Liquidity Services (L1S) Risk Analysis

We sell assets, such as scientific instruments, information technology equipment and aircraft parts, that are subject to export control and economic sanctions laws, among other laws, imposed by the United States and other governments. Such restrictions include the U.S. Export Administration Regulations, the International Traffic in Arms Regulations, and economic sanctions and embargo laws administered by the Office of the Foreign Assets Control Regulations. These restrictions prohibit us from selling property to (a) persons or entities that appear on lists of restricted or prohibited parties maintained by the United States or other governments or (b) countries, regimes, or nationals that are the target of applicable economic sanctions or other embargoes. Such laws could become even more restrictive and cover a wider array of assets in the event of escalations of geopolitical conflict. We may incur significant costs or be required to modify our business to comply with these requirements. If we are alleged to have violated these laws or regulations, we may be subject to civil and criminal penalties and administrative sanctions, including termination of contracts, forfeiture of profits, suspension of payments, fines, and suspension or debarment from doing business with U.S. federal government agencies. In addition, we could suffer serious harm to our reputation if allegations of impropriety are made against us, whether or not true.

We rely on a limited number of banks and financial institutions both domestically and internationally to provide critical services, including cash management, payment processing, credit facilities, and other transactional support. Our ability to access funds, process payments, and manage liquidity depends on the continued stability and operational soundness of these banking partners. Instability or failure of any of our primary banks or financial partners-whether due to insolvency, regulatory action, cyberattack, or other disruptions-could result in a sudden loss of access to our funds, delays or failures in payment processing, or increased costs of obtaining alternative banking services. In addition, changes in the terms of our banking relationships, such as reduced credit availability, increased collateral requirements, or changes in transaction limits, could adversely affect our ability to manage working capital and meet our financial obligations. If we are unable to access our funds or secure alternative banking arrangements on acceptable terms, our operations, financial condition, and results of operations could be materially and adversely affected.

The laws and regulations related to the Internet and e-commerce are evolving, including laws and regulations regarding user privacy, freedom of expression, pricing, fraud, quality of assets and services, taxation, advertising, intellectual property rights, and information security. There are numerous federal, state, local and international laws, regulations, rules, industry codes of conduct, policies and standards regarding data privacy and security, such as the California Consumer Privacy Act, the Federal Trade Commission enforcement decisions, and the European Union's General Data Protection Regulation. Any failure or perceived failure by us, or third parties with which we do business, to comply with applicable data privacy and security laws, regulations, rules, industry codes of conduct, policies, standards or other legal or contractual obligations, may result in, among other things, governmental or regulatory investigations, enforcement actions, regulatory or other fines, orders requiring that we change our practices, criminal compliance orders, claims for damages by affected individuals or litigation or public statements against us by consumer advocacy groups or others, and could cause customers to lose trust in us. Current and future laws and regulations could increase our cost of doing business and/or decrease the demand for our services. Laws adopted prior to the advent of the Internet may not contemplate or address the unique issues of the Internet and related technologies and it is not clear how they may apply.