategy is to develop our own proprietary software
and license technologies from third parties as appropriate in order to simplify and improve the shopping experience, as well as facilitate
our fulfillment, financial and customer service operations.
IT Infrastructure
We have built our technology platform by relying primarily on software
and systems that we have developed in-house and, to a lesser extent, on third-party software. Our technology infrastructure is designed
for scalability and reliability to support business growth. We utilize high-availability clusters comprising groups of servers to provide
sufficient redundancy and maintain continued service in the event of single point server failure due to hostile attacks, systematic errors
or other reasons. Our high-availability data system is designed so that back-up servers instantly connect to our network once master servers
experience technical difficulties.
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. 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. It provides product descriptions, search and ordering functionalities, and product reviews.
●
Mobile site and apps.   Customer activity on mobile devices is growing, and we are investing significantly in mobile technology to increase sales to customers using mobile devices. 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.   Data collected from our operations, including inventory data, behavioral and transactional data and pricing data, are housed in our data centers. 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. 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. It enables effective sales forecasting and inventory management that increases the efficiency of our supply chain and helps us control costs. Our inventory availability is coordinated through our technology platform. We have added functionality to update our platforms on a real-time basis when items become out of stock in our fulfillment centers. 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. We utilize both proprietary and third-party applications for accepting and validating purchase orders, placing and tracking orders with suppliers, managing inventory and assigning it to purchase orders, and ensuring proper shipment of products to customers.
●
Fulfillment management. We have software for our fulfillment operations that tracks customer orders from placement through packing and shipping. We have installed sophisticated, "pick-to-light" conveyor systems and associated software and are making investments in new warehouse robotics technology. We have also developed software modules that efficiently manage the sorting and picking process of our products. Our systems are integrated with those from our primary U.S. shipping partners to facilitate tracking of the orders after shipment.
●
Anti-fraud monitoring.   Online fraud is a constant threat to the security and reliability of e-commerce retailers. We work with third-party vendors to monitor our network security devices and secure our online payment systems. We have developed proprietary tools in-house to monitor our online traffic for suspicious activities. Our websites have earned certifications from organizations and agencies like Tevora, based on our meeting of their information protection and fraud prevention standards.
Research & Development Team
Our global research and development team is focused on innovation through
software development, algorithm design and development, and IT infrastructure design and maintenance. Our research and development personnel
continually upgrade our platforms and test new features to improve our customer experience. Our research and development team also develops
custom-built proprietary systems and engages third-party solutions to support our specific customer, vendor and Marketplace seller requirements,
including handling heavy traffic on our platforms, and providing quick and efficient fulfillment services to meet customer expectations.
Security and Privacy Policy
We are committed to protecting information security across all Newegg
platforms. We use a variety of techniques to protect the integrity of our networks and the confidential data we collect and store. Confidential
information concerning our customers, sellers and suppliers is encrypted and protected using SSL encryption software. In addition, we
use multiple layers of network segregation and hierarchical levels of firewall technology to protect against attacks or unauthorized access
to our networks, servers, and databases. We also continue to build new procedural safeguards as part of our comprehensive privacy program.
We operate in a secured and locked facility that requires all of our employees to check in and wear valid ID badges.
We have adopted a detailed privacy policy that describes in plain language
our data use practices and how privacy is protected at Newegg, including the extent to which other Newegg users may have access to this
information. We require users to acknowledge and expressly agree to this policy when registering with our platforms. 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. 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.
Our "Newegg" trademark and logo have also been registered with the relevant authorities in the United States, Canada and China
(as well as in other regions, such as the European Union and Brazil). Furthermore, we have also registered the trademarks and logos of
our private labels, such as Rosewill and ABS.
In addition to the protection of our intellectual property, we are
focusing on ensuring that our product offerings (especially our private-label products) do not infringe on the intellectual property of
others. Generally, our agreements with suppliers contain provisions to safeguard us against potential intellectual property infringement
by our suppliers and impose penalties in the event of any infringement. We reserve the right to refuse to work with or terminate our relationship
with suppliers where we become aware that they are violating the intellectual property rights of a third party.
Competition
The worldwide market in which we compete is evolving rapidly and intensely
competitive, and we face a broad array of competitors from many different industry sectors around the world. Our current and potential
competitors include: (i) online, offline and multichannel retailers, publishers, vendors, distributors, manufacturers, and producers of
the products we offer and sell to customers; (ii) companies that provide ancillary D2C platform services and solutions, including website
development, advertising, customer service and payment processing; (iii) companies that provide fulfillment and logistics services for
themselves or for third parties, whether online or offline; and (iv) companies that design, manufacture, market, or sell consumer electronics,
telecommunication, and electronic devices.
We believe the principal competitive factors in our market are:
●
breadth and quality of product
offerings;
●
pricing;
●
fulfillment capabilities;
●
brand recognition and reputation;
●
customer service;
●
ability to respond more quickly
to changing consumer preferences;
●
ability to reach a geographically
broader set of customers; and
●
ability to be more flexible in marketing to a specific set of potential customers.
Some of our current and potential competitors have greater resources,
longer histories, more customers, greater brand recognition, and greater control over inputs critical to our various businesses. They
may secure better terms from suppliers, adopt more aggressive pricing, pursue restrictive distribution agreements that restrict our access
to supply, direct consumers to their own offerings instead of ours, lock-in potential customers with restrictive terms, and devote more
resources to technology, infrastructure, fulfillment, and marketing. Each of our businesses is also subject to rapid change and the development
of new business models and the entry of new and well-funded competitors. Other companies also may enter into business combinations or
alliances that strengthen their competitive positions.
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. 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. 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.
Other existing and future laws cover issues such as user privacy, spyware and the tracking of consumer activities, marketing emails and
communications, other advertising and promotional practices, money transfers, pricing, content and quality of products and services, taxation,
electronic contracts and other communications and information security.
Particularly, under applicable federal and state laws and regulations
addressing privacy and data security, we must provide notice to consumers of our policies with respect to the collection and use of personal
information, and our sharing of personal information with third parties and notice of changes to our data handling practices. In some
instances, we may be obligated to give customers the right to prevent sharing of their personal information with third parties. Under
applicable federal and state laws, we also are required to comply with a number of requirements when sending commercial email to consumers,
including identifying advertising and promotional emails as such, ensuring that subject lines are not deceptive, giving consumers an opportunity
to opt out of further communications and clearly disclosing our name and physical address in each commercial email. Regulation of privacy
and data security matters is an evolving area, with new laws and regulations enacted frequently. For example, California enacted legislation
that, among other things, requires new disclosures to California consumers, and affords such consumers new abilities to opt out of certain
sales of personal information, which was effective on January 1, 2020. In addition, under applicable federal and state unfair competition
laws, including the California Consumer Legal Remedies Act, and U.S. Federal Trade Commission, regulations, we must accurately identify
product offerings, not make misleading claims on our platforms, and use qualifying disclosures where and when appropriate.
There is also great uncertainty over whether or how existing laws governing
issues such as property ownership, sales and other taxes, auctions, libel, and personal privacy apply to the Internet and commercial online
services. For example, tax authorities in a number of states are currently reviewing the appropriate tax treatment of companies engaged
in online commerce, and new state tax regulations may subject us to additional state sales and income taxes. Additionally, new state legislation
may also subject us to other types of taxes. New legislation or regulation, the application of laws and regulations from jurisdictions
whose laws do not currently apply to our business or the application of existing laws and regulations to the Internet and commercial online
services could result in significant additional taxes or regulatory restrictions on our business or may necessitate changes to our business
practices. 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. For example, in Canada, we are subject to labor
and employment laws, laws governing advertising, privacy and data security laws, safety regulations and other laws, including consumer
protection regulations that apply to online retailers and/or the promotion and sale of merchandise and the operation of stores and warehouse
facilities. 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.
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.
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.
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.
Item 5. Operating and Financial Review and Prospects
You should read the following discussion and analysis of our financial
condition and results of operations in conjunction with our consolidated financial statements and the related notes included elsewhere
in this annual report. This discussion contains forward-looking statements that are subject to known and unknown risks and uncertainties.
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.
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. Through
Newegg.com
, our flagship retail site, and other online
platforms, we connect our global customer base to a wide and increasing assortment of tech products and a massive pool of brands, sellers,
suppliers, manufacturers, distributors, and third-party service providers.
Headquartered in California, Newegg's reach is global. 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.
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. We define GMV as 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. GMV also includes the services fees charged through our NPS in
rendering services for our 3PL, SBN, SLS, staffing and media ad services, as well as the sales made by our Asia subsidiaries. We generate
GMV and net sales primarily from the following sources:
●
Direct sales
, where
we control inventories sourced from suppliers and directly sell goods to our customers on our platforms or certain other third-party
platforms. Our direct sales revenues include net sales generated from sales of products directly by us to customers on our Newegg platforms
(including wholesale where we sell inventories in bulk and mostly at a discount), sales through third-party websites of products we source
from suppliers, and freight revenues from fees we charge for delivery of goods that we directly sell to customers.
●
Newegg Marketplace
,
where third-party sellers sell products through our Newegg Marketplace, and we recognize commission and service fees from such third-party
sellers in our net sales. 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. 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 such net sales as services revenues.
Factors Affecting Newegg's Results of Operations
Our financial condition and results of operations have been, and will
continue to be, affected by a number of important factors, including the following:
Newegg's ability to grow our customer base and increase
their engagement level
We monitor the following key operating metrics to evaluate our user
traffic and the engagement of our customer base.
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.
Active customers as of a given
date are calculated by unique customer ID with at least one transaction purchased on our platforms during the relevant 12-month measurement
period.
2.
Measured by the percentage of customers who made at least two purchases on Newegg platforms during the relevant 12-month measurement period.
3.
Calculated by dividing sales volume by number of transactions during the relevant 12-month measurement period.
We use the above operating metrics to measure our overall customer
engagement with our platforms. Our operating metrics vary from time to time due to factors including economic trends, new product releases,
the level of competition we face, and the purchase patterns of our customers. 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. Products are offered
on our online platforms across a range of types, brands, and price points. We believe that customers are attracted to our online platforms
primarily by the breadth and depth of our product offerings, a critical component of our ability to increase sales and drive long-term
profitability. 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.
Our results of operations are affected by our merchandise mix, as products
of different categories, brands and price points have a range of margin and profitability profiles. For example, categories where we hold
lower market share and we strive to grow at an accelerated rate over market may offer relatively lower margins. Our merchandise mix may
shift over time due to the combination of a variety of factors, including consumer demands and preferences, average selling prices, our
ability to maintain and expand our supplier relationships, our ability to forecast market trends, and our marketing and promotional efforts.
We continuously monitor the GMV and margin mix of our product offerings and we seek to increase the percentage of GMV and net sales from
categories and brands with attractive margin profiles.
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. 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. 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.
Our results of operations have been, and will continue to be, influenced
by shifts over time in the GMV mix between direct sales and Marketplace. This is primarily due to the difference in revenue recognition — we
recognize revenues from direct sales on a gross basis, while we recognize revenues from the Newegg Marketplace on a net basis. See "— Key
Components of Results of Operations" for details. Accordingly, for the same amount of GMV, direct sales generates more net sales
than Marketplace and, therefore, an increase in the GMV contribution of Marketplace as a portion of the total GMV would have a negative
impact on our net sales.
Newegg's ability to forecast consumer needs and preferences
The IT/CE e-commerce market in North America and globally is characterized
by rapidly evolving technologies, fast-changing consumer requirements and preferences and frequent releases of new products and introductions
of updated industry standards and practices. We must effectively respond to these changes to remain competitive. We may have difficulty
anticipating consumer demand and preferences, and the goods offered on our online platforms may not be accepted by the market or may be
rendered obsolete or uneconomical. Our inability to adapt to these developments may lead to excessive or deficient inventories or a failure
to attract new customers and retain existing customers, which could materially and adversely affect our financial condition and results
of operations.
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. However, our contracts or arrangements with such suppliers generally
do not guarantee the availability of merchandise or provide for the continuation of particular pricing or other practices. 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. Some of our competitors could enter into
exclusive or favorable distribution arrangements for certain products with our vendors, which would deny us complete or partial access
to those products and marketing and promotional resources. In addition, some vendors whose products are offered on our online platforms
also sell their products directly to customers. If we are unable to develop and maintain relationships with suppliers that permit us to
obtain sufficient quantities of desirable merchandise on favorable terms, our results of operations could be adversely impacted.
Segment Information
Our chief operating decision maker (i.e. chief executive officer) reviews
financial information presented on a consolidated basis, accompanied by disaggregated information about revenue by countries or regions for
purposes of allocating resources and evaluating financial performance. There are no segment managers who are held accountable for operations,
operating results and plans for levels or components below the consolidated unit level. Based on qualitative and quantitative criteria
established by Accounting Standards Codification ("
ASC
") 280, "Segment Reporting," we consider ourselves
to be operating within one reportable segment.
A.
Operating Results
Key Components of Results of Operations
Net Sales
Our net sales consist of direct sales revenues, Marketplace revenues
and services revenues. See "— Newegg's Business Model" for more information about these sources of net sales.
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.
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.
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. Cost of sales also includes (i) costs relating to our service revenues, which include personnel
expenses and other costs relating to our third-party logistics services; (ii) inbound and outbound freight costs; and (iii) inventory
write-offs relating to refurbished, slow-moving and obsolete inventories and adjustments for vendor incentives related to inventory still
on hand at the reporting date.
Cost of sales is partially offset by payments we earn under vendor
incentive programs, or VIPs, such as purchase rebates, marketing development funds that vendors give us to advertise their products, cooperative
marketing programs jointly funded with vendors, and price protection refunds to offset reductions in the manufacturer's suggested
retail price. 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.
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.
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.
Other significant components of SG&A expenses include advertising
and marketing expenses, merchant processing fees, depreciation and amortization, rent expenses, warehouse costs, office expenses, professional
fees, and other general corporate costs.
The following table sets forth the components of our SG&A expenses,
in absolute amounts and as percentages of net sales, for the periods indicated.
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. Period-to-period comparisons of historical results
of operations should not be relied upon as indicative of future performance.
For 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.
Year Ended December 31, 2022 Compared to Year Ended December 31,
2021
Net sales
Net sales decreased by 27.6% for the year ended December 31, 2022
compared to the comparable prior year period from $2,376.2 million in 2021 to $1,720.3 million in 2022, which was mainly due
to the decrease in GMV from our direct sales and marketplace businesses from $2,195.9 million and $742.4 million for the year
ended December 31, 2021, respectively, to $1,544.8 million and $552.2 million for the year ended December 31, 2022, respectively.
The decrease in GMV was primarily due to a downward trend in consumer
spending in technology products in light of economic uncertainty and recession fears as consumers reduced their discretionary spending.
In addition, recent consumer purchases of technology products during the pandemic, along with longer expected product lifespans, have
extended the upgrade cycle. 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. During the same period, our gross profit decreased by 33.5% from $326.0 million for the year ended
December 31, 2021 to $216.7 million for the year ended December 31, 2022.
Our profit margin decreased to 12.6% for the year ended December 31,
2022 from 13.7% for the year ended December 31, 2021, primarily due to the significant decline in consumer demand caused by reduction
in consumer discretionary spending for certain products such as video graphic cards, hard disk and solid-state drives which led to excess
inventory in 2022. We implemented aggressive promotions in 2022 to move inventory which caused a significant drop in margin.
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.
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.
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.
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. 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. 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 U.S., 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.
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.
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.
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. 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.
Provision for/(benefit from) income taxes
Our provision for income taxes was $14.1 million for the year
ended December 31, 2022 compared to a benefit of $5.8 million for the year ended December 31, 2021. The increase in our provision
for income taxes was mainly due to the recording of the valuation allowance of $17.5 million.
Net income/(loss)
For the year ended December 31, 2022, we recorded a net loss of
$57.4 million in 2022, as compared to a net income of $36.3 million for the same period in 2021. The decrease in net income
is primarily driven by a decline in our net sales and gross margin.
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.
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. 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. 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.
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.
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.
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.
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.
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. 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, 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.
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.
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. 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.
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. We recorded a gain on the change in fair value of warrant liabilities of $0.1 million due to
the increase in stock price as of December 31, 2021, as compared to the stock price as of May 19, 2021. There were no warrant liabilities
as of December 31, 2020.
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. 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.
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.
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.
GMV
GMV is the total dollar value of products sold on our websites and
third-party marketplace platforms (including Nutrend, an online retailer specialized in automotive, motorcycle, ATV, and RV products,
and Rosewill sales), directly to customers and by our Marketplace sellers through Newegg Marketplace, net of returns, discounts, taxes,
and cancellations. 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. It helps us assess and analyze changes in revenues, and if reviewed
in conjunction with net sales and other GAAP financial measures, it can provide more information in evaluating our current performance
and in assessing our future performance. See "— Newegg's Business Model."
GMV, in previous filings, was defined as the total dollar value of
products sold on our websites, directly to customers and by our Marketplace sellers through Newegg Marketplace, net of returns, discounts,
taxes and cancellations.  We redefined GMV, as of the date of the filing of our Annual Report on Form 20-F for the year ended December
31, 2021, to include Nutrend and Rosewill sales through third-party marketplace platforms, service and other revenues through NPS, such
as 3PL, SBN, SLS, staffing, and media ad services, as well as sales made by our Asia subsidiaries.  The change was warranted to ensure
that we report GMV to include all revenues of the company across all our revenue streams that will allow the readers to better understand
our overall performance.  The change in the GMV definition resulted in an increase in GMV for 2020 of $110.7 million.
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. We believe that exclusion of certain expenses in calculating Adjusted
EBITDA facilitates operating performance comparisons on a period-to-period basis and excludes items that we do not consider to be indicative
of our core operating performance. 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. Some of these limitations are:
●
although depreciation and amortization
are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not
reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;
●
Adjusted EBITDA does not reflect
changes in, or cash requirements for, our working capital needs;
●
Adjusted EBITDA does not consider
the potentially dilutive impact of stock-based compensation;
●
Adjusted EBITDA does not reflect
tax payments that may represent a reduction in cash available to us; and
●
Other companies, including
companies in our industry, may calculate Adjusted EBITDA differently, which reduces its usefulness as a comparative measure.
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.
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.
Liquidity and Capital Resources
Cash flows and working capital
We have historically funded our operations through existing working
capital, credit facilities, bank loans, return from investing activities, and equity financings. See Notes 8 and 9 to our consolidated
financial statements included elsewhere in this annual report for more information about the line of credit and long-term debt that we
obtain from financial institutions.
Our cash and cash equivalents consist primarily of cash on deposit,
certificates of deposit, and money market accounts. Cash equivalents are all highly liquid investments with original maturities of three months
or fewer. Amounts receivable from payment processors are also considered cash equivalents as they are both short term and highly liquid
in nature and are typically converted to cash within three business days. 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.
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. 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.
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.
We intend to finance our future working capital requirements and capital
expenditures from cash generated from operating activities, borrowings from our existing credit facilities, funds raised from financing
activities, and returns from investing activities. Our future capital requirements may, however, vary materially from those now planned
or anticipated. Changes in our operating plans, lower than anticipated net sales, increased expenses or other events, including those
described in "Risk Factors," may cause us to seek additional debt or equity financing in the future. If our existing cash
is insufficient to meet our requirements, we may seek to issue debt or equity securities or obtain additional credit facilities. Financing
may not be available on acceptable terms, on a timely basis, or at all, and our failure to raise adequate capital when needed could negatively
impact our growth plans and our financial condition and results of operations. Issuance of additional equity securities, including convertible
debt securities, would dilute our earnings per share. 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.
Historical Cash Flows
The following table sets forth our selected consolidated cash flow
data for the years ended December 31, 2022, 2021, and 2020.
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. Net loss was $57.4 million for the period. The adjustments for non-cash expenses are primarily comprised of (i) $11.0 million
of depreciation and amortization that was associated with property and equipment; (ii) $9.5 million of provision for obsolete
and excess inventory; (iii) $33.9 million of stock-based compensation; (iv) $2.3 million loss from impairment of equity
method investment; (v) $12.5 million from deferred income taxes and partially offset by (a) $1.7 million gain from sale of investment
and (b) $1.1 million change in fair value of warrant liabilities. The changes in operating assets and liabilities represented $10.2 million
cash provided by (i) a decrease in inventory of $78.8 million; (ii) a decrease in prepaid expenses of $0.9 million; (iii)
a decrease in other assets of $10.0 million, partially offset by (a) an increase in accounts receivable of $22.0 million, (b) a decrease
in accounts payable of $14.1 million; (c) a decrease in accrued liabilities and other liabilities of $34.4 million; and (d) a decrease
in deferred revenue of $8.9 million.
Net cash used in operating activities was $53.3 million in 2021.
Net income was $36.3 million for the period. The adjustments for non-cash expenses are primarily comprised of (i) $10.8 million
of depreciation and amortization that was associated with property and equipment; (ii) $8.3 million of provision for obsolete
and excess inventory; (iii) $6.3 million of stock-based compensation; (iv) $7.4 million equity loss from equity method
investments; and partially offset by $12.7 million from deferred income taxes. The changes in operating assets and liabilities represented
$109.1 million cash used in (i) an increase in inventory of $70.8 million; (ii) an increase in other assets of $50.9 million;
(iii) a decrease in accounts payable of $20.1 million; (iv) a decrease in deferred revenue of $7.4 million; and (v) an increase in
prepaid expenses of $2.2 million, partially offset by (a) an increase in accrued liabilities and other liabilities of $41.5 million;
and (b) a decrease in accounts receivable of $0.8 million.
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 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.
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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.
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 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.
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 $12.7 million for
the year ended December 31, 2021, which was mainly due to (i) cash received from common control asset transaction of $11.4 million;
and (ii) borrowings under line of credit of $0.8 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. 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.
Prior to August 20, 2023 and subject to certain terms and conditions, the Maximum Revolving Advance Amount, as defined in the credit
agreement, could be increased up to $150.0 million. The revolving credit facility includes a letter of credit sublimit of $30.0 million,
which can be used to issue standby and trade letters of credit, and a $20.0 million sublimit for swingline loans. In April 2023,
we amended the credit agreement in order to transition the benchmark rate for certain loans made under the credit agreement from LIBOR
to SOFR. In general, advances from this line of credit will be subject to interest at the Term SOFR Rate plus the Applicable Margin, as
defined in the credit agreement, so long as the Term SOFR Reference Rate or Term SOFR is offered, ascertainable, and not unlawful, or
the Alternate Base Rate (to be defined as the highest of the (a) the Base Rate in effect on such day, (b) the sum of the
Overnight Bank Funding Rate in effect on such day plus 0.50%, or (c) the daily Term SOFR Rate plus 1.0%) plus the Applicable
Margin. For Term SOFR Rate loans, we may select interest periods of one or three months. Interest on Term SOFR Rate loans shall be
payable at the end of the selected interest period. Interest on Alternate Base Rate loans is payable monthly. 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, 2022 and December 31, 2021, there
was no balance outstanding under this line of credit.
60
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.
To maintain availability of funds under the loan agreement, we will pay on a quarterly basis, an unused commitment fee of 0.15% per annum
on the unused amount for the facility. The credit facility contains customary covenants, including covenants that limit or restrict our
ability to incur capital expenditures and lease payments, make certain investments and enter into certain related-party transactions.
The credit facility also requires us to maintain certain minimum financial ratios and maintain operation banking relationship with the
financial institutions. 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.
Trend information
Other than as disclosed in this annual report, we are not aware of
any trends, uncertainties, demands, commitments or events for the current fiscal year that are reasonably likely to have a material effect
on our net revenues, income, profitability, liquidity or capital resources, or that caused the disclosed financial information to be not
necessarily indicative of future operating results or financial conditions.
E.
Critical Accounting Estimates
Our consolidated financial statements are prepared in accordance with
GAAP. The preparation of our financial statements requires us to make estimates and assumptions that affect the reported amounts of assets,
liabilities, net sales, costs and expenses, as well as the disclosure of contingent assets and liabilities and other related disclosures.
We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances,
the results of which form the basis for making judgments about carrying values of our assets and liabilities that are not readily apparent
from other sources. In many instances, we could have reasonably used different accounting estimates. Actual results could differ from
those estimates, and we include any revisions to our estimates in our results for the period in which the actual amounts become known.
We believe the critical accounting policies described below affect
the more significant judgments and estimates used in the preparation of our consolidated financial statements. 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:
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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 that the tax position no longer meets the more-likely-than-not threshold of being sustained. The Company accrues interest
and penalties related to unrecognized tax benefits in income tax expense.
Expense and Valuation of Shares of our Common Stock
The measurement and recognition of compensation expense for all stock-based
payment awards made to employees, consultants and directors, including employee stock options and restricted stock, is based on estimated
fair value of the awards on the date of grant. The value of awards that are ultimately expected to vest is recognized as expense on a
straight-line basis over the requisite service periods in the consolidated statements of operations.
For detailed discussion on stock-based compensation, see Note 14
to the consolidated financial statements.
Recent Accounting Pronouncements
For detailed discussion on recent accounting pronouncements, see Note 3
to the consolidated financial statements of Newegg Commerce, Inc. included elsewhere in 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.
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MANAGEMENT
Set forth below is information concerning our directors, executive
officers and other key employees as of the date of this annual report.
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.
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. He served as the Chief Executive Officer of Lianluo Smart Limited from April, 2020 to
August 2020. Mr. Zhitao He is also the Chairman of the Board of Hangzhou Lianluo, a China-listed company and parent of Newegg. Mr. He
successfully led Hangzhou Lianluo to list on China's A share market (ticker: 002280). He was named one of the "10 Top Entrepreneurs
of Post-1980s" by Hurun Report and "Top Ten Entrepreneurial Leader of Listed Companies" by Securities Times. Under his
leadership, Hangzhou Lianluo has moved into the field of smart hardware, including the purchase of Newegg, investments in American
virtual reality ("VR") device manufacturer Avegant and hardware corporation Razer, and promotion of the world's biggest
VR Operating System OSVR in China together with Razer. 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, 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. 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 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. 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. 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 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. He has served as Chief Financial
Officer of X Financial since August 2020. He was a consultant of Yingde Gases Group Company ("Yingde Gases"), a leading industrial
gas supplier in China, from September 2017 to March 2020. Mr. Zheng was an independent director of Yingde Gases from September 2009 to
September 2017. From February 2018 until May 2019, Mr. Zheng was also an independent director of ChinaCache International Holdings Ltd.
(CCIHY). From January 2008 to November 2012, Mr. Zheng was Chief Financial Officer of Cogo Group, Inc., a then Nasdaq listed company that
provided customized module design solutions and manufactured electronic products in China. Mr. Zheng was also a director of the same company
from January 2005 to November 2012. Prior to that, Mr. Zheng was vice president of travel service at eLong, Inc., one of the leading online
travel service companies in China and listed on Nasdaq, where he was responsible for the overall operation of eLong Inc.'s travel
services. Mr. 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. 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. 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 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. 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. 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 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. 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. 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. 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. Then in 2015, he was appointed Vice President
of Haier China, a global home appliance and consumer electronics manufacturer based in Qingdao, China. Upon rejoining Newegg Inc. in 2019,
Mr. Chow made sweeping changes to position the Company for continued success in the rapidly expanding e-commerce space. Consequently,
Newegg remains one of the leading tech e-commerce companies with strong market share in consumer sales, and a growing portfolio of services
for the Company's vendor partners, Marketplace sellers and 3PL clients. Mr. Chow holds a Bachelor's degree in Electrical &
Electronics Engineering from the University of Toledo, and a Master of Business Administration from the UCLA Anderson School of Management.
Mr. Robert Chang.
Mr. Chang is the Chief Financial Officer of
Newegg. In this role, he is responsible for overseeing all aspects of the Company's financial performance, including forecasting,
evaluation and reporting. Mr. Chang has served Newegg Inc. in various finance-related roles for more than two decades, first joining in
1999 and later being appointed to the CFO role in 2015. Prior to Newegg Inc., Mr. Chang spent five years as an Operational Analyst at
Taiwan YFY Paper Manufacturers. 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. Spannos also oversees Newegg Media Services, a separate Newegg business unit that provides
brand marketing services to other e-commerce companies. Prior to joining Newegg Inc. in 2018, Mr. Spannos was Senior Vice President of
North America Fulfillment and Logistics at FTD.com from 2017 to 2018, where he oversaw all FTD.com and sub-brand operations across all
drop-ship and internal distribution centers. Before his time at FTD.com, Mr. Spannos spent five years heading up distribution for Kraft
Heinz Company, managing the company's robust network of 3PL and Kraft Heinz employees across all distribution locations. In that
role, he also played an instrumental part in providing strategic and executional direction in optimizing the company's warehousing
infrastructure, in turn unifying several distribution partnership models related to a multitude of company mergers and divestitures. His
experience of more than 20 years across a broad range of business functions uniquely qualifies 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.
Mr. Montaque Hou.
Mr. Hou has served as Newegg's
Chief Information Security Officer since December 2022.  In this role, Mr. 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.  From January 2016 to November 2022, he served as our Chief Technology Officer and was Chief
Technology Officer of Newegg Inc. from January 2016 to May 2021. In his prior role as Chief Technology Officer, he was responsible
for all technical aspects of the Newegg shopping experience, including the website, mobile app and other touchpoints including SMS
and email interaction. Mr. Hou's global technology team designs, develops and deploys the technology that underpins site
design, customer service, Newegg's Marketplace, resource planning, logistics and inventory management. The technical
development under Mr. Hou's direction infuses data science, machine learning and artificial intelligence to enhance the
shopping experience with search personalization and product recommendations, as well as safeguards that deter fraudulent activity
and eliminate counterfeit product listings on Newegg's Marketplace. Prior to Mr. Hou's tenure as CTO, he held various
technical positions at Newegg, including Solutions Architect, Director of Technology Strategy and Chief Architecture Engineer. Mr.
Hou holds a Master of Science in analytical chemistry from Tongji University in Shanghai.
Mr. Michael Chen
. Mr. Chen has served as Newegg's Chief
Legal Officer since October 2022. His responsibilities extend across all aspects of Newegg's legal and corporate affairs, including
securities, corporate governance, commercial transactions, employment, litigation, intellectual property and data privacy. In addition,
Mr. Chen also maintains responsibility for Newegg's risk management program. Mr. Chen has over a decade of legal experience advising
public and private companies on a wide variety of corporate matters. Prior to joining Newegg, Mr. Chen served as in-house counsel at Emerald
Holding, Inc. (NYSE: EEX), an NYSE-listed company in the trade show and live event industry, from May 2017 to October 2022. Before joining
Emerald Holding, Inc., he served as an attorney at top international law firms in New York and Hong Kong, where he specialized in securities
and capital markets transactions. Mr. Chen holds a Juris Doctor degree from Northwestern University Pritzker School of Law and a Bachelor's
degree in International Political Economy from the University of California, Berkeley.
Ms. Christina S. Ching
has served as Newegg's Chief Accounting
Officer since September 2022. From 2013 to 2022, Ms. Ching served as the Chief Financial Officer for North American and Asia regions for
Kriss USA Inc. a leading Swiss Defense Manufacture company. From 2004 to 2013, Ms. Ching served as Newegg Senior Director of Accounting
overseeing accounting department. 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. 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. Non-employee directors were entitled
to receive payment for serving as directors and may receive option grants or restricted stock units.
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. 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.
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.
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. 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 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. Bonus awards under the Profit Sharing Program
start at 30% of base salary (60% for the CEO) based upon meeting the threshold level of performance and are subject to increase based
upon performance above threshold. Payments under both the Discretionary Bonus Program and the Profit Sharing Program are contingent upon
the executive remaining employed with the Company through the date bonuses are paid.
Stock Option Plans
Newegg 2005 Incentive Award Plan
In September 2005, the Newegg 2005 Incentive Award Plan was approved
and subsequently amended in January 2008, October 2009, December 2011 and September 2015. Under the Newegg 2005 Incentive Award Plan,
we may grant equity incentive awards to employees, directors, and consultants based on our common shares. A committee of our board of
directors determines the eligibility, types of equity awards, vesting schedules, and exercise prices for equity awards granted. Subject
to certain adjustments in the event of a change in capitalization or similar transaction, we may issue a maximum of 82,952,149 common
shares under the Newegg 2005 Incentive Award Plan. We issue new common shares from this authorized share pool to settle stock-based compensation
awards. The exercise price of options granted under the plan shall not be less than the fair value of our common shares as of the date
of grant. Options typically vest over a term of four years, and are typically exercisable for a period of 10 years after the date of grant,
except when granted to a holder who, at the time the option is granted, owns stock representing more than 10% of the voting power of all
classes of stock of Newegg or any subsidiaries, in which case, the term of the option shall be no more than five years from the date of
grant. 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 November 2021, all shares reserved under the 2021 Equity Incentive Plan
were granted to our executive officers and key employees in the form of restricted stock unit awards. These grants vest over four years,
with 25% vesting on the one-year anniversary of grant, and the remainder vesting monthly over the following three years, such that they
will be fully vested after four years. One half of the grants, or 3,687,450 RSUs, were granted to the Chief Executive Officer, Anthony
Chow. Our other executive officers received a combined total of 680,000 RSUs. The remaining 3,007,450 RSUs were granted or reserved for
252 other key employees or expected new hires.
In July 2022, the Board of Directors approved an amendment of the 2021
Plan to increase the maximum share pool from 7,374,900 to 16,374,900 shares. In August 2022, 5,560,780 performance-based vesting restricted
stock units ("PRSUs") were granted to the Chief Executive Officer, Anthony Chow, vesting over four performance periods. The
vesting of each PRSU is based on financial performance tied to Budgeted GMV as defined in the grant agreement. The vesting of PRSUs is
determined at the end of each of the four-year performance periods. 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.
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. The employment is "at will" and can be terminated by us or each such executive
officer at any time and for any reason, with or without notice, with or without cause. If the executive is terminated by us without cause
or by the executive for good reason, then the executive is entitled to receive severance of 12 months' base salary and a prorated
bonus. If such termination is also made in conjunction with a change of control, then the severance amount will increase to 24 months'
base salary and 200% of the executive's target bonus. The agreements also contain customary confidentiality, non-solicit and invention
assignment provisions.
On November 19, 2021, we entered into an employment agreement with
our Chief Executive Officer, Anthony Chow. The employment is "at will" and can be terminated by us or Mr. Chow at any time
and for any reason, with or without notice, with or without cause. Under the terms of the agreement, Mr. Chow is guaranteed a base salary
of $1.1 million per year and a target bonus of 160% to 200% of his base salary. The employment agreement has a four-year term, and guarantees
that Mr. Chow will receive the base salary component for the entire term, even if he is terminated during the term, unless he is terminated
for cause. If Mr. Chow's employment is terminated by us without cause or by Mr. Chow for good reason, then he is entitled to receive
severance of 12 months' base salary and a bonus equal to the average of the prior three years' annual bonuses at the time
of termination (this severance amount is in addition to the remaining owed guaranteed base salary for the rest of term). In addition,
all unvested equity incentive awards that are outstanding and due to be vested within one year of his termination are subject to accelerated
vesting if he is terminated by us without cause or by Mr. Chow for good reason. If termination without cause or for good reason occurs
in the context of a change in control of Newegg, then the severance increases to 24 months' base salary (instead of 12 months')
and all unvested equity incentive awards that are outstanding at the time of his termination (not just those that vest within one year)
are subject to accelerated vesting. 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.
A director may vote in respect of any contract or transaction in which
he or she is interested, provided, however that the nature of the interest of any director in any such contract or transaction shall be
disclosed by him or her at or prior to the consideration and vote on that matter. A general notice or disclosure to the directors or otherwise
contained in the minutes of a meeting or a written resolution of the directors or any committee thereof of the nature of a director's
interest shall be sufficient disclosure and after such general notice it shall not be necessary to give special notice relating to any
particular transaction. A director may be counted for a quorum upon a motion in respect of any contract or arrangement which he or she
shall make with our company, or in which he or she is so interested and may vote on such motion. There are no membership qualifications
for directors. Further, there are no share ownership qualifications for directors unless so fixed by us in a general meeting.
The Nasdaq Listing Rules generally require that a majority of an issuer's
board of directors must consist of independent directors. However, the Nasdaq Listing Rules permit foreign private issuers like us to
follow "home country practice" in certain corporate governance matters. 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 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. Fred Chang, acting as the "Minority
Representative," shall be entitled to designate nominees to our Board in a number that is proportionate to the voting power of Digital
Grid and its affiliates, and our Legacy Shareholders, respectively.
Digital Grid has nominated Mr. Zhitao He, Ms. Yingmei Yang, Mr. Poi
(Paul) Wu, and Fuya (Frank) Zheng to serve as directors. Mr. 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. Our directors also have a duty to exercise the care, diligence and skills
that a reasonably prudent person would exercise in comparable circumstances. In fulfilling their duty of care to us, our directors must
oversee the Company, including our compliance with our Amended and Restated Memorandum and Articles of Association. We have the right
to seek damages if a duty owed by our directors is breached. The 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.
Under our Amended and Restated Memorandum and Articles of Association,
we may indemnify our directors, officers and liquidators against all expenses, including legal fees, and against all judgments, fines
and amounts paid in settlement and reasonably incurred in connection with civil, criminal, administrative or investigative proceedings
to which they are party or are threatened to be made a party by reason of their acting as our director, officer or liquidator. To be entitled
to indemnification, these persons must have acted honestly and in good faith with a view to the best interest of the Company and, in the
case of criminal proceedings, they must have had no reasonable cause to believe their conduct was unlawful.
We have entered into indemnification agreements with our directors
and executive officers. These agreements require us to indemnify these individuals, to the fullest extent permitted by law, for certain
liabilities to which they may become subject as a result of their affiliation with us.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted for our directors or officers under the foregoing provisions, we have been informed that in the opinion of the SEC,
such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable as a matter of United
States law.
Involvement in Certain Legal Proceedings
On August 6, 2020, Hangzhou Lianluo and Mr. Zhitao
He received an investigation notice from the China Securities Regulatory Commission ("CSRC") for alleged violation of laws
and regulations regarding information disclosures of Hangzhou Lianluo. Hangzhou Lianluo   is a PRC company with shares listed
on the Shenzhen Stock Exchange and is a majority owner of Newegg through Digital Grid, a wholly-owned subsidiary. Mr. He is the Chairman
and Chief Executive Officer of Hangzhou Lianluo. 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.
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. Zhitao He received a warning and was required to pay a fine of RMB 400,000.
Further, the shares of our common stock 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. 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. 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. The court has ruled
that the loans are in default in a final, non-appealable judgment. On December 19, 2022, Digital Grid, BOC, Newegg, and Hangzhou Lianluo
entered into a supplemental agreement (the "Supplemental Agreement") to agree upon procedures to temporarily remove BOC's
lien on Digital Grid's Newegg Common Shares to enable their sale and use of proceeds to repay BOC. Such sales of our common stock
could cause the market price of our common stock to drop significantly.
In addition, on April 11, 2023, Hangzhou Lianluo announced that the
Industrial and Commercial Bank of China ("ICBC") filed a lawsuit against Hangzhou Lianluo in the Hangzhou Intermediate People's
Court in China alleging that Hangzhou Lianluo failed to repay when due three separate loans, provided by ICBC to Hangzhou Lianluo, and
was in breach of the related loan agreements. 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.
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.
Terms of Directors and Executive Officers
Each of our directors holds office until a successor has been duly
elected and qualified unless the director was appointed by the Board, in which case such director holds office until the next annual meeting
of shareholders at which time such director is eligible for re-election. 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.
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. 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. 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. 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. 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. Our chief executive officer may not be present at any committee meeting during which his compensation is deliberated. The compensation
committee is responsible for, among other things:
●
reviewing and recommending to the board the total compensation package for our most senior executive officers;
●
approving and overseeing the total compensation package for our executives other than the most senior executive officers;
●
reviewing and recommending to the board the compensation of our directors;
●
reviewing periodically and approving any long-term incentive compensation or equity plans;
●
selecting compensation consultants, legal counsel or other advisors after taking into consideration all factors relevant to that person's independence from management; and
●
reviewing all other compensation and benefit plans as appropriate.
Nominating and Corporate Governance Committee
Our nominating and corporate governance committee currently consists
of Mr. Gregory Moore, Mr. Poi (Paul) Wu, and Mr. Fuya (Frank) Zheng. Mr. Zheng is the chairperson of our nominating and corporate governance
committee. The nominating and corporate governance committee assists the Board in selecting individuals qualified to become our directors
and in determining the composition of the board and its committees. 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.
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. 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. 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
Item 7. Major Shareholders and Related Party Transactions
A.
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.
Beneficial ownership includes voting or investment power with respect
to the securities. Except as indicated below, and subject to applicable community property laws, the persons named in the table have sole
voting and investment power with respect to all common shares shown as beneficially owned by them. 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.
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.
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. 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 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. 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. The court has ruled that the loan is in default
in a final, non appealable judgment.
(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. All of those persons are affiliated with each other and
under the control of Fred Chang.
Tekhill USA, LLC previously pledged
32,713,520 Common Shares as collateral to Preferred Bank, securing a loan from Preferred Bank to Fred Chang with a principal amount of
$7.1 million. In early 2022, this loan was paid off and the pledge of common shares was released. Contemporaneously, 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.
(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.
(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.
Related Party Transactions
For a description of our related party transactions, see "Related
Party Transactions" as discussed in Note 18 of the consolidated financial statements to this annual report on Form 20-F.
C.
Interest of Experts and Counsel
Not applicable.
Item 8. Financial Information
A.
Consolidated Statements and Other Financial Information
Refer to "Item 18. Financial Statements" for our Consolidated
Financial Statements as of December 31, 2022 and December 31, 2021 and for the years ended December 31, 2022, December 31, 2021 and December
31, 2020 and report of our independent registered public accounting firm included herein.
Legal or Arbitration Proceedings
In December 2014, an individual plaintiff sued our subsidiary,
Newegg.com
Americas Inc. ("
Newegg.com
Americas
"), in Superior Court in Los Angeles County, California,
alleging that
Newegg.com
Americas had engaged in deceptive advertising practices and seeking to certify a class action. In 2016,
the trial court sustained
Newegg.com
Americas' demurrer to the plaintiff's claims without leave to amend. The plaintiff
appealed, and in July 2018 an appellate court reversed the decision of the trial court, thus allowing the case to proceed. The matter
is now pending in the trial court, with Newegg Inc. having been added as a defendant. We intend to vigorously defend ourselves and our
subsidiaries. Depending on the amount and timing, an unfavorable result could materially affect our business, consolidated results of
operations, financial position or cash flows.
In September 2021, two subsidiaries of the Company were served with
a complaint filed in the Superior Court for Los Angeles County, California, alleging various wage and hour violations and seeking to certify
a class action. In October 2021, a second complaint was filed as a representative action pursuant to the Private Attorneys General Act
of 2004 against the same two subsidiaries in the Superior Court for Los Angeles County, California, alleging various violations of the
California Labor Code. The Company intends to vigorously defend its subsidiaries in both matters. The outcome of these matters is uncertain.
Depending on the amount and timing, an unfavorable result in either matter could materially affect our business, consolidated results
of operations, financial position or cash flows.
From time to time, we may be subject to legal proceedings, investigations
and claims incidental to the conduct of our business. Except as disclosed above, we are not currently a party to any legal proceeding
or investigation which, in the opinion of our management, is likely to have a material adverse effect on our business, financial condition
or results of operations.
Dividend Policy
To date, we have not paid any cash dividends on our shares. As a BVI
company, we may only declare and pay dividends if our directors are satisfied, on reasonable grounds, that immediately after the distribution
(i) the value of our assets will exceed our liabilities and (ii) we will be able to pay our debts as they fall due. We currently anticipate
that we will retain any available funds to finance the growth and operation of our business and we do not anticipate paying any cash dividends
in the foreseeable future. Additionally, our cash held in foreign countries may be subject to certain control limitations or repatriation
requirements, limiting our ability to use this cash to pay dividends.
B.
Significant Changes
Except otherwise disclosed within this annual report on Form 20-F,
no significant change has occurred since December 31, 2022.
74
Item 9. The Offer and Listing
A.
Offering and Listing Details
Not applicable.
B.
Plan of Distribution
Not applicable.
C.
Markets
Our common shares are traded on the Nasdaq Capital Market ("Nasdaq")
under the symbol "NEGG."
D.
Selling Shareholders
Not applicable.
E.
Dilution
Not applicable.
F.
Expenses of the Issue
Not applicable.
Item 10. Additional Information
A.
Share Capital
Description of Shares
We are a company incorporated in the British Virgin Islands with limited
liability and our affairs are governed by our Amended and Restated Memorandum and Articles of Association, the Companies Act, the common
law of the British Virgin Islands, our corporate governance documents and rules and regulations of the stock exchange on which our common
shares are traded.
Rights and Obligations of Shareholders
Each of common shares confers on its holder:
●
the right to vote;
●
the right to an equal share in any dividend paid by the Company in accordance with the Companies Act; and
●
the right to an equal share in the distribution of the surplus of the Company.
75
Voting Rights.
Holders of common shares shall at all times vote
together as one class on all resolutions submitted to a vote by the shareholders. Each common share is entitled to one (1) vote on all
matters subject to vote at general meetings of the Company.
Dividends.
The holders of shares are entitled to such dividends
as may be declared by the directors of the Company at such time and of such an amount as the directors think fit if they are satisfied,
on reasonable grounds, that immediately after the distribution, the value of Company assets exceeds the Company's liabilities and
the Company will be able to pay its debts as they fall due.
Pre-emptive rights.
Except as set forth in the Amended Shareholders
Agreement, there are no pre-emptive rights applicable to the issue by the Company of new shares under either the Companies Act or our
Amended and Restated Memorandum and Articles of Association.
Warrants
On April 28, 2016, the Company closed the sale of warrants to purchase
125,000 of our common shares to Hangzhou Lianluo pursuant to the terms of a certain securities purchase agreement. These warrants are
exercisable at any time for an exercise price of $17.60 per share, with no expiration date.
B.
Memorandum and Articles of
Association
We are incorporated in the British Virgin Islands and have been assigned
company number 553525 in the Register of Companies in the BVI. Our registered office is at the offices of Vistra Corporate Services Center,
Wickhams Cay II, Road Town, Tortola, VG1110, British Virgin Islands.
Objects of the Company
Under our Amended and Restated Memorandum and Articles of Association,
the objects of our Company are unrestricted and we have the full power and authority to carry out any object not prohibited by the law
of the British Virgin Islands.
Amendment
Clause 12.1 of our Amended and Restated Memorandum provides that the
Company may amend the Memorandum or the Articles of Association by Resolution of Shareholders or by Resolution of Directors, provided
that no amendment may be made by Resolution of Directors: (a) to restrict the rights or powers of the Shareholders to amend the Memorandum
or the Articles of Association; (b) to change the percentage of Shareholders required to pass a Resolution of Shareholders to amend the
Memorandum or the Articles of Association; (c) in circumstances where the Memorandum or the Articles of Association cannot be amended
by the Shareholders; and (d) provided that the Directors may not amend certain sections of the Amended and Restated Memorandum and Articles
of Association that would negatively affect existing shareholders.
Rights of Certain Principal Shareholders
Appointment and Removal of the Directors
Pursuant to the Amended and Restated Memorandum and Articles of Association
and subject to compliance with applicable laws and Nasdaq Listing Rules, the board of the Company shall consist of up to seven directors.
Initially, four of the directors shall be appointed by Digital Grid, and three of the directors shall be appointed by the Minority Representative.
If the number of Shares or other Equity Interests (as defined in the
Amended and Restated Memorandum and Articles of Association) of the Company held by the Legacy Shareholders represents (i) more than two
sevenths (2/7) of the total voting power of all outstanding Shares or other Equity Interests of the Company, then the Minority Representative
shall be entitled to appoint and replace three directors, (ii) less than or equal to two sevenths (2/7) and more than one seventh (1/7)
of the total voting power of all outstanding Shares or other Equity Interests of the Company, then the Minority Representative shall be
entitled to appoint and replace two directors, (iii) less than or equal to one seventh (1/7) and more than five percent (5%) of the total
voting power of all outstanding Shares or other Equity Interests of the Company, then the Minority Representative shall be entitled to
appoint and replace one director, and (iv) less than or equal to five percent (5%) of the total voting power of all outstanding Shares
or other Equity Interests of the Company, then the Minority Representative shall no longer be entitled to appoint or replace any directors.
76
If the number of Shares or other Equity Interests held by Digital Grid
or its affiliates represents (i) more than fifty percent (50%) of the total voting power of all outstanding Shares or other Equity Interests
of the Company, then Digital Grid shall be entitled to appoint and replace four directors, (ii) less than or equal to fifty percent (50%)
and more than two sevenths (2/7) of the total voting power of all outstanding Shares or other Equity Interests of the Company, then Digital
Grid shall be entitled to appoint and replace three directors, (iii) less than or equal to two sevenths (2/7) and more than one seventh
(1/7) of the total voting power of all outstanding Shares or other Equity Interests of the Company, then Digital Grid shall be entitled
to appoint and replace two directors, (iv) less than or equal to one seventh (1/7) and more than five percent (5%) of the total voting
power of all outstanding Shares or other Equity Interests of the Company, then Digital Grid shall be entitled to appoint and replace one
director, and (v) less than or equal to five percent (5%) of the total voting power of all outstanding Shares or other Equity Interests
of the Company, then Digital Grid shall no longer be entitled to appoint or replace any directors.
Any director positions which neither Digital Grid nor the Minority
Representative are entitled to appoint under the Amended and Restated Memorandum and Articles of Association shall be appointed by a majority
of the remaining directors, or by any other means allowed under the Amended and Restated Memorandum and Articles of Association and the
Companies Act.
A director or member of a committee of the Board or the board of a
subsidiary may be removed from his or her position, with cause, by the majority of the shareholders or the majority of the Board; provided
that
i.
Any director or member of a
committee of the Board or the board of a subsidiary that is appointed or nominated by the Minority Representative shall be removed from
their position upon and only upon, the written request of the Minority Representative; and
ii.
Any director or member of a
committee of the Board or the board of a subsidiary that is appointed or nominated by Digital Grid shall be removed from their position
upon and only upon, the written request of Liaison.
Requirements of Board Approval on Certain Matters
In addition, the Amended and Restated Memorandum and Articles of Association
also provides that, as long as the number of common shares held by Legacy Shareholders represents more than ten percent (10%) of the total
voting power of all outstanding common shares of the Company, the Company agrees not to take, or permit our subsidiaries to take, certain
actions, without the approval of the affirmative vote of not less than a majority of the number of votes represented by the directors,
which majority must include one of the directors designated by the Minority Representative as being the Primary Minority Board Appointee.
Such actions include the following:
i.
initiate any liquidation, dissolution,
bankruptcy filing or similar action, recapitalization, share combination or division, restructuring or reorganization of the Company
or any of its subsidiaries;
ii.
other than to the Company or
a wholly-owned subsidiary thereof, sell, license, transfer or otherwise dispose of (including through merger or consolidation) all or
substantially all of the assets or properties of the Company or any of its subsidiaries in any transaction or series of related transactions;
iii.
agree to any merger, consolidation
or combination of the Company or any of its subsidiaries, or to a sale of all or substantially all of the assets of the Company in connection
with a Company Sale (as defined in the Amended and Restated Memorandum and Articles of Association);
iv.
commence or undertake any Reorganization (as defined in the Amended and Restated Memorandum and Articles of Association);
v.
issue, directly or indirectly, any equity interest of the Company or permit any of the subsidiaries to issue any equity interest other than, in each case, any Excluded Issuance (as defined in the Amended and Restated Memorandum and Articles of Association);
vi.
materially alter or fundamentally change the nature of the business of the Company and its Subsidiaries;
vii.
amend, change, or waive any provision of, the memorandum and articles of association of the Company;
viii.
purchase or otherwise acquire all or any part of the assets or business of, or Equity Interests or other evidences of beneficial ownership of, invest in or participate in any joint venture, partnership or similar arrangement with, any Person (other than the Company or any of its subsidiaries), in each case in any transaction or series of related transactions involving a commitment in excess of $10,000,000;
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ix.
other than to the Company or a wholly-owned subsidiary thereof, sell, license, transfer or otherwise dispose of (including through merger or consolidation) any assets or properties of the Company or any of its subsidiaries, in each case in any transaction or series of related transactions involving a commitment in excess of $10,000,000;
x.
other than loans to wholly-owned subsidiaries, (A) extend any credit or make any loans to any Person, (B) incur, assume, guarantee, endorse or otherwise become responsible for indebtedness, or (C) amend, modify or supplement in any material respect the agreements governing (or otherwise extend or refinance) existing indebtedness;
xi.
appoint or remove the Chief Executive Officer of the Company;
xii.
enter into any Affiliate Transactions (as defined in the Amended and Restated Memorandum and Articles of Association);
xiii.
amend, change or waive any of the actions of the Company described in the Fifth Amended and Restated Articles of Association or the required voting threshold specified herein; and
xiv.
agree or commit to do any of the foregoing, or delegate any of the foregoing to the Company or any of its subsidiaries or any officer or agent of the Company or subsidiary thereof.
The rights granted to the Principal Shareholders are in addition to
and not intended to limit in any way the rights that the Principal Shareholders or any of their affiliates may have to appoint, elect
or remove our directors under our Amended and Restated Memorandum and Articles of Association or laws of the British Virgin Islands.
Pre-emptive Rights of the Principal Shareholders
Newegg, Digital Grid, the Principal Shareholders and we agreed to enter
into the Amended Shareholders Agreement, pursuant to which we agreed to assume all of the rights and obligations of Newegg under the original
Shareholders Agreement.
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
the "excluded issuance" as defined in the Amended Shareholders Agreement or common shares offered pursuant to a registration
statement filed with the SEC.
For the purpose of the Amended Shareholders Agreement, the "excluded
issuance" means (i) any equity interests issued as share dividends, or pursuant to share splits, recapitalization or other similar
events that do not adversely affect the proportionate amount of the common shares held by the Principal Shareholders, and (ii) common
shares issuable pursuant to any stock option or any similar equity incentive plan of the Company approved by the Board; and (iii) equity
interests issued pursuant to acquisitions or strategic transactions approved by a majority of the disinterested directors of the Company
provided that any such issuance shall only be to an entity (or to the equity holders of an entity) which is, itself or through its subsidiaries,
an operating company or an owner of an asset in a business synergistic with the business of the Company and shall provide to the Company
additional benefits in addition to the investment of funds, but shall not include a transaction in which the Company is issuing equity
interests primarily for the purpose of raising capital or to an entity whose primary business is investing in securities.
The Company is required to give Principal Shareholders a notice stating
the price (or formula by which the price will be determined, which may refer to a future contingent event) and terms of issuance of new
securities and to remain the offer to issue the Principal Shareholders their Pro Rata Shares of such new securities (as defined below)
open until the 15th calendar day following the receipt of such notice. The Principal Shareholders shall deliver an exercise notice along
with payment to exercise their pre-emptive rights.
In the event that the Principal Shareholder fails to give an exercise
notice timely, or elects to purchase fewer than all of its Pro Rata Share of such new securities, then the Company shall send written
notice to any Principal Shareholder who has elected to purchase all of its Pro Rata Share of such new securities, who will then have the
right, by giving written notice to the Company within two business days upon receiving notice from the Company, to purchase its Pro Rata
Share of such unsubscribed portion, and such right shall continue to apply repeatedly and iteratively until all of such new securities
have been allocated to the Principal Shareholders or none of the Principal Shareholders have elected to participate in such further purchase.
If, at the end of such process, there are new securities that have not been subscribed for by the Principal Shareholders, the Company
may, for a period of time not to exceed 60 days, sell such unsubscribed new securities, on the same times to a third-party purchaser.
If, however, at the end of such 60-day period, the Company has not consummated a sale of any of such unsubscribed new securities, the
Company shall no longer be permitted to sell such new securities without again complying with these provisions of pre-emptive rights in
the Amended Shareholders Agreement.
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Right of First Refusal of the Company and Principal Shareholders
Pursuant to the Amended Shareholders Agreement, subject to compliance
with applicable laws and Nasdaq's Listing Rules, if any Principal Shareholders or any of their affiliates, receives a bona fide
offer from any person other than its affiliate for any of the common shares such Principal Shareholders received in connection with the
Merger (the "ROFR Shares"), then the Company has a right of first refusal, but not the obligation, to elect to purchase all
(and not less than all) of the ROFR Shares, at the same price, and on the same terms and conditions offered by the purchaser (the "ROFR
Terms"). In the event the Company does not decide to purchase such ROFR Shares or decides to purchase for less than all of the ROFR
Shares, then each of the Principal Shareholders other than the selling Principal Shareholders shall have a right of first refusal to elect
to purchase all (and not less than all) of its Pro Rata Share of the ROFR Shares on the ROFR Terms. By amendment dated August 2022, the
Amended and Restated Shareholders Agreement was amended such that the Company's right of first refusal would apply only to 80% of
the shares of the Company's common shares subject to such ROFR Right collectively owned by each Principal Shareholder and its Affiliates.
For the purpose of this Amended Shareholders Agreement, "Pro Rata Share" means the percentage which corresponds to the ratio
which each selling Principal Shareholder's "Percentage Interest" (which is calculated by dividing (i) the number of
the common shares owned by such Principal Shareholder, by (ii) total number of the then outstanding shares of the common shares held by
all Principal Shareholders) bears to the total Percentage Interests of all Principal Shareholders exercising their right of first refusal.
In the event that the ROFR Shares are in exchange for non-cash consideration, then such right of first refusal shall be exercisable based
on the fair market value determined in good faith by the board of such non-cash consideration. Such rights of first refusal may delay
or prevent us from raising other funding in the future and may have an adverse impact on the liquidity and market price of our common
shares.
Limitations on Right to Own Shares
British Virgin Islands law and our Amended and Restated Memorandum
and Articles of Association impose no limitations on the right of nonresident or foreign owners to hold or vote our securities. There
are no provisions in the Amended and Restated Memorandum and Articles of Association governing the ownership threshold above which shareholder
ownership must be disclosed.
Anti-Takeover Provisions
Some provisions of our Amended and Restated Memorandum and Articles
of Association may discourage, delay or prevent a change of control of our Company or management, that shareholders may consider favorable,
including provisions that limit the ability of shareholders to requisition and convene general meetings of shareholders. Our Amended and
Restated Memorandum and Articles of Association allow our shareholders holding shares representing in aggregate not less than thirty percent
(30%) of our voting shares to requisition a special meeting of shareholders, in which case our directors are obliged to call such meeting
and to put the resolutions so requisitioned to a vote at such meeting.
However, under British Virgin Islands law, our directors may only exercise
the rights and powers granted to them under our Amended and Restated Memorandum and Articles of Association for a proper purpose and for
what they believe in good faith to be in the best interests of our Company.
Register of Members
The Company is required to keep a register of members containing (i)
the names and addresses of the shareholders, (ii) the number of each class and series of shares held by each shareholder, (iii) the date
on which the name of each shareholder was entered in the register of members, and (iv) the date on which any person ceased to be a shareholder.
A share is deemed to be issued when the name of the shareholder is entered in the register of members and the entry of the name of a person
in the register of members as a holder of a share is prima facie evidence that legal title in the share vests in that person.
Variation of Rights of Shareholders
If at any time the shares are divided into different classes, the rights
attached to any class may only be varied, whether or not the Company is in liquidation, by a resolution passed at a meeting by a majority
of the votes cast by those entitled to vote at a meeting of the holders of the issued shares in that class.
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Meetings
Any action required or permitted to be taken by the shareholders may
be effected at a duly called annual or special meeting of the shareholders entitled to vote on such action. An action that may be taken
by the shareholders at a meeting (other than the election of Directors) may also be taken by a resolution of shareholders consented to
in writing, without the need for any notice, but if any resolution of shareholders is adopted otherwise than by the unanimous written
consent of all shareholders, a copy of such resolution shall forthwith be sent to all shareholders not consenting to such resolution.
All meetings of shareholders (whether annual or special) will be held on such dates and at such places as may be fixed from time to time
by the directors. The Company is not required to hold an annual general meeting in any calendar year. However, where so determined by
the directors of the Company, an annual general meeting shall be held once in each calendar year at such date and time as may be determined
by the directors of the Company.
At any meeting of shareholders, a quorum will be present if there are
one or more shareholders present in person or by proxy representing not less than 50% of the issued shares entitled to vote on the resolutions
to be considered at the meeting. The shareholders present at a duly called or held meeting of shareholders at which a quorum is present
may continue to transact business until adjournment notwithstanding the withdrawal of enough shareholders to leave less than a quorum,
if any action (other than adjournment) is approved by at least a majority of the shares required to constitute a quorum.
A shareholder may be represented at a meeting of shareholders by a
proxy who may speak and vote on behalf of the shareholder. A shareholder will be deemed to be present at the meeting if he participates
by telephone or other electronic means and all shareholders participating in the meeting are able to hear each other.
Transfer of Shares
Subject to the restrictions and conditions in our Amended and Restated
Memorandum and Articles of Association, as amended, and the Amended Shareholders Agreement, any shareholder may transfer all or any of
his or her shares by written instrument of transfer signed by the transferor and containing the name and address of the transferee. The
transfer of a share is effective when the name of the transferee is entered on the register of members of the Company.
Redemption of Shares
The Company may purchase, redeem or otherwise acquire any of its own
shares for such consideration as the directors of the Company may determine if the directors are satisfied, on reasonable grounds, that
immediately after the acquisition the value of the Company's assets will exceed its liabilities and the Company will be able to
pay its debts as they fall due. Shares that the Company purchases, redeems or otherwise acquires may be cancelled or held as treasury
shares except to the extent that such shares are in excess of 50% of the issued shares in which case, they shall be cancelled to the extent
of such excess, but they shall be available for reissue.
Differences Between the Law of Different Jurisdictions
We were incorporated under, and are governed by, the laws of the BVI.
Set forth below is a summary of some of the differences between provisions of the Companies Act applicable to us and the laws application
to companies incorporated in Delaware and their shareholders.
Director's Fiduciary Duties
Under Delaware corporate law, a director of a Delaware corporation
has a fiduciary duty to the corporation and its shareholders. This duty has two components: the duty of care and the duty of loyalty.
The duty of care requires that a director act in good faith, with the care that an ordinarily prudent person would exercise under similar
circumstances. Under this duty, a director must inform himself of, and disclose to shareholders, all material information reasonably available
regarding a significant transaction. The duty of loyalty requires that a director act in a manner he reasonably believes to be in the
best interests of the corporation. He must not use his corporate position for personal gain or advantage. This duty prohibits self-dealing
by a director and mandates that the best interest of the corporation and its shareholders take precedence over any interest possessed
by a director, officer or controlling shareholder and not shared by the shareholders generally. In general, actions of a director are
presumed to have been made on an informed basis, in good faith and in the honest belief that the action taken was in the best interests
of the corporation. However, this presumption may be rebutted by evidence of a breach of one of the fiduciary duties. Should such evidence
be presented concerning a transaction by a director, a director must prove the procedural fairness of the transaction, and that the transaction
was of fair value to the corporation.
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BVI law provides that every director of a BVI company in exercising
his powers or performing his duties shall act honestly and in good faith and in what the director believes to be in the best interests
of the company. Additionally, the director shall exercise the care, diligence, and skill that a reasonable director would exercise in
the same circumstances, taking into account the nature of the company, the nature of the decision and the position of the director and
his responsibilities. In addition, BVI law provides that a director shall exercise his powers as a director for a proper purpose and shall
not act, or agree to the company acting, in a manner that contravenes the Companies Act or the memorandum of association or articles of
association of the company.
Amendment of Governing Documents
Under Delaware corporate law, with very limited exceptions, a vote
of the shareholders is required to amend the certificate of incorporation. Under BVI law and our Amended and Restated Memorandum and Articles
of Association, we may amend the Amended and Restated Memorandum and Articles of Association by resolution of shareholders or by resolution
of directors, provided that no amendment may be made by resolution of directors: (a) to restrict the rights or powers of the shareholders
to amend the memorandum of association or the articles of association; (b) to change the percentage of shareholders required to pass a
resolution of shareholders to amend the memorandum of association or the articles of association; (c) in circumstances where the memorandum
of association or the articles of association cannot be amended by the shareholders; and (d) provided that the directors may not amend
certain sections of the Amended and Restated Memorandum and Articles of Association that would negatively affect existing shareholders.
Written Consent of Directors
Under Delaware corporate law, directors may act by written consent
only on the basis of a unanimous vote. Under BVI law, directors' consents need only a majority of directors signing to take effect.
Under our Amended and Restated Memorandum and Articles of Association, directors may act by written consents of all directors.
Written Consent of Shareholders
Under Delaware corporate law, unless otherwise provided in the certificate
of incorporation, any action to be taken at any annual or special meeting of shareholders of a corporation, may be taken by written consent
of the holders of outstanding stock having not less than the minimum number of votes that would be necessary to take such action at a
meeting. As permitted by BVI law, shareholders' consents need only shareholders representing a majority of votes of the shares entitled
to vote signing to take effect. Our Amended and Restated Memorandum and Articles of Association provide that an action that may be taken
by the shareholders at a meeting (other than the election of directors) may also be taken by a resolution of shareholders consented to
in writing, without the need for any notice, but if any resolution of shareholders is adopted otherwise than by the unanimous written
consent of all shareholders, a copy of such resolution shall forthwith be sent to all shareholders not consenting to such resolution.
Shareholder Proposals
Under Delaware corporate law, a shareholder has the right to put any
proposal before the annual meeting of shareholders, provided it complies with the notice provisions in the governing documents. A special
meeting may be called by the board of directors or any other person authorized to do so in the governing documents, but shareholders may
be precluded from calling special meetings. BVI law and our Amended and Restated Memorandum and Articles of Association provide that our
directors shall call a meeting of the shareholders in respect of the matter for which the meeting is requested in writing by shareholders
entitled to exercise 30% or more of the voting rights.
Sale of Assets
Under Delaware corporate law, a vote of the shareholders is required
to approve the sale of assets only when all or substantially all assets are being sold. In the BVI, shareholder approval is required when
more than 50% of a company's total assets by value are being disposed of or sold.
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Dissolution; Winding Up
Under Delaware corporate law, unless the board of directors approves
the proposal to dissolve, dissolution must be approved by shareholders holding 100% of the total voting power of the corporation. Only
if the dissolution is initiated by the board of directors may it be approved by a simple majority of the corporation's outstanding
shares. Delaware corporate law allows a Delaware corporation to include in its certificate of incorporation a supermajority voting requirement
in connection with dissolutions initiated by the board. As permitted by BVI law and our Amended and Restated Memorandum and Articles of
Association, we may by a resolution of shareholders or, subject to the requirements under our Amended and Restated Memorandum and Articles
of Association, by resolution of directors appoint a voluntary liquidator to undertake the liquidation of the Company.
Redemption of Shares
Under Delaware corporate law, any stock may be made subject to redemption
by the corporation at its option or at the option of the holders of such stock provided there remains outstanding shares with full voting
power. Such stock may be made redeemable for cash, property or rights, as specified in the certificate of incorporation or in the resolution
of the board of directors providing for the issue of such stock. As permitted by BVI law and our Amended and Restated Memorandum and Articles
of Association, we may purchase, redeem or otherwise acquire any of our own shares for such consideration as our directors may determine
if the directors are satisfied, on reasonable grounds, that immediately after the acquisition the value of our assets will exceed our
liabilities and we will be able to pay our debts as they fall due. Shares that the Company purchases, redeems or otherwise acquires may
be cancelled or held as treasury shares except to the extent that such shares are in excess of 50% of the issued shares in which case
they shall be cancelled to the extent of such excess but they shall be available for reissue.
Variation of Rights of Shares
Under Delaware corporate law, a corporation may vary the rights of
a class of shares with the approval of a majority of the outstanding shares of such class, unless the certificate of incorporation provides
otherwise. As permitted by BVI law and our Amended and Restated Memorandum and Articles of Association, if at any time the shares are
divided into different classes, the rights attached to any class may only be varied, whether or not the Company is in liquidation, by
a resolution passed at a meeting by a majority of the votes cast by those entitled to vote at a meeting of the holders of the issued shares
in that class.
Removal of Directors
Under Delaware corporate law, a director of a corporation with a classified
board may be removed only for cause with the approval of a majority of the outstanding shares entitled to vote, unless the certificate
provides otherwise. As permitted by BVI law and our Amended and Restated Memorandum and Articles of Association, a director or member
of a committee of the board or the board of a subsidiary may be removed from his or her position, with cause, by the majority of the shareholders
or the majority of the board; provided that (i) any director or member of a committee of the board or the board of a subsidiary that is
appointed or nominated by the minority representative shall be removed from their position upon and only upon, the written request of
the minority representative; and (ii) any director or member of a committee of the board or the board of a subsidiary that is appointed
or nominated by Digital Grid shall be removed from their position upon and only upon, the written request of Digital Grid.
Mergers
Under Delaware corporate law, one or more constituent corporations
may merge into and become part of another constituent corporation in a process known as a merger. A Delaware corporation may merge with
a foreign corporation as long as the law of the foreign jurisdiction permits such a merger. To effect a merger under Delaware General
Corporation Law §251, an agreement of merger must be properly adopted and the agreement of merger or a certificate of merger must
be filed with the Delaware Secretary of State. In order to be properly adopted, the agreement of merger must be adopted by the board of
directors of each constituent corporation by a resolution or unanimous written consent. In addition, the agreement of merger generally
must be approved at a meeting of shareholders of each constituent corporation by a majority of the outstanding stock of the corporation
entitled to vote, unless the certificate of incorporation provides for a supermajority vote. In general, the surviving corporation assumes
all of the assets and liabilities of the disappearing corporation or corporations as a result of the merger.
Under the Companies Act, two or more companies may merge or consolidate
in accordance with the statutory provisions. A merger means the merging of two or more constituent companies into one of the constituent
companies, and a consolidation means the uniting of two or more constituent companies into a new company. In order to merge or consolidate,
the directors of each constituent company must approve a written plan of merger or consolidation which must be authorized by a resolution
of shareholders.
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Shareholders not otherwise entitled to vote on the merger or consolidation
may still acquire the right to vote if the plan of merger or consolidation contains any provision which, if proposed as an amendment to
the memorandum association or articles of association, would entitle them to vote as a class or series on the proposed amendment. In any
event, all shareholders must be given a copy of the plan of merger or consolidation irrespective of whether they are entitled to vote
at the meeting or consent to the written resolution to approve the plan of merger or consolidation.
Inspection of Books and Records
Under Delaware corporate law, any shareholder of a corporation may
for any proper purpose inspect or make copies of the corporation's stock ledger, list of shareholders and other books and records.
Under the Companies Act, members of the general public, on payment
of a nominal fee, can obtain copies of the public records of a company available at the office of the Registrar which will include the
company's certificate of incorporation, its memorandum and articles of association (with any amendments) and records of license
fees paid to date and will also disclose any articles of dissolution, articles of merger and a register of charges if the company has
elected to file such a register.
A member of a company is entitled, on giving written notice to the
company, to inspect:
a.
the memorandum and articles;
b.
the register of members;
c.
the register of directors; and
d.
the minutes of meetings and
resolutions of members and of those classes of members of which he is a member; and to make copies of or take extracts from the documents
and records referred to in (a) to (d) above.
Subject to our Amended and Restated Memorandum and Articles of Association,
the directors may, if they are satisfied that it would be contrary to the company's interests to allow a member to inspect any document,
or part of a document, specified in (b), (c) or (d) above, refuse to permit the member to inspect the document or limit the inspection
of the document, including limiting the making of copies or the taking of extracts from the records.
Where a company fails or refuses to permit a member to inspect a document
or permits a member to inspect a document subject to limitations, that member may apply to the British Virgin Islands Court for an order
that he should be permitted to inspect the document or to inspect the document without limitation.
Transactions with Interested Shareholders
Delaware corporate law contains a business combination statute applicable
to Delaware public corporations whereby, unless the corporation has specifically elected not to be governed by such statute by amendment
to its certificate of incorporation, it is prohibited from engaging in certain business combinations with an "interested shareholder"
for three years following the date that such person becomes an interested shareholder. An interested shareholder generally is a person
or group who or that owns or owned 15% or more of the target's outstanding voting stock within the past three years. This has the
effect of limiting the ability of a potential acquirer to make a two-tiered bid for the target in which all shareholders would not be
treated equally. The statute does not apply if, among other things, prior to the date on which such shareholder becomes an interested
shareholder, the board of directors approves either the business combination or the transaction that resulted in the person becoming an
interested shareholder. This encourages any potential acquirer of a Delaware public corporation to negotiate the terms of any acquisition
transaction with the target's board of directors.
BVI law has no comparable provision.
Cumulative Voting
Under Delaware corporate law, cumulative voting for elections of directors
is not permitted unless the company's certificate of incorporation specifically provides for it. Cumulative voting potentially facilitates
the representation of minority shareholders on a board of directors since it permits the minority shareholder to cast all the votes to
which the shareholder is entitled on a single director, which increases the shareholder's voting power with respect to electing
such director. There are no prohibitions to cumulative voting under the laws of the BVI, but our Amended and Restated Memorandum and Articles
of Association do not provide for cumulative voting.
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C.
Material Contracts
Except as otherwise disclosed in this annual report (including
the Exhibits under Item 19), we are not currently, nor have we been for the past two years, party to any material contract, other
than contracts entered into in the ordinary course of business.
D.
Exchange Controls
BVI Exchange Controls
There are no material exchange controls restrictions on payment of
dividends, interest or other payments to the holders of our common shares or on the conduct of our operations in the BVI, where we were
incorporated. There are no material BVI laws that impose any material exchange controls on us or that affect the payment of dividends,
interest or other payments to nonresident holders of our common shares. BVI law and our Amended and Restated Memorandum and Articles of
Association do not impose any material limitations on the right of non-residents or foreign owners to hold or vote our common shares.
E.
Taxation
BVI, PRC AND U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following is a general summary of certain material BVI, PRC
and U.S. federal income tax considerations. The discussion is not intended to be, nor should it be construed as, legal or tax advice to
any particular shareholder or prospective shareholder. The discussion is based on laws and relevant interpretations thereof in effect
as of the date hereof, all of which are subject to change or different interpretations, possibly with retroactive effect.
BVI Taxation
The BVI does not impose a withholding tax on dividends paid to holders
of our common shares, nor does the BVI levy any capital gains or income taxes on us. Further, a holder of our common shares who is not
a tax resident of the BVI is exempt from the BVI income tax on dividends paid with respect to the common shares. Holders of common shares
are not subject to the BVI income tax on gains realized on the sale or disposition of the common shares.
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Our common shares are not subject to transfer taxes, stamp duties or
similar charges in the BVI. However, as a company incorporated under the Companies Act, we are required to pay the BVI government an annual
license fee based on the number of shares we are authorized to issue.
There is no income tax treaty or convention currently in effect between
the United States and the BVI.
PRC Taxation
We are a holding company incorporated in the BVI, which directly holds
our equity interests in our PRC operating subsidiaries. The EIT Law and its implementation rules, both of which became effective as of
January 1, 2008, as amended on February 24, 2017, provide that a PRC enterprise is subject to a standard income tax rate of 25% and China-sourced
income of foreign enterprises, such as dividends paid by a PRC subsidiaries to its overseas parent, will normally be subject to PRC withholding
tax at a rate of 10%, unless there are applicable treaties between the overseas parent's jurisdiction of incorporation and China
to reduce such rate.
The EIT Law also provides that enterprises organized under the laws
of jurisdictions outside China with their "de facto management bodies" located within China may be considered PRC resident
enterprises and therefore subject to PRC enterprise income tax at the rate of 25% on their worldwide income. Its implementation rules
further define the term "de facto management body" as the management body that exercises substantial and overall management
and control over the business, personnel, accounts and properties of an enterprise. We do not consider the Company to be a PRC resident
enterprise since our management team, which exercises substantial and overall management and control over the Company and its overseas
subsidiaries, is located in the United States. If the PRC tax authorities determine that our BVI holding company is a "resident
enterprise" for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could follow. Under the EIT Law
and its implementation regulations issued by the State Council, a 10% PRC withholding tax is applicable to dividends paid to investors
that are non-resident enterprises, which do not have an establishment or place of business in the PRC or which have such establishment
or place of business but the dividends are not effectively connected with such establishment or place of business, to the extent such
dividends are derived from sources within the PRC. In addition, any gain realized on the transfer of shares by such investors is also
subject to PRC tax at a rate of 10%, if such gain is regarded as income derived from sources within the PRC. If we are deemed a PRC resident
enterprise, dividends paid on our common shares, and any gain realized from the transfer of our common shares, may be treated as income
derived from sources within the PRC and may as a result be subject to PRC taxation. Furthermore, if we are deemed a PRC resident enterprise,
dividends paid to individual investors who are non-PRC residents and any gain realized on the transfer of common shares by such investors
may be subject to PRC tax at a current rate of 20% (which in the case of dividends may be withheld at source). Any PRC tax liability may
be reduced under applicable tax treaties or tax arrangements between China and other jurisdictions. If we or any of our subsidiaries established
outside China are considered a PRC resident enterprise, it is unclear whether holders of our common shares would be able to claim the
benefit of income tax treaties or agreements entered into between China and other countries or areas.
U.S. Federal Income Taxation
We believe that we are an inverted corporation for U.S. federal tax
purposes. This means that, notwithstanding that we are a company incorporated in the BVI, we believe that we will be treated for all U.S.
federal tax purposes as if we are a U.S. corporation and that a holder of our common shares will be treated for all U.S. federal tax purposes
as holding the stock of a U.S. corporation.
The following discussion is a summary of certain U.S. federal income
tax considerations generally applicable to the ownership and disposition of our common shares but does not purport to be a complete analysis
of all potential tax effects. The effects of other U.S. federal tax laws, such as estate and gift tax laws, and any applicable state or
local tax laws are not discussed. This discussion is based on the Internal Revenue Code and U.S. Treasury Regulations promulgated thereunder,
judicial decisions, and published rulings and administrative pronouncements of the U.S. Internal Revenue Service, or the IRS, in each
case in effect as of the date hereof. These authorities may change or be subject to differing interpretations. Any such change or differing
interpretation may be applied retroactively in a manner that could adversely affect owners of our common shares. We have not sought and
will not seek any rulings from the IRS regarding the matters discussed below. There can be no assurance the IRS or a court will not take
a contrary position to that discussed below regarding the tax consequences of the ownership and disposition of our common shares.
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This discussion is limited to beneficial owners that hold our common
shares as a "capital asset" within the meaning of Section 1221(a) of the Code (generally, property held for investment). This
discussion does not address all U.S. federal income tax consequences, including the impact of the Medicare contribution tax on net investment
income. In addition, it does not address consequences relevant to certain types of investors subject to special rules, including, without
limitation:
●
financial institutions or financial services entities;
●
broker-dealers;
●
governments or agencies or instrumentalities thereof;
●
regulated investment companies;
●
real estate investment trusts;
●
expatriates or former long-term residents of the U.S.;
●
persons that actually or constructively own five percent or more (by vote or value) of our shares;
●
insurance companies;
●
dealers or traders subject to a mark-to-market method of accounting with respect to the securities;
●
persons holding the securities as part of a "straddle," constructive sale, hedge, conversion or other integrated or similar transaction;
●
persons that purchase or sell our securities as part of a wash sale for U.S. federal income tax purposes;
●
U.S. holders (as defined below) whose functional currency is not the U.S. dollar;
●
partnerships (or entities or arrangements classified as partnerships or other pass-through entities for U.S. federal income tax purposes) and any beneficial owners of such entities;
●
tax-exempt entities;
●
controlled foreign corporations;
●
passive foreign investment companies; and
●
persons that acquired our securities as compensation or in connection with services.
If you are a partnership or other pass-through entity (including an
entity or arrangement treated as a partnership or other pass-through entity for U.S. federal income tax purposes), the U.S. federal income
tax treatment of your partners, members or other beneficial owners will generally depend on the status of the partners, members or other
beneficial owners, your activities, and certain determinations made at the partner, member or other beneficial owner level. If you are
a partner, member or other beneficial owner of a partnership or other pass-through entity that acquires our securities, you are urged
to consult your tax advisor regarding the tax consequences of acquiring, owning and disposing of our securities.
U.S. Holders
For purposes of this discussion, a "U.S. holder" is any
beneficial owner of our common shares that is:
●
an individual who is a citizen or resident of the United States;
●
a corporation (or other entity or arrangement taxable as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia;
●
an estate the income of which is includable in gross income for U.S. federal income tax purposes regardless of its source; or
●
a trust, if (i) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons (as defined in the Code) have authority to control all substantial decisions of the trust or (ii) it has a valid election in effect under Treasury regulations to be treated as a U.S. person.
86
Taxation of Distributions
If we pay distributions in cash or other property (other than certain
distributions of our common shares or rights to acquire our common shares) to U.S. holders of our common shares, such distributions generally
will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits,
as determined under U.S. federal income tax principles. Distributions in excess of current and accumulated earnings and profits will constitute
a return of capital that will be applied against and reduce (but not below zero) the U.S. holder's adjusted tax basis in our common
shares. Any remaining excess will be treated as gain realized on the sale or other disposition of the common shares and will be treated
as described under "U.S. Holders — Sale, Taxable Exchange or Other Taxable Disposition of Our common shares" below.
Dividends we pay to a U.S. holder that is a taxable corporation generally
will qualify for the dividends received deduction if the requisite holding period is satisfied. With certain exceptions and provided certain
holding period requirements are met, dividends we pay to a non-corporate U.S. holder may constitute "qualified dividend income"
that will be subject to tax at the applicable tax rate accorded to long-term capital gains. If the holding period requirements are not
satisfied, then a corporation may not be able to qualify for the dividends received deduction and would have taxable income equal to the
entire dividend amount, and non-corporate holders may be subject to tax on such dividend at regular ordinary income tax rates instead
of the preferential rate that applies to qualified dividend income.
Sale, Taxable Exchange or Other Taxable Disposition of Our Common
Shares
Subject to the discussion below under "U.S. Holders — Redemption
of Our Common Shares," upon a sale, taxable exchange or other taxable disposition of our common shares, a U.S. holder generally
will recognize capital gain or loss in an amount equal to the difference between the amount realized and the U.S. holder's adjusted
tax basis in such common shares. Any such capital gain or loss generally will be long-term capital gain or loss if the U.S. holder's
holding period for the common shares so disposed of exceeds one year. Long-term capital gains recognized by non-corporate U.S. holders
currently will be eligible to be taxed at reduced rates. The deductibility of capital losses is subject to limitations.
Redemption of Our Common Shares
In the event that a U.S. holder's common shares is redeemed or
if we purchase a U.S. holder's common shares in an open market transaction (such open market purchase of common shares by us is
referred to as a "redemption" for the remainder of this discussion), the treatment of the transaction for U.S. federal income
tax purposes will depend on whether the redemption qualifies as a sale of the common shares under Section 302 of the Code. Under these
rules, the redemption generally will be treated as a sale of the common shares (rather than as a distribution) if the redemption (i) is
"substantially disproportionate" with respect to the U.S. holder, (ii) results in a "complete termination" of
the U.S. holder's interest in us or (iii) is "not essentially equivalent to a dividend" with respect to the U.S. holder.
In determining whether any of these tests have been met, shares considered to be owned by the U.S. holder by reason of certain constructive
ownership rules set forth in the Code, as well as shares actually owned, must generally be taken into account. Because the determination
as to whether any of the alternative tests of Section 302 of the Code is satisfied with respect to any particular holder of the stock
will depend upon the facts and circumstances as of the time the determination is made, U.S. holders should consult their tax advisors
to determine such tax treatment.
If the redemption qualifies as a sale of common shares, the U.S. holder
will be treated as described under "U.S. Holders — Sale, Taxable Exchange or Other Taxable Disposition of Our Common Shares"
above. If the redemption does not qualify as a sale of our common shares, the U.S. holder will be treated as receiving a distribution
with the tax consequences described above under "U.S. Holders — Taxation of Distributions." The amount of the distribution
would be measured by the amount of cash and the fair market value of any property received by the U.S. holder and any remaining tax basis
of the U.S. holder in the redeemed common shares would be added to the U.S. holder's adjusted tax basis in its remaining common
shares. If the U.S. holder has no remaining common shares, such basis may, under certain circumstances, be transferred to a related person
or it may be lost entirely.
Information Reporting and Backup Withholding
In general, information reporting requirements may apply to dividends
paid to a U.S. holder and to the proceeds of the sale, taxable exchange or other taxable disposition of our common shares unless the U.S.
holder is an exempt recipient. Backup withholding may apply to such payments if the U.S. holder fails to provide a taxpayer identification
number, a certification of exempt status or has been notified by the IRS that it is subject to backup withholding (and such notification
has not been withdrawn).
Backup withholding is not an additional tax. Any amounts withheld under
the backup withholding rules will be allowed as a credit against a U.S. holder's U.S. federal income tax liability and may entitle
such holder to a refund, provided the required information is timely furnished to the IRS.
Non-U.S. Holders
For purposes of this discussion, a Non-U.S. holder is any beneficial
owner of our common shares that is neither a "U.S. person" nor an entity or arrangement treated as a partnership for U.S.
federal income tax purposes.
87
Taxation of Distributions
If we pay distributions in cash or other property (other than certain
distributions of our common shares or rights to acquire our common shares) to Non-U.S. holders of our common shares, such distributions
generally will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and
profits, as determined under U.S. federal income tax principles. Distributions in excess of current and accumulated earnings and profits
will constitute a return of capital that will be applied against and reduce (but not below zero) the Non-U.S. holder's adjusted
tax basis in our common shares. Any remaining excess will be treated as gain realized on the sale or other disposition of the common shares
and will be treated as described under "Non-U.S. Holders — Sale, Taxable Exchange or Other Taxable Disposition of Our Common
Shares."
Subject to the discussions below on effectively connected income, dividends
paid to a Non-U.S. holder of our common shares will be subject to U.S. federal withholding tax at a rate of 30% of the gross amount of
the dividends (or such lower rate specified by an applicable income tax treaty, provided the Non-U.S. holder furnishes a valid IRS Form
W-8BEN or W-8BEN-E (or other applicable documentation) certifying qualification for the lower treaty rate). A Non-U.S. holder that does
not timely furnish the required documentation, but that qualifies for a reduced treaty rate, may obtain a refund of any excess amounts
withheld by timely filing an appropriate claim for refund with the IRS.
If dividends paid to a Non-U.S. holder are effectively connected with
the Non-U.S. holder's conduct of a trade or business within the United States (and, if required by an applicable income tax treaty,
the Non-U.S. holder maintains a permanent establishment in the United States to which such dividends are attributable), the Non-U.S. holder
will be exempt from the U.S. federal withholding tax described above. To claim the exemption, the Non-U.S. holder generally must furnish
to the applicable withholding agent a valid IRS Form W-8ECI, certifying that the dividends are effectively connected with the Non-U.S.
holder's conduct of a trade or business within the United States.
Any such effectively connected dividends will be subject to U.S. federal
income tax on a net basis at the regular graduated rates. A Non-U.S. holder that is a corporation also may be subject to a branch profits
tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty) on such effectively connected dividends, as adjusted
for certain items.
Non-U.S. holders should consult their tax advisors regarding any applicable
tax treaties that may provide for different rules.
Sale, Taxable Exchange or Other Taxable Disposition of Our Common
Shares
Subject to the discussion below under "Non-U.S. Holders —
Redemption of Our Common Shares," a Non-U.S. holder will not be subject to U.S. federal income tax on any gain realized upon the
sale, taxable exchange or other taxable disposition of our common shares unless:
●
the gain is effectively connected with the Non-U.S. holder's conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, the Non-U.S. holder maintains a permanent establishment in the United States to which such gain is attributable);
●
the Non-U.S. holder is a nonresident alien individual present in the United States for 183 days or more during the taxable year of the disposition and certain other requirements are met; or
●
our common shares constitute a U.S. real property interest, or USRPI, by reason of our status as a U.S. real property holding corporation, or USRPHC, for U.S. federal income tax purposes.
Gain described in the first bullet point above generally will be subject
to U.S. federal income tax on a net income basis at the regular graduated rates. A Non-U.S. holder that is a corporation also may be subject
to a branch profits tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty) on such effectively connected
gain, as adjusted for certain items.
Gain described in the second bullet point above will be subject to
U.S. federal income tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty), which may be offset by U.S.
source capital losses of the Non-U.S. holder, provided the Non-U.S. holder has timely filed U.S. federal income tax returns with respect
to such losses.
88
With respect to the third bullet point above, we believe we currently
are not, and do not anticipate becoming, a USRPHC. Because the determination of whether we are a USRPHC depends, however, on the fair
market value of our USRPIs relative to the fair market value of our non-U.S. real property interests and our other business assets, there
can be no assurance we currently are not a USRPHC or will not become one in the future. Even if we are or were to become a USRPHC, gain
arising from the sale or other taxable disposition by a Non-U.S. holder of our common shares will not be subject to U.S. federal income
tax if our common shares is "regularly traded," as defined by applicable Treasury Regulations, on an established securities
market, and such Non-U.S. holder owned, actually and constructively, 5% or less of our common shares throughout the shorter of the five-year
period ending on the date of the sale or other taxable disposition and the Non-U.S. holder's holding period.
Non-U.S. holders should consult their tax advisors regarding potentially
applicable income tax treaties that may provide for different rules.
Redemption of Our Common Shares
The characterization for U.S. federal income tax purposes of the redemption
of a Non-U.S. holder's common shares generally will correspond to the U.S. federal income tax characterization of such a redemption
of a U.S. holder's common shares, as described under "U.S. Holders — Redemption of Our common shares" above, and
the consequences of the redemption to the Non-U.S. holder will be as described above under "Non-U.S. Holders — Taxation of
Distributions" and "Non-U.S. Holders — Sale, Taxable Exchange or Other Taxable Disposition of Our common shares,"
as applicable. Because it may not be certain at the time a Non-U.S. holder is redeemed whether such Non-U.S. holder's redemption
will be treated as a sale of shares or a distribution constituting a dividend, and because such determination will depend in part on a
Non-U.S. holder's particular circumstances, we or the applicable withholding agent may not be able to determine whether (or to what
extent) a Non-U.S. holder is treated as receiving a dividend for U.S. federal income tax purposes. Therefore, we or the applicable withholding
agent may withhold tax at a rate of 30% on the gross amount of any consideration paid to a Non-U.S. holder in redemption of such Non-U.S.
holder's common shares unless special procedures are available to Non-U.S. holders to certify that they are entitled to exemptions
from, or reductions in, such withholding tax. However, there can be no assurance that such special certification procedures will be available.
A Non-U.S. holder generally may obtain a refund of any such excess amounts withheld by timely filing an appropriate claim for refund with
the IRS. Non-U.S. holders should consult their tax advisors regarding the application of the foregoing rules in light of their particular
facts and circumstances.
Information Reporting and Backup Withholding
Payments of dividends on our common shares will not be subject to backup
withholding, provided the applicable withholding agent does not have actual knowledge or reason to know the Non-U.S. holder is a United
States person and the Non-U.S. holder either certifies its non-U.S. status, such as by furnishing a valid IRS Form W-8BEN, W-8BEN-E or
W-8ECI, or otherwise establishes an exemption. However, information returns are required to be filed with the IRS in connection with any
dividends on our common shares paid to the Non-U.S. holder, regardless of whether any tax was actually withheld. In addition, proceeds
of the sale, taxable exchange or other taxable disposition of our common shares within the United States or conducted through certain
U.S.-related brokers generally will not be subject to backup withholding or information reporting, if the applicable withholding agent
receives the certification described above and does not have actual knowledge or reason to know that such Non-U.S. holder is a United
States person, or the Non-U.S. holder otherwise establishes an exemption. Proceeds of a disposition of our common shares conducted through
a non-U.S. office of a non-U.S. broker generally will not be subject to backup withholding or information reporting.
Copies of information returns that are filed with the IRS may also
be made available under the provisions of an applicable treaty or agreement to the tax authorities of the country in which the Non-U.S.
holder resides or is established.
Backup withholding is not an additional tax. Any amounts withheld under
the backup withholding rules may be allowed as a refund or a credit against a Non-U.S. holder's U.S. federal income tax liability,
provided the required information is timely furnished to the IRS.
All Non-U.S. holders should consult their tax advisors regarding the
application of information reporting and backup withholding to them.
89
FATCA Withholding Taxes
Sections 1471 through 1474 of the Code and the Treasury Regulations
and administrative guidance promulgated thereunder (commonly referred to as the "Foreign Account Tax Compliance Act" or "FATCA")
generally impose withholding of 30% on payments of dividends (including constructive dividends) on our common shares to "foreign
financial institutions" (which is broadly defined for this purpose and in general includes investment vehicles) and certain other
non-U.S. entities unless various U.S. information reporting and due diligence requirements (generally relating to ownership by U.S. persons
of interests in or accounts with those entities) have been satisfied by, or an exemption applies to, the payee (typically certified as
to by the delivery of a properly completed IRS Form W-8BEN-E). The IRS has issued proposed regulations (on which taxpayers may rely until
final regulations are issued) that provide that these withholding requirements would generally not apply to gross proceeds from sales
or other dispositions of our common shares. However, there can be no assurance that final Treasury regulations will provide the same exceptions
from FATCA withholding as the proposed Treasury regulations. Foreign financial institutions located in jurisdictions that have an intergovernmental
agreement with the United States governing FATCA may be subject to different rules. Under certain circumstances, a Non-U.S. holder might
be eligible for refunds or credits of such withholding taxes, and a Non-U.S. holder might be required to file a U.S. federal income tax
return to claim such refunds or credits. Similarly, dividends in respect of our common shares held by an investor that is a non-financial
non-U.S. entity that does not qualify under certain exceptions will generally be subject to withholding at a rate of 30%, unless such
entity either (1) certifies to us or the applicable withholding agent that such entity does not have any "substantial United States
owners" or (2) provides certain information regarding the entity's "substantial United States owners," which will
in turn be provided to the U.S. Department of Treasury. Prospective investors should consult their tax advisors regarding the effects
of FATCA on their investment in our common shares.
F.
Dividends and Paying Agents
Not applicable.
G.
Statement by Experts
Not applicable.
H.
Documents on Display
The SEC maintains an Internet site that contains reports, proxy and
information statements, and other information regarding issuers that file electronically with the SEC, including the Company, at http://www.sec.gov.
The address of the SEC's website is provided solely for information purposes and is not intended to be an active link.
We also make our periodic reports as well as other information filed
with or furnished to the SEC available through our website, at www.Newegg.com, as soon as reasonably practicable after those reports and
other information are electronically filed with or furnished to the SEC. The information on our website is not incorporated by reference
in this document.
I.
Subsidiary information
Not applicable.
J.
Annual Report to Security Holders
Not applicable.
Item 11. Quantitative and Qualitative Disclosures About Market Risk
We do not use financial instruments for speculative trading purposes,
and do not hold any derivative financial instruments that could expose us to significant market risk. Our primary market risk exposures
are changes in interest rates and foreign currency fluctuations.
Interest rate risk
Our main interest rate exposure relates to long-term borrowings that
we obtain from banks and financial institutions to meet our working capital expenditure requirements. We also have interest-bearing assets,
including cash and cash equivalents, restricted cash and loans to affiliates. We manage our interest rate exposure with a focus on reducing
our overall cost of debt and exposure to changes in interest rates. As of December 31, 2022 and 2021, we had outstanding long-term borrowings
in the aggregate amount of $1.7 million and $2.1 million, respectively, with the majority of our long-term borrowings having floating
interest rates.
90
We have not used derivative financial instruments to hedge the interest
rate risk. We have not been exposed to material risks due to changes in market interest rates. However, we cannot provide assurance that
we will not be exposed to material risks due to changes in market interest rates in the future.
Foreign currency risk
We have currency fluctuation exposure arising from both sales and purchases
denominated in foreign currencies. Significant changes in exchange rates between foreign currencies in which we transact business and
the U.S. dollar may adversely affect our results of operations and financial condition. Historically, we have not entered into any hedging
activities, and, to the extent that we continue not to do so in the future, we may be vulnerable to the effects of currency exchange-rate
fluctuations.
We expect our exposure to foreign currency risk will increase as we
increase our operations and sales in Canada and other countries and regions. Although the effect of currency fluctuations on our financial
statements has not been material in the past, there can be no assurance that the effect of currency fluctuations will not be material
in the future. For the years ended December 31, 2022, 2021, and 2020, we recorded foreign exchange gain of $0.9 million, loss of $3.3
million, and loss of $0.7 million, respectively. Based on the balance of our foreign-denominated cash and cash equivalents as of December
31, 2022, 2021, and 2020, an assumed 10% negative currency movement would not have a material impact.
To date, we have not entered into any hedging transactions in an effort
to reduce our exposure to foreign currency exchange risk.
Item 12. Description of Securities Other than Equity Securities
Not applicable.
91
PART II
Item 13. Defaults, Dividend Arrearages and Delinquencies
None.
Item 14. Material Modifications to the Rights of Security Holders
and Use of Proceeds
See "Item 10. Additional Information—B. Memorandum and
Articles of Association— Rights of Certain Principal Shareholders" for a description of the rights of securities holders,
which remain unchanged.
Item 15. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Management, with the participation of our Chief
Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31,
2022. The term "disclosure controls and procedures," as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), means controls and other procedures of a company that are designed to ensure
that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that
it files or submits under the Exchange Act is accumulated and communicated to the company's management, including its principal
executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
Based on the evaluation performed as of December 31, 2022, as a result
of the material weaknesses in internal control over financial reporting that are described below in Management's Report on Internal Control
Over Financial Reporting, our Chief Executive Officer and Chief Financial Officer determined that our disclosure controls and procedures
were not effective as of such date.
Management's Annual Report on Internal Control Over Financial
Reporting
Management
is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange
Act Rules 13a-15(f) and 15d-15(f). A company's internal control over financial reporting is a process designed by, or under the
supervision of, its Chief Executive Officer and Chief Financial Officer, and effected by such company's board of directors, management
and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures
that:
●
pertain to the maintenance
of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
●
provide reasonable
assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations
of management and directors of the company; and
●
provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that
could have a material effect on the financial statements.
Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may deteriorate.
92
Management,
with the participation of our Chief Executive Officer and Chief Financial Officer, has conducted an evaluation of the effectiveness of
our internal control over financial reporting as of December 31, 2022, based on the framework set forth in Internal Control-Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). While progress was made towards
remediating material weaknesses over the course of the year, based on the assessment, management has concluded that the Company did not
maintain effective internal control over financial reporting as of December 31, 2022 due to the material weaknesses described below.
A material weakness is a deficiency, or a combination
of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement
of our annual or interim financial statements will not be prevented or detected on a timely basis. Notwithstanding the material weaknesses
in our internal control over financial reporting, we have concluded that the consolidated financial statements included in this annual
report on Form 20-F fairly present, in all material respects, our financial position, results of operations and cash flows for the periods
presented in conformity with accounting principles generally accepted in the United States of America.
Material Weaknesses
Control Activities and Information & Communication
The material weaknesses below impacted internal
controls within the revenue, inventory, financial reporting & close, payroll, accounts payable, fixed assets, enterprise incentives,
stock compensation, treasury, and tax business cycles.
●
Management
did not maintain effective general controls over information systems that support the financial reporting process. Specifically, management
did not design and maintain effective (i) program change management and program development controls for financial systems relevant to
our financial reporting and (ii) logical user access controls, including user access reviews, to ensure appropriate segregation of duties
and adequate restrictions of users, including those with privileged access.
●
Management
did not implement controls to address relevant risks in certain business processes.
●
Management
did not implement and operate review controls with a sufficient precision level or threshold of investigation to detect material misstatements
within its financial statements.
●
Management
did not retain documentation to sufficiently evidence that certain review procedures were performed.
●
Management
did not implement and operate controls over the completeness and accuracy of certain reports and underlying data used in the operation
of certain controls within its financial reporting process.
Remediation of Previously Reported Material Weakness in Internal
Control over Financial Reporting
As previously disclosed in our Annual Report on
Form 20-F for the year ended December 31, 2021, a material weakness in our internal controls existed as of December 31, 2021 relating
to Control Environment and Risk Assessment. During the year ended December 31, 2022, we implemented the following remedial actions that
addressed this material weakness:
●
Hired
qualified resources including a Chief Accounting Officer, a Chief Legal Officer, a Director of Human Resources, and a VP of Internal
Audit to oversee risk assessment procedures and remedial actions over internal controls.
●
Contracted
with a qualified firm to support management's remedial actions related to internal control, internal audit and technical accounting.
●
Conducted internal control trainings for business process owners and
control owners.
●
Enhanced
controls over review and approval of technical memorandums related to accounting areas in revenue recognition and leases.
During 2022, management continued to make progress
towards remediating prior year material weaknesses and enhancing internal controls including the following:
●
Continued
to enhance controls around segregations of duties over the IT function including segregations of development and production environments
and organizational segregations for developers and IT operational roles.
●
Continued
to enhance controls around program change management and system development controls over key financial systems.
●
Continued
to enhance controls around logical user access controls, including system enforced preventative controls and periodic user access reviews.
●
Continued
to enhance controls around system administrators.
●
Continued
to enhance controls around automated completeness and accuracy testing over several key reports as a year-end control.
93
Changes in Internal Control Over Financial Reporting.
Except as described above, there were no changes in our internal control
over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during the period covered by this annual
report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Item 16. [Reserved]
Item 16A. Audit Committee Financial Expert
Our board of directors has determined that each director appointed
to the audit committee is financially literate and is independent as defined under Nasdaq Listing Rules. Our board also has determined
that Mr. Gregory 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. Refer to "Item 6 Directors, Senior Management and Employees" for further detail
on each of their backgrounds.
Item 16B. Code of Ethics
We have adopted a Code of Business Conduct and Ethics, which is posted
on our website at www.newegg.com/corporate/about, that applies to all employees and each of officers, including our Chief Executive Officer,
Chief Financial Officer and Chief Accounting Officer. Written copies of the Code of Business Conduct and Ethics are available free of
charge upon written request to us at the address on the first page of this annual report. If we make any substantive amendments to the
code of ethics or grant any waivers, including any implicit waiver, from a provision of these codes to our chief executive officer or
chief financial officer, we will disclose the nature of such amendment or waiver on our website.
Item 16C. Principal Accountant Fees and Services
Our principal accountants for the years ended December 31, 2022 and
December 31, 2021 were BDO USA, LLP ("BDO USA"). We incurred the following fees from BDO USA for professional services for
the years ended December 31, 2022 and 2021, respectively:
December 31,
2022
December 31,
2021
Principal Accountant Fees
(U.S. Dollars in thousands)
Audit Fees
$
1,708
$
1,209
Tax fees
-
-
Audit-related fees
-
-
All other fees
-
-
Total fees
$
1,708
$
1,209
"Audit fees" are the aggregate fees earned by BDO USA for
the audit of our consolidated annual financial statements, reviews of interim financial statements and attestation services that are provided
in connection with statutory and regulatory filings or engagements. The audit fees for the year ended December 31, 2021 include one off
fees related to the IPO and Merger.
"Tax fees" are the aggregate fees charged by BDO USA for
professional services rendered for tax compliance activities.
"Audit-related fees" are fees charged by the BDO USA for
assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and are
not reported under "Audit fees." This category comprises fees for agreed-upon procedures engagements and other attestation
services subject to regulatory requirements.
"All other fees" are fees billed in each of the last two
fiscal years for products and services provided by BDO USA, other than the services reported in the aforementioned categories in this
section.
The policy of our audit committee or our board of directors is to pre-approve
all audit and non-audit services provided by our principal accountant, including audit services, audit-related services, and other services
as described above.
Item 16D. Exemptions from the Listing Standards for Audit Committees
Not applicable.
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated
Purchasers
None.
94
Item 16F. Change in Registrant's Certifying Accountant
Not applicable.
Item 16G. Corporate Governance
Newegg Commerce, Inc. (previously known as "Lianluo Smart Limited")
was incorporated as an international business company under the International Business Companies Act, 1984, in the British Virgin Islands
on July 22, 2003.
We are a foreign private issuer within the meaning of the rules under
the Exchange Act. As such we are exempt from certain provisions of the securities rules and regulations in the United States that are
applicable to U.S. domestic issuers. As a foreign private issuer, the information we are required to file with or furnish to the SEC will
be less extensive and less timely compared to that required to be filed with the SEC by U.S. domestic issuers. In addition, as a company
incorporated in the British Virgin Islands, we are permitted to adopt certain home country practices in relation to corporate governance
matters that differ significantly from the Nasdaq Listing Rules. We rely on home country practice to be exempted from some of Nasdaq's
corporate governance requirements. For instance, unlike the requirements of Nasdaq, we are not required, under the BVI Business Companies
Act, 2004, as amended (the "Companies Act"), to have our board consist of a majority of independent directors, nor are we
required to have a compensation committee or a nominating and corporate governance committee consisting entirely of independent directors
or have regular executive sessions with only independent directors each year. These practices may afford less protection to shareholders
than they would enjoy if we complied fully with the Nasdaq Listing Rules.
Item 16H. Mine Safety Disclosure
Not applicable.
Item 16I. Disclosure Regarding Foreign Jurisdictions that Prevent
Inspections
Not applicable.
95
PART III
Item 17. Financial Statements
We have responded to Item 18 in lieu of responding to this item.
Item 18. Financial Statements
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULE
Page
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (BDO USA, LLP; LOS ANGELES, CALIFORNIA; PCAOB ID #
243
)
F-2
CONSOLIDATED BALANCE SHEETS
F-3
CONSOLIDATED STATEMENTS OF OPERATIONS
F-4
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
F-5
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
F-6
CONSOLIDATED STATEMENTS OF CASH FLOWS
F-7
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
F-8
F-
1
Report of Independent Registered Public Accounting
Firm
Report of Independent Registered Public Accounting
Firm
Stockholders and Board of Directors
Newegg Commerce, Inc.
City of Industry, California
Opinion on the Consolidated
Financial Statements
We have audited the accompanying
consolidated balance sheets of Newegg Commerce, Inc. and subsidiaries (the "Company") as of December 31, 2022 and 2021, the
related consolidated statements of operations, comprehensive income (loss), stockholders' equity, and cash flows for the three years
in the period ended December 31, 2022, and the related notes (collectively referred to as the "consolidated financial statements").
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company
at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December
31, 2022
,
in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial
statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's
consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight
Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the
standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about 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 $63.6 million as of December 31, 2022. 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 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 conditions of vendor agreements.
The primary procedures we performed to address
this critical audit matter included:
●
Evaluating management's accounting policies
and practices including the reasonableness of management's judgments and assumptions relating to the Company's accounting
for vendor incentive receivables.
●
Testing a sample of vendor agreements and underlying
relevant supporting documents to evaluate the appropriateness of management's recording vendor incentive receivables including assessment
of various terms and conditions in these agreements.
/s/
BDO USA, LLP
We have served as the Company's auditor
since 2019.
Los Angeles, California
April 27,
2023
F-
2
NEWEGG COMMERCE, INC.
Consolidated Balance Sheets
December 31, 2022 and 2021
(In thousands, except par value)
2022
2021
Assets
Current assets:
Cash and cash equivalents
$
122,559
$
99,993
Restricted cash
947
4,337
Accounts receivable, net
83,517
62,373
Inventories, net
156,016
245,078
Income taxes receivable
5,173
1,303
Prepaid expenses
16,999
17,946
Other current assets
5,611
7,931
Total current assets
390,822
438,961
Property and equipment, net
45,075
50,149
Noncurrent deferred tax assets
868
13,367
Investment at cost
11,250
15,000
Right of use assets, net
84,161
94,581
Other noncurrent assets
9,919
14,524
Total assets
$
542,095
$
626,582
Liabilities and Equity
Current liabilities:
Accounts payable
$
207,147
$
220,776
Accrued liabilities
51,003
74,689
Deferred revenue
31,028
39,767
Line of credit
6,056
6,182
Current portion of long-term debt
269
293
Lease liabilities – current
14,265
14,603
Total current liabilities
309,768
356,310
Long-term debt, less current portion
1,404
1,843
Income taxes payable
739
696
Lease liabilities – noncurrent
74,838
84,307
Other liabilities
124
1,144
Total liabilities
386,873
444,300
Commitments and contingencies (Note 16)
Stockholders' Equity
Common Stock, $
0.021848
par value; unlimited shares authorized;
376,660
and
369,719
shares issued and outstanding as of December 31, 2022 and 2021, respectively
8,230
8,078
Additional paid-in capital
232,776
197,613
Notes receivable – related party
(
15,189
)
(
15,189
)
Accumulated other comprehensive income
1,114
6,060
Accumulated deficit
(
71,709
)
(
14,280
)
Total stockholders' equity
155,222
182,282
Total liabilities and stockholders' equity
$
542,095
$
626,582
See accompanying notes to consolidated financial
statements.
F-
3
NEWEGG COMMERCE, INC.
Consolidated Statements of Operations
Years ended December 31, 2022, 2021 and
2020
(In thousands, except per share data)
2022
2021
2020
Net sales
$
1,720,273
$
2,376,225
$
2,114,872
Cost of sales
1,503,647
2,050,249
1,841,243
Gross profit
216,626
325,976
273,629
Selling, general, and administrative expenses
266,164
292,464
250,239
Income (loss) from operations
(
49,538
)
33,512
23,390
Interest income
1,164
1,079
1,124
Interest expense
(
685
)
(
612
)
(
664
)
Other income, net
5,280
1,758
5,320
Impairment of equity method investment
(
2,281
)
—
—
Income (loss) from equity method investment
—
(
7,374
)
3,197
Gain from sales of investment
1,669
—
—
Gain from disposal of a subsidiary
—
2,043
—
Change in fair value of warrants liabilities
1,063
61
—
Income (loss) before provision for income taxes
(
43,328
)
30,467
32,367
Provision for (benefit from) income taxes
14,101
(
5,795
)
1,941
Net income (loss)
$
(
57,429
)
$
36,262
$
30,426
Basic earnings (loss) per share
$
(
0.15
)
$
0.10
$
0.08
Diluted earnings (loss) per share
$
(
0.15
)
$
0.08
$
0.08
Weighted average shares used in computation of earnings (loss) per share:
Basic
373,067
366,651
363,326
Diluted
373,067
432,250
385,013
See accompanying notes to consolidated financial
statements.
F-
4
NEWEGG COMMERCE, INC.
Consolidated Statements of Comprehensive Income
(Loss)
Years ended December 31, 2022, 2021 and
2020
(In thousands)
2022
2021
2020
Net income (loss)
$
(
57,429
)
$
36,262
$
30,426
Foreign currency translation adjustments
(
4,946
)
3,003
3,562
Comprehensive income (loss)
$
(
62,375
)
$
39,265
$
33,988
See accompanying notes to consolidated financial
statements.
F-
5
NEWEGG COMMERCE, INC.
Consolidated Statements of Stockholders'
Equity
Years ended December 31, 2022, 2021 and
2020
(In thousands)
Common stock
Additional
paid-In
Notes
Accumulated
other
comprehensive
(Accumulated
deficit)/
Retained
Total
stockholders'
Shares
Par value
capital
receivable
income
earnings
equity
Balance at January 1, 2020
363,326
$
7,938
$
180,608
$
(
15,029
)
$
(
505
)
$
(
80,968
)
$
92,044
Net income
—
—
—
—
—
30,426
30,426
Other comprehensive income
—
—
—
—
3,562
—
3,562
Interest on notes receivable
—
—
—
(
157
)
—
—
(
157
)
Stock-based compensation
—
—
1,622
—
—
—
1,622
Balance at December 31, 2020
363,326
$
7,938
$
182,230
$
(
15,186
)
$
3,057
$
(
50,542
)
$
127,497
Net income
—
—
—
—
—
36,262
36,262
Other comprehensive income
—
—
—
—
3,003
—
3,003
Exercise of vested options
1,420
31
239
—
—
—
270
Recapitalization transaction, net
4,854
106
8,324
—
—
—
8,430
Exercise of warrants
119
3
535
—
—
—
538
Interest on notes receivable
—
—
—
(
3
)
—
—
(
3
)
Stock-based compensation
—
—
6,285
—
—
—
6,285
Balance at December 31, 2021
369,719
$
8,078
$
197,613
$
(
15,189
)
$
6,060
$
(
14,280
)
$
182,282
Net loss
—
—
—
—
—
(
57,429
)
(
57,429
)
Other comprehensive loss
—
—
—
—
(
4,946
)
—
(
4,946
)
Exercise of vested options
6,016
131
2,759
—
—
—
2,890
Vesting of restricted stock units
1,674
37
(
37
)
—
—
—
—
Redemption for employee tax withholdings
(
749
)
(
16
)
(
1,498
)
—
—
—
(
1,514
)
Stock-based compensation
—
—
33,939
—
—
—
33,939
Balance at December 31, 2022
376,660
$
8,230
$
232,776
$
(
15,189
)
$
1,114
$
(
71,709
)
$
155,222
See accompanying notes to consolidated financial
statements.
F-
6
NEWEGG COMMERCE, INC.
Consolidated Statements of Cash Flows
Years ended December 31, 2022, 2021 and
2020
(In thousands)
2022
2021
2020
Cash flows from operating activities:
Net income (loss)
$
(
57,429
)
$
36,262
$
30,426
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization
11,021
10,838
9,091
Allowance for expected credit losses
697
1,718
7,288
Recovery of related party receivable
(
50
)
(
335
)
—
Provision for obsolete and excess inventory
9,537
8,274
4,218
Stock-based compensation
33,939
6,285
1,622
Impairment of equity method investment
2,281
—
—
Loss (income) from equity method investment
—
7,374
(
3,197
)
Gain from sales of investment
(
1,669
)
—
—
Change in fair value of warrant liabilities
(
1,063
)
(
61
)
—
Loss on disposal of property and equipment
431
83
246
Gain from disposal of subsidiary
—
(
2,043
)
—
Unrealized loss on marketable securities
55
101
—
Deferred income taxes
12,499
(
12,698
)
372
Changes in operating assets and liabilities:
Accounts receivable
(
21,969
)
788
(
14,054
)
Inventories
78,766
(
70,830
)
(
76,240
)
Prepaid expenses
905
(
2,152
)
(
7,516
)
Other assets
9,982
(
50,919
)
(
10,532
)
Accounts payable
(
14,063
)
(
20,072
)
76,337
Accrued liabilities and other liabilities
(
34,449
)
41,547
44,636
Deferred revenue
(
8,941
)
(
7,443
)
21,817
Dues from affiliate
—
(
3
)
(
2
)
Net cash provided by (used in) operating activities
20,480
(
53,286
)
84,512
Cash flows from investing activities:
Insurance settlement proceeds
—
—
788
Payments to acquire property and equipment
(
9,190
)
(
13,839
)
(
6,156
)
Proceeds on disposal of property and equipment
1
1
132
Proceeds from sale of investment
5,419
—
—
Net cash used in investing activities
(
3,770
)
(
13,838
)
(
5,236
)
Cash flows from financing activities:
Borrowings under line of credit
46,188
787
20,000
Repayments under line of credit
(
45,742
)
—
(
21,467
)
Repayments of long-term debt
(
274
)
(
285
)
(
265
)
Cash received from common control asset transaction
—
11,426
—
Proceeds from exercise of warrants
—
538
—
Proceeds from exercise of stock options
2,890
270
—
Payments for employee taxes related to stock compensation
(
1,514
)
—
—
Net cash provided by (used in) financing activities
1,548
12,736
(
1,732
)
Foreign currency effect on cash, cash equivalents and restricted cash
918
972
(
345
)
Net increase (decrease) in cash, cash equivalents and restricted cash
19,176
(
53,416
)
77,199
Cash, cash equivalents and restricted cash:
Beginning of period
104,330
157,746
80,547
End of period
$
123,506
$
104,330
$
157,746
Supplemental disclosures of cash flow information:
Cash paid for interest
$
558
$
268
$
270
Cash paid for income taxes
$
4,963
$
6,374
$
261
Supplemental schedule of noncash investing activities
Cashless exercise of stock options
$
723
$
677
$
—
ROU assets exchanged for lease liabilities
$
7,517
$
60,672
$
16,910
See accompanying notes to consolidated financial
statements.
F-
7
NEWEGG COMMERCE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1.
Organization and Description of Business
Newegg Commerce, Inc. ("Newegg" or the "Company")
(previously known as "Lianluo Smart Limited" or "LLIT") was incorporated as an international business company
under the International Business Companies Act, 1984, in the British Virgin Islands on July 22, 2003.
Newegg is an electronics-focused e-retailer that offers
customers a comprehensive selection of the latest consumer electronics products, detailed product descriptions and images, "how-to"
information, and customer reviews via its websites. The Company's strategic focus is based on three key areas: (1) providing
a differentiated and superior online shopping experience, (2) offering reliable and timely product fulfillment, and (3) delivering
superior customer service.
Newegg Inc. was incorporated as Newegg Computers in the
state of California on February 4, 2000. In June 2005, Newegg Inc. was incorporated in the state of Delaware. On September 29,
2005, Newegg Computers was merged into Newegg Inc. under Delaware law with Newegg Inc. being the surviving company.
In August 2016, Newegg Inc. entered into a share purchase
agreement (the "Purchase Agreement") with Hangzhou Liaison Interactive Information Technology Co., Ltd, ("Hangzhou
Lianluo"), a publicly traded company in China. The transaction was completed on March 30, 2017. Pursuant to the Purchase Agreement,
Hangzhou Lianluo purchased
490,706
shares of Newegg Inc.'s Class A Common Stock and
12,782,546
shares of Newegg Inc.'s
Series A convertible Preferred Stock from existing shareholders for a total consideration of $
91.9
million. Additionally, Newegg
Inc. issued, and Hangzhou Lianluo purchased,
24,870,027
shares of Newegg Inc.'s Series AA Convertible Preferred Stock
for a total consideration of $
172.2
million. Upon the close of this transaction, Hangzhou Lianluo, through Digital Grid (Hong Kong)
Technology Co., Limited ("Digital Grid"), a fully-owned subsidiary of Hangzhou Lianluo, became the majority owner of Newegg
Inc.
On May 19, 2021, the Company closed the merger with
Newegg Inc. contemplated by the Agreement and Plan of Merger dated October 23, 2020, by and among LLIT, Lightning Delaware Sub, Inc.
("Merger Sub"), a Delaware corporation and wholly owned subsidiary of the Company, and Newegg Inc. As the consideration for
the merger, the Company issued to all the stockholders of Newegg Inc. an aggregate of
363,325,542
common shares. Each issued and outstanding
share of Newegg Inc. capital stock was exchanged for
5.8417
shares of common shares of the Company. The Company also converted each Class B
common share into one common share immediately prior to completion of the merger.
On May 19, 2021, the Company disposed all of LLIT's
legacy business contemplated by that certain Equity Transfer Agreement dated October 23, 2020, by and among LLIT, its wholly owned
subsidiary, Lianluo Connection Medical Wearable Device Technology (Beijing) Co., Ltd ("Lianluo Connection"), and Beijing Fenjin
Times Development Co., Ltd. ("Beijing Fenjin"). The Company sold all of its equity interests in Lianluo Connection to Beijing
Fenjin immediately following completion of the merger for a purchase price of RMB
0
.
In May 2021, the Company changed its name from Lianluo
Smart Limited to Newegg Commerce, Inc., and on May 20, 2021 changed its Nasdaq stock ticker from LLIT to NEGG.
2.
Basis of Presentation
The merger is accounted for as a transfer of assets under
common control in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP").
Under this method of accounting, LLIT did not meet the definition of a business as of the close of the transaction and was considered
a group of assets. Newegg Inc. was deemed to be the receiving entity in the common control transaction, consequently, the transaction
is treated similar to a recapitalization of Newegg Inc. Accordingly, the consolidated assets, liabilities and results of operations of
Newegg Inc. became the historical financial statements. The assets and liabilities of LLIT were combined with Newegg Inc. using its carryover
basis on the transfer date. The carrying value of the net assets received by Newegg on May 19, 2021 was approximately $
8.4
million.
The assets were primarily comprised of cash, cash equivalents and restricted cash of $
11.4
million, marketable securities of $
0.2
million,
and prepaid and other assets of $
0.5
million. The liabilities received were primarily comprised of warrant liabilities of $
1.2
million
and accrued expenses and other liabilities of $
2.5
million.
F-
8
The recapitalization of the number of shares of capital
stock attributable to Newegg Inc. is reflected retroactively as shares reflecting the exchange ratio of
5.8417
to the earliest period
presented and is utilized for calculating earnings per share in all prior periods presented along with certain other related disclosures.
On the date of the transfer, the Company subsequently disposed
Lianluo Connection which had a carrying value of negative $
2.0
million for $
0
consideration and recognized a gain of $
2.0
million, which
is included in the Company's consolidated statements of operations for the year ended December 31, 2021.
3.
Summary of Significant Accounting Policies
a.
Principles of Consolidation
The accompanying consolidated financial statements are prepared
in accordance with U.S. GAAP and include the accounts of all consolidated subsidiaries. All intercompany balances and transactions have
been eliminated in consolidation.
b.
Use of Estimates
The preparation of the Company's consolidated financial
statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect amounts reported in the
consolidated financial statements and accompanying notes. Estimates are used for, but not limited to, revenue recognition, incentives
earned from vendors, allowance for credit losses, investment valuation, valuation allowance for deferred tax assets, and stock-based compensation.
Actual results could differ from such estimates.
c.
Reclassifications
Certain prior period amounts have been reclassified to conform
to the current period presentation.
d. Cash and Cash Equivalents
Cash and cash equivalents consist primarily of cash on deposit,
certificates of deposit, and money market accounts. Cash equivalents are all highly liquid investments with original maturities of three months
or less. The Company maintains its cash in bank deposits which, at times, may exceed federally insured limits. The Company has not experienced
any losses in such accounts. The Company believes it is not exposed to any significant credit risk of cash and cash equivalents. Amounts
receivable from credit card processors are also considered cash equivalents as they are both short term and highly liquid in nature and
are typically converted to cash within three business days. Amounts due to the Company from credit card processors that are classified
as cash and cash equivalents totaled $
13.0
million and $
14.3
million at December 31, 2022 and 2021, respectively.
e. Restricted Cash
Restricted cash includes amounts deposited in commercial
bank time deposits and money market accounts to collateralize the Company's deposit obligations. The Company considers restricted
cash related to obligations classified as current liabilities to be current assets and restricted cash related to obligations classified
as long-term liabilities as noncurrent assets. At December 31, 2022 and 2021, the Company had $
0.9
million and $
4.3
million, respectively,
in restricted cash, primarily related to collateralization required pursuant to a lease agreement, the restricted cash account required
under the Company's health insurance plan, and funds held in third-party escrow account associated with the merger. The restricted
cash balance is classified as a current asset in the consolidated balance sheets.
F-
9
The following is a reconciliation of cash and cash equivalents,
and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the consolidated
statements of cash flows (in thousands):
December 31,
2022
2021
Cash and cash equivalents
$
122,559
$
99,993
Restricted cash
947
4,337
Total cash and cash equivalents, and restricted cash
$
123,506
$
104,330
f. Accounts Receivable
Accounts receivable consist primarily of vendor receivables,
which do not bear interest, and represent amounts due for marketing development funds, cooperative advertising, price protection and other
incentive programs offered to the Company by certain vendors. Accounts receivable also include receivables from business customers generally,
on 30-day to 60-day credit terms. On January 1, 2020, the Company adopted Accounting Standards Update ("ASU") 2016-13
(as amended through March 2020), Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses
on Financial Instruments. The Company estimates the provision for credit losses based on historical experience, current conditions, and
reasonable and supportable forecasts. Accounts receivables are written off when deemed uncollectible. Recoveries of accounts receivable
previously written off are recorded when received. Amounts receivable from business customers were $
19.4
million and $
17.6
million, net
of allowances of $
1.0
million and $
1.9
million, at December 31, 2022 and 2021, respectively. See further discussion of amounts receivable
related to vendor incentive programs under Incentives Earned from Vendors below.
g. Inventories
Inventories, consisting of products available for sale, are
accounted for using the first-in, first-out (FIFO) method and are valued at the lower of cost and net realizable value. In-bound freight-related
costs are included as part of the cost of merchandise held for resale. In addition, certain vendor payments are deducted from the cost
of merchandise held for resale. The Company records an inventory provision for refurbished, slow-moving, or obsolete inventories based
on historical experience and assumptions of future demand for product. These allowances are released when the related inventory is sold
or disposed of. Amounts of inventory allowances were $
5.5
million and $
6.8
million, as of December 31, 2022 and 2021, respectively.
h. Property and Equipment
Property and equipment are stated at cost, less accumulated
amortization and depreciation computed using the straight-line method over the estimated useful life of each asset. Leasehold improvements
are amortized over the lesser of the remaining lease term or the estimated useful life of the assets. Expenditures for repair and maintenance
costs are expensed as incurred, and expenditures for major renewals and improvements are capitalized. Costs incurred during the application
development stage of internal-use software and website development are capitalized and included in property and equipment. When assets
are retired or otherwise disposed of, the cost and accumulated depreciation or amortization are removed from the accounts, and any gain
or loss is reflected in the Company's consolidated statements of operations. The useful lives for depreciable assets are as follows:
Buildings
20
–
39
years
Machinery and equipment
3
–
7
years
Computer and software
3
–
5
years
Leasehold improvements
Lesser of lease term or
10
years
Capitalized software
3
–
5
years
Furniture and fixtures
5
–
7
years
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10
i. Leases
The Company defines lease agreements at their inception as
either operating or finance leases depending on certain defined criteria. Certain lease agreements may entitle the Company to receive
rent holidays, other incentives, or periodic payment increases over the lease term. Accordingly, rent expense under operating leases is
recognized on the straight-line basis over the original lease term, inclusive of predetermined minimum rent escalations or modifications
and rent holidays.
j. Impairment of Long-Lived Assets
The Company evaluates the recoverability of long-lived assets
for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The impairment
test consists of two steps. The first step compares the carrying amount of the asset to the sum of expected undiscounted future cash flows.
If the sum of expected undiscounted future cash flows exceeds the carrying amount of the asset, no impairment is taken. If the sum of
expected undiscounted future cash flows is less than the carrying amount of the asset, a second step is warranted and an impairment loss
is measured as the amount by which the carrying amount of the asset exceeds its fair value calculated using the present value of estimated
net future cash flows. There have been no impairment losses recognized by the Company for the years ended December 31, 2022, 2021 and
2020.
k. Investments
Investments are accounted for using the equity method if
the investment provides the Company the ability to exercise significant influence, but not control, over an investee. Significant influence
is generally deemed to exist if the Company has an ownership interest in the voting stock of the investee between
20
% and
50
%, although
other factors are considered in determining whether the equity method is appropriate. Also, investments in limited partnerships of more
than
3
% to
5
% are generally viewed as more than minor and are accounted for using the equity method.
The investments for which the Company is not able to exercise
significant influence over the investee and which do not have readily determinable fair values were accounted for under the cost method
prior to the adoption of ASU 2016-01
Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial
Assets and Financial Liabilities
. Subsequent to the adoption of this standard as of January 1, 2018, the Company has elected
the measurement alternative to measure such investments at cost, less any impairment, plus or minus changes resulting from observable
price changes in orderly transactions for the identical or a similar investment of the same issuer.
Equity investments, except for those accounted under ASU
2016-01 equity method, are measured at fair value, and any changes in fair value are recognized in earnings. For equity investments measured
at fair value with changes in fair value recorded in earnings, the Company does not assess whether those securities are impaired.
l. Fair Value of Financial Instruments
Fair value is defined as the price that would be received
to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase
the comparability of fair value measures, a three-tier fair value hierarchy prioritizes the inputs used in measuring fair value. These
tiers include Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other
than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs
in which little or no market data exist, therefore, requiring the Company to develop its own assumptions to determine the best estimate
of fair value.
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11
The carrying amounts of cash and cash equivalents, accounts
receivable, accounts payable, and accrued and other liabilities approximate fair value because of the short maturity of these instruments.
The carrying amounts of long-term debt and line of credit at December 31, 2022 and 2021 approximate fair value because the interest
rate approximates the current market interest rate. The fair value of these financial instruments was determined using level 2 input.
m. Warrant Liability
For warrants that are not indexed to the Company's
stock, the Company records the fair value of the issued warrants as a liability at each balance sheet date and records changes in the
estimated fair value as a non-cash gain or loss in the consolidated statement of income and comprehensive income. The warrant liability
is recognized in the balance sheet at the fair value (level 3). The fair value of these warrants has been determined using the Black-Scholes
pricing model. The Black-Scholes pricing model provides for assumptions regarding volatility, call and put features and risk-free interest
rates within the total period to maturity (see Note 13 - Warrants).
n. Accumulated Other Comprehensive Income (Loss)
Comprehensive income (loss) consists of net income (loss)
and adjustments to stockholders' equity for foreign currency translation adjustments. Accumulated other comprehensive income (loss)
consists entirely of foreign currency translation adjustments. The tax impact is not material to the consolidated financial statements.
o. Revenue Recognition
Revenue is recognized when control of a promised product
or service transfers to a customer, in an amount that reflects the consideration to which the Company expects to be entitled in exchange
for transferring that product or service. Revenue is recognized net of sales taxes and discounts. The Company primarily generates revenue
through product and extended warranty sales on its platforms, through fees earned for facilitating marketplace transactions, and services
rendered through its Newegg Partner Services ("NPS").
The Company recognizes revenue on product sales at a point
in time to customers when control of the product passes to the customer upon delivery to the customer or when service is provided. The
Company fulfills orders with its owned inventory or with inventory sourced through its suppliers. The vast majority of the Company's
product sales are fulfilled from its owned inventory. The amount recognized in revenue represents the expected consideration to be received
in exchange for such goods or services. For orders fulfilled with inventory sourced through the Company's suppliers, and where the
products are shipped directly by the Company's supplier to the Company's customer, the Company evaluates the criteria outlined
in ASC 606-10-55,
Principal versus Agent Considerations
, in determining whether revenue should be recognized on a gross or
net basis. The Company determined that it is the principal in these transactions as it controls the specific good before it is transferred
to the customer. The Company is the entity responsible for fulfilling the promise to provide the specified good to the customer and takes
responsibility for the acceptability of the goods, assumes inventory risk before the specified good has been transferred to the customer
or after transfer of control to the customer, has discretion in establishing the price, and selects the suppliers of products sold. The
Company accounts for product sales under these arrangements on a gross basis upon receipt of the product by the customer. Product sales
exceeded
94
% of consolidated net sales in each of the years ended December 31, 2022, 2021 and 2020.
The Company generally requires payment by credit card upon
placement of an order, and to a limited extent, grants credit to business customers, typically on 30-day to 60-day terms. Shipping and
handling is considered a fulfillment activity, as it takes place before the customer obtains controls of the good. Amounts billed to customers
for shipping and handling are included in net sales upon completion of the performance obligation.
The Company's product sales contracts include terms
that could cause variability in the transaction price such as sales returns and credit card chargebacks. As such, the transaction price
for product sales includes estimates of variable consideration to the extent it is probable that a significant reversal of revenue recognized
will not occur. Sales are reported net of estimated returns and allowances and credit card chargebacks, based on historical experience.
F-
12
The Company also earns fees for facilitating marketplace
transactions and extended warranty sales on its platforms. For marketplace transactions, the Company's websites host third-party
sellers and the Company also provides the payment processing function. The Company recognizes revenue upon sale of products made available
through its marketplace store. The Company is not the principal in this arrangement and does not control the specific goods sold to the
customer. The Company reports the net amount earned as commissions, which are determined using a fixed percentage of the sales price or
fixed reimbursement amount. The Company also offers extended warranty programs for various products on behalf of an unrelated third party.
The Company reports the net amount earned as revenue at the time of sale, as it is not the principal in this arrangement and does not
control the specific goods sold to the customer.
The Company offers its customers the opportunity to purchase
goods and services on its websites using deferred financing promotional programs provided by a third-party financing company. These programs
include an option to make no payments for a period of six, twelve, eighteen or twenty-four months. The third-party financing company
makes all decisions to extend credit to the customer under a separate agreement with the customer, owns all such receivables from the
customer, assumes all risk of collection, and has no recourse to the Company in the event the customer does not pay. The third-party financing
company pays the Company for the purchase price on behalf of the customer, less certain transaction fees. Accordingly, sales generated
through these programs are not reflected in the Company's receivables once payment is received from the third-party financing company.
The transaction fee paid by the Company to the third-party financing company is recognized as a reduction of revenue. These transaction
fees for the years ended December 31, 2022, 2021 and 2020 were immaterial.
To the extent that the Company sells its products on third-party
platforms, the Company incurs incremental contract acquisition costs in the form of sales commissions paid to the platforms. The commissions
are generally determined based on the sales price and an agreed-upon commission rate. The Company elects the practical expedient under
Accounting Standards Update No. 2014-09
Revenue From Contracts with Customers (Topic 606)
to recognize sales commission
as an expense as incurred, as the amortization period of the asset that the Company otherwise would have recognized is less than
one year
.
The Company offers e-commerce solutions to its vendors and
sellers through its Newegg Partner Services. Part of the services include third-party logistics (3PL), Shipped-by-Newegg (SBN), shipping
label service (SLS), staffing, and media services. The fees we earn from these arrangements are recognized when the services are rendered.
For 3PL, SBN, and SLS, the revenues are recognized upon the shipment of the product to its end consumer, and upon processing of a returned
item for the client. For staffing, revenues are recognized based on when an employee is dispatched to a client, hours are accumulated
by the dispatched employees' timecard, or when a direct hire placement is made. For media services, revenues are recognized when
the applicable commercial or editorial creative content is delivered.
The Company has two types of contractual liabilities: (1) amounts
collected, or amounts invoiced and due, related to product sales where receipt of the product by the customer has not yet occurred or
revenue cannot be recognized. Such amounts are recorded in the consolidated balance sheets as deferred revenue and are recognized when
the applicable revenue recognition criteria have been satisfied. For all of the product sales, the Company ships a large volume of packages
through multiple carriers. Actual delivery dates may not always be available and as such, the Company estimates delivery dates as needed
based on historical data. (2) unredeemed gift cards, which are initially recorded as deferred revenue and are recognized in the period
they are redeemed. Subject to governmental agencies' escheat requirements, certain gift cards not expected to be redeemed, also
known as "breakage," are recognized as revenue based on the historical redemption pattern. These gift cards breakage revenue
for the years ended December 31, 2022, 2021, and 2020 were immaterial.
Deferred revenue totaled $
31.0
million and $
39.8
million
at December 31, 2022 and 2021, respectively. During the year ended December 31, 2022, the Company recognized $
36.6
million of
net revenue included in deferred revenue at December 31, 2021. During the year ended December 31, 2021, the Company recognized
$
43.7
million of net revenue included in deferred revenue at December 31, 2020.
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13
p. Cost of Sales
The Company's cost of sales represents the purchase
price of the products it sells to its customers, offset by incentives earned from vendors, including marketing development funds and other
vendor incentive programs. See further discussion of vendor payments under Incentives Earned from Vendors below. Cost of sales also includes
freight-in and freight-out costs and charges related to refurbished, slow-moving, or obsolete inventory.
q. Shipping and Handling
The Company records revenue for shipping and handling billed
to its customers. Shipping and handling revenue totaled approximately $
15.3
million, $
25.3
million and $
33.7
million for the years
ended December 31, 2022, 2021 and 2020, respectively.
The related shipping and handling costs are included in cost
of sales. Shipping and handling costs totaled approximately $
49.2
million, $
64.7
million and $
80.1
million for the years ended December 31,
2022, 2021 and 2020, respectively.
r. Incentives Earned from Vendors
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
for certain cooperative advertising, and price protection agreements. 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 the Company 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.
The Company reduced cost of sales by $
224.3
million, $
140.0
million and $
135.8
million for the years ended December 31, 2022, 2021 and 2020, respectively, for these vendor incentive programs.
Reductions to advertising and promotional expenses related to direct reimbursements for costs incurred in advertising vendors' products
totaled $
1.3
million, $
1.5
million and $
1.1
million for the years ended December 31, 2022, 2021 and 2020, respectively. Amounts
receivable related to vendor incentive programs were $
63.6
million and $
41.5
million, net of allowances of $
0.6
million and $
0.6
million,
at December 31, 2022 and 2021, respectively. Amounts due to the Company are included in accounts receivable in the consolidated balance
sheets.
s. Selling, General, and Administrative Expenses
Selling, general, and administrative expenses primarily consist
of marketing and advertising expenses, sales commissions, credit card processing fees, payroll and related benefits, depreciation and
amortization, professional fees, litigation costs, rent expense, information technology expenses, warehouse costs, office expenses, and
other general corporate costs.
The Company recognizes the cost of legal services related
to defending litigation when the services are provided.
t. Advertising
Advertising and promotional expenses are charged to operations
when incurred and are included in selling, general, and administrative expenses. Advertising and promotional expenses for the years
ended December 31, 2022, 2021 and 2020 were $
14.7
million, $
32.8
million and $
29.0
million, respectively.
F-
14
u. Stock-Based Compensation
The measurement and recognition of compensation expense for
all stock-based payment awards made to employees and directors, including employee stock options and restricted stock, is based on estimated
fair value of the awards on the date of grant. The value of awards that are ultimately expected to vest is recognized as expense on a
straight-line basis over the requisite service periods in the consolidated statements of operations. See Note 14 — Stock-Based
Compensation for further information about the Company's stock compensation plans.
v. 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 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 that the tax position no longer meets the more-likely-than-not threshold of being sustained. The
Company accrues interest and penalties related to unrecognized tax benefits in income tax expense.
w. Concentration of Credit Risk and Significant Customers
and Vendors
The Company maintains its cash and cash equivalents in bank
deposit accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts and
does not believe it is exposed to any significant credit risk from cash and cash equivalents.
For the years ended December 31, 2022, 2021 and
2020, the Company had no individual customers that accounted for greater than
10
% of net sales.
The Company purchases its products on credit terms from vendors located
primarily in the United States. For the years ended December 31, 2022, 2021 and 2020, the Company's cumulative annual
purchases from four vendors, three vendors and one vendor, respectively, exceeded
10
% of total purchases. The majority of products that
the Company sells are available through multiple channels.
The Company has receivables due from vendors related to its
advertising and promotional programs and receivables due from business customers with credit terms. As of December 31, 2022, receivables
from two vendors exceeded
10
% of net receivables. As of December 31, 2021, no receivables from any vendor exceeded
10
% of net receivables.
As of December 31, 2022 and 2021, no receivables from business customers with credit terms exceeded
10
% of net receivables.
x. Foreign Currency Translation
The financial statements of foreign subsidiaries and affiliates
where the local currency is the functional currency are translated into U.S. dollars using exchange rates in effect at the balance
sheet date for assets and liabilities and average exchange rates during the year for revenues and expenses. Any gain or loss on currency
translation is included in stockholders' equity as accumulated other comprehensive income.
F-
15
y. Recent Accounting Pronouncements
In March 2020, the FASB issued ASU 2020-04
Reference
Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting,
as amended and supplemented
by subsequent ASUs (collectively, "ASU 2020-04" and "ASU 2022-06"), which provides practical expedients for contract
modifications and certain hedging relationships associated with the transition from reference rates that are expected to be discontinued.
This guidance is applicable for borrowing instruments, which use LIBOR as a reference rate, and is available through December 31, 2024.
The Company is currently evaluating this ASU and does not expect its adoption to have a material impact on its consolidated financial
statements.
4.
Fair Value
The Company's financial assets and liabilities that
are measured at fair value on a recurring basis include cash and cash equivalents, and restricted cash. The carrying amounts of cash and
cash equivalents and restricted cash approximate their fair value.
The Company's financial assets that are measured at
fair value on a non-recurring basis when impairment is identified include equity method investment and investment in equity securities
without readily determinable fair value not accounted for under the equity method. The fair values of these investments are determined
based on valuation techniques using the best information available, and may include quoted market prices, market comparables, and discounted
cash flow projections. An impairment charge is recorded when the cost of the investment exceeds its fair value. This is considered a Level
3 fair value measurement. See Note 6 — Investment for further information regarding the fair value measurement of these investments.
The Company's notes receivable from affiliate, loans
from affiliate (see Note 18 — Related Party Transactions), line of credit and long-term debt are carried at cost with fair
value disclosed, if required. The fair value of the amounts outstanding under the line of credit and long-term debt with a floating interest
rate approximates the carrying value primarily due to the variable nature of the interest rate of the instruments, which is considered
a Level 2 fair value measurement. The fair value of the amounts outstanding under notes receivable from affiliate, loans from affiliate,
and line of credit with a fixed interest rate is estimated based on the discounted amount of the contractual future cash flows using an
appropriate discount rate. This is considered a Level 3 fair value measurement.
The Company's warrants are measured at fair value
on a recurring basis which is considered as a Level 3 fair value measurement (see Note 13 - Warrants).
The following is a summary of the carrying amounts and estimated
fair values of these financial instruments as of December 31, 2022 and 2021 (in thousands):
December 31, 2022
December 31, 2021
Carrying
Value
Estimated
Fair Value
Carrying
Value
Estimated
Fair Value
Notes receivable from affiliate (Level 3)
$
15,000
$
15,000
$
15,000
$
15,000
Line of credit (Level 2)
$
4,898
$
4,898
$
5,395
$
5,395
Line of credit (Level 3)
$
1,158
$
1,114
$
787
$
754
Long-term debt (Level 2)
$
1,673
$
1,624
$
2,136
$
2,078
Warrants liabilities (Level 3)
$
28
$
28
$
1,091
$
1,091
F-
16
5.
Property and Equipment, Net
Property and equipment, net consisted of the following (in
thousands):
December 31
2022
2021
Land
$
2,157
$
2,376
Buildings
32,723
35,659
Machinery and equipment
34,396
35,349
Computer and software
20,590
28,189
Leasehold improvements
8,515
9,991
Capitalized software
28,784
17,031
Furniture and fixtures
3,812
3,604
Construction in progress(1)
1,423
7,654
132,400
139,853
Accumulated depreciation and amortization
(
87,325
)
(
89,704
)
Property and equipment, net
$
45,075
$
50,149
(1)
Property construction-in-progress
is stated at cost and not depreciated. The property would be transferred to its respective account within property, plant and equipment
upon completion.
Depreciation and amortization expense associated with property
and equipment was $
11.0
million, $
10.8
million and $
9.1
million for the years ended December 31, 2022, 2021 and 2020, respectively.
6.
Investment
On April 17, 2018, the Company entered into an agreement
to acquire an equity interest in Mountain Capital Fund L.P. ("Mountain") from Pegasus View Global Ltd., an international business
company incorporated in the Republic of Seychelles ("Pegasus"), which is a related party. Mountain is an exempted limited
partnership registered under the partnership law in the Cayman Islands and primarily engages in investing. The Company's equity
interest in Mountain was limited to
50
% of Mountain's investment in One97 Communications Limited and PayTM E-Commerce Private Limited
(collectively, the "Mountain Investment"). In addition to the $
43.0
million initial investment made during 2018, the purchase
price in this transaction included a contingent consideration of up to $
7.0
million upon satisfaction of certain conditions described
in the purchase agreement. This contingent consideration of $
7.0
million was paid in April 2019. The Company evaluated the Mountain
Investment under the variable interest model and the voting interest model and concluded that Mountain Capital Fund L.P. is not a variable
interest entity and no consolidation is needed under either the variable interest model or the voting interest model.
The Company recorded
an estimate of contingent consideration payable of $7.0 million as of the acquisition date.
The Company accounted for the Mountain Investment
under the equity method. During the year 2019, Mountain sold a portion of its investment in One97 Communications Limited ("One97")
to various third-party buyers, which resulted in the Company's disposal of all of its investment in One97.
As of December 31, 2021, the carrying value of the
Company's investment in Mountain was $
2.3
million and the Company's ownership percentage in Mountain was approximately
4
%.
In December 2022, the Company was informed that Mountain
intends to sell
100
% of its shares in PayTM E-Commerce Private Limited to an unrelated third party and effectively dissolve Mountain,
in exchange for approximately $
0.7
million. Mountain and the unrelated third party buyer entered into a share purchase agreement on December
29, 2022. The Company reached a mutual understanding with Mountain that the Company does not expect to receive any proceeds as part of
the final sale and dissolution of Mountain as of December 31, 2022. The Company then reviewed the investment in Mountain and determined
an impairment existed as of December 31, 2022 and wrote off the full remaining balance of $
2.3
million.
In August 2018, the Company purchased
11,506,695
Series B+
Preferred shares in Bitmain Technologies Holding Company, a privately-held company incorporated in the Cayman Islands, for a total consideration
of $
15.0
million. Bitmain Technologies Holding Company and its subsidiaries (together "Bitmain") primarily design and sell
cryptocurrency mining hardware, operate cryptocurrency mining pools, and provide mining farm services. As this represents an investment
in equity securities without readily determinable fair values, the Company elected the measurement alternative under ASU 2016-01
to measure this investment at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions
for the identical or a similar investment of the same issuer.
F-
17
In June 2022, Bitmain repurchased
11,149,200
Series B+ shares of Bitmain
held by the Company's subsidiary, Newegg Tech Corporation at $
0.48605796
per share in accordance with Bitmain's articles of
association. The Company reviewed the transaction and concluded that the transaction is not an orderly transaction, and the Company would
continue to account for the investment in Bitmain at cost. As a result of the redemption, the Company recognized a gain on sale of investment
of $
1.7
million in June 2022. The proceeds were received in July 2022.
The Company reviewed the investment in Bitmain for impairment
as of December 31, 2022 and 2021, respectively, by evaluating if events or circumstances have occurred that may have a significant
adverse effect on the fair value of the investment. The Company concluded there were no impairment indicators as of December 31,
2022 and 2021. In the absence of observable price changes in orderly transactions for the identical or a similar investment of the same
issuer during the years ended December 31, 2022 and 2021, the carrying value of the investment remained at $
11.3
million and
$
15.0
million as of December 31, 2022 and 2021.
There was no impairment loss on Bitmain cost method investment
for the years ended December 31, 2022, 2021 and 2020.
7.
Accrued Liabilities
Accrued liabilities consisted of the following (in thousands):
December 31
2022
2021
Sales and other taxes payable
$
17,250
24,512
Accrued personnel
13,474
21,132
Allowance for sales returns
8,664
9,102
Accrued freight expense
2,522
6,625
Accrued advertising expense
2,513
3,392
Accrued legal expense
1,996
3,338
Accrued inventory
1,374
2,647
Other
3,210
3,941
Total accrued liabilities
$
51,003
$
74,689
8.
Line of Credit
In July 2018, the Company entered into a credit agreement
with several financial institutions that provided a revolving credit facility of up to $
100.0
million with a maturity date of
July 27,
2021
. Prior to July 27, 2020 and subject to certain terms and conditions, the Maximum Revolving Advance Amount, as defined in the
loan agreement, could be increased up to $
140.0
million. The revolving credit facility included a letter of credit sublimit of $
25.0
million,
which could be used to issue standby and trade letters of credit, and a $
10.0
million sublimit for swingline loans. Advances from this
line of credit were subject to interest at LIBOR plus the Applicable Margin, as defined in the loan agreement, or the Alternate Base Rate
(defined as the highest of the financial institution's prime rate, the Overnight Bank Funding Rate plus
0.50
%, or the daily LIBOR
plus
1.0
%) plus the Applicable Margin. For LIBOR loans, the Company could select interest periods of one, two, or three months. Interest
on LIBOR loans were payable at the end of the selected interest period. Interest on Alternate Base Rate loans was payable monthly. The
line of credit was guaranteed by certain of the Company's U.S. subsidiaries and was collateralized by certain of the assets
of the Company. Such assets included all receivables, equipment and fixtures, general intangibles, inventory, subsidiary stock, securities,
property, and financial assets, contract rights, and ledger sheets, as defined in the loan agreement. To maintain availability of funds
under the loan agreement, the Company paid on a quarterly basis, an unused commitment fee of either
0.25
% of the difference between the
amount available and the amount outstanding under the facility if the difference was less than one-third of the Maximum Revolving Advance
Amount or
0.40
% of the difference between the amount available and the amount outstanding under the facility if the difference was equal
to or greater than one-third of the Maximum Revolving Advance Amount.
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18
The credit facility contains customary covenants, including
covenants that limit or restrict the Company's ability to incur capital expenditures and lease payments, make certain investment,
enter into certain related-party transactions, and pay dividends. That credit facility also requires the Company to maintain certain minimum
financial ratios and maintain an operational banking relationship with the financial institutions.
The Company 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
. Prior to August 20, 2023 and subject to certain terms and conditions, the Maximum Revolving Advance Amount, as defined in the
credit agreement, could be increased up to $
150.0
million. The revolving credit facility includes a letter of credit sublimit of
$
30.0
million, which can be used to issue standby and trade letters of credit, and a $
20.0
million sublimit for swingline loans.
In April 2023, the Company amended the credit agreement in order to transition the benchmark rate for certain loans made under the credit
agreement from LIBOR to SOFR (as defined in the credit agreement). In general, advances from this line of credit will be subject to interest
at the Term SOFR Rate plus the Applicable Margin, as defined in the credit agreement, so long as the Term SOFR Reference Rate or Term
SOFR is offered, ascertainable, and not unlawful, or the Alternate Base Rate (to be defined as the highest of the (a) the Base Rate
in effect on such day, (b) the sum of the Overnight Bank Funding Rate in effect on such day plus
0.50
%, or (c) the
daily Term SOFR Rate plus
1.0
%) plus the Applicable Margin. For Term SOFR Rate loans, we may select interest periods of one or three months.
Interest on Term SOFR Rate loans shall be payable at the end of the selected interest period. Interest on Alternate Base Rate loans is
payable monthly. 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.
The new line of credit is secured by certain of the Company's
subsidiaries and is collateralized by certain of the of the assets of the Company. Such assets include all receivables, equipment and
fixtures, general intangibles, inventory, subsidiary stock, securities, property, and financial assets, contract rights, and ledger sheets,
as defined in the credit agreement. To maintain availability of funds under the credit agreement, the Company will pay on a quarterly
basis, an unused commitment fee of
0.15
% per annum on the unused amount for the facility. The new credit facility contains customary covenants,
including covenants that limit or restrict the Company's ability to incur capital expenditures and lease payments, make certain
investments, and enter into certain related-party transactions. The credit facility also requires the Company to maintain certain minimum
financial ratios and maintain an operational banking relationship with the financial institutions.
As of December 31, 2022 and 2021, there was no balance
outstanding under this line of credit, and the Company was in compliance with all covenants related to the line of credit. As of December
31, 2022, Newegg has outstanding letters of credit of $
2.0
million from the $
100
million revolving line of credit.
In July 2015, the Company entered into a credit agreement
with a financial institution that provided for a revolving credit facility of up to $
5.0
million (
150.0
million New Taiwan Dollar) with
a maturity date of no later than August 26, 2016. The Company extended the maturity date of this credit agreement to
December 15,
2023
. Advances from this line of credit are subject to interest at a floating interest rate of the one-year savings account plus
0.78
%
not to be lower than
1.62
% per annum. The interest rate was equivalent to
2.12
% as of December 31, 2022. The line of credit is guaranteed
by one of the Company's China subsidiaries and is collateralized by a real estate asset of that subsidiary. As of December 31,
2022 and 2021, there was $
4.9
million and $
5.4
million outstanding under this line of credit, respectively.
In June 2021, a subsidiary of the Company entered into a credit agreement
with a financial institution that provided for a revolving credit facility of up to $
0.8
million (
5.0
million Chinese Yuan) with a maturity
date of
June 15, 2022
. Advances from this line of credit are subject to interest at a fixed interest rate of one-year Loan Prime
Rate (LPR) plus
0.50
%. In June 2022, the Company paid off the outstanding balance under this line of credit and entered into a new credit
agreement with the same financial institution that provided for a revolving credit facility of up to approximately $
1.2
million (
8.0
million
Chinese Yuan) with a maturity date of June 22, 2023. Advances from this line of credit are subject to interest at a fixed rate of one-year
Loan Prime Rate plus
0.30
%. The interest rate was equivalent to
4.0
% and
4.35
% as of December 31, 2022 and 2021, respectively. As of December 31,
2022 and 2021, there was $
1.2
million and $
0.8
million outstanding under this line of credit, respectively.
F-
19
9.
Long-Term Debt
The Company has entered into various loans with financial
institutions. Long-term debt consisted of the following (in thousands):
December 31,
2022
2021
Term Loan
$
1,673
$
2,136
Less current portion
(
269
)
(
293
)
Long-term debt less current portion
$
1,404
$
1,843
Term Loan
In 2013, the Company entered into a term loan agreement
with a financial institution for $4.1 million with a maturity date of November 26, 2028 (the "Term Loan").
The Term Loan
bears a floating interest rate of the one-year savings account plus
0.43
% per annum in the first two years and a floating interest
rate of the one-year savings account plus
0.61
% per annum for the remaining of the term, not to be lower than
1.8
% during the entire term.
The interest rate was equivalent to
1.95
% as of December 31, 2022. The Term Loan is collateralized by a first position security interest
in a floor of an office building owned by the Company in Taiwan.
Aggregate maturities of long-term debt, excluding unamortized
debt issuance costs, were as follows (in thousands) as of December 31, 2022:
2023
$
269
2024
275
2025
280
2026
286
2027
291
Thereafter
272
$
1,673
10.
Lease Obligations
Operating Leases
The Company leases certain office and warehouse facilities
and warehouse equipment under various noncancelable operating leases. The Company is also committed under the terms of certain of these
operating lease agreements to pay property taxes, insurance, utilities, and maintenance costs.
Most of the Company's leases do not provide an implicit
rate that can be readily determined. Therefore, the Company uses a discount rate based on its incremental borrowing rate, which is determined
using its credit rating and information available as of the commencement date. The Company's operating lease agreements may include
options to extend the lease term. The Company made an accounting policy election to exclude options that are not reasonably certain of
exercise when determining the term of the borrowing in the assessment of the incremental borrowing rate. Additionally, the Company also
made an accounting policy election to not separate lease and non-lease components of a contract, and to recognize the lease payments under
short-term leases as an expense on a straight-line basis over the lease term without recognizing the lease liability and the right of
use ("ROU") lease asset.
F-
20
The Company evaluates whether its contractual arrangements
contain leases at the inception of such arrangements. Specifically, the Company considers whether it can control the underlying asset
and have the right to obtain substantially all of the economic benefits or outputs from the assets. Substantially all of its leases are
long-term operating leases with fixed payment terms. The Company does not have significant financing leases. Its ROU operating lease assets
represent the right to use an underlying asset for the lease term, and its operating lease liabilities represent the obligation to make
lease payments. ROU operating lease assets are recorded in other noncurrent assets in the consolidated balance sheet. Operating lease
liabilities are recorded in other current liabilities or other noncurrent liabilities in the consolidated balance sheets based on their
contractual due dates.
The Company's operating lease liability is recognized
as of the lease commencement date at the present value of the lease payments over the lease term. The Company's ROU operating lease
asset is recognized as of the lease commencement date at the amount of the corresponding lease liability, adjusted for prepaid lease payments,
lease incentives received, and initial direct costs incurred. The Company evaluates its ROU lease assets for impairment consistent with
its impairment of long-lived assets policy. See Note 3 — Summary of Significant Accounting Policies.
Operating lease expense is recognized on a straight-line
basis over the lease term, and is included in selling, general, and administrative expenses in the consolidated statements of operations.
Operating lease expense totaled $
25.3
million, $
20.1
million and $
16.5
million, respectively, for the years ended December 31,
2022, 2021 and 2020. The Company has made an accounting policy election by underlying asset class to not apply the recognition requirements
of ASC 842 to short-term leases. As a result, certain leases with a term of 12 months or less are not recorded on the balance
sheet and expense is recognized on a straight-line basis over the lease term. Cash payments made for operating leases totale
d
$
22.0
million,
$
17.7
million, and $
14.5
million during years ended December 31, 2022, 2021, and 2020 respectively, which
were included in cash flows from operating activities in the consolidated statement of cash flows. As of December 31, 2022 and 2021,
the Company's ROU operating lease assets were $
84.2
million and $
94.6
million, and its operating lease liabilities were $
89.1
million
and $
98.9
million, of which $
74.8
million and $
84.3
million were classified as non-current, respectively. New ROU operating lease assets
and liabilities entered into during 2022 were $
7.5
million and $
7.5
million, respectively. New or modified ROU operating lease assets
and liabilities entered into during 2021 were $
60.7
million and $
60.7
million, respectively. The Company's weighted average remaining
lease term and the discount rate for its operating leases were approximately
5.99
years and
3.8
% at December 31, 2022. The Company's
weighted average remaining lease term and the discount rate for its operating leases were approximately
6.86
years and
3.8
% at December 31,
2021.
In January 2023, the Company extended one of its operating
leases for an additional
10
years. Modified ROU operating lease assets and liabilities totaled $
15.9
million and $
15.9
million, respectively.
Total future minimum lease payment is $
21.2
million.
The Company has certain sublease arrangements for some of
the leased office and warehouse facilities. Sublease rental income for the years ended December 31, 2022, 2021, and 2020 was
immaterial.
The following table summarizes the future minimum rental
payments under noncancelable operating lease arrangements in effect at December 31, 2022 (in thousands):
2023
$
17,996
2024
16,887
2025
16,538
2026
14,307
2027
14,593
Thereafter
19,685
Total minimum payments
$
100,006
Less: Imputed interest
10,903
Present value of lease liabilities
$
89,103
F-
21
11.
Income Taxes
The components of the Company's income tax provision
expense are as follows (in thousands):
Year ended December 31
2022
2021
2020
Current provision:
Federal
$
(
68
)
$
2,536
$
21
State and local
268
795
133
Foreign
1,402
3,572
1,415
1,602
6,903
1,569
Deferred expense (benefit):
Federal
8,882
(
9,013
)
—
State and local
3,552
(
3,472
)
(
118
)
Foreign
65
(
213
)
490
12,499
(
12,698
)
372
Provision for (benefit from) income taxes
$
14,101
$
(
5,795
)
$
1,941
Income (loss) before provision for income taxes consisted
of the following (in thousands):
Year ended December 31
2022
2021
2020
United States
$
(
52,598
)
$
17,018
$
24,616
International
9,270
13,449
7,751
Total
$
(
43,328
)
$
30,467
$
32,367
Deferred income taxes reflect the tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax
purposes. The 2017 tax reform act amended Internal Revenue Code Section 174, effective for amounts paid or incurred for research and experimentation
expenses in tax years beginning after December 31, 2021.  Prior to this change taxpayers could elect to expense these costs in the
year incurred or amortize these them over
5
years.  Under the law as amended research and experimental expenses are capitalized and
amortized over
five years
(
15
years for expenditures attributable to foreign research). As such, The Company capitalizing its Section
174 costs for fiscal year 2022 in the amount of
2.6
M, net of current year amortization. The Company's deferred income tax assets
and liabilities consisted of the following (in thousands):
December 31
2022
2021
Deferred tax assets:
Accounts receivable
$
5,123
4,295
Inventories
2,807
4,413
Reserves and other accruals
3,062
5,903
Lease liabilities
20,668
22,203
Section 174 Costs
2,601
—
Credits and other
1,965
2,144
Net operating losses
9,921
6,102
Gross deferred tax assets
46,147
45,060
Valuation allowance
(
24,128
)
(
5,543
)
Total deferred tax assets, net
22,019
39,517
Deferred tax liabilities:
Prepaid expenses
(
864
)
(
798
)
Other
(
773
)
(
621
)
ROU
(
19,514
)
(
21,212
)
Property and equipment
—
(
3,219
)
Long-term investment
—
(
300
)
Total deferred tax liabilities
(
21,151
)
(
26,150
)
Net deferred tax assets
$
868
$
13,367
F-
22
In accordance with ASC 740,
Income Taxes
, the
Company evaluates whether a valuation allowance should be established against the net deferred tax assets based upon the consideration
of all available evidence and using a "more-likely than-not" standard. Significant weight is given to evidence that can be
objectively verified. The determination to record a valuation allowance is based on the recent history of cumulative losses and losses
expected in the near future.
The Company's U.S. federal consolidated filing
group includes certain international entities. Based upon results of operations for the years ended December 31, 2022, 2021
and 2020, it is determined that it is not more likely than not that the Company will realize the benefit from the U.S. federal net
deferred tax assets. As a result, the Company has recorded a valuation allowance against its net deferred tax assets for the year ended
December 31, 2022 for its U.S. operations. The Company maintains valuation allowances against certain non-US loss corporations. Total
valuation allowance against U.S. and non-U.S. deferred tax assets was $
24.1
million and $
5.5
million as of December 31,
2022 and 2021, respectively.
At December 31, 2022, the Company has net
operating losses ("NOL") carryforward of $
19.6
million and has $
22.0
million of apportioned state NOL carryforwards
available to reduce future taxable income. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act
("CARES Act") was enacted into law in response to the COVID-19 pandemic. The CARES Act temporarily suspends the
80
% of
taxable income limitation on the use of NOLs for tax years beginning before January 1, 2021, thereby permitting corporate
taxpayers to use NOLs to fully offset taxable income in these years regardless of the year in which the NOL arose. As a result,
the Company can fully utilize the remaining cumulative federal NOL for tax years before January 1, 2021, and then will be
limited to
80
% of taxable income afterwards. The state NOL carryforwards begin to expire in 2028. The Company has $
4.6
million
of NOL carryforwards in China as of December 31, 2022. The Company has $
10.0
million of NOL carryforwards in Taiwan, which
will begin to expire in 2024. The Company has $
2.3
million NOLs in Hong Kong with indefinite carryforward. A valuation
allowance was recorded on the NOLs in China, Taiwan, and Hong Kong. The Company has not provided for deferred income taxes on
undistributed earnings of its foreign subsidiaries, as these amounts are considered indefinitely reinvested outside the
United States. It is not practicable to determine the estimated income tax liability that might apply if these earnings were to
be repatriated.
A reconciliation of the U.S. federal statutory tax
rate to the Company's effective tax rate is as follows:
Year ended December 31
2022
2021
2020
Federal taxes at statutory rate
21.00
%
21.00
%
21.00
%
State taxes, net of federal benefit
2.48
(
6.85
)
0.04
Permanent items:
Other nondeductible items
(
0.30
)
0.48
0.17
Subpart F income
(
0.80
)
—
0.03
SEC. 956 Income inclusion
—
—
—
Stock-based compensation
(
10.88
)
0.74
0.07
Foreign withholding tax
—
—
—
Research & development credit
1.57
—
(
2.04
)
Global intangible low-taxed income
—
—
2.36
Foreign rate differential and foreign tax credits
(
0.74
)
2.15
1.12
Change in valuation allowance – U.S. Federal
(
34.09
)
(
33.11
)
(
15.48
)
Change in valuation allowance – U.S. States
(
11.17
)
—
—
Change in valuation allowance – Foreign
0.96
—
—
Change in uncertainty in income taxes ("FIN48")
(
0.10
)
—
—
Other
(
0.01
)
(
3.43
)
(
1.27
)
Effective tax rate
(
32.08
)%
(
19.02
)%
6.00
%
F-
23
The significant items that caused the effective tax rate
change related to recording of the U.S. portion of the valuation allowance and equity compensation.
Uncertain Tax Positions
As of the end of fiscal year 2022, the total liability for
income tax associated with unrecognized tax benefits was $
1.6
million. The Company's effective tax rate will be affected by any
portion of this liability we may recognize. The Company does not believe it is reasonably possible that any of the uncertain tax benefits
will be recognized in the next 12 months. As such, all uncertain tax positions, including accrued interest, have been classified
as long-term taxes payable on the consolidated balance sheets.
A reconciliation of the beginning and ending amounts of
uncertain tax positions is as follows (in thousands):
Year ended
December 31
2022
2021
Beginning balance
$
1,563
$
850
Additions based on tax positions related to the prior year
43
713
Ending balance
$
1,606
$
1,563
The Company's continuing practice is to recognize
interest and penalties related to unrecognized tax benefits as tax expense. As of December 31, 2022 and 2021, interest and penalties
related to uncertain tax positions were not material.
The Company files a consolidated federal income tax return
in the United States, as well as combined and separate U.S. state income tax returns. Certain subsidiaries of the Company are
subject to income tax
in China, Taiwan, Hong Kong, and Canada. The
Company is still subject to examination for federal income tax returns for the years 2014 through 2021, for certain U.S. state
income tax returns for the years 2009 through 2021, and for certain foreign income tax returns for the years 2012 through
2021. The Company is currently under examination by the Internal Revenue Service for the years 2012 through 2014 and by the California
Franchise Tax Board for the years 2007 through 2012. The California Franchise Tax Board examination is related to amended tax returns
filed for the years under exam. No additional reserve was accrued in 2022 based on the current audit status.
12.
Common Stock
The Company is authorized to issue unlimited shares of common
stock with a par value of $
0.021848
.
Each share of common stock is entitled to one vote.
At December 31, 2022 and 2021, the number
of shares of common stock issued and outstanding were
376,660,069
and
369,718,680
, respectively.
No Common Stock dividend was declared by the Company's
Board of Directors for the years ended December 31, 2022, 2021 and 2020.
F-
24
13.
Warrants
On April 28, 2016, LLIT signed a Share Purchase Agreement
("SPA") with Hangzhou Lianluo. In this SPA, Hangzhou Lianluo was entitled with
125,000
warrants to acquire from the Company
125,000
common shares at a purchase price of $
17.60
per share. The warrants are exercisable at any time. The Company recognized the warrants
as a derivative liability because warrants can be settled in cash. Warrants are remeasured at fair value with changes in fair value recorded
in earnings in each reporting period.
There was a total of
125,000
warrants issued and outstanding
as of December 31, 2022.
The fair value of the outstanding warrants was calculated
using the Black-Scholes model with the following assumptions:
December 31,
2022
December 31,
2021
Market price per share (USD/share)
$
1.31
$
10.37
Exercise price (USD/share)
17.60
17.60
Risk free rate
4.18
%
1.16
%
Dividend yield
0
%
0
%
Expected term/Contractual life (years)
3.32
4.32
Expected volatility
96.90
%
147.33
%
The following is a reconciliation of the beginning and ending
balances of warrants liability measured at fair value on a recurring basis using Level 3 inputs (in thousands):
Beginning balance, May 19, 2021
$
1,152
Fair value change of the issued warrants included in earnings
(
61
)
Ending balance, December 31, 2021
1,091
Beginning balance, January 1, 2022
$
1,091
Fair value change of the issued warrants included in earnings
(
1,063
)
Ending balance, December 31, 2022
$
28
14.
Stock-Based Compensation
Legacy Newegg Inc. Stock Based Compensation
Newegg Inc.'s stock-based compensation includes stock
option awards issued under Newegg Inc.'s employee incentive plan, as further discussed below. There was no income tax benefit recognized
in the consolidated statements of income for stock-based compensation arrangements in any of the periods presented.
The exercise prices of stock options and restricted stock
granted were determined contemporaneously by the Newegg Inc.'s Board of Directors based on the estimated fair value of the underlying
Class A Common Stock and Series A convertible Preferred Stock. The Newegg Inc. Class A Common Stock and Series A convertible
Preferred Stock valuations were based on a combination of the income approach and two market approaches, which were used to estimate the
total enterprise value of Newegg Inc. The income approach quantifies the present value of the future cash flows that management expects
to achieve from continuing operations. These future cash flows are discounted to their present values using a rate corresponding to Newegg
Inc.'s estimated weighted average cost of capital. Newegg Inc.'s weighted average cost of capital is calculated by weighting
the required return on interest-bearing debt and common equity capital in proportion to their estimated percentages in Newegg Inc.'s
capital structure. The market approach considers multiples of financial metrics based on acquisition values or quoted trading prices of
comparable public companies. An implied multiple of key financial metrics based on the trading and transaction values of publicly traded
peers is applied to Newegg Inc.'s similar metrics in order to derive an indication of value. A marketability discount is then applied
to reflect the fact that Newegg Inc.'s Class A Common Stock and Series A convertible Preferred Stock are not traded on
a public exchange. The amount of the discount varies based on management's expectation of effecting a public offering of Newegg
Inc.'s Class A Common Stock within the ensuing 12 months. The enterprise value indications from the income approach and
market approaches were used to estimate the fair value of Newegg Inc.'s Class A Common Stock and Series A convertible
Preferred Stock in the context of Newegg Inc.'s capital structure as of each valuation date. Each valuation was based on certain
estimates and assumptions. If different estimates and assumptions had been used, these valuations could have been different.
F-
25
At the close of the merger, the holders of Legacy Newegg
Inc. stock options continue to hold such options, and such options remain subject to the same vesting, exercise and other terms and conditions.
The holders of Legacy Newegg Inc. options, as applicable, may exercise their options to purchase a number of shares of the Company's
Class A Common Stock equal to the number of shares of Legacy Newegg Inc. common stock subject to such Legacy Newegg Inc. options multiplied
by the conversion ratio at an exercise price per share divided by the conversion ratio.
2005 Incentive Award Plan:
On September 22, 2005, the Board of Directors approved
Newegg Inc.'s 2005 Equity Incentive Plan, which was amended in January 2008, October 2009, December 2011 and September 2015
(the "Incentive Award Plan"). Under the Incentive Award Plan, the Company may grant equity incentive awards to employees,
directors, and consultants based on Newegg Inc.'s Class A Common Stock. A committee of the Board of Directors of Newegg Inc.
determines the eligibility, types of equity awards, vesting schedules, and exercise prices for equity awards granted. Subject to certain
adjustments in the event of a change in capitalization or similar transaction, Newegg Inc. may issue a maximum of
82,952,149
shares
of its Class A Common Stock under the Incentive Award Plan. Newegg Inc. issues new shares of Class A Common Stock from its authorized
share pool to settle stock-based compensation awards. The exercise price of options granted under the plan shall not be less than the
fair value of the Newegg Inc.'s Class A Common Stock as of the date of grant. Options typically vest over the term of
four
years,
and are typically exercisable for a period of
10
years
after the date of grant, except when granted to a holder who, at the time the option
is granted, owns stock representing more than
10
% of the voting power of all classes of stock of Newegg Inc. any subsidiaries, in which
case, the term of the option shall be no more than
five
years from the date of grant. In September 2015, the Incentive Award
Plan was amended to permit additional awards to be made after the tenth anniversary of the original adoption of said plan.
The fair value of each option award granted under the Incentive
Award Plan is estimated using the Black-Scholes option pricing model on the date of grant. This model requires the input of highly complex
and subjective variables. These variables include, but are not limited to, the expected stock price volatility over the expected life
of the awards and actual and projected employee stock option exercise behavior with the following inputs: risk-free interest rate, expected
stock price volatility, forfeiture rate, expected term, dividend yield and weighted average grant date fair value.
The risk-free interest rate is based on the currently available
rate on a U.S. Treasury zero-coupon issue with a remaining term equal to the expected term of the option converted into a continuously
compounded rate. The expected volatility of stock options is based on a review of the historical volatility and the implied volatility
of a peer group of publicly traded companies comparable to the Company. In evaluating comparability, the Company considered factors such
as industry, stage of life cycle, and size. After the adoption of Accounting Standards Update No. 2016-09
Compensation-Stock Compensation
(Topic 718): Improvements to Employee Share-Based Payment Accounting
as of January 1, 2017, the Company elected to recognize
the effect of awards for which the requisite service is not rendered when the award is forfeited. The expected term assumption used by
the Company reflects the application of the simplified method set out in Securities and Exchange Commission Staff Accounting Bulletin
No. 110, Shared-Based Payment. The simplified method defines the expected term of an option as the average of the contractual term
of the options and the weighted average vesting period for all option tranches. The dividend yield reflects the Company's dividend
rate on the date of grant. During the years ended December 31, 2022 and 2021, Newegg Inc. did not grant any stock options representing
the right to purchase Newegg Inc. Common Stock.
F-
26
The following table summarizes the activity for all stock
options granted:
Options
outstanding
Weighted
average
exercise
price
Average
remaining
contractual
terms
(in years)
Aggregate
intrinsic
Value
(in thousands)
Outstanding at January 1, 2020
15,201,143
$
0.43
4.80
$
1,723
Exercised
—
Grant
51,921,030
Forfeited or expired
(
85,347
)
0.73
Outstanding at December 31, 2020
67,036,826
$
0.60
8.19
$
51,754
Exercised
(
1,457,517
)
Grant
—
Forfeited or expired
(
178,916
)
0.73
Outstanding at December 31, 2021
65,400,393
$
0.60
7.30
$
639,131
Exercised
(
6,305,365
)
0.61
Grant
—
Forfeited or expired
(
59,635
)
0.73
Outstanding at December 31, 2022
59,035,393
$
0.60
6.46
$
42,143
Vested and expected to vest at December 31, 2022
59,035,393
$
0.60
6.46
$
42,143
Exercisable at December 31, 2022
37,637,243
$
0.57
5.90
$
27,787
During the year ended
December 31, 2022, stock options were exercised for
6,305,365
of the Company's common stock. Cash exercises totaled
4,956,468
shares of the Company's common stock with proceeds of approximately $
2.9
million. Cashless exercises totaled
1,348,897
shares which
resulted in the Company issuing
1,059,240
net shares. The exercise prices ranged from $
0.55
to $
0.73
per share during the year ended December 31,
2022.
During the year ended December 31, 2021, stock options
were exercised for
1,457,517
of the Company's common stock. Cash exercises totaled
371,527
shares of the Company's common
stock with proceeds of approximately $
0.3
million. Cashless exercises totaled
1,085,990
shares which resulted in the Company issuing
1,048,298
net shares. The exercise prices ranged from $
0.44
to $
0.73
per share during the year ended December 31, 2021.
During the years
ended December 31, 2022, 2021 and 2020, the total intrinsic value of stock options exercised was $
24.3
million, $
24.2
million, and
$
0
million, respectively, and the compensation expense for stock options granted included in "Selling, general and administrative
expenses" in the consolidated statements of operations totaled $
3.2
million, $
3.2
million and $
1.6
million, respectively.
As of December 31, 2022 and 2021, there were $
4.6
million
and $
7.8
million, respectively, of unrecognized compensation costs related to nonvested options. The weighted average remaining vesting
term of the stock option was
1.46
years,
2.46
years and
3.46
years as of December 31, 2022, 2021 and 2020, respectively.
Newegg Commerce, Inc. Stock Based
Compensation
2021 Equity Incentive Plan
On November 26, 2021, the Board of Directors approved
the Company's 2021 Equity Incentive Plan (the "2021 Plan"). Under the 2021 Plan, the Company may grant equity incentive
awards to employees, directors, and consultants based on the Company's Common Stock. A committee of the Board of Directors of the
Company determines the eligibility, types of equity awards, vesting schedules, and exercise prices for equity awards granted. Subject
to certain adjustments in the event of a change in control or similar transaction, the Company may issue a maximum of
7,374,900
of its
Common Stock under the 2021 Plan. The Company issues new shares of its Common Stock from its authorized share pool to settle stock-based
compensation awards.
F-
27
On July 21, 2022, the Board of Directors approved the amendment
of the 2021 Plan to increase the maximum share pool from
7,374,900
to
16,374,900
shares.
The following table summarizes the activity for all restricted
stock units granted:
Shares
Weighted-
average
grant date
fair value
Unvested at January 1, 2020
—
$
—
Granted
7,040,998
18.38
Vested
—
—
Cancelled
—
—
Unvested at December 31, 2021
7,040,998
$
18.38
Granted
1,671,445
3.69
Vested
(
1,675,007
)
18.38
Cancelled
(
1,022,720
)
18.38
Unvested at December 31, 2022
6,014,716
$
14.30
During the years ended December 31, 2022 and 2021, the Company
granted
285,000
and
7,040,998
restricted stock units ("RSUs"), respectively, to its executives and employees. The vesting
of each RSU is subject to the employee's continued employment through applicable vesting dates. The RSUs are accounted for as equity
awards and are measured at fair value based upon the grant date price of the Company's common stock. Compensation expense is recognized
on a straight-line basis over the requisite service period of
four years
.
On August 13, 2022 the Company issued
5,560,780
performance-based
vesting restricted stock units ("PRSUs") to one of its executives over four performance periods where
1,386,445
PRSUs were
granted during the year ended December 31, 2022. Each of the
four
performance periods will have a separate grant date and service inception
date, and a separate requisite service period. The PRSUs are accounted for as equity awards and are measured at fair value based upon
the grant date price of the Company's common stock. The vesting of each PRSU is based on financial performance tied to GMV. The
vesting of PRSUs is determined at the end of each of the four-year performance periods. 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.
During the years ended December 31, 2022 and 2021,
the compensation expense for restricted stock units granted included in "Selling, general and administrative expenses" in
the consolidated statements of operations totaled $
30.8
million and $
3.1
million, respectively.
As of December 31, 2022, there was $
82.9
million unrecognized
compensation costs related to restricted stock units.
15.
Net Income (Loss) per Share
Basic earnings per share of Common Stock is calculated by
dividing net income available to holders of Common stock by the weighted average number of shares of Common Stock outstanding for the
period. The diluted earnings per share of Common Stock calculation assumes the issuance of all dilutive potential common shares outstanding.
Dilutive potential Common Stock consists of incremental shares of Class A Common Stock issuable upon the exercise of the stock options.
F-
28
The following table summarizes the calculation of basic
and diluted net income (loss) per common share (in thousands, except per share data):
Year Ended December 31,
2022
2021
2020
Net income (loss)
$
(
57,429
)
$
36,262
$
30,426
Basic earnings per share
Basic weighted average shares outstanding
373,067
366,651
363,326
Basic earnings (loss) per share
$
(
0.15
)
$
0.10
$
0.08
Diluted earnings per share
Basic weighted average shares outstanding
373,067
366,651
363,326
Dilutive effect of stock options
—
65,599
21,687
Diluted weighted average shares outstanding
373,067
432,250
385,013
Diluted earnings (loss) per share
$
(
0.15
)
$
0.08
$
0.08
The following shares were excluded from the calculation
of diluted net loss per share calculation as their effect would have been anti-dilutive (in thousands):
Year Ended December 31,
2022
2021
2020
Stock options
51,845
54
4,329
Restricted stock units
7,084
7,041
—
Warrants
125
125
—
16.
Commitments and Contingencies
From time to time, the Company is a party to various lawsuits,
claims, and other legal proceedings that arise in the ordinary course of business. The Company discloses contingencies deemed to be reasonably
possible and accrues loss contingencies when, in consultation with legal advisors, it is concluded that a loss is probable and reasonably
estimable.
In December 2014, an individual plaintiff sued our
subsidiary,
Newegg.com
Americas Inc. ("
Newegg.com
Americas
"), in Superior Court in Los Angeles County,
California, alleging that
Newegg.com
Americas had engaged in deceptive advertising practices and seeking to certify a class action.
In 2016, the trial court sustained
Newegg.com
Americas' demurrer to the plaintiff's claims without leave to amend.
The plaintiff appealed, and in July 2018 an appellate court reversed the decision of the trial court, thus allowing the case to proceed.
The matter is now pending in the trial court, with Newegg Inc. having been added as a defendant. We intend to vigorously defend ourselves
and our subsidiaries. Depending on the amount and timing, an unfavorable result could materially affect our business, consolidated results
of operations, financial position or cash flows.
In September 2021, two subsidiaries of the Company were
served with a complaint filed in the Superior Court for Los Angeles County, California, alleging various wage and hour violations and
seeking to certify a class action. In October 2021, a second complaint was filed as a representative action pursuant to the Private Attorneys
General Act of 2004 against the same two subsidiaries in the Superior Court for Los Angeles County, California, alleging various violations
of the California Labor Code. The Company intends to vigorously defend its subsidiaries in both matters. The outcome of these matters
is uncertain. Depending on the amount and timing, an unfavorable result in either matter could materially affect our business, consolidated
results of operations, financial position or cash flows.
In addition to the legal proceedings mentioned above, from
time to time, the Company may become involved in legal proceedings arising in the ordinary course of business. There can be no assurance
with respect to the outcome of any legal proceeding. The outcome of the litigation described above, the other pending lawsuits filed against
the Company and other claims, including those that may be made in the future, may be adverse to the Company, and the monetary liability
and other negative operational or financial impact may be material to the Company's consolidated results of operations, financial
position, and cash flows.
F-
29
17.
Employee Benefit Plan
The Company maintains a 401(k) defined-contribution
plan for the benefit of its eligible employees. All full-time domestic employees who are at least 18 years of age are eligible to participate
in the plan. Eligible employees may elect to contribute up to
100
% of their eligible compensation. The Company's matching contributions
are made at the discretion of the Company's Board of Directors. In addition, the Company may make a profit-sharing contribution
at the sole discretion of the Board of Directors. Total contributions by the Company for each of the years ended December 31,
2022, 2021 and 2020 were $
1.6
million, $
1.9
million and $
1.7
million, respectively. Contributions made by the Company are immediately
100
% vested.
18.
Related Party Transactions
Loans to Affiliate
On December 17, 2019, the Company loaned $
15.0
million
to Digital Grid under a term loan agreement with a maturity date of
April 30, 2020
and a fixed interest rate of
5.0
% (the "$15.0
Million Loan"). The $
15.0
Million Loan was subsequently extended to June 30, 2023. The $
15.0
Million Loan is included as "Notes
receivable" at the Stockholders' Equity section of the Consolidated Balance Sheets as of December 31, 2022 and 2021.
During the years ended December 31, 2022, 2021
and 2020, the Company recorded interest income of $
0.8
million, $
0.8
million and $
0.7
million, respectively, from loans to affiliate in
interest income in the consolidated statement of operations. As of December 31, 2022 and 2021, the amount of interest receivable
on the $
15.0
Million Loan outstanding included as a component of "Notes receivable" at the Stockholders' Equity section
in the consolidated balance sheets was $
0.2
million and $
0.2
million, respectively.
Sales to Related Parties
Due from related parties and net sales to related parties
primarily reflect sales of finished goods and services with the exception of loans to affiliate as discussed above. Sales during the years
ended December 31, 2022, 2021 and 2020 were immaterial.
As of December 31, 2022 and 2021, amount
due to related parties was immaterial.
19. Segment Information
The Company's Chief Executive Officer, who is the
chief operating decision maker ("CODM"), reviews financial information presented on a consolidated basis. There are no segment
managers who are held accountable for operations, operating results and plans for levels or components below the consolidated unit level.
The Company considers itself to be operating within
one
reportable segment.
The following table summarizes net sales from external customers
(in thousands):
December 31,
2022
2021
2020
United States
$
1,553,389
$
2,101,975
$
1,906,058
Canada
138,123
211,778
150,707
Rest of world
28,761
62,472
58,107
Total
$
1,720,273
$
2,376,225
$
2,114,872
F-
30
The following table summarizes net sales by product category
and revenue stream (in thousands):
Year Ended December 31,
Net Sales by Product Category
2022
2021
2020
Components & Storage
$
1,046,095
$
1,346,053
$
1,311,608
Computer System
345,949
644,923
403,203
Office Solutions
96,679
155,526
155,592
Software & Services
58,424
56,402
70,558
Electronics
38,302
52,058
46,881
Others
134,824
121,263
127,030
Total Net Sales
$
1,720,273
$
2,376,225
$
2,114,872
Year Ended December 31,
Net Sales by Revenue Stream
2022
2021
2020
Direct sales revenues(1)
$
1,607,027
$
2,243,421
$
1,974,897
Marketplace revenues(2)
47,005
63,492
57,640
Services revenues(3)
66,241
69,312
82,335
Total Net Sales
$
1,720,273
$
2,376,225
$
2,114,872
(1)
Includes all first-party product
sales where Newegg owns and sells its own inventories within its websites and third-party marketplace platforms.
(2)
Includes all the commission revenues
earned from sales made by sellers on its websites.
(3)
Includes all revenue recognized
from providing services to customers, including third-party logistics services, advertising services, and all other third-party seller
services.
The following table summarizes net property, plant and equipment
by country (in thousands):
December 31,
2022
2021
United States
$
21,637
$
23,178
Canada
94
9
Rest of world
23,344
26,962
Total
$
45,075
$
50,149
20.
Subsequent Events
On April 21, 2023 (the "Effective Date"), Newegg
Inc. entered into a purchase and sale agreement (the "Agreement") to purchase a commercial office building located in Diamond
Bar, California for a purchase price of twenty-three million dollars ($
23,000,000
).  As part of the Agreement, Newegg Inc. will pay
an initial deposit of six hundred ninety thousand dollars ($
690,000
) (the "Initial Deposit") and an additional deposit of
fifty thousand dollars ($
50,000
) (the "Additional Deposit") within three business days of the Effective Date.  The purchase
is subject to a thirty-day inspection period (the "Inspection Period"), and closing is expected to occur fifteen days after
the expiration of the inspection period, subject to certain extension rights.  The Initial Deposit is refundable if Newegg Inc. elects
to terminate the Agreement prior to the expiration of the Inspection Period.  The Additional Deposit is non-refundable, except in
the event of certain events of default by Seller.
The Company intends to fund the purchase price through a combination
of cash on hand and borrowings under our revolving credit facility.
F-
31
Item 19. Exhibits
Exhibit
Number
Description of Documents
1.1
Amended and Restated Memorandum and Articles of Association (incorporated by reference to the Company's Registration Statement on Form F-1/A, filed December 10, 2021).
1.2
Amended and Restated Newegg Inc. Shareholders Agreement (incorporated by reference to the Company's Registration Statement on Form F-1/A, filed December 10, 2021).
1.3
First Amendment to the Amended and Restated Newegg Inc. Shareholders Agreement (incorporated by reference to the Company's Report on Form 6-K filed on April 28, 2022).
1.4
Second Amendment to the Amended and Restated Newegg Inc. Shareholders Agreement (incorporated by reference to the Company's Report on Form 6-K filed on September 2, 2022).
2.1
Description of Securities (incorporated by reference to the Company's Annual Report on Form 20-F filed on April 28, 2022).
2.2
Form of Indemnification Agreement between the Registrant and its directors and executive officers
4.1
Form of Merger Agreement, by and among LLIT, Lightning Delaware Sub, Inc., and Newegg (incorporated by reference to the Company's Registration Statement on Form F-1, filed October 26, 2020).
4.2
Form of Disposition Agreement, by and between LLIT and Beijing Fenjin Times Technology Development Co., Ltd. (incorporated by reference to the Company's Registration Statement on Form F-1/A, filed December 10, 2021).
4.3
Newegg's 2005 Incentive Plan, as Amended (incorporated by reference to the Company's Registration Statement on Form F-1, filed October 26, 2020).
4.5
Employment Agreement by and between Anthony Chow and Newegg Commerce, Inc. (incorporated by reference to the Company's Registration Statement on Form F-1/A, filed December 10, 2021).
4.6
Form of Employment Agreement by and between Newegg Commerce, Inc. and certain of its executive officers
4.7
Revolving Credit and Security Agreement, by and among East West Bank, the Lender Parties thereto, Newegg and Newegg's subsidiaries (incorporated by reference to the Company's Report on Form 6-K filed August 27, 2021).
4.8
First Amendment to Revolving Credit and Security Agreement, by and among East West Bank, the Lender Parties thereto, Newegg and Newegg's subsidiaries
4.9
Pledge Agreement, by and among East West Bank, Newegg and Newegg's subsidiaries (incorporated by reference to the Company's Report on Form 6-K filed August 27, 2021).
4.10
Pledge and Security Agreement, by and among East West Bank, Newegg Tech, Inc. and ChiefValue.com, Inc. (incorporated by reference to the Company's Report on Form 6-K filed August 27, 2021).
4.11
Guaranty and Suretyship Agreement, by and among East West Bank, Newegg Tech, Inc., ChiefValue, Inc. and NuTrend Automotive, Inc. (incorporated by reference to the Company's Report on Form 6-K filed August 27, 2021).
4.12
Intercompany Subordination Agreement, by and East West Bank, Newegg and Newegg's subsidiaries (incorporated by reference to the Company's Report on Form 6-K filed August 27, 2021).
4.13
Letter Agreement, between East West Bank and Newegg (incorporated by reference to the Company's Registration Statement on Form F-1/A, filed December 10, 2021).
4.14
Newegg Commerce, Inc. 2021 Equity Incentive Plan (incorporated by reference to the Company's Report  on Form 6-K, filed November 29, 2021).
4.15
Supplemental Agreement dated April 22, 2022 between Digital Grid, Bank of China Limited Zhejiang Branch, Newegg Inc., Newegg Commerce, Inc., and Hangzhou Lianluo (incorporated by reference to the Company's Annual Report on Form 20-F filed on April 28, 2022).
4.16
Amended and Restated Supplemental Agreement dated December 2022 between Digital Grid, Bank of China Limited Zhejiang Branch, Newegg Inc., Newegg Commerce, Inc., and Hangzhou Lianluo.
4.17
Purchase and Sale Agreement by and between BSP Senita Gateway Center, LLC and Newegg Inc.
8.1
List of Significant Subsidiaries.
12.1
Certification of Chief Executive Officer, pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.
12.2
Certification of Chief Financial Officer, pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.
13.1
Certification of Chief Executive Officer, pursuant to 18 U.S.C. Section 1350.
13.2
Certification of Chief Financial Officer, pursuant to 18 U.S.C. Section 1350.
15.1
Consent of Independent Registered Public Accounting Firm.
101.INS
Inline XBRL Instance Document.
101.SCH
Inline XBRL Schema Document.
101.CAL
Inline XBRL Calculation Linkbase Document.
101.DEF
Inline XBRL Definition Linkbase Document.
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104
Cover Page Interactive Data File (formatted as Inline XBRL document and included in Exhibit 101).
96
Signature
The registrant hereby certifies that it meets all
of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its
behalf.
Date: April 27, 2023
NEWEGG COMMERCE, INC.
/s/ Anthony Chow
Anthony Chow
Chief Executive Officer
97