SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

For the quarterly period ended ~~December 31, 2017~~June 30, 2021



o☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF ~~1934.~~1934

For the transition period from to

Commission file number 0-51813

LIQUIDITY SERVICES, INC.

(Exact Name of Registrant as Specified in Its Charter)



Delaware						52-2209244
(State or Other Jurisdiction of						(I.R.S. Employer
Incorporation or Organization)						Identification No.)

6931 Arlington Road, Suite 200, Bethesda, ~~MD.~~MD						20814
(Address of Principal Executive Offices)						(Zip Code)

(Registrant’s Telephone Number, Including Area Code)

(Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report)

Title of Each Class

Trading Symbol(s)

Name of Each Exchange on Which Registered

Common Stock, $0.001 par value

LQDT

Nasdaq


Large accelerated filer ☐		Accelerated filer ☒

Non-accelerated filer ☐		Smaller reporting company ☒

~~Large accelerated filer~~ o		~~Accelerated filer~~ x

~~Non-accelerated filer~~ o	~~Smaller reporting company~~ o

	Emerging growth company o ☐

The number of shares outstanding of the issuer’s common stock, par value ~~$.001~~$0.001 per share, as of ~~January 29, 2018~~August 2, 2021 was ~~31,935,263.~~ 35,440,468.

INDEX


				Page
PART I. FINANCIAL INFORMATION

			~~Page~~
~~Part I. FINANCIAL INFORMATION (UNAUDITED)~~

Item 1.	~~Consolidated~~ Financial Statements		3

		Consolidated Balance Sheets		3

		Consolidated Statements of Operations		4

		Consolidated Statements of Comprehensive Income (Loss)		5

		Consolidated Statement of Stockholders' Equity		6

		Consolidated Statements of Cash Flows		67

		Notes to the Unaudited Consolidated Financial Statements		78

Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		2021

Item 3.		Quantitative and Qualitative Disclosures About Market Risk		3332

Item 4.		Controls and Procedures		3332

~~Part~~PART II. OTHER INFORMATION

Item 1.		Legal Proceedings		3533

Item 1A.		Risk Factors		3533

Item 6.2.		~~Exhibits~~Unregistered Sales of Equity Securities and Use of Proceeds		3633

~~SIGNATURES~~Item 5.		37Other Information		33

Item 6.		Exhibits		34

SIGNATURES				35

Table of Contents

PART I—FINANCIAL INFORMATION

Item 1. ~~Consolidated~~ Financial Statements.

Liquidity Services, Inc. and Subsidiaries

Consolidated Balance Sheets

(Dollars in ~~Thousands)~~

December 31, 2017
September 30, 2017
(Unaudited)

Assets

Current assets:

Cash and cash equivalents $ 96,766

$ 94,348
Accounts receivable, net of allowance for doubtful accounts of $685 and $668 at December 31, 2017 and September 30, 2017, respectively 7,442

11,598
Inventory 17,053

20,736
Prepaid taxes 2,517

2,466
Prepaid expenses and other current assets 4,878

9,774
Total current assets 128,656

138,922
Property and equipment, net 16,531

16,793
Intangible assets, net 425

427
Goodwill 45,466

45,388
Net deferred long-term tax assets 962

962
Other assets 12,809

12,737
Total assets $ 204,849

$ 215,229
Liabilities and stockholders’ equity

Current liabilities:

Accounts payable $ 11,509

$ 13,099
Accrued expenses and other current liabilities 26,469

30,193
Distributions payable 2,388

3,081
Payables to sellers 25,377

24,383
Total current liabilities 65,743

70,756
Deferred taxes and other long-term liabilities 6,584

11,837
Total liabilities 72,327

82,593
Commitments and contingencies (Note 12) 0

0
Stockholders’ equity:

Common stock, $0.001 par value; 120,000,000 shares authorized; 31,889,679 shares issued and outstanding at December 31, 2017; 31,503,349 shares issued and outstanding at September 30, 2017 29

29
Additional paid-in capital 228,626

227,264
Accumulated other comprehensive loss (6,482 )
(6,431 )
Retained earnings (accumulated deficit) (89,651 )
(88,226 )
Total stockholders’ equity 132,522

132,636
Total liabilities and stockholders’ equity $ 204,849

$ 215,229
Thousands, Except Par Value)


	June 30, 2021		September 30, 2020
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	112,666	$	76,036

Accounts receivable, net of allowance for doubtful accounts of $634 and $389	5,470		5,322
Inventory, net	13,799		5,607
Prepaid taxes and tax refund receivable	1,600		1,652
Prepaid expenses and other current assets	5,970		5,962
Total current assets	139,505		94,579
Property and equipment, net of accumulated depreciation of $17,834 and $14,555	17,003		17,843
Operating lease assets	12,008		10,561
Intangible assets, net	3,777		4,758
Goodwill	60,023		59,839
Deferred tax assets	762		806
Other assets	5,325		8,248
Total assets	$	238,403	$	196,634
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	39,748	$	21,957
Accrued expenses and other current liabilities	22,226		19,124
Current portion of operating lease liabilities	4,081		3,818

Deferred revenue	4,517		3,255
Payables to sellers	39,426		26,170
Total current liabilities	109,998		74,324
Operating lease liabilities	8,872		7,499
Other long-term liabilities	2,972		2,996
Total liabilities	121,842		84,819
Commitments and contingencies (Note 12)	0		0
Stockholders’ equity:
Common stock, $0.001 par value; 120,000,000 shares authorized; 35,417,715 shares issued and outstanding at June 30, 2021; 34,082,406 shares issued and outstanding at September 30, 2020	35		34
Additional paid-in capital	251,048		247,892
Treasury stock, at cost; 1,587,199 shares at June 30, 2021 and 547,508 shares at September 30, 2020	(21,628)		(3,983)
Accumulated other comprehensive loss	(8,740)		(9,782)
Accumulated deficit	(104,154)		(122,346)
Total stockholders’ equity	116,561		111,815
Total liabilities and stockholders’ equity	$	238,403	$	196,634

See accompanying notes to the unaudited consolidated financial statements.

Table of Contents

Liquidity Services, Inc. and Subsidiaries

~~Unaudited~~ Consolidated Statements of Operations

(Dollars in Thousands, Except Per Share Data)

Three Months Ended December 31,
2017
2016
Revenue $ 40,280

$ 47,980
Fee revenue 20,863

22,816
Total revenue 61,143

70,796
Costs and expenses from operations:

Cost of goods sold 27,631

32,271
Seller distributions 3,312

4,548
Technology and operations 18,100

21,892
Sales and marketing 8,310

9,987
General and administrative 7,572

9,857
Depreciation and amortization 1,211

1,429
Other operating expenses (income) 1,459

(928 )
Total costs and expenses 67,595

79,056
Loss from operations (6,452 )
(8,260 )
Interest and other (income) expense, net (425 )
34
Loss before provision for income taxes (6,027 )
(8,294 )
(Benefit) provision for income taxes (4,815 )
103
Net loss $ (1,212 )
$ (8,397 )
Basic and diluted loss per common share $ (0.04 )
$ (0.27 )
Basic and diluted weighted average shares outstanding 31,876,603

31,261,603


	Three Months Ended June 30,				Nine Months Ended June 30,
	2021		2020		2021		2020
	(Unaudited)
Revenue	$	37,862	$	30,442	$	104,902	$	95,994
Fee revenue	31,804		17,280		82,302		54,056
Total revenue	69,666		47,722		187,204		150,050
Costs and expenses from operations:
Cost of goods sold (excludes depreciation and amortization)	28,543		22,494		77,501		73,289

Technology and operations	12,307		9,515		34,952		32,342
Sales and marketing	9,661		7,412		27,679		27,126
General and administrative	7,676		6,217		21,578		21,321
Depreciation and amortization	1,705		1,567		5,246		4,716
Other operating expenses	1,180		319		1,390		500
Total costs and expenses	61,072		47,524		168,346		159,294
Income (loss) from operations	8,594		198		18,858		(9,244)
Interest and other income, net	(254)		(224)		(468)		(733)
Income (loss) before provision for income taxes	8,848		422		19,326		(8,511)
Provision for income taxes	429		209		1,133		710
Net income (loss)	$	8,419	$	213	$	18,193	$	(9,221)
Basic income (loss) per common share	$	0.25	$	0.01	$	0.55	$	(0.27)
Diluted income (loss) per common share	$	0.24	$	0.01	$	0.52	$	(0.27)
Basic weighted average shares outstanding	33,371,906		33,695,936		33,345,580		33,621,740
Diluted weighted average shares outstanding	35,437,761		33,815,332		35,006,898		33,621,740

See accompanying notes to the unaudited consolidated financial statements.

Table of Contents

Liquidity Services, Inc. and Subsidiaries

~~Unaudited~~ Consolidated Statements of Comprehensive ~~Loss~~Income (Loss)

(Dollars in Thousands)

Three Months Ended December 31,
2017 2016
Net loss $ (1,212 ) $ (8,397 )
Other comprehensive income (loss):

Foreign currency translation (51 ) (639 )
Other comprehensive loss, net of taxes (51 ) (639 )
Comprehensive loss $ (1,263 ) $ (9,036 )


	Three Months Ended June 30,				Nine Months Ended June 30,
	2021		2020		2021		2020
	(Unaudited)
Net income (loss)	$	8,419	$	213	$	18,193	$	(9,221)
Other comprehensive income (loss):
Foreign currency translation	23		424		1,042		(46)
Other comprehensive income (loss)	23		424		1,042		(46)
Comprehensive income (loss)	$	8,442	$	637	$	19,235	$	(9,267)

See accompanying notes to the unaudited consolidated financial statements.

Table of Contents

Liquidity Services, Inc. and Subsidiaries

~~Unaudited~~ Consolidated ~~Statements~~Statement of ~~Cash Flows~~Stockholders’ Equity

(Dollars In Thousands)


	Common Stock					Treasury Stock
	Shares	Amount		Additional Paid-in Capital		Shares	Amount		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total
	(Unaudited)
Balance at September 30, 2020	34,082,406	$	34	$	247,892	(547,508)	$	(3,983)	$	(9,782)	$	(122,346)	$	111,815
Net income	—	—		—		—	—		—		4,514		4,514
Exercise of stock options, grants of restricted stock awards, and vesting of restricted stock units	151,845	—		197		—	—		—		—		197
Taxes paid associated with net settlement of stock compensation awards	(7,703)	—		(57)		—	—		—		—		(57)
Forfeitures of restricted stock awards	(13,733)	—		—		—	—		—		—		—
Common stock repurchased	—	—		—		(309,496)	(4,103)		—		—		(4,103)
Common stock surrendered in the exercise of stock options	—	—		169		(9,384)	(169)		—		—		0
Stock compensation expense	—	—		1,801		—	—		—		—		1,801
Foreign currency translation	—	—		—		—	—		896		—		896
Balance at December 31, 2020	34,212,815	$	34	$	250,002	(866,388)	$	(8,255)	$	(8,886)	$	(117,832)	$	115,063
Net income	—	—		—		—	—		—		5,260		5,260
Exercise of stock options, grants of restricted stock awards, and vesting of restricted stock units	1,079,955	1		154		—	—		—		—		155
Taxes paid associated with net settlement of stock compensation awards	(177,463)	—		(3,145)		—	—		—		—		(3,145)

Common stock repurchased	—	—		—		(647,583)	(12,040)		—		—		(12,040)
Common stock surrendered in the exercise of stock options	—	—		1,333		(73,228)	(1,333)		—		—		0
Stock compensation expense	—	—		1,522		—	—		—		—		1,522
Foreign currency translation	—	—		—		—	—		123		—		123
Balance at March 31, 2021	35,115,307	$	35	$	249,866	(1,587,199)	$	(21,628)	$	(8,763)	$	(112,572)	$	106,938
Net income	—	—		—		—	—		—		8,419		8,419
Exercise of stock options, grants of restricted stock awards, and vesting of restricted stock units	318,242	—		—		—	—		—		—		—
Taxes paid associated with net settlement of stock compensation awards	(15,834)	—		(343)		—	—		—		—		(343)



Stock compensation expense	—	—		1,525		—	—		—		—		1,525
Foreign currency translation and other	—	—		—		—	—		23		(1)		22
Balance at June 30, 2021	35,417,715	$	35	$	251,048	(1,587,199)	$	(21,628)	$	(8,740)	$	(104,154)	$	116,561

Three Months Ended December 31,
2017
2016
Operating activities

Net loss $ (1,212 )
$ (8,397 )
Adjustments to reconcile net loss to net cash (used) provided by operating activities:

Depreciation and amortization 1,211

1,429
Stock compensation expense 930

2,500
Adjustment related to the adoption of ASU 2016-09 (113 ) —
Provision for inventory allowance 1,841

715
Provision for doubtful accounts 16

84
Deferred tax benefit (5,017 )
—
Change in fair value of financial instruments 110

(928 )
Changes in operating assets and liabilities:

Accounts receivable 4,140

(440 )
Inventory 1,842

151
Prepaid and deferred taxes (51 )
(9 )
Prepaid expenses and other assets 4,714

773
Accounts payable (1,590 )
(552 )
Accrued expenses and other current liabilities (3,549 )
(2,922 )
Distributions payable (693 )
2,967
Payables to sellers 995

(11 )
Other liabilities (78 )
(381 )
Net cash provided (used) by operating activities 3,496

(5,021 )
Investing activities

Increase in intangibles (18 )
(7 )
Purchases of property and equipment, including capitalized software (948 )
(2,321 )
Net cash used in investing activities (966 )
(2,328 )
Financing activities

Proceeds from exercise of common stock options (net of tax) —

32
Net cash provided by financing activities —

32
Effect of exchange rate differences on cash and cash equivalents (112 )
(282 )
Net increase (decrease) in cash and cash equivalents 2,418

(7,599 )
Cash and cash equivalents at beginning of period 94,348

134,513
Cash and cash equivalents at end of period $ 96,766

$ 126,914
Supplemental disclosure of cash flow information

Cash paid (received) for income taxes, net $ 251

$ (209 )

See accompanying notes to the unaudited consolidated financial statements.

Table of Contents

Liquidity Services, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(Dollars In Thousands)


	Nine Months Ended June 30,
	2021		2020
	(Unaudited)
Operating activities
Net income (loss)	$	18,193	$	(9,221)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	5,246		4,716
Stock compensation expense	5,793		3,785
Provision for doubtful accounts	269		131
Deferred tax provision	96		228
Loss (gain) on disposal of property and equipment	87		(29)
Change in fair value of earnout liability	0		200
Impairment of long-lived and other assets	1,338		0
Changes in operating assets and liabilities:
Accounts receivable	(420)		1,415
Inventory	(8,192)		(1,572)
Prepaid and deferred taxes	57		(551)
Prepaid expenses and other assets	(2,477)		942
Operating lease assets and liabilities	5		(165)
Accounts payable	17,791		13,951
Accrued expenses and other current liabilities	2,242		(9,525)
Distributions payable	0		(1,675)
Deferred revenue	1,262		(23)
Payables to sellers	13,256		6,072
Other liabilities	(275)		522
Net cash provided by operating activities	54,271		9,201
Investing activities
Increase in intangibles	(23)		(53)
Purchases of property and equipment, including capitalized software	(3,488)		(3,608)
Proceeds from sales of property and equipment	68		47
Proceeds from promissory note	4,343		2,553
Purchases of short-term investments	0		(25,000)
Maturities of short-term investments	0		55,000
Net cash provided by investing activities	900		28,939
Financing activities
Payments of the principal portion of finance lease liabilities	(35)		(26)
Taxes paid associated with net settlement of stock compensation awards	(3,545)		(564)
Proceeds from exercise of stock options	353		36
Payment of earnout liability related to business acquisition	0		(1,200)
Common stock repurchased	(16,143)		0
Net cash (used in) financing activities	(19,370)		(1,754)
Effect of exchange rate differences on cash and cash equivalents	829		(154)
Net increase in cash and cash equivalents	36,630		36,232
Cash and cash equivalents at beginning of period	76,036		36,497
Cash and cash equivalents at end of period	$	112,666	$	72,729
Supplemental disclosure of cash flow information
Cash paid for income taxes, net	$	907	$	203
Non-cash: Common stock surrendered in the exercise of stock options	$	1,502	$	0

See accompanying notes to the unaudited consolidated financial statements.

Table of Contents

Liquidity Services, Inc. and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements

Liquidity Services, Inc. (the ~~“Company”)~~Company) operates a network of ~~leading ecommerce~~e-commerce marketplaces that power the circular economy which benefits businesses, society, and the environment through the safe and effective resale and redeployment of surplus assets; reducing waste, carbon emissions and transportation costs; and by creating markets for items that would otherwise be landfilled. The Company's marketplaces enable buyers and sellers to transact in an efficient, automated environment offering over ~~500~~ 600 product ~~categories. The Company’s marketplaces~~categories and provide professional buyers access to a global, organized supply of new, surplus and ~~scrap~~idle assets presented with digital images and other relevant product information. ~~Additionally, the Company enables its~~The Company's marketplaces enable corporate and government sellers to enhance their financial return on offered assets by providing a liquid marketplace and value-added services that encompass the consultative management, valuation and sale of surplus assets. The Company's ~~broad range of~~ services include program management, valuation, asset management, reconciliation, ~~Return to Vendor ("RTV") and Returns Management Authorization ("RMA"),~~ refurbishment and recycling, fulfillment, marketing and sales, warehousing and transportation, buyer support, ~~and~~ compliance and risk mitigation, as well as ~~self-service tools.~~self-directed service tools for its sellers. The Company organizes the products on its marketplaces into categories across major industry verticals such as consumer electronics, general merchandise, apparel, scientific equipment, aerospace parts and equipment, technology hardware, energy equipment, industrial capital assets, heavy equipment, fleet and transportation equipment and specialty equipment. The Company’s marketplaces ~~are~~are: www.allsurplus.com, www.liquidation.com, ~~www.govliquidation.com,~~ www.govdeals.com, ~~www.networkintl.com,~~ www.secondipity.com, ~~www.go-dove.com, www.unclesamsretailoutlet.com, www.irondirect.com,~~ and ~~www.auctiondeals.com.~~www.go-dove.com. The Company also operates a global search engine for listing used machinery and equipment for sale at www.machinio.com. The Company has ~~over 10,000 sellers, including Fortune 1000 and Global 500 organizations as well as federal, state, and local government agencies. The Company has three~~4 reportable ~~segments,~~segments: GovDeals, Retail Supply Chain Group (RSCG), Capital Assets Group (CAG), and ~~GovDeals.~~Machinio. See Note 13 ~~in the Notes to the Consolidated Financial Statements~~ for Segment Information.

~~The Company has evaluated subsequent events through the date that these financial statements were issued and filed with the Securities and Exchange Commission.~~

2.Summary of Significant Accounting Policies

~~In March 2016,~~The preparation of financial statements in conformity with accounting principles generally accepted in the ~~Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-09,~~ ~~Compensation - Stock Compensation (Topic 718). This update was issued as part~~United States requires management to make estimates and assumptions that affect amounts in the consolidated financial statements and accompanying notes. For the three and nine months ended June 30, 2021, these estimates required the Company to make assumptions about the extent and duration of restrictions on cross-border transactions and the impact of the ~~FASB’s simplification initiative~~COVID-19 pandemic on macroeconomic conditions and, ~~affects all entities~~in turn, the Company's results of operations. As there remains uncertainty associated with the COVID-19 pandemic, the Company will continue to update its assumptions as conditions change. Actual results could differ significantly from those estimates.

Contract assets reflect an estimate of expenses that ~~issue share-based awards to their employees.~~will be reimbursed upon settlement with a seller. The ~~amendments in this update cover such areas~~ contract asset balance was $0.4 million as ~~the recognition~~ of ~~excess tax benefits~~June 30, 2021 and ~~deficiencies~~$0.4 million as of September 30, 2020 and ~~an accounting policy election for forfeitures. As part of the new guidance:~~

Liquidity Services, Inc. and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements —- (Continued)

~~A forfeiture election will be made to either estimate forfeitures (similar to~~

The Company adopted this guidance during the first quarter of fiscal 2018. As part of its adoption of ASU 2016-09, the Company made an accounting policy election to change the way in which it accounts for forfeitures of share-based awards. Specifically, beginning in the first quarter of fiscal 2018, the Company recognizes forfeitures of share-based awards as they occur in the period of forfeiture rather than estimating the number of awards expected to be forfeited at the grant date and subsequently adjusting the estimate when awards are actually forfeited. The change in accounting policy resulted in an adjustment to retained earnings as of October 1, 2017 of approximately $0.2 million.

~~Accounting Standards Not Yet Adopted~~

~~In January 2017, the FASB issued ASU 2017-01,~~ ~~Business Combinations~~ (Topic 805). ASU 2017-01 clarifies the definition of a business to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. This guidance will become effective for the Company beginning on October 1, 2018. The amendments in this update should be applied prospectively on or after the effective date. No disclosures are required at transition. The Company does not expect the adoption of this standard to have a material effect upon the consolidated financial statements.

~~In May 2014, the FASB issued ASU 2014-09,~~ ~~Revenue from Contracts with Customers~~, which supersedes most existing revenue recognition guidance under GAAP. The new standard will change the way the Company recognizes revenue and significantly expand the disclosure requirements for revenue arrangements. The guidance may be adopted either retrospectively or on a modified retrospective basis whereby the new standard would be applied to new and existing arrangements with remaining performance obligations as of the effective date, with a cumulative catch-up adjustment recorded to retained earnings at the effective date for existing arrangements with remaining performance obligations. During fiscal year ended September 30, 2017, the Company initiated a formal project to assess the new standard, which is being completed in phases: the assessment phase followed by the implementation phase. The Company has completed the assessment phase of its project. The assessment phase consisted of reviewing a representative sample of contracts, discussions with key stakeholders, and cataloging potential impacts on the Company’s accounting policies, financial statements, and systems and processes. The implementation team has apprised both management and the audit committee of project status on a recurring basis. The Company is continuing to evaluate the accounting impacts, and has identified some areas of the accounting guidance which will require more detailed analysis, including the principal-agent guidance, the transfer of control guidance, and the guidance on when certain services that the Company provides ~~would be considered separate~~the services over the term of the subscription. At June 30, 2021, the Machinio business segment had a remaining performance ~~obligations. Because this assessment is preliminary and the accounting for revenue recognition is subject to significant judgment, this could change as~~obligation of $4.5 million; the Company ~~finalizes~~expects to recognize the ~~implementation~~substantial majority of that amount as Fee Revenue over the next 12 months.

Contract costs relate to sales commissions paid on subscription contracts that are capitalized. Contract costs are amortized over the expected life of the ~~new standard.~~customer contract. The ~~Company does not yet know~~contract cost balance was $1.5 million as of June 30, 2021 and ~~cannot reasonably estimate~~$0.7 million as of September 30, 2020 and is included in the ~~quantitative impact~~line items Prepaid expenses and other current assets and Other assets on the consolidated financial statements. This guidance will become effective for the Company beginning October 1, 2018, which is when the Company must adopt. The Company intends to adopt the new standard on a modified retrospective basis. This determination is subject to change based on finalization of the Company's implementation work.

~~In February 2016, the FASB issued ASU 2016-2,~~ ~~Leases~~. ASU 2016-02 will change the way the Company recognizes its leased assets. ASU 2016-2 will require organizations that lease assets—referred to as "lessees"—to recognize on the balance sheet the assetsConsolidated Balance Sheets. Amortization expense was $0.2 million and ~~liabilities representing the rights and obligations created by those leases. ASU 2016-2 will also require~~

~~Liquidity Services, Inc. and Subsidiaries~~

~~Notes to the Unaudited Consolidated Financial Statements — (Continued)~~

disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. The standard will be effective for the Company beginning on October 1, 2019. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The Company is currently evaluating the new standard and the effect that adoption of the standard is expected to have on the Company's consolidated financial statements and related disclosures.

On May 12, 2021, the Company entered into the First Amendment to the Forbearance Agreement with JTC, providing JTC with full satisfaction and discharge from its indebtedness upon receipt of a $3.5 million ~~has been repaid. Of~~ payment made on May 17, 2021. As a result, the ~~remaining $9.8~~Company recorded a $1.1 million ~~$8.3~~ loss as component of Other operating expenses in its Consolidated Statement of Operations during the three and nine months ended June 30, 2021, representing the difference between the $4.6 million ~~is recorded in Other assets,~~ outstanding balance of principal and ~~$1.5~~accrued interest and the $3.5 million ~~in Prepaid expenses and other current assets as of December 31, 2017.~~payment received.

During the quarter ended December 31, 2017, the Company had two material vendor contracts with the Department of Defense (DoD) under which it acquired, managed and sold government property, the Surplus contract and the Scrap contract. Revenue from the sale of property acquired, as well as provision of services, under the Surplus Contract accounted for 26.5% and 29.9% of the Company's consolidated revenue for the quarters ended December 31, 2017 and 2016, respectively. Revenue from the sale of property acquired under the Scrap contract accounted for approximately 8.4% and 10.0% of the Company's

Liquidity Services, Inc. and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements —- (Continued)

Recent Accounting Pronouncements

Accounting Standards Adopted

On October 1, 2020, the Company adopted ASU 2018-15, Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract. This accounting standard has not had a material impact on the Company's consolidated financial statements as no significant implementations of cloud computing arrangements have occurred since adoption.

Accounting Standards Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments (Topic 326), or ASC 326. ASC 326, including all amendments and related guidance, was designed to provide financial statement users with more useful information about the expected credit losses on financial instruments and other commitments to extend credit. ASC 326 will require estimation of expected credit losses using a methodology that takes into consideration a broad range of reasonable and supportable information. The guidance will be effective for the Company beginning on October 1, 2023 and will be applied on a modified-retrospective basis, with any cumulative-effect adjustment recorded to retained earnings on the adoption date. The Company is in the process of evaluating the impact ASC 326 will have on its consolidated financial statements and expects to estimate credit losses on its financial assets such as its Accounts receivable and money market funds. While the Company has not experienced significant credit losses historically, the materiality of the impact of adoption will depend on events and conditions as of the date of adoption, which cannot be determined conclusively at this time.

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes. ASU 2019-12 seeks to improve the consistent application of, and simplify the guidance for, the accounting for income taxes. The ASU removes certain exceptions to the general principals in ASC 740, Income Taxes, and clarifies and amends other existing guidance. The ASU will become effective for the Company beginning October 1, 2021. The Company does not expect the adoption of this ASU will have a material impact on its consolidated financial statements.

~~The Company calculates~~Basic net income (loss) per share ~~in accordance with FASB Topic 260 Earnings Per Share (“ASC 260”). Under ASC 260, basic net income (loss) per common share~~ is ~~calculated~~computed by dividing net income (loss) for the period by the ~~weighted-average~~weighted average number of ~~common~~ shares outstanding during the ~~reporting~~ period. ~~The~~Diluted net income (loss) per share is computed by dividing net income for the period by the weighted average number of shares of common stock and potentially dilutive common stock outstanding ~~includes vested restricted stock units. Diluted net income (loss) per share (“EPS”) reflects~~during the ~~potential dilution that could occur assuming conversion or exercise of all dilutive unexercised stock options and unvested restricted stock units.~~period. The dilutive effect of unexercised stock options and unvested restricted stock units was determined using the treasury stock method. Under the treasury stock method, the proceeds received from the exercise of stock options, and the amount of compensation cost for future service not yet recognized by the Company are assumed to be used to repurchase shares of the Company’s common stock. Stock options and restricted stock units are not included in the computationcalculation of diluted net income ~~(loss)~~ per share ~~when they are antidilutive.~~excludes all anti-dilutive common shares.

~~For the three months ended December 31, 2017 and 2016, the~~The computation of basic and diluted ~~weighted average common shares were the same because the inclusion of dilutive securities in the computation of diluted~~ net income ~~would have been anti-dilutive. See Note 7 for outstanding stock options and unvested restricted stock, all of which are anti-dilutive for the three months ended December 31, 2017 and 2016.~~per share is as follows:

~~The following summarizes the basic and diluted loss per share:~~


	Three Months Ended June 30,				Nine Months Ended June 30,
	2021		2020		2021		2020
Numerator:
Net income (loss)	$	8,419	$	213	$	18,193	$	(9,221)
Denominator:
Basic weighted average shares outstanding	33,371,906		33,695,936		33,345,580		33,621,740
Dilutive impact of stock options, RSUs and RSAs	2,065,855		119,396		1,661,318		0
Diluted weighted average shares outstanding	35,437,761		33,815,332		35,006,898		33,621,740
Basic income (loss) per common share	$	0.25	$	0.01	$	0.55	$	(0.27)
Diluted income (loss) per common share	$	0.24	$	0.01	$	0.52	$	(0.27)
Stock options, RSUs and RSAs excluded from income (loss) per diluted share because their effect would have been anti-dilutive	198,308		3,841,385		592,588		4,829,473

Three Months Ended December 31,
2017 2016

(Unaudited)
(dollars in thousands, except per share amounts)
Weighted average shares calculation:

Basic weighted average common shares outstanding 31,876,603
31,261,603
Treasury stock effect of options and restricted stock —
—

Diluted weighted average common shares outstanding 31,876,603
31,261,603

Net loss $ (1,212 ) $ (8,397 )
Basic and diluted loss per common share $ (0.04 ) $ (0.27 )

~~Stock-Based Compensation~~

The Company estimates the fair value of share-based awards on the date of grant. The Company issues stock options and stock appreciation rights with restrictions that lapse upon either the passage of time (service vesting conditions), the achievement of performance targets (performance vesting conditions), or some combination thereof. In addition, the Company issues stock options that vest upon the achievement of certain Company stock price targets (market vesting conditions). The fair value of stock options and stock appreciation rights with service and/or performance vesting conditions is determined using the Black-Scholes option-pricing model. For those stock options with only service vesting conditions, the Company recognizes compensation cost on a straight-line basis over the explicit service period. For stock options with both performance and service vesting conditions, the Company starts recognizing compensation cost over the remaining service period, when it is probable the performance condition will be met.

Liquidity Services, Inc. and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements —- (Continued)

The Company issues restricted stock units with service vesting conditions, performance vesting conditions, and market vesting conditions, or some combination thereof. For those restricted stock units with only service vesting conditions, the Company recognizes compensation cost on a straight-line basis over the explicit service period. For restricted stock units with both performance and service vesting conditions, the Company starts recognizing compensation cost over the remaining service period when it is probable the performance condition will be met. The fair value of restricted stock units with service vesting and/or performance vesting is based on the closing price of the Company’s common stock on the date of grant.

For the Company's stock options and restricted stock units with market vesting conditions, the ultimate number of shares to be earned depends on the Company's total shareholder return during the performance period. The fair value of these stock options and restricted stock units is estimated on the grant date using a Monte Carlo simulation model. The Company recognizes compensation cost for stock options and restricted stock units with market vesting conditions over the derived service period.

The determination of the fair value of the Company’s stock options and stock appreciation rights with service and performance vesting conditions is based on a variety of factors including, but not limited to, the Company’s common stock price on the date of grant, expected stock price volatility over the expected life of units, and actual and projected exercise behavior. The determination of the fair value of the Company’s stock options and restricted stock units with service and market vesting conditions is based on a variety of factors including, but not limited to, the Company’s common stock price on the grant date, expected stock price volatility, risk free interest rate, dividend yield, and projected exercise behavior.

Upon adoption of ASU 2016-09, beginning in the first quarter of fiscal 2018, the Company recognizes forfeitures of share-based awards as they occur in the period of forfeiture rather than estimating the number of awards expected to be forfeited at the grant date and subsequently adjusting the estimate when awards are actually forfeited. The change in accounting policy resulted in an adjustment to retained earnings as of October 1, 2017, of $0.2 million.

Stock options and restricted stock units that contain performance vesting or market vesting conditions are excluded, diluted earnings per share computations until the contingency is met as of the end of that reporting period.

The Company presents the cash flows from the tax benefits resulting from tax deductions in excess of the compensation cost recognized for those options (excess tax benefits) as an operating activity in the Consolidated Statements of Cash Flows.


	Three Months Ended June 30,				Nine Months Ended June 30,
(in thousands)	2021		2020		2021		2020
Finance lease – lease asset amortization	$	18	$	16	$	50	$	53
Finance lease – interest on lease liabilities	4		6		14		18
Operating lease cost	1,218		1,310		3,873		3,990
Operating lease impairment expense	0		0		172		0
Short-term lease cost	45		48		166		92
Variable lease cost (1)	360		371		1,178		1,122
Sublease income	(34)		(61)		(141)		(200)
Total net lease cost	$	1,611	$	1,690	$	5,312	$	5,075

(1)Variable lease costs primarily relate to the ~~Company by the DoD at a fixed percentage of the DoD's original acquisition value (OAV). This fixed percentage is 4.35%. The Company retains 100% of the profits from the resale of the property~~Company's election to combine non-lease components such as common area maintenance, insurance and bears all of the costs for the merchandising and sale of the property. Included in Accrued expenses and other current liabilities in the Consolidated Balance Sheet is a liability to the DoD for the inventory that has not been paid for in the amount of $7.5 million and $6.8 million as of December 31, 2017 and September 30, 2017, respectively.

~~Under the Scrap Contract, the Company is the remarketer of all DoD non-electronic scrap turned into the DLA available for sale within the United States, Puerto Rico, and Guam.~~

Liquidity Services, Inc. and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements —- (Continued)

~~period of the Scrap contract will expire on September 30, 2019.~~


	June 30, 2021
(in thousands)	Operating Leases		Finance Leases
2021	$	1,284	$	26
2022	4,509		103
2023	3,602		103
2024	2,501		83
2025	1,852		55
Thereafter	822		50
Total lease payments (1)	$	14,570	$	420
Less: imputed interest (2)	(1,617)		(59)
Total lease liabilities	$	12,953	$	361

(1)The ~~Company pays a revenue-sharing payment to the DLA under this contract equal to 64.5% of the gross resale proceeds of the scrap property,~~weighted average remaining lease term is 3.6 years for operating leases and 4.4 years for finance leases.

(2)The weighted average discount rate is 6.6% for operating leases and 7.0% for finance leases.

Additionally, the Company ~~bears all~~has approximately $4.8 million of future payment obligations related to executed warehouse lease agreements that have not yet commenced as of June 30, 2021.


	Nine Months Ended June 30,
(in thousands)	2021		2020
Cash paid for amounts included in operating lease liabilities	$	3,225	$	3,642
Cash paid for amounts included in finance lease liabilities	35		26
Non-cash: lease liabilities arising from new operating lease assets obtained (1)	885		12,188
Non-cash: lease liabilities arising from new finance lease assets obtained	130		10
Non-cash: adjustments to lease assets and liabilities	3,705		1,592

(1)Nine months ended June 30, 2020 amount includes $12.2 million of lease liabilities recognized upon the ~~costs for the sorting, merchandising and sale~~adoption of the property. The contract contains a provision permitting the DLA to terminate the contract for convenience upon written notice to the Company. The Company commenced operations under this contract in the quarter ended December 31, 2016.ASC 842 on October 1, 2019.

~~Revenue from the Scrap contract accounted for approximately 8.4% and 10.0% of the Company's consolidated revenue for the quarters ended December 31, 2017 and 2016, respectively.~~

The carrying value and changes in the carrying value of goodwill attributable to each reportable segment were as follows:


(in thousands)	CAG		GovDeals		Machinio		Total
Balance at September 30, 2019	$	21,178	$	23,731	$	14,558	$	59,467
Translation adjustments	372		0		0		372
Balance at September 30, 2020	$	21,550	$	23,731	$	14,558	$	59,839
Translation adjustments	184		0		0		184
Balance at June 30, 2021	$	21,734	$	23,731	$	14,558	$	60,023

Goodwill (in thousands) CAG GovDeals Total
Balance at September 30, 2017 21,657
23,731
45,388
Translation adjustments 78
—
78
Balance at December 31, 2017 $ 21,735
$ 23,731
$ 45,466

December 31, 2017 September 30, 2017

Useful
Life
(in years)

Gross
Carrying
Amount

Accumulated
Amortization

Net
Carrying
Amount

Gross
Carrying
Amount

Accumulated
Amortization

Net
Carrying
Amount
(dollars in thousands)
Patent and trademarks 3 - 10 959
(534 ) 425
943
(516 ) 427
Total intangible assets $ 959
$ (534 ) $ 425
$ 943
$ (516 ) $ 427

Future
Amortization
Years ending September 30, (in thousands)
2018 Remaining nine months $ 58
2019 71
2020 69
2021 58
2022 and thereafter 169
Total $ 425

Liquidity Services, Inc. and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements —- (Continued)


(in thousands)	Expected Amortization Expense
Years ending September 30,
Remainder of 2021	$	333
2022	1,330
2023	1,186
2024	648
2025	280

Total	$	3,777

The Company applies the authoritative guidance related to uncertainty in income taxes. ASC Topic 740, Income Taxes, states that a benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including ~~resolutions~~resolution of any related appeals or litigation processes, on the basis of technical merits. The Company ~~records unrecognized tax benefits as a reduction to its deferred tax asset for its net operating loss carryforward. The Company~~ identified no new uncertain tax positions during the ~~three~~nine months ended ~~December 31, 2017. The Company’s policy is to recognize interest and penalties in the period in which they occur in the income tax provision.~~June 30, 2021. The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, various state and local jurisdictions and in foreign jurisdictions, primarily Canada and the ~~U.K. Currently,~~United Kingdom. As of June 30, 2021, none of the ~~Company has open~~Company's federal ~~and~~or state income tax ~~examinations~~returns are under examination, however, we remain subject to examination for ~~fiscal years 2012 through 2015.~~certain of our foreign income tax returns. The Company ~~anticipates~~has no ~~material~~open income tax ~~liability will arise from these examinations. The~~examinations in the U.S. and the statute of limitations for ~~U.S. federal income tax returns for~~ years prior to ~~fiscal 2013~~2018 is now closed. However, certain tax attribute carryforwards that were generated prior to fiscal ~~2013~~year 2018 may be adjusted upon examination by tax authorities if they are utilized.

On March 27, 2020, The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, accelerates the recovery of alternative minimum tax (AMT) credits into fiscal year 2020. During fiscal year 2020, the Company recovered its full AMT refund of $1.7 million. Prior to the CARES Act, the Company’s AMT credits were recoverable in fiscal years 2021 through 2023. The CARES Act also permits net operating loss (NOL) carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021.

Liquidity Services, Inc. and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements - (Continued)

In addition, NOLs incurred in fiscal years 2019, 2020, and 2021 may be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. The Company is currently evaluating the impact of the CARES Act, but at present does not expect the NOL provisions of the CARES Act to result in a material cash benefit.

8. Stockholders’ Equity


	Common Stock
(dollars in thousands)	Shares	Amount		Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total
Balance at September 30, 2019	33,687,115	$	34	$	242,686	$	(7,973)	$	(118,572)	$	116,175
Net loss	—	—		—		—		(5,196)		(5,196)
Exercise of stock options, grants of restricted stock awards, and vesting of restricted stock units	283,164	—		2		—		—		2
Taxes paid associated with net settlement of stock compensation awards	(67,688)	—		(498)		—		—		(498)
Forfeitures of restricted stock awards	(15,000)	—		—		—		—		—
Stock compensation expense	—	—		1,121		—		—		1,121
Foreign currency translation	—	—		—		833		—		833
Balance at December 31, 2019	33,887,591	$	34	$	243,311	$	(7,140)	$	(123,768)	$	112,437
Net loss	—	—		—		—		(4,238)		(4,238)
Exercise of stock options, grants of restricted stock awards, and vesting of restricted stock units	111,272	—		32		—		—		32
Taxes paid associated with net settlement of stock compensation awards	(10,065)	—		(60)		—		—		(60)

Stock compensation expense	—	—		1,244		—		—		1,244
Foreign currency translation	—	—		—		(1,303)		—		(1,303)
Balance at March 31, 2020	33,988,798	$	34	$	244,527	$	(8,443)	$	(128,006)	$	108,112
Net income	—	—		—		—		213		213
Exercise of stock options, grants of restricted stock awards, and vesting of restricted stock units	34,185	—		1		—		—		1
Taxes paid associated with net settlement of stock compensation awards	(1,210)	—		(6)		—		—		(6)
Stock compensation expense	—	—		1,494		—		—		1,494
Foreign currency translation and other	—	—		—		424		—		424
Balance at June 30, 2020	34,021,773	$	34	$	246,016	$	(8,019)	$	(127,793)	$	110,238

Liquidity Services, Inc. and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements - (Continued)


	Three Months Ended June 30,				Nine Months Ended June 30,
	2021		2020		2021		2020
Equity-classified awards:
Stock options	$	762	$	546	$	2,491	$	1,523
RSUs & RSAs	763		948		2,357		2,337
Total equity-classified awards	$	1,525	$	1,494	$	4,848	$	3,860
Liability-classified awards:
SARs	278		22		945		(75)
Total stock compensation expense:	$	1,803	$	1,516	$	5,793	$	3,785


	Nine Months Ended
	June 30, 2021
Stock Options granted:
Options containing only service conditions:	558,673
Weighted average exercise price	$	10.69
Weighted average grant date fair value	$	4.49

7.Options containing performance or market conditions:	~~Stockholders’ Equity~~549,600
Weighted average exercise price	$	10.51
Weighted average grant date fair value	$	4.34

RSUs & RSAs granted:
RSUs & RSAs containing only service conditions:	139,945
Weighted average grant date fair value	$	13.48

RSUs & RSAs containing performance or market conditions:	139,600
Weighted average grant date fair value	$	9.22

The stock options and RSUs & RSAs containing only service conditions will vest over a four-year service period. The stock options and RSUs & RSAs containing performance conditions will vest upon the achievement of specified financial targets of the Company or its segments. The stock options and RSUs & RSAs containing market conditions will vest upon the achievement of specified increases in the Company’s share price. Vesting is measured the first day of each fiscal quarter over the four-year terms of the awards, starting with the first fiscal quarter after the first anniversary of the grant date, based upon the trailing 20-days average of the Company’s share price.

Liquidity Services, Inc. and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements - (Continued)

The range of assumptions used to determine the fair value of stock options containing only service conditions using the Black-Scholes option-pricing model during the nine months ended June 30, 2021 were as follows:


						Nine Months Ended
						June 30, 2021
Dividend yield						0
Expected volatility						51.0% - 55.9%
Risk-free interest rate						0.4% - 0.8%
Expected term						4.6 - 7.6 years


						Nine Months Ended
						June 30, 2021
Dividend yield						0
Expected volatility						51.6% - 54.6%
Risk-free interest rate						0.3% - 0.9%
Expected holding period (% of remaining term)						31.7% - 100.0%

During the nine months ended June 30, 2021, the Company did 0t issue any SARs, 43,959 SARs were exercised requiring the Company to make cash payments of $0.4 million, and 73,681 SARs were canceled. As of June 30, 2021, 43,170 SARs were outstanding.

~~The Company is~~We are authorized to repurchase issued and outstanding shares of ~~its~~our common stock under a share repurchase program approved by ~~the Company's~~our Board of Directors. Share repurchases may be made through open market purchases, privately negotiated transactions or otherwise, at times and in such amounts as management deems appropriate. The timing and actual number of shares repurchased will depend on a variety of factors including price, corporate and regulatory requirements and other market conditions. The repurchase program may be discontinued or suspended at any time and will be funded using our available cash. ~~The Company's~~

As of the fiscal year ended September 30, 2020, we had $6.1 million of remaining share repurchase authorization. On March 8, 2021, our Board of Directors ~~reviews~~authorized an additional $10 million of share repurchases of the ~~share repurchase program periodically, the last such review having occurred in May 2016. The Company did not repurchase~~Company's outstanding shares of common stock through March 31, 2023. We repurchased 647,583 shares for $12.0 million and 957,079 shares for $16.1 million under this program during the three and six months ended ~~December~~March 31, ~~2017 or 2016.~~2021, respectively. As of ~~December~~March 31, ~~2017, the Company may~~2021, we had 0 remaining authorization to repurchase ~~an additional $10.1 million in~~ shares under ~~this program.~~these programs.

~~2006 Omnibus Long-Term Incentive~~On May 3, 2021, the Company's Board of Directors authorized a new stock repurchase plan (the “May 3, 2021 Stock Repurchase Plan”) of up to $15 million of our outstanding shares of common stock through June 30, 2023. We made 0 repurchases under the May 3, 2021 Stock Repurchase Plan ~~(the 2006 Plan)~~during the three months ended June 30, 2021.

~~Under~~Other Share Repurchases

Separate from the ~~2006 Omnibus Long-Term Incentive Plan, or~~share repurchase program, our stock incentive plans allow for participants to exercise stock options by surrendering shares of common stock equivalent in value to the ~~2006 Plan, as amended, 13,000,000~~exercise price due. During the three months ended June 30, 2021, 0 shares of common stock were surrendered by participants in the exercise of stock options. During the nine months ended June 30, 2021, participants surrendered 82,612 shares of common stock in the exercise of stock options. Any shares surrendered to the Company in this manner are not available for issuance as of September 30, 2016. On February 23, 2017, at the Company's annual meeting of stockholders, the stockholders approved amendments to the 2006 Plan to increase the number of shares available for issuance under the 2006 Plan by 3,300,000, to a total of 16,300,000 shares. The 2006 Plan has a fungible share pool so that awards other than options or stock appreciation rights granted would be counted as 1.5 shares from the shares reserved for issuance.future grant.

Liquidity Services, Inc. and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements —- (Continued)

The maximum number of shares subject to options or stock appreciation rights that can be awarded under the 2006 Plan to any person is 1,000,000 per year. The maximum number of shares that can be awarded under the 2006 Plan to any person, other than pursuant to an option or stock appreciation right, is 700,000 per year. The Company issues stock appreciation rights with restrictions that lapse upon either the passage of time (service vesting), achievement of performance targets, or some combination of these conditions. For those stock appreciation rights with only service vesting conditions, the Company recognizes compensation cost on a straight-line basis over the explicit service period. For awards subject to both performance and service vesting conditions, the Company starts recognizing compensation cost over the remaining service period, when it is probable the performance vesting condition will be met. The stock appreciation rights that include only service vesting conditions generally vest over a period of one to four years conditioned on continued employment for the incentive period.

~~Cash-Settled Stock Appreciation Rights~~

~~Stock Option Activity~~

Options
Weighted-
Average
Exercise Price
Options outstanding at September 30, 2016 1,708,487
$ 13.91
Options granted 232,845
9.18
Options exercised (12,421 ) 7.41
Options canceled (223,938 ) 13.00
Options outstanding at September 30, 2017 1,704,973
13.43
Options granted 531,300
4.65
Options exercised —
—
Options canceled (225,516 ) 12.39
Options outstanding at December 31, 2017 2,010,757
11.23
Options exercisable at December 31, 2017 1,109,171
15.30

~~Liquidity Services, Inc. and Subsidiaries~~

~~Notes to the Unaudited Consolidated Financial Statements — (Continued)~~

~~Restricted Share Activity~~

Restricted
Shares

Weighted-
Average
Fair Value
Unvested restricted shares at September 30, 2016 2,661,245
$ 9.34
Restricted shares granted 849,352
8.78
Restricted shares vested (748,266 ) 11.04
Restricted shares canceled (571,900 ) 9.81
Unvested restricted shares at September 30, 2017 2,190,431
8.42
Restricted shares granted 77,600
3.66
Restricted shares vested (386,330 ) 9.19
Restricted shares canceled (280,997 ) 10.18
Unvested restricted shares at December 31, 2017 1,600,704
7.70

Level 1: Quoted market prices in active markets for identical assets or liabilities;

Level 2: Inputs other than Level 1 inputs that are either directly or indirectly observable; and

Level 3: Unobservable inputs developed using estimates and assumptions developed by the Company, which reflect those that a market participant would use.

Level 3 Assets

Balance at September 30, 2017 $ 491
Acquisition of financial assets —
Settlements (375 )
Change in fair value of financial assets (110 )
Balance at December 31, 2017 $ 6

~~Liquidity Services, Inc. and Subsidiaries~~

~~Notes to the Unaudited Consolidated Financial Statements — (Continued)~~

10.Defined Benefit Pension Plan

The ~~net periodic benefit recognized for the three months ended December 31, 2017 and 2016 included the following components:~~

Three Months Ended December 31,
Qualified Defined Benefit Pension Plan 2017 2016
(dollars in thousands)
Service cost $ —
$ —
Interest cost 166
144
Expected return on plan assets (252 ) (204 )
Settlement cost (4 ) —
Total net periodic (benefit) $ (90 ) $ (60 )


	Three Months Ended June 30,				Nine Months Ended June 30,
(in thousands)	2021		2020		2021		2020

Interest cost	$	142	$	119	$	343	$	336
Expected return on plan assets	(245)		(192)		(637)		(595)
Amortization of prior service cost	6		5		17		15
Total net periodic (benefit)	$	(97)	$	(68)	$	(277)	$	(244)

~~11. Business Realignment expenses~~

During the fourth quarter of fiscal year 2017, the Company began to restructure its CAG business. The restructuring plan resulted in a reduction in force across a number of departments, including Sales, Marketing and Operations in both the US and in Europe. Severance costs associated with this restructuring amounted to $0.6 million. In addition, the restructuring plan calls

Liquidity Services, Inc. and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements —- (Continued)

11. Business Realignment Expenses

~~for the closure of several offices and legal entities in Europe. Legal and administrative costs~~Business realignment expenses are associated with ~~the restructuring amounted to $0.1 million. The Company continued to implement its CAG~~management changes, exiting certain businesses, or other cost ~~cutting initiatives during the first quarter of fiscal 2018. In addition, as discussed in Note 3 - Significant Contracts, the Company was not the high bidder for the new Surplus contracts,~~saving actions, and therefore will be winding down operations of the Surplus Contract over the remainder of fiscal 2018. As a result, the Company recognized an additional $0.9 million in restructuring costs, $0.5 million of which related to severance and occupancy cost as a result of the loss of the Surplus Contract. Restructuring costs associated with the restructuring plan were recognized within the other operating expense (income) line item in the consolidated statement of operations. These amounts are presented within the table below.

In connection with the restructuring of its CAG business, on September 25, 2017 the Company entered into a Severance Agreement and General Release (the "Severance Agreement") with the President of the Capital Assets Group. Pursuant to the terms of the Severance Agreement, the Company provided a severance package to the executive in the amount of $0.3 million. This activity is included withininclude employee severance and benefit costs inassociated with terminations, occupancy costs associated the ~~table below.~~ceased use of facilities, and other related costs, such as impairments. Business realignment expenses are recorded as a component of Other operating expenses on the Consolidated Statements of Operations.

~~During fiscal~~For the year ~~2017, the Company reorganized its IronDirect business. As a result, the Company recorded approximately $0.9 million of net expense~~ended September 30, 2020, business realignment expenses were incurred related to the ~~impairment~~elimination of long-lived assets associated with the IronDirect business, as well as a fair value adjustment. The impairment was comprised of $1.2 million of impairment of contract intangibles, and $0.6 million of impairment of fixed assets. This expense was netted with a $0.9 million reversal of an earn-out liability. In addition to these impairments, and the restructuring of its IronDirect business model, the Company entered into a Severance Agreement and General Release with the previous President of IronDirect. As a result, the Company incurred severance costs of approximately $0.1 million, which is included withincertain employee ~~severance and benefit costs~~positions in ~~the table below.~~

On June 16, 2017, the Company entered into a sub-lease agreement for 18,412 square feet of office space at 6931 Arlington Road, Bethesda, Maryland. The sub-lease commenced September 29, 2017, and will expire April 30, 2023. On the sub-lease commencement date, the Company relocated its headquarters previously located at 1920 L Street NW, Washington DC,response to the new Bethesda location. The Company ceased using the previous location as of September 30, 2017 and recognized a $2.0 million cease-use charge in its consolidated statements of operations at September 30, 2017, under the Other operating expenses line item. During the three months ended December 31, 2017, the Company paid down the cease-use charge in the amount of approximately $0.3 million. This activity is presented under occupancy cost in the table below.

During the first quarter of fiscal 2018, the Company recognized an additional $0.5 million in severance cost primarily related to the restructuring of its Corporate IT department. This is recorded within the Corporate & Other line item below. This cost is in addition to the $0.9 million of severance cost described in the first paragraph of this Note 11.COVID-19 pandemic.


(in thousands)	Liability Balance at September 30, 2019		Adoption of ASC 842		Business Realignment Expenses		Cash Payments		Liability Balance at September 30, 2020		Business Realignment Expenses		Cash Payments		Liability Balance at June 30, 2021
Employee severance and benefit costs:
GovDeals	$	0	$	0	$	29	$	(25)	$	4	$	0	$	(4)	$	0
RCSG	0		0		84		(64)		20		0		(20)		0
CAG	414		0		120		(481)		53		5		(58)		0
Corporate & Other	238		0		172		(410)		0		0		0		0
Total employee severance and benefit costs	$	652	$	0	$	405	$	(980)	$	77	$	5	$	(82)	$	0
Occupancy and other costs:
CAG	169		(169)		0		0		0		0		0		0
Corporate & Other	0		0		0		0		0		0		0		0
Total occupancy and other costs	$	169	$	(169)	$	0	$	0	$	0	$	0	$	0	$	0
Total business realignment	$	821	$	(169)	$	405	$	(980)	$	77	$	5	$	(82)	$	0

(in thousands)
Liability
Balance at
September 30,
2017

Business
Realignment
Expenses

Cash
Payments

Liability
Balance at
December 31,
2017
Employee severance and benefit costs:
CAG 793
751
(207 ) 1,337
Corporate & Other 399
474
(737 ) 136
Total employee severance and benefit costs $ 1,192
$ 1,225
$ (944 ) $ 1,473
Occupancy costs:
CAG —
94
(55 ) 39
Corporate & Other 1,988
28
(331 ) 1,685
Total occupancy costs $ 1,988
$ 122
$ (386 ) $ 1,724
Total business realignment $ 3,180
$ 1,347
$ (1,330 ) $ 3,197

The $1.3 million in employee severance and occupancy cost per the table above is recorded in Other operating expenses (income) in the Consolidated Statements of Operations. Of this $1.3 million in cost, approximately $0.2 million is associated with general and administrative, $0.2 million with sales and marketing, and $0.9 million with technology and operations activities.

Liquidity Services, Inc. and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements —- (Continued)

12.Legal Proceedings and Other Contingencies

~~12.Legal Proceedings~~

~~Howard v. Liquidity Services, Inc., et al., Civ. No. 14-1183 (D.D.C. 2014).~~

~~On July 14, 2014, Leonard Howard~~turn, dismissed Plaintiff’s claim after plaintiff filed a ~~putative class action~~ complaint in the United States District Court for the District of ~~Columbia (the ‘‘District Court’’) against the Company and its chief executive officer, chief financial officer, and chief accounting officer,~~Maryland Southern Division on ~~behalf of stockholders who purchased the Company’s common stock between February 1, 2012, and~~ May 7, 2014. The complaint alleged that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by, among other things, misrepresenting the Company’s growth initiative, growth potential, and financial and operating conditions, thereby artificially inflating its stock price, and sought unspecified compensatory damages and costs and expenses, including attorneys’ and experts’ fees. On October 14, 2014, the Court appointed Caisse de Dépôt et Placement du Québec and the Newport News Employees’ Retirement Fund as co-lead plaintiffs. The plaintiffs filed an amended complaint on December 15, 2014, which alleges substantially similar claims, but which does not name the chief accounting officer as a defendant. On March 2, 2015, the Company moved to dismiss the amended complaint for failure to state a claim or plead fraud with the requisite particularity. On March 31, 2016, the Court granted that motion in part and denied it in part. Only the claims related to the Company’s retail division were not dismissed. On May 16, 2016, the Company answered the amended complaint. Plaintiffs’ class certification was granted on September 6, 2017. The scheduling order in this action requires that fact discovery be completed by April 9, 2018, and that expert discovery be completed by October 1, 2018.

19, 2021. The Company believes ~~the allegations in the amended complaint are~~this claim is without merit and cannot estimate a range of potential liability, if any, at this time. The Company’s employment practices liability insurance carrier, CNA, has accepted tender of this claim.

Following the dismissal of the putative derivative action discussed above, former plaintiffs Girardi and Slingerland sent the Company a letter dated January 5, 2018 (the “Shareholder Demand”) demanding that the Board of Directors take action to remedy purported breaches of fiduciary duties allegedly related to the claims asserted in the above-discussed securities class action and derivative actions. The Company acknowledged the Shareholder Demand on January 22, 2018. The Company’s Board of Directors has delegated evaluation of the Shareholder Demand to the Audit Committee of the Board of Directors.

13.Segment Information

•The GovDeals reportable segment provides ~~self-service~~self-directed service solutions in which sellers list their own assets, ~~for sale without relying on our services,~~ and it consists of marketplaces that enable local and state government entities including city, county and state agencies, as well as ~~commercial~~quasi-governmental businesses located in the United States and Canada to sell

~~Liquidity Services, Inc. and Subsidiaries~~

~~Notes to the Unaudited Consolidated Financial Statements — (Continued)~~

surplus and salvage assets. GovDeals also offers a suite of services to sellers that includes asset sales and ~~marketing services. This segment includes the Company's GovDeals.com and AuctionDeals.com marketplaces.~~marketing.

The CAG reportable segment provides full-service solutions to sellers and it consists of marketplaces that enable federal government agencies as well as commercial businesses to sell surplus, salvage, and scrap assets. The assets that the Company receives as the exclusive contractor of the Defense Logistics Agency of the Department of Defense (DoD) are sold in this segment. CAG also offers a suite of services that includes surplus management, asset valuation, and asset sales and marketing services. Commercial sellers are located worldwide. This segment includes the Company's Network International, GoIndustry DoveBid, Government Liquidation, and Uncle Sam's Retail Outlet marketplaces.

•The CAG reportable segment provides full-service solutions to sellers and it consists of marketplaces that enable commercial businesses to sell surplus and idle assets. CAG also offers a suite of services that includes surplus management, asset valuation, asset sales and marketing. Commercial sellers are located in the United States, Europe, Australia and Asia. This segment includes the Company's GoIndustry DoveBid marketplace and self-directed and full-service solutions for commercial businesses on the AllSurplus marketplace.

•The Machinio reportable segment operates a global online platform for listing used equipment for sale in the construction, machine tool, transportation, printing and agriculture sectors.

~~The following table sets forth certain financial information for the Company's reportable segments:~~

Three Months Ended December 31,
2017 2016
GovDeals:
Revenue $ 7,040
$ 5,813
Gross profit $ 6,543
$ 5,438

CAG:
Revenue $ 32,063
$ 42,506
Gross profit $ 17,603
$ 21,202

RSCG:
Revenue $ 20,485
$ 21,411
Gross profit $ 6,728
$ 7,002

Corporate & Other:
Revenue $ 1,555
$ 1,065
Gross profit $ (675 ) $ 335

Consolidated:
Revenue $ 61,143
$ 70,796
Gross profit $ 30,199
$ 33,977

Liquidity Services, Inc. and Subsidiaries

Notes to the Unaudited Consolidated Financial Statements —- (Continued)


		Three Months Ended June 30,				Nine Months Ended June 30,
(in thousands)		2021		2020		2021		2020
GovDeals:
	Revenue	$	0	$	0	$	0	$	0
	Fee revenue	14,658		6,021		36,448		21,858
	Total revenue	14,658		6,021		36,448		21,858
	Gross profit	$	13,965	$	5,637	$	34,544	$	20,361

RSCG:
	Revenue	$	35,923	$	29,454	$	95,997	$	89,857
	Fee revenue	8,172		4,099		22,086		11,650
	Total revenue	44,095		33,553		118,083		101,507
	Gross profit	$	17,755	$	12,022	$	48,315	$	34,721

CAG:
	Revenue	$	1,939	$	988	$	8,905	$	6,137
	Fee revenue	6,528		5,384		16,967		15,216
	Total revenue	8,467		6,372		25,872		21,353
	Gross profit	$	7,099	$	5,892	$	20,445	$	16,628

Machinio:
	Revenue	$	0	$	0	$	0	$	0
	Fee revenue	2,446		1,776		6,801		5,332
	Total revenue	2,446		1,776		6,801		5,332
	Gross Profit	$	2,304	$	1,677	$	6,399	$	5,051

Corporate & Other, including elimination adjustments:
	Revenue	$	0	$	0	$	0	$	0
	Fee revenue	0		0		0		0
	Total revenue	0		0		0		0
	Gross profit	$	0	$	0	$	0	$	0

Consolidated:
	Revenue	$	37,862	$	30,442	$	104,902	$	95,994
	Fee revenue	31,804		17,280		82,302		54,056
	Total revenue	69,666		47,722		187,204		150,050
	Gross profit	$	41,123	$	25,228	$	109,703	$	76,761


		Three Months Ended June 30,				Nine Months Ended June 30,
(in thousands)		2021		2020		2021		2020
Reconciliation:
	Gross profit	$	41,123	$	25,228	$	109,703	$	76,761
	Operating expenses	31,349		24,711		89,455		85,505
	Other operating expenses	1,180		319		1,390		500
	Interest and other income, net	(254)		(224)		(468)		(733)
	Income (loss) before provision for income taxes	$	8,848	$	422	$	19,326	$	(8,511)

The percent of our revenues that came from transactions conducted outside of the United States for the three months ended June 30, 2021 and 2020 was 14.4% and 11.2%, respectively, and the percent of our revenues that came from transactions conducted outside the United States for the nine months ended June 30, 2021 and 2020 was 16.2% and 12.5%, respectively.

Three months ended December 31,
2017 2016
Reconciliation:
Revenue $ 61,143
$ 70,796
Gross profit 30,199
33,977
Operating Expenses 36,651
42,237
Interest and other (income) expense, net (425 ) 34
(Benefit) provision for income taxes (4,815 ) 103
Net loss $ (1,212 ) $ (8,397 )

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

FORWARD-LOOKING STATEMENTS

This document contains forward-looking statements. These statements are only predictions. The outcome of the events described in these forward-looking statements is subject to known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. These risks and other factors include but are not limited to the factors set forth in our Annual Report on Form 10-K for the fiscal year ended September 30, ~~2017~~2020 and subsequent filings with the Securities and Exchange ~~Commission.~~Commission (SEC). You can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “would,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continues” or the negative of these terms or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. There may be other factors of which we are currently unaware or deem immaterial that may cause our actual results to differ materially from the forward-looking statements.

All forward-looking statements attributable to us or persons acting on our behalf apply only as of the date of this document and are expressly qualified in their entirety by the cautionary statements included in this document. Except as may be required by law, we undertake no obligation to publicly update or revise any forward-looking statement to reflect events or circumstances occurring after the date of this document or to reflect the occurrence of unanticipated events.

The following discussion should be read in conjunction with our consolidated financial statements and related notes and the information contained elsewhere in this document.

Overview

~~About us.~~ ~~We manage, value, and sell inventory and equipment for business and government clients by operating~~The Company operates a network of ~~leading ecommerce~~e-commerce marketplaces that power the circular economy which benefits businesses, society, and the environment through the safe and effective resale and redeployment of surplus assets; reducing waste, carbon emissions and transportation costs; and by creating markets for items that would otherwise be landfilled. Our marketplaces enable buyers and sellers to transact in an efficient, automated environment offering over ~~500~~600 product ~~categories. Our marketplaces~~categories and provide professional buyers access to a global, organized supply of new, surplus, and scrap assets presented with digital images and other relevant product information. ~~Additionally, we~~Our marketplaces enable corporate and government sellers to enhance their financial return on offered assets by providing a liquid marketplace and value-added services that encompass the consultative management, valuation, and sale of surplus assets. ~~Our broad range of~~The Company's services include program management, valuation, asset management, reconciliation, ~~Return to Vendor ("RTV") and Returns Management Authorization ("RMA"),~~ refurbishment and recycling, fulfillment, marketing and sales, warehousing and transportation, buyer support, ~~and~~ compliance and risk mitigation, as well as ~~self-service tools. We organize~~self-directed service tools for its sellers. The Company organizes the products on ~~our~~its marketplaces into categories across major industry verticals such as consumer electronics, general merchandise, apparel, scientific equipment, aerospace parts and equipment, technology hardware, energy equipment, industrial capital assets, fleet and transportation equipment and specialty equipment. ~~Our network of~~The Company’s marketplaces ~~includes:~~are: www.liquidation.com, ~~www.govliquidation.com,~~ www.govdeals.com, ~~www.networkintl.com,~~ www.secondipity.com, ~~www.go-dove.com, www.unclesamsretailoutlet.com, www.irondirect.com,~~ and ~~www.auctiondeals.com.~~www.go-dove.com. We ~~have~~also operate a global search engine for listing used machinery and equipment for sale at www.machinio.com. The Company has over ~~10,000~~15,000 sellers, including Fortune 1000 and Global 500 organizations as well as federal, state, and local government agencies. We

Impacts of the COVID-19 Pandemic

The Company has been closely monitoring the COVID-19 pandemic. In April 2020, the Company experienced the largest impacts on its operations thus far stemming from the initial actions taken by governments and the private sector to limit the spread of COVID-19. The restrictions on economic activity were caused, in part, by business closures, limitations on the operations of business activity and significant prioritization of essential business functions. Starting in May 2020, we have ~~three reportable~~seen subsequent increases in Gross Merchandise Volume (GMV) and revenues as businesses and governments re-opened from government ordered closures which, combined with cost control measures, generated positive net income for the third and fourth quarters of fiscal 2020, and has continued throughout fiscal 2021. However, our international business continues to experience impacts to cross-border commerce due to ongoing travel restrictions in various countries. At this time, the likelihood, magnitude and timing of business developments across our segments ~~Retail Supply Chain Group (RSCG), Capital Assets Group (CAG),~~are difficult to predict given the current economic uncertainty, unknown duration and ~~GovDeals. See Note 13~~overall impact of the global pandemic. As a result, prior trends in the ~~Notes~~Company's results of operations may not be applicable throughout the duration of the COVID-19 pandemic.

Throughout the COVID-19 pandemic, the Company has actively monitored its liquidity position and working capital needs. During each quarter of fiscal 2021 including during the three months ended June 30, 2021, the Company determined that its liquidity position and working capital were more than sufficient to meet its projected needs. As discussed in Note 8 - Shareholder's Equity, during this time the ~~Consolidated Financial Statements~~Company repurchased 647,583 shares for ~~Segment Information.~~$12.0 million and 957,079 shares for $16.1 million under our share repurchase program during the three and six months ended March 31, 2021, respectively. While we made no repurchases under our May 3, 2021 Stock Repurchase Plan during the three months ended June 30, 2021, the timing and actual number of shares repurchased will depend on a variety of factors, including price, general business and market conditions, and the existence of alternative investment opportunities. The repurchase program will be executed consistent with the Company's capital allocation strategy of prioritizing investment to grow the business over the long term.

In the longer term, we continue to be highly focused on creating efficiencies and benefits for our sellers and our buyers by focusing on the platform services and support that will deliver optimal liquidity in the reverse supply chain and further enable our growth through an asset light, low-touch marketplace solution. As e-commerce penetration continues to grow substantially for both consumers and business-to-business (B2B), we believe that our online platform and cloud-based solutions should become even more relevant and necessary for the evolving global economy.

Our Marketplace Transactions

We believe our ability to create liquid marketplaces for surplus and salvage assets generates a continuous flow of goods from our corporate and government sellers. This flow of goods in turn attracts an increasing number of professional buyers to our ~~marketplaces.~~marketplaces. During the twelve months ~~ended December 31, 2017,~~ended June 30, 2021, the approximate number of registered buyers ~~grew~~increased from ~~3,018,000~~3,719,000 to ~~3,209,000,~~3,970,000, or ~~approximately 6.0%~~6.7%.

Our revenue. Substantially all of our revenue is earned through the following transaction ~~models.~~models:

Purchase model. Under our purchase transaction model, we recognize revenue within the Revenue line item on the Consolidated Statements of Operations from the resale of inventory that we purchased from sellers. We consider these sellers to be our vendors. We pay our ~~vendors~~sellers either a fixed amount or a portion of the net or gross proceeds received from our completed sales based on the value we receive from the sale, in some cases, after deducting a required return to us that we have negotiated with the seller. Because we are the ~~primary obligor, and take general and physical inventory risks and credit risk under this~~principal in purchase transaction model sales, we recognize as revenue the sale price paid by the buyer upon completion of a transaction. ~~Also included in the~~The proceeds paid by buyers ~~are~~also include transaction fees, ~~charged to the buyers,~~ referred to as buyer premiums. ~~Revenue from~~For the three and nine months ended June 30, 2021, our purchase transaction model accounted for ~~approximately 65.9%~~14.8% and 16.3% of our GMV, and 54.3% and 56.0% of our total ~~revenue for~~revenues, respectively. For the three and nine months ended December 31, 2017. Included in these amounts is revenue earned from the sale of property obtained under the Scrap Contract, where the price we pay the Defense Logistics Agency Disposition Services (DLA) of the Department of Defense (DoD) for the property purchased is based on a revenue share model, and which accounted for approximately 8.4% of our total revenue for the three months ended December 31, 2017. The merchandise sold underJune 30, 2020, our purchase transaction model accounted for ~~approximately 24.7%~~22.1% and 22.4% of our ~~gross~~GMV, and 63.8% and 64.0% of our total revenues, respectively. These amounts included sales of commercial merchandise ~~volume, which is the total sales value~~sourced from vendor contracts with Amazon.com, Inc. by our RSCG segment. The commercial merchandise we purchased under these contracts with Amazon.com, Inc. represented 63.5% and 61.7% of ~~all merchandise~~consolidated Costs of goods sold ~~through our marketplaces during a given period,~~ for the three and nine months ended ~~December 31, 2017. The revenue from our purchase transaction model is recognized within~~June 30, 2021, respectively, and 60.4% and 54.5% of consolidated Cost of goods sold for the ~~Revenue line item on the Consolidated Statements of Operations.~~

three and nine months ended June 30, 2020, respectively.

Consignment model — fee revenue. Under our consignment transaction model, we enable our sellers to sell goods they own in our marketplaces and we charge them a commission fee based on the gross or net proceeds received from such sales. ~~This~~The revenue from our consignment transaction model is recognized within the Fee revenue line item on the Consolidated Statements of Operations. Because we are the agent in consignment model sales, our commission fee revenue, which we refer to as seller commissions, represents a percentage of the sales price the buyer pays upon completion of a transaction. We vary the percentage amount of the seller commission depending on the various value-added services we provide to the seller to facilitate the transaction. For example, we generally increase the percentage amount of the commission if we take possession, handle, ship, or provide enhanced product information for the merchandise. In most cases we collect the seller commission by deducting the appropriate amount from the sales proceeds prior to ~~their~~the distribution to the seller after completion of the transaction. In addition to ~~the~~ seller commissions, we also collect ~~transaction fees charged to buyers, referred to as~~ buyer premiums. ~~Revenue from~~For the three and nine months ended June 30, 2021, our consignment model accounted for ~~approximately 29.1%~~85.2% and 83.7% of our GMV, and 37.4% and 36.2% of our total ~~revenue for~~revenues, respectively. For the three and nine months ended ~~December 31, 2017. The merchandise sold under~~June 30, 2020, our consignment model accounted for ~~approximately 75.3%~~77.9% and 77.6% of our GMV, ~~for the three months ended December 31, 2017. The revenue from~~and 30.2% and 29.9% of our ~~consignment transaction model is recognized within the Fee Revenue line item on the Consolidated Statements of Operations.~~total revenues, respectively

Other — fee revenue. We also earn non-consignment fee revenue ~~which is largely made up~~from Machinio's sales listing subscription and MachineryHost services, as well as other services including returns management, refurbishment of ~~service revenue related~~assets, and asset valuation services. Other revenues accounted for 8.2% and 7.8% of our total revenues for the three and nine months ended June 30, 2021, respectively, and 6.0% and 6.2% of our total revenues for the three and nine months ended June 30, 2020, respectively.

Industry trends. While we continue to ~~our Surplus Contract. This revenue is recognized within~~review and assess the ~~Fee revenue line item~~COVID-19 pandemic's impact on our ~~Consolidated Statements of Operations,~~customers, our suppliers, and ~~is discussed in further detail in Note 3 - Significant Contracts of the Notes to~~ our ~~Consolidated Financial Statements.~~

~~We collect a buyer premium on substantially all transactions under the transaction models~~business, we offer to sellers. Buyer premiums are calculated as a percentage of the sale price of the merchandise sold and are paid to us by the buyer. Buyer premiums are in addition to the price of the merchandise.

~~Industry trends.~~ We believe there are several industry trends positively impacting the long-term growth of our ~~business~~Company including: (1) ~~the increase in the adoption of the Internet by businesses to conduct ecommerce both in the United States and abroad; (2)~~ the increase in the volume of returned merchandise handled both online and in stores as online and omni-channel retail grow as a percentage of overall retail sales; ~~(3)~~(2) the increase in government regulations and the need for corporations to have sustainability solutions necessitating verifiable recycling and remarketing of surplus assets; ~~(4)~~(3) the increase in outsourcing ~~by corporate and government organizations~~the disposition of ~~disposition activities for~~ surplus and end-of-life assets by corporations and government entities as they focus on reducing costs, improving transparency, compliance and working capital flows, and increasingly prefer service providers with a proven track record, innovative scalable solutions and the ability to make a strategic impact in the reverse supply ~~chain, which we expect to increase our seller base; (5) an~~chain; (4) the increase in buyer demand for surplus merchandise as consumers trade down by purchasing less expensive goods and seek greater value from their purchases, which results in lower per unit prices and margins in our retail goods ~~vertical, and (6)~~vertical; (5) in the long-term we expect innovation in the retail supply chain will increase the pace of product obsolescence and, therefore, increase the supply of surplus ~~assets.~~assets; and (6) the increase in demand from sellers and buyers to transact in a low touch, online solution as compared to live, in-person auctions or public sale events.

Our Vendor Agreements

Our ~~DoD~~commercial agreements. We have ~~two~~multiple vendor contracts ~~with the DoD pursuant to which we acquire, manage and sell excess property.~~

•~~Surplus Contract.~~ The Surplus Contract is a competitive-bid contract under which we acquire, manage and sell usable DoD surplus personal property turned into the DLA. Surplus property generally consists of items determined by the DoD to be no longer needed, and not claimed for reuse by any federal agency, such as electronics, industrial equipment, office supplies, scientific and medical equipment, aircraft parts, clothing and textiles. The Surplus Contract requires us to purchase substantially all usable non-rolling stock surplus property offered by the DoD at 4.35% of the DoD’s original acquisition value (OAV). The current Surplus Contract, which is the third such contract awarded to us since 2001, became effective in December 2014, covers only non-rolling stock and has a base term of two years with four one-year options to extend. The prior, or second, Surplus contract required us to purchase substantially all rolling and non-rolling usable surplus property offered by the DoD at 1.8% of the DoD’s OAV; the wind-down period under the second Surplus contract was in effect until January 2017 to allow for the continued processing of usable recycling control point non-rolling stock surplus property. The initial two-year base period of the current Surplus contract ended in December 2016 and was extended through December 14, 2017. Transactions under this contract follow the purchase transaction model described above. This contract is included within our CAG segment.

On October 11, 2017, the DLA published a Request for Technical Proposal (“RFTP”) and draft Invitation for Bid (“IFB”) for the sale of surplus, useable non-rolling stock property. The RFTP and IFB related to the DLA’s award of two term contracts. On December 5, 2017, the DLA determined that we were not the high bidder for either of the two contracts. We made our final inventory purchase under the Surplus Contract during December 2017, and we are currently in the process of winding down the Surplus Contract. The Surplus Contract accounted for $74.6 million, or 27.6% of revenue in fiscal year 2017, $21.1 million or 29.9% of revenue in the first quarter of fiscal 2017, and $16.2 million or 26.5% of revenue in the first quarter of fiscal 2018. We expect revenue to continue to decline further in the second and third quarters of fiscal 2018, and no further revenue from this contract in future periods. The property sold under the Surplus Contract accounted for approximately 8.9% and 9.9% of our GMV for the three months ended December 31, 2017 and 2016.

In regards to the impact on our profitability resulting from the Surplus contract revenue change noted above, we anticipate the lost profits will be offset by benefits from the reorganization and realignment efforts in fiscal 2017 and Q1-FY18 (see Note 11 Business realignment expenses). The reorganization efforts in our CAG commercial business and Corporate functions are expected to generate a benefit during FY18 and beyond, which combined with the 2017 realignments of our Truckcenter and Iron Direct businesses, are expected to offset the impact of the DoD Surplus contract.

We recorded approximately $0.5 million of severance and occupancy cost during the first quarter of fiscal 2018, as a result of the restructuring and realignment efforts undertaken due to the loss of the Surplus Contract. The wind-down is expected to be completed within fiscal 2018.

•~~Scrap Contract.~~ On April 8, 2016, the DLA awarded us the second Scrap Contract. Under the second Scrap Contract, we acquire scrap property from the DLA and pay the DLA a revenue-sharing payment equal to 64.5% of the gross resale proceeds. The Scrap Contract is a competitive-bid contract under which we acquire, manage and sell substantially all scrap property of the DoD turned into the DLA. Scrap property generally consists of items determined by the DoD to have no use beyond their base material content, such as metals, alloys, and building materials. We bear all of the costs for the sorting, merchandising and sale of the property. The second Scrap Contract has a 36-month base term, commencing in the first quarter of fiscal year 2017, with two 12-month extension options exercisable by the DLA. Transactions under this contract follow the purchase transaction model described above.

Under the first Scrap contract, we acquired scrap property at a per pound price and disbursed to the DLA a percentage of the profits, most recently 65% of the amount realized from the sale of the inventory, after deduction for allowable expenses. We refer to these disbursement payments to the DoD as profit-sharing distributions. We recognized as revenue the gross proceeds from these sales. The DoD reimbursed us for certain direct expenses deemed to be payable by the DoD rather than by us. During fiscal year 2015, if our buyer base met certain small business criteria as defined in the contract, we received an additional incentive payment which was withheld from payments to the DLA. The prior Scrap contract expired on September 30, 2016.

Resale of scrap property that we purchased under the Scrap Contract accounted for 8.4% and 10.0% of our revenue, and 3.3%, and 4.5% of our GMV for the three months ended December 31, 2017 and 2016, respectively. This contract is included within our CAG segment.

~~Our commercial agreements.~~ ~~We have a vendor contract~~ with Amazon.com, Inc. under which ~~we acquire~~the Company acquires and ~~sell~~sells commercial merchandise. The property we purchased under ~~this contract~~these contracts with Amazon.com, Inc. represented ~~approximately 19.4%,~~63.5% and ~~17.8%~~60.4% of ~~cost~~consolidated Cost of goods sold for the three months ended ~~December 31, 2017~~June 30, 2021 and ~~2016,~~2020, respectively, and 61.7% and 54.5% of consolidated Cost of goods sold for the nine months ended June 30, 2021 and 2020, respectively. ~~This contract is~~These contracts are included within our RSCG segment. Our agreements with our other sellers are generally terminable at will by either party.

Key Business Metrics

Our management periodically reviews certain key business metrics for operational planning purposes and to evaluate the effectiveness of our operational strategies, allocation of resources, and our capacity to fund capital expenditures and expand our business. These key business metrics include:

~~Gross merchandise volume.~~Gross merchandise volume or(GMV). GMV is the total sales value of all merchandise sold by us or our sellers through our marketplaces or by us through other channels during a given ~~period.~~period of time. We review GMV because it provides a measure of the volume of goods being sold in our marketplaces and thus the activity of those marketplaces. GMV also provides a means to evaluate the effectiveness of investments that we have made and continue to make, including in the areas of buyer and seller support, value-added services, product development, sales and marketing, and operations. ~~The GMV of goods sold in our marketplaces during the three months ended December 31, 2017 and 2016 totaled $155.4 million and $159.7 million, respectively.~~

Total registered ~~buyers.~~buyers. We grow our buyer base through a combination of marketing and promotional efforts. A person becomes a registered buyer by completing an online registration process on one of our marketplaces. As part of this process, we collect business and personal information, including name, title, company name, business address and contact information, and information on how the person intends to use our marketplaces. Each prospective buyer must also accept our terms and conditions of use. Following the completion of the online registration process, we verify each prospective buyer’s e-mail address and confirm that the person is not listed on any banned persons list maintained internally or by the U.S. federal government. After the verification process, which is completed generally within 24 hours, the registration is approved and activated, and the prospective buyer is added to our registered buyer list.

Total registered buyers, as of a given date, represent the aggregate number of persons or entities who have registered on one of our marketplaces. We use this metric to evaluate how well our marketing and promotional efforts are performing. Total registered buyers exclude duplicate registrations, buyers who are suspended from utilizing our marketplaces and those buyers who have voluntarily removed themselves from our registration database. In addition, if we become aware of registered buyers that are no longer in business, we remove them from our database. As of ~~December 31, 2017~~June 30, 2021 and ~~September 30, 2017,~~2020, we had ~~3,209,000~~approximately 3,970,000 and ~~3,171,000~~3,719,000 registered buyers, respectively.

Total auction participants. For each auction we manage, the number of auction participants represents the total number of registered buyers who have bid one or more times in that auction. As a result, a registered buyer who bids, or participates, in more than one auction is counted as an auction participant in each auction in which he or she participates. Thus, total auction participants for a given period is the sum of the auction participants in each auction conducted during that period. We use this metric to allow us to compare our online auction marketplaces to our competitors, including other online auction sites and traditional on-site auctioneers. In addition, we measure total auction participants on a periodic basis to evaluate the activity level of our base of registered buyers and to measure the performance of our marketing and promotional efforts. During the three months ended ~~December 31, 2017~~June 30, 2021 and ~~2016, 519,000~~2020, approximately 617,000 and ~~544,000~~420,000, respectively, total auction participants participated in auctions on our ~~marketplaces, respectively.~~marketplaces. During the nine months ended June 30, 2021 and 2020, approximately 1,695,000 and 1,363,000, respectively, total auction participants participated in auctions on our marketplaces.

Completed transactions. Completed transactions represents the number of auctions in a given period from which we have recorded revenue. Similar to GMV, we believe that completed transactions is a key business metric because it provides an additional measurement of the volume of activity flowing through our marketplaces. During the three months ended ~~December 31, 2017~~June 30, 2021 and ~~2016,~~2020, we completed ~~122,280~~approximately 185,000 and ~~129,000~~134,000 transactions, respectively. During the nine months ended June 30, 2021 and 2020, we completed approximately 511,000 and 420,000 transactions, respectively.

Non-GAAP Financial Measures

Non-GAAP EBITDA and ~~adjusted~~Non-GAAP Adjusted EBITDA. Non-GAAP EBITDA is a supplemental non-GAAP financial measure and is equal to net income (loss) plus interest and other ~~(income) expense, net;~~income, net excluding the non-service components of net periodic pension (benefit); provision for income taxes; and depreciation and amortization. Interest and other ~~(income) expense,~~income, net, can include ~~nonoperating~~non-operating gains and losses, such as from foreign currency ~~fluctuations and disposals of~~

~~fixed assets.~~fluctuations. Our definition of ~~adjusted~~Non-GAAP Adjusted EBITDA differs from Non-GAAP EBITDA because we further adjust Non-GAAP EBITDA for stock-based compensation expense, acquisition costs such as transaction expenses and changes in earn out estimates, business realignment expense, ~~disposition expenses,~~deferred revenue purchase accounting adjustments, and goodwill and long-lived asset impairment.

We believe Non-GAAP EBITDA and ~~adjusted~~Non-GAAP Adjusted EBITDA are useful to an investor in evaluating our performance for the following reasons:

•Depreciation and amortization expense primarily relates to property and equipment and the amortization of intangible assets. These expenses are non-cash charges that have fluctuated significantly ~~over~~in the ~~past five years.~~past. As a result, we believe that adding back these non-cash charges ~~to net income~~ is useful in evaluating the operating performance of our business on a consistent basis from year-to-year.

•As a result of varying federal and state income tax rates, we believe that presenting a financial measure that adjusts ~~net income~~ for provision for income taxes is useful to investors when evaluating the operating performance of our business on a consistent basis from year to year.

•The authoritative guidance for stock-based compensation requires all share-based payments to employees, including grants of employee stock options, restricted stock and stock appreciation rights to be recognized in the income statement based on their estimated fair values. We believe adjusting ~~net income~~ for this stock-based compensation expense is useful to investors when evaluating the operating performance of our business on a consistent basis from year to year.

•The authoritative guidance related to business combinations requires the initial recognition of contingent consideration ~~so that it is recognized~~ at fair value with subsequent changes in fair value recorded through the ~~time~~Consolidated Statements of ~~acquisition rather than when it is probable~~Operations and disallows the capitalization of transaction costs. We believe adjusting ~~net income~~ for these acquisition related expenses is useful to investors when evaluating the operating performance of our business on a consistent basis from ~~year to year.~~year-to-year.

•We believe adjusting ~~net income~~ for business realignment expense is useful to investors when evaluating the operating performance of our business on a consistent basis from year-to-year, as these expenses are outside our ordinary course of business.

•We believe isolating non-cash charges, such as amortization and depreciation, and other items, such as impairment costs incurred outside our ordinary course of business, provides additional information about our cost structure, and, over time, helps track our performance.

•We believe Non-GAAP EBITDA and ~~adjusted~~Non-GAAP Adjusted EBITDA are important indicators of our operational strength and the performance of our business because they provide a link between profitability and operating cash flow.

•We also believe that analysts and investors use Non-GAAP EBITDA and ~~adjusted~~Non-GAAP Adjusted EBITDA as supplemental measures to evaluate the overall operating performance of companies in our industry.

Our management uses Non-GAAP EBITDA and ~~adjusted~~Non-GAAP Adjusted EBITDA:

•as measurements of operating performance because they assist us in comparing our operating performance on a consistent basis as they remove the impact of items not directly resulting from our core operations;

•for planning purposes, including the preparation of our internal annual operating budget;

•to allocate resources to enhance the financial performance of our business;

•to evaluate the effectiveness of our operational strategies; and

•to evaluate our capacity to fund capital expenditures and expand our business.

Non-GAAP EBITDA and ~~adjusted~~Non-GAAP Adjusted EBITDA as calculated by us are not necessarily comparable to similarly titled measures used by other companies. In addition, Non-GAAP EBITDA and ~~adjusted~~Non-GAAP Adjusted EBITDA: (a) do not represent net income (loss) or cash flows from operating activities as defined by GAAP; (b) are not necessarily indicative of cash available to fund our cash flow needs; and (c) should not be considered as alternatives to net income (loss), income (loss) from operations, cash provided by (used in) operating activities or our other financial information as determined under GAAP.

We prepare ~~adjusted~~Non-GAAP Adjusted EBITDA by adjusting Non-GAAP EBITDA to eliminate the impact of items that we do not consider indicative of our core operating performance. You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. As an analytical tool, ~~adjusted~~Non-GAAP Adjusted EBITDA is subject to all of the limitations applicable to Non-GAAP EBITDA. Our presentation of ~~adjusted~~Non-GAAP Adjusted EBITDA should not be construed as an implication that our future results will be unaffected by unusual or non-recurring items.

The table below reconciles net income ~~from continuing operations~~(loss) to Non-GAAP EBITDA and ~~adjusted~~Non-GAAP Adjusted EBITDA ~~from continuing operations~~ for the periods presented.


	Three Months Ended June 30,				Nine Months Ended June 30,
	2021		2020		2021		2020
(in thousands)	(Unaudited)
Net income (loss)	$	8,419	$	213	$	18,193	$	(9,221)
Interest and other income, net1	(157)		(156)		(191)		(489)
Provision for income taxes	429		209		1,133		710
Depreciation and amortization	1,705		1,567		5,246		4,716
Non-GAAP EBITDA	$	10,396	$	1,833	$	24,381	$	(4,284)
Stock compensation expense	1,803		1,516		5,793		3,785
Acquisition costs and impairment of long-lived and other assets2	1,136		—		1,338		5
Business realignment expenses2, 3	—		328		5		328
Fair value adjustments to acquisition earn-outs2	—		—		—		200
Deferred revenue purchase accounting adjustment	—		—		—		3
Non-GAAP Adjusted EBITDA	$	13,335	$	3,677	$	31,517	$	37

1 Represents Interest and other income, net, per the Statement of Operations, excluding the non-service components of net periodic pension (benefit).

Three Months Ended December 31,
2017 2016
(In thousands)
(Unaudited)
Net loss $ (1,212 ) $ (8,397 )
Interest and other (income) expense, net (425 ) 34
(Benefit) provision for income taxes (4,815 ) 103
Depreciation and amortization 1,211
1,429
EBITDA (5,241 ) (6,831 )
Stock compensation expense 930
2,500
Business realignment expenses* 1,349
—
Adjusted EBITDA $ (2,962 ) $ (4,331 )

* Business2 Acquisition costs, impairment of long-lived assets and other assets, fair value adjustments to acquisition earn-outs, and business realignment expenses ~~which~~ are ~~excluded from Adjusted EBITDA, are included in~~components of Other operating expenses ~~(income)~~ on the ~~Statement~~Statements of Operations. ~~See~~For the three and nine months ended June 30, 2021, this amount included a $1.1 million impairment expense from the settlement of a note receivable associated with a previous divestiture (see Note 2 to the Consolidated Financial Statements).

3 Business realignment expense includes the amounts accounted for as exit costs under ASC 420 as described in Note 11 to ~~Notes to Consolidated~~the Consolidated Financial Statements, and the related impacts of business realignment actions subject to other accounting guidance. There were no related impacts for ~~further detail.~~the three and nine months ended June 30, 2021 and 2020.

Critical Accounting Policies and Estimates

~~Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP.~~ The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. A “critical accounting estimate” is one which is both important to the portrayal of our financial condition and results and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. We continuously evaluate ourCompany's critical accounting ~~estimates. We base our~~policies and estimates ~~on historical experience and on various other assumptions that~~ are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

~~Revenue recognition.~~ ~~For transactions~~described in our ~~ecommerce marketplaces, which generate substantially all of our revenue, we recognize revenue when all of the following criteria are met:~~

~~a buyer submits the winning bid in an auction and, as a result, evidence of an arrangement exists, and the sale price has been determined;~~

~~the buyer has assumed risks and rewards of ownership; and~~

~~collection is reasonably assured.~~

Most of our sales are recorded subsequent to receipt of payment authorization, utilizing credit cards, wire transfers and PayPal, an Internet based payment system, as methods of payments. As a result, we are not subject to significant collection risk, as goods are generally not shipped before payment is received.

~~Fee revenue is principally revenue earned under the consignment model, and is presented separately as it accounts for more than 10% of total revenue.~~

Transactions are also evaluated to determine whether we should report gross proceeds as revenue, for example, when we act as the principal in the arrangement, or if we should report revenue as our net commissions, for example, when we act as an agent. In arrangements in which we are deemed to be the primary obligor, bear physical and general inventory risk, and credit risk, we recognize as revenue the gross proceeds from the sale, including buyer’s premiums. In arrangements in which we act as an agent or brokerAnnual Report on a consignment basis, without taking general or physical inventory risk, revenue is recognized based on the sales commissions that are paid to us by the sellers for utilizing our services; in this situation, sales commissions represent a percentage of the gross proceeds from the sale that the seller pays to us upon completion of the transaction.

We have evaluated our revenue recognition policy related to sales under our purchase transaction model and determined it is appropriate to account for these sales on a gross basis. The following factors were most heavily relied upon in our determination:

~~We are the primary obligor in the arrangement.~~

We are the seller in substance and in appearance to the buyer; the buyer contacts us if there is a problem with the purchase. Only we and the buyer are parties to the sales contract and the buyer has no recourse to the supplier. If the buyer has a problem, he or she looks to us, not the supplier.

~~The buyer does not and cannot look to the supplier for fulfillment or for product acceptability concerns.~~

~~We have general inventory risk.~~

We take title to the inventory upon paying the amount set forth in the contract with the supplier. Such amount is generally a percentage of the supplier’s original acquisition cost and varies depending on the type of the inventory purchased or a fixed nominal amount under our Scrap contract.

We are at risk of loss for all amounts paid to the supplier in the event the property is damaged or otherwise becomes unsaleable. In addition, under the previous Scrap contract, as payments made for inventory were excluded from the calculationForm 10-K for the ~~profit-sharing distribution under our DoD contracts, we effectively bore inventory risk for the full amount paid to acquire the property (i.e., there was no sharing of inventory risk).~~

~~The amount of our revenue that was generated outside of the U.S. for the three months ended December 31, 2017 and 2016 was 13.4% and 13.3%, respectively.~~

~~Inventory.~~ Inventory consists of products available for sale and is valued at net realizable value. This valuation requires us to make judgments based on currently available information about expected recoverable value.

~~Valuation of goodwill and other intangible assets.~~ We identify and value intangible assets that we acquire in business combinations, such as customer arrangements, customer relationships and non-compete agreements, that arise from contractual or other legal rights or that are capable of being separated or divided from the acquired entity and sold, transferred, licensed, rented or exchanged. The fair value of identified intangible assets is based upon an estimate of the future economic benefits expected to result from ownership, which represents the amount at which the assets could be bought or sold in a current transaction between willing parties, that is, other than in a forced or liquidation sale.

We test our goodwill for impairment annually or more frequently if events or circumstances indicate impairment may exist. Examples of such events or circumstances could include a significant change in business climate, a loss of significant sellers or buyers, or a significant decline in stock price. We make a qualitative evaluation about the likelihood of goodwill impairment to determine whether we should calculate the fair value of a reporting unit. If our evaluation indicates a likelihood of goodwill impairment, we apply a two-step fair value-based test to assess goodwill for impairment of our four reporting units, which are the same as our four operating segments (RSCG, CAG, GovDeals, and IronDirect). The first step compares the fair value of a reporting unit to its carrying amount, including goodwill. If the carrying amount of the reporting unit exceeds its fair value, we perform the second step, which compares the carrying amount of the reporting unit’s goodwill to the implied fair value of the goodwill. If the fair value of the goodwill is less than the carrying amount, an impairment loss would be recorded in our statements of operations. Intangible assets with definite lives are amortized over their estimated useful lives and are also reviewed for impairment if events or changes in circumstances indicate that their carrying amount may not be realizable.

Our management makes certain estimates and assumptions in order to determine the fair value of net assets and liabilities, including, among other things, an assessment of market conditions, projected cash flows, cost of capital and growth rates, which could significantly impact the reported value of goodwill and other intangible assets. Estimating future cash flows requires significant judgment, and our projections may vary from cash flows eventually realized. The valuations employ a combination of present value techniques to measure fair value, corroborated by comparisons to estimated market multiples. These valuations are based on a discount rate determined by our management to be consistent with industry discount rates and the risks inherent in our current business model.

Determining the fair value of a reporting unit requires the exercise of significant judgment, including judgments about the appropriate discount rates, terminal growth rates, weighted average costs of capital, exit multiples, and the amount and timing of expected future cash flows. The judgments used in determining the fair value of our reporting units are based on significant unobservable inputs which causes the determination of the implied fair value of goodwill to fall within level three of the GAAP fair value hierarchy. The cash flows employed in the discounted cash flow analysis are based on the most recent budgets, forecasts, and business plans as well as various growth rate assumptions for years beyond the current business plan period. Discount rate assumptions are based on an assessment of the risk inherent in the future revenue streams and cash flows of the reporting unit. Various factors, including the failure to successfully implement our business plan for any of our reporting units, as well as other factors beyond our control, could have a negative effect on the fair value of such reporting unit, and increase the risk of further impairments of goodwill in the future.

A reporting unit represents a component of an operating segment that (a) constitutes a business, (b) has discrete financial information, and (c) its performance is reviewed by management. During fiscal year 2016 we concluded we had five

reporting units-RSCG, CAG, GovDeals, TruckCenter, and IronDirect. On January 30, 2017, we decided to exit certain TruckCenter operations in order to focus our time and resources on our ecommerce marketplace strategy. As a result, as of December 31, 2017, we have four reporting units. We will continue to sell trucks and related equipment through our other ecommerce marketplaces.

As part of our fiscal year 2017 annual impairment assessment performed as of July 1, 2017, we believed that certain events required performing a step one evaluation of goodwill to identify potential impairment. As a result of the step one test, we determined that our reporting units with goodwill had fair values as of September 30, 2017, that substantially exceeded their respective book values.

~~During the three months ended December 31, 2017, we did not identify any indicators of impairment.~~

We cannot predict the occurrence of certain future events that might adversely affect the reported value of goodwill and other intangible assets, which totaled $45.9 million at December 31, 2017. Such events may include strategic decisions made in response to economic and competitive conditions, the impact of the economic environment on our base of buyers and sellers or material negative changes in our relationships with material customers.

~~Income taxes.~~ We account for income taxes using the asset and liability approach for measuring deferred taxes based on temporary differences between the financial statement and income tax bases of assets and liabilities existing at each balance sheet date using enacted tax rates for the years in which the taxes are expected to be paid or recovered. We recognize deferred tax assets to the extent that we believe that these assets are more likely than not to be realized. In making such determination, we consider all available positive and negative evidence to estimate whether future taxable income will be generated to permit use of the existing deferred tax asset. A significant piece of subjective negative evidence evaluated was the cumulative loss incurred over the three-year period ended September 30, 2017, and projected losses in the near-term future. Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future growth.

~~On the basis of the evaluation, we recorded a charge of $10.1 million to our valuation allowance during the fiscal~~ year ended September 30, ~~2017. During~~2020, and in Note 2 — Summary of Significant Accounting Policies to the ~~three months ended December 31, 2017, we recorded~~consolidated financial statements.

As of June 30, 2021, the Company has a ~~reduction~~valuation allowance of $28 million against its net deferred tax assets in the United States. The Company intends to continue to maintain its valuation allowance on these net deferred tax assets until there is sufficient positive evidence to support a partial or full reversal. Should the Company’s improved operating results continue, sufficient positive evidence may accumulate in a future period that changes our valuation allowance ~~of $10.3 million. The reduction is comprised of $10.3 million for~~conclusions, resulting in a partial or full reversal. In a period where significant valuation allowances are reversed, the ~~re-measurement of deferred~~Company will reflect a material tax assets at the newly enacted tax rate and $1.7 million for the recognition of tax credits resulting from the repeal of the alternative minimum tax, netted against a charge of $1.7 million of net operating losses generatedbenefit in ~~the first quarter.~~

We apply the authoritative guidance related to accounting for uncertainty in income taxes. A benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, on the basis of the technical merits. During the three months ended December 31, 2017, we did not identify new uncertain tax benefits.

~~We provide~~its provision (benefit) for income taxes ~~based on our estimate of federal and state~~that could cause its effective tax liabilities. These estimates include, among other items, effective rates for state and local income taxes, estimates related to depreciation and amortization expense allowable for tax purposes, and the tax deductibility of certain other items. Our estimates are based on the information available to us at the time we prepare the income tax provision. We generally file our annual income tax returns several months after our fiscal year-end. Income tax returns are subject to audit by federal, state and local governments, generally years after the returns are filed. These returns could be subject to material adjustments or differing interpretations of the tax laws.

~~Stock-based compensation.~~ We recognize all share-based payments to employees, including grants of employee stock options, in the statements of operations based on their estimated fair values. We use the Black-Scholes option pricing model as well as a Monte Carlo simulation to estimate the fair values of certain share-based payments.

~~The above list is not intended~~rate to be a comprehensive list of all of our accounting estimates. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP, with little need for management’s judgment in their application. There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result. See our audited financial statements and related notes, which contain accounting policies and other disclosures required by GAAP.negative.

Components of Revenue and Expenses

Revenue. ~~We generate a large portion~~Refer to the discussion in the Our revenue section above, and to Note 2 — Summary of ~~our revenue from the proceeds of sales of merchandise held in inventory. We also generate commission revenue from sales~~Significant Accounting Policies in our ~~marketplaces~~Annual Report on Form 10-K for discussion of ~~merchandise that is owned by others. Our revenue recognition practices are discussed in more detail in~~ the ~~section above entitled “Critical Accounting Estimates~~.”

Company's related accounting policies.

Cost of goods sold. ~~Cost~~Refer to the discussion in Note 2 — Summary of Significant Accounting Policies in our Annual Report on Form 10-K for discussion of the Company's Costs of goods sold ~~includes the costs of purchasing~~ and ~~transporting property for auction, as well as credit card transaction fees.~~related accounting policies.

~~Seller distributions.~~ Under the current Scrap contract, we acquire scrap property from the DLA for resale and pay the DLA a revenue-sharing payment equal to 64.5% of the gross resale proceeds. We bear all of the costs for the sorting, merchandising and sale of the property. Our previous Scrap contract with the DoD was structured as a profit-sharing arrangement in which we purchased and took possession of all goods we received from the DoD at a contractual price per pound. After deducting allowable operating expenses, we disbursed to the DoD on a monthly basis a percentage of the profits of the aggregate monthly sales. We retained the remaining percentage of these profits after the DoD’s disbursement.

Technology and operations. Technology expenses consist primarily of the cost of technical staff who develop, deploy, and maintain our marketplaces and corporate infrastructure. These personnel also develop and upgrade the software systems that support our operations, such as sales processing. Technology expenses also includes certain costs associated with our ~~LiquidityOne~~e-commerce platform.

Because our marketplaces and support systems require frequent upgrades and enhancements to maintain viability, we have determined that the useful life for certain internally developed software is less than one year. As a result, we expense those costs as incurred. However, where we determine that the useful life of the internally developed software will be greater than one year, we capitalize development costs in accordance with ASC ~~350.~~350-40, Internal-use software. As such, we are capitalizing certain development costs associated with our ~~LiquidityOne platform. At the end of the first quarter of fiscal 2017, we determined that a seller and buyer management module of the LiquidityOne~~e-commerce platform, was ready for its intended use. As such, we began amortizing the associated capitalized costs during the second quarter of fiscal year 2017. During the fourth quarter of fiscal year 2017, we launched our Network International energy marketplace on the new LiquidityOne platform. As such, we determined that additional modules of the LiquidityOne platform were ready for their intended use, and began amortizing the associated capitalized costs during the fourth quarter of fiscal year 2017. During the first quarter of fiscal 2018, we completedas well as other software development ~~of our new Return to Vendor ("RTV") module of the LiquidityOne platform, and began amortizing the associated capitalized costs during the quarter.~~activities.

Operations expenses consist primarily of operating costs, including buyer relations, shipping logistics and distribution center operating costs.

Sales and marketing. Sales and marketing expenses include the cost of our sales and marketing personnel as well as the cost of marketing and promotional activities. These activities include all sales and marketing-related activity, including but not limited to trade shows and online marketing campaigns such as paid search advertising.

General and administrative. General and administrative expenses include all corporate and administrative functions that support our operations and provide an infrastructure to facilitate our future growth. Components of these expenses include executive management and staff salaries, bonuses and related taxes and employee benefits; travel; headquarters rent and related occupancy costs; and legal and accounting fees. The salaries, bonus and employee benefits costs included as general and administrativeThese expenses are generally more fixed in nature than our other operating expenses and do not significantly vary ~~directly with~~in response to the volume of merchandise sold through our marketplaces.

Depreciation and amortization. Depreciation and amortization expenses consist ~~primarily~~ of ~~the~~ depreciation of property and equipment, amortization of ~~amounts recorded in connection with the purchase of furniture, fixtures and equipment~~internally developed software, and amortization of intangible ~~assets from our acquisitions.~~assets.

Other operating expenses (income). Other operating ~~expenses (income)~~expense includes impairment of long-lived and other assets, the change in fair value of ~~financial assets and liabilities,~~contingent consideration, as well as business realignment expenses, including those associated with restructuring initiatives and the exit of certain business operations.

Interest and other ~~(income) expense,~~income, net. Interest and other ~~(income) expense,~~income, net consists of interest income on money market funds and the promissory note ~~receivable related~~issued to JTC, the ~~sale~~components of net periodic pension (benefit) other than the ~~Jacobs Trading business,~~service component and impacts of foreign currency ~~fluctuations, and gains and losses on the sale of fixed assets.~~fluctuations.

Income taxes. For interim income tax reporting, ~~the Company estimates its~~we estimate our annual effective tax rate and ~~applies~~apply this effective tax rate to ~~its year to date~~our year-to-date pre-tax income (loss) ~~income. The Company’s~~. Our effective income tax rate before discrete items was ~~-5.8%~~5.9% for the ~~three~~nine months ended ~~December 31, 2017.~~June 30, 2021. The ~~2018~~ effective tax rate differed from the statutory federal rate of ~~24.53%~~21% primarily as a result of the ~~valuation allowance charge for fiscal 2017~~utilization of net operating losses and the impact of foreign, state, and local income taxes and permanent tax adjustments.

Results of Operations

The following table sets forth, for the periods indicated, ~~selected statement of operations data expressed as a percentage of revenue:~~our operating results:


	Three Months Ended June 30,								Nine Months Ended June 30,
(dollars in thousands)	2021		2020		$ Change		% Change		2021		2020		$ Change		% Change
Revenue	$	37,862	$	30,442	$	7,420	24.4	%	$	104,902	$	95,994	$	8,908	9.3	%
Fee revenue	31,804		17,280		14,524		84.1		82,302		54,056		28,246		52.3
Total revenue	69,666		47,722		21,944		46.0		187,204		150,050		37,154		24.8
Costs and expenses from operations:
Cost of goods sold (excludes depreciation and amortization)	28,543		22,494		6,049		26.9		77,501		73,289		4,212		5.7

Technology and operations	12,307		9,515		2,792		29.3		34,952		32,342		2,610		8.1
Sales and marketing	9,661		7,412		2,249		30.3		27,679		27,126		553		2.0
General and administrative	7,676		6,217		1,459		23.5		21,578		21,321		257		1.2
Depreciation and amortization	1,705		1,567		138		8.8		5,246		4,716		530		11.2
Other operating expenses	1,180		319		861		269.9		1,390		500		890		178.0
Total costs and expenses	61,072		47,524		13,548		28.5		168,346		159,294		9,052		5.7
Income (loss) from operations	8,594		198		8,396		4,240.4		18,858		(9,244)		28,102		NM
Interest and other income, net	(254)		(224)		(30)		(13.4)		(468)		(733)		265		36.2
Income (loss) before provision for income taxes	8,848		422		8,426		1,996.7		19,326		(8,511)		27,837		NM
Provision for income taxes	429		209		220		105.3		1,133		710		423		59.6
Net income (loss)	$	8,419	$	213	$	8,206	3,852.6%		$	18,193	$	(9,221)	$	27,414	NM

NM = not meaningful

Three Months Ended December 31,
2017 2016
Revenue 100.0 % 100.0 %
Costs and expenses from operations:

Cost of goods sold 45.2
45.7
Seller distributions 5.4
6.4
Technology and operations 29.6
30.9
Sales and marketing 13.6
14.1
General and administrative 12.4
13.9
Depreciation and amortization 2.0
2.0
Other operating expenses (income) 2.4
(1.3 )
Total costs and expenses 110.6
111.7
Loss from operations (10.6 ) (11.7 )
Interest and other (income) expense, net (0.7 ) —
(Loss) before provision for income taxes (9.9 ) (11.7 )
(Benefit) provision for income taxes (7.9 ) 0.2
Net loss (2.0 )% (11.9 )%

The following table presents segment GMV, revenue, gross profit ~~and gross profit margin for the periods indicated:~~

Three Months Ended December 31,
2017 2016
GovDeals:
Total revenue $ 7,040
$ 5,813
Gross profit 6,543
5,438
Gross profit margin 92.9 % 93.5 %

CAG:
Total revenue 32,063
42,506
Gross profit 17,603
21,202
Gross profit margin 54.9 % 49.9 %

RSCG:
Total revenue 20,485
21,411
Gross profit 6,728
7,002
Gross profit margin 32.8 % 32.7 %

Corporate & Other:
Total revenue 1,555
1,065
Gross profit (675 ) 335
Gross profit margin (43.4 )% 31.5 %

Consolidated:
Total revenue 61,143
70,796
Gross profit $ 30,199
$ 33,977
Gross profit margin 49.4 % 48.0 %

~~Three Months Ended December 31, 2017 Compared to Three Months Ended December 31, 2016~~

~~Segment Results~~

~~GovDeals.~~ Revenue from our GovDeals segment increased 21.1%, or $1.2 million, due to additional sales volume from existing clients and an increase in the number of new sellers. GMV from this segment increased 26.8%, or $15.1 million, also due to additional sales volume from existing clients and an increase in the number of new sellers. Gross profit within this segment increased 20.3%, or $1.1 million, to $6.5 million for the three months ended December 31, 2017, from $5.4 million for the three months ended December 31, 2016, due to the new business. As a percentage of revenue, gross profit slightly decreased to 92.9%, from 93.5% in the prior year. Gross profit(which is calculated as total revenue less cost of goods sold (exclusive of depreciation and ~~client distributions.~~amortization)), and gross profit margin for the periods indicated:


		Three Months Ended June 30,						Nine Months Ended June 30,
(dollars in thousands)		2021			2020			2021			2020
GovDeals:
	GMV	$	146,058		$	57,906		$	364,601		$	214,255
	Total revenue	$	14,658		$	6,021		$	36,448		$	21,858
	Gross profit	$	13,965		$	5,637		$	34,544		$	20,361
	Gross profit margin	95.3		%	93.6		%	94.8		%	93.2		%

RSCG:
	GMV	$	61,231		$	44,991		$	171,557		$	129,181
	Total revenue	$	44,095		$	33,553		$	118,083		$	101,507
	Gross profit	$	17,755		$	12,022		$	48,315		$	34,721
	Gross profit margin	40.3		%	35.8		%	40.9		%	34.2		%

CAG:
	GMV	$	37,379		$	27,191		$	106,222		$	79,546
	Total revenue	$	8,467		$	6,372		$	25,872		$	21,353
	Gross profit	$	7,099		$	5,892		$	20,445		$	16,628
	Gross profit margin	83.8		%	92.5		%	79.0		%	77.9		%

Machinio:
	GMV	$	—		$	—		$	—		$	—
	Total revenue	$	2,446		$	1,776		$	6,801		$	5,332
	Gross profit	$	2,304		$	1,677		$	6,399		$	5,051
	Gross profit margin	94.2		%	94.4		%	94.1		%	94.7		%







Consolidated:
	GMV	$	244,668		$	130,088		$	642,380		$	422,982
	Total revenue	$	69,666		$	47,722		$	187,204		$	150,050
	Gross profit	$	41,123		$	25,228		$	109,703		$	76,761
	Gross profit margin	59.0		%	52.9		%	58.6		%	51.2		%

~~CAG.~~

Three Months Ended June 30, 2021 Compared to the Three Months Ended June 30, 2020

Segment Results

GovDeals. Revenue from our ~~CAG~~GovDeals segment ~~decreased 24.6%~~increased 143.4%, or ~~$10.4~~$8.6 million, due to a ~~lower volume of goods sold under our Surplus Contract, and a change~~152.2%, or $88.2 million, increase in mix of commodities to lower value commodities sold under our Scrap contract. Also contributing to the decrease in revenue is lower service revenue related to our Surplus contract, as well as a decrease in revenue within our CAG Commercial business. GMV from adding new sellers and increasing volumes with existing sellers across several key categories, including transportation and real estate, and an increase in recovery rates on assets sold, driven by our ~~CAG segment decreased 29.4%, or $22.4 million, due to a lower volume of goods sold under our Surplus Contract, a change~~growing buyer base, automated asset promotion tools, and favorable macroeconomic factors in ~~mix of commodities to lower value commodities sold under our Scrap contract,~~certain asset categories, such as ~~well as a decrease in GMV related to our CAG Commercial business. Gross profit within the CAG segment decreased 17.0%, or $3.6 million, to $17.6 million for the~~transportation assets. The three months ended ~~December 31, 2017, from $21.2 million for~~June 30, 2020 also contained the ~~three months ended December 31, 2016. This decrease can primarily be attributed to~~negative impact of the ~~lower volume~~economic restrictions put in place at the onset of ~~goods sold under our Surplus Contract, a change in mix of commodities to lower value commodities sold under our Scrap Contract, and lower service revenue under~~ the ~~Surplus Contract.~~COVID-19 pandemic. As a ~~percentage~~result of ~~revenue,~~the increase in revenues, gross profit increased ~~to 54.9%~~147.7%, ~~from 49.9%.~~or $8.3 million. Gross profit margin remained relatively consistent between the periods.

RSCG. Revenue from our RSCG segment ~~decreased 4.3%~~increased 31.4%, or ~~$0.9 million. The decrease in revenue is driven by the change in mix from purchase model~~$10.5 million, due to ~~consignment model transactions. GMV from our RSCG segment increased 16.9%~~a 36.1%, or

~~$4.2~~ $16.2 million, ~~over fiscal 2016. The~~ increase in GMV ~~is attributable~~driven by growing volumes within existing seller accounts and launching new programs with mid-sized and large retailers looking to capitalize on the secular growth in online retail. Revenues grew at a slightly lower rate than GMV due to an increase in the mix of transactions conducted under the consignment model. This mix however, served to increase gross profit by 47.7%, or $5.7 million. Gross profit margin increased ~~sales~~4.5% due to this change in the mix of transactions conducted under ~~our~~the consignment model ~~during fiscal 2018. The overall decrease in revenue, but~~ as well as improved recovery rates on assets sold.

CAG. Revenue from the CAG segment increased by 32.9%, or $2.1 million, due to a 37.5%, or $10.2 million, increase in GMV isfrom continued growth of our industrial and heavy equipment categories, increases in principal transactions across the EMEA and Asia-Pacific regions, and increased use of the consignment model internationally. Revenues did not increase at the same rate as GMV due to increases in transactions using partner organizations. As a ~~change~~result of the increase in ~~mix from purchase to consignment model transactions.~~revenues, gross profit increased 20.5%, or $1.2 million. Gross profit ~~within~~margin decreased 8.7% due to an increase in the mix of transactions conducted under the purchase model, responding to the reducing levels of COVID-19 related restrictions on cross-border transactions.

Machinio. Revenue from our Machinio segment increased 37.7%, or $0.7 million, due to an increase in subscription activity. As a result of the increase in revenues, gross profit increased 37.4%, or $0.6 million.

Consolidated Results

Revenue - Total consolidated revenue increased $21.9 million, or 46.0%. Refer to the discussion of Segment Results above for discussion of the increase in revenue.

Cost of goods sold (excludes depreciation and amortization). Cost of goods sold increased $6.0 million, or 26.9%, which changed at a lower rate than Revenue primarily due to an increase in the mix of transactions conducted under the consignment model.

Technology and operations expenses. Technology and operations expenses increased $2.8 million, or 29.3%, to support the increased transaction volumes in the RSCG ~~segment decreased 3.9%~~and CAG segments.

Sales and marketing expenses. Sales and marketing expenses increased $2.2 million, or 30.3%, as a result of our continued efforts to promote our consolidated marketplace and expand market share in key verticals.

General and administrative expenses. General and administrative expenses increased $1.5 million, or ~~$0.3 million for~~23.5%, as the temporary actions taken in the prior year to reduce operating expenses in response to the COVID-19 pandemic are no longer in place.

Depreciation and amortization. Depreciation and amortization expense was consistent between the three months ended ~~December 31, 2017, due to the decrease in revenue. As a percentage~~June 30, 2021 and 2020.

Other operating expenses. Other operating expenses of ~~revenue, gross profit slightly increased to 32.8%, from 32.7%.~~

~~Corporate & Other.~~ Revenue from Corporate & Other primarily relates to IronDirect and certain TruckCenter operations. The decrease in revenue of $0.5 million is largely made up of the decreases in revenue related to our decision to exit certain TruckCenter operations in January 2017, partially offset by increases in revenue from IronDirect. Gross profit within Corporate & Other decreased $1.0 million over prior year, mostly attributable to a $0.6 million inventory reserve within IronDirect during the first quarter of fiscal 2018, and $0.3 million of gross profit related to our Truckcenter operations during the three months ended December 31, 2017, which we subsequently exited.

~~Consolidated Results~~

~~Total Revenue.~~ Total consolidated revenue decreased $9.7 million, or 13.7%, to $61.1 million for the three months ended December 31, 2017, from $70.8 million for the three months ended December 31, 2016, primarily due to a $10.4 million decrease in revenue from our CAG segment, a $0.9 million decrease in revenue from our RSCG segment, partially offset by a $1.2 million increase in revenue from our GovDeals segment. Total consolidated GMV decreased $4.3 million, or 2.8%, to $155.4 million for the three months ended December 31, 2017, from $159.7 million for the three months ended December 31, 2016, primarily due to a $22.4 million decrease in GMV from our CAG segment, a $1.2 million decrease within Corporate & Other, partially offset by a $15.1 million increase in GMV from our GovDeals segment, and a $4.2 million increase in GMV from our RSCG segment.

~~Cost of goods sold.~~ Cost of goods sold decreased $4.7 million, or 14.6%, to $27.6 million for the three months ended December 31, 2017, from $32.3 million for the three months ended December 31, 2016. Approximately $4.3 million of this decrease is attributable to a lower volume of sales under our Surplus Contract during the three months ended December 31, 2017. In line with these changes, cost of goods sold slightly decreased to 45.2% of revenue, from 45.7%.

~~Seller distributions.~~ Seller distributions decreased $1.2 million, or 26.7%, to $3.3 million for the three months ended December 31, 2017, from $4.5 million for the three months ended December 31, 2016, due to lower sales under our Scrap Contract during the three months ended December 31, 2017. As a percentage of revenue, seller distributions decreased to 5.4%, from 6.4%.

~~Technology and operations expenses.~~ Technology and operations expenses decreased $3.8 million, or 17.4%, to $18.1 million for the three months ended December 31, 2017, from $21.9 million for the three months ended December 31, 2016, due to a decrease in staff costs of approximately $3.4 million, partially the result of business realignment activities. As a percentage of revenue, technology and operations expenses decreased to 29.6%, from 30.9%.

~~Sales and marketing expenses.~~ Sales and marketing expenses decreased $1.7 million, or 17.0%, to $8.3 million for the three months ended December 31, 2017, from $10.0 million for the three months ended December 31, 2016, due to decreases in staff cost of approximately $1.2 million, as well as lower marketing and promotional expenses. As a percentage of revenue, sales and marketing expenses decreased to 13.6%, from 14.1% in the prior year.

~~General and administrative expenses.~~ General and administrative expenses decreased $2.3 million, or 23.2%, to $7.6 million for the three months ended December 31, 2017, from $9.9 million for the three months ended December 31, 2016. Included within this decrease are reductions in overall staff cost of approximately $1.2 million, partially the result of business realignment activities, as well as lower non-income tax regulatory costs, and a decrease in certain lease costs. As a percentage of revenue, general and administrative expenses decreased to 12.4%, from 13.9% in the prior year.

~~Depreciation and amortization expenses.~~ ~~Depreciation and amortization expenses decreased $0.2 million, or 14.3%, to~~ $1.2 million for the three months ended ~~December 31, 2017, from $1.4~~June 30, 2021 primarily related to the $1.1 million ~~for~~loss following the full satisfaction and discharge of JTC's indebtedness to the Company. Refer to the discussion in Note 2 — Summary of Significant Accounting Policies.

Interest and other income, net. Interest and other income, net was consistent between the three months ended ~~December 31, 2016.~~June 30, 2021 and 2020.

~~Other operating expenses (income).~~ Other operating expenses (income) reflected an expense of approximately $1.5 million in the three months ended December 31, 2017, which consisted of approximately $1.3 million of restructuring cost (for further information, see Note 11 to the Consolidated Financial Statements included in this Report), and a $0.1 million loss on the value of a right the Company holds from its participation in certain principal transactions in the Company's CAG business. In the three months ended December 31, 2016, Other operating expenses (income) reflected income of $0.9 million, which

~~represented a gain on the value of a right the Company holds from its participation in certain principal transactions in the Company's CAG business.~~

~~Interest and other (income) expense, net.~~ Interest and other (income) expense, net, increased $0.4 million over prior year, consisting of a gain on sale of equipment of approximately $0.3 million, and $0.1 million of interest income on our note receivable.

~~(Benefit) provision~~Provision for income taxes. ~~(Benefit) provision~~Provision for income taxes increased ~~$4.9~~$0.2 million ~~to a benefit of $4.8 million for the three months ended December 31, 2017, from a provision of $0.1 million for the three months ended December 31, 2016,~~ due to ~~a decrease in the deferred tax balance resulting from the newly enacted lower corporate tax rate, a reduction to the valuation allowance, and~~ the impact of foreign, state, and local taxes and permanent tax ~~adjustments.~~adjustments, as well as the increase in our Income from operations.

~~Net loss.~~ ~~Net loss for~~Nine Months Ended June 30, 2021 Compared to the ~~three~~Nine Months Ended June 30, 2020

Segment Results

GovDeals. Revenue from our GovDeals segment increased 66.7%, or $14.6 million, due to a 70.2%, or $150.3 million, increase in GMV from adding new sellers and increasing volumes with existing sellers across several key categories, including transportation and real estate. The gain also reflects an increase in recovery rates on assets sold, driven by our growing buyer base, automated asset promotion tools, and favorable macroeconomic factors in certain asset categories, such as transportation assets. The nine months ended ~~December 31, 2017 was $1.2~~June 30, 2020 also contained the negative impact of the economic restrictions put in place at the onset of the COVID-19 pandemic. As a result of the increase in revenues, gross profit increased 69.7%, or $14.2 million. Gross profit margin remained relatively consistent between the periods.

RSCG. Revenue from our RSCG segment increased 16.3%, or $16.6 million, ~~compared~~due to ~~$8.4~~a 32.8%, or $42.4 million, increase in GMV driven by growing volumes within existing seller accounts and launching new programs with mid-sized and large retailers looking to capitalize on the secular growth in online retail. Revenues did not increase at the same rate as GMV due to an increase in the mix of transactions conducted under the consignment model. As a result of the increase in revenues, gross profit increased 39.2%, or $13.6 million. Gross profit margin increased 6.7% due to an increase in the mix of transactions conducted under the consignment model and improved recovery rates on assets sold.

CAG. Revenue from the CAG segment increased by 21.2%, or $4.5 million due to a 33.5%, or $26.7 million increase in GMV due to continued growth of our industrial and heavy equipment categories, increases in principal transactions across the EMEA and Asia-Pacific regions, and increased use of the consignment model internationally. Revenues did not increase at the same rate as GMV due to increases in transactions using partner organizations and in the mix of transactions conducted under the consignment model. As a result of the increase in revenues, gross profit increased 23.0% or $3.8 million. Gross profit margin remained relatively consistent between the periods.

Machinio. Revenue from our Machinio segment increased 27.6%, or $1.5 million, due to an increase in subscription activity. As a result of the increase in revenues, gross profit increased 26.7%, or $1.3 million.

Consolidated Results

Revenue.Total consolidated revenue increased $37.2 million, or 24.8%. Refer to the discussion of Segment Results above for discussion of the ~~three~~increase in revenue.

Cost of goods sold (excludes depreciation and amortization). Cost of goods sold increased $4.2 million, or 5.7%, which changed at a lower rate than Revenue primarily due to lower cost of sales associated with principal transactions, which benefited from higher recovery rates during the period, and an increase in the mix of transactions conducted under the consignment model.

Technology and operations expenses. Technology and operations expenses increased $2.6 million, or 8.1%, to support the increased transaction volumes in the RSCG and CAG segments.

Sales and marketing expenses. Sales and marketing expenses increased $0.6 million, or 2.0%, primarily due to increase in marketing expenses to promote our consolidated marketplace and expand market share in key verticals.

General and administrative expenses. General and administrative expenses were consistent between the nine months ended ~~December 31, 2016.~~June 30, 2021 and 2020.

Depreciation and amortization. Depreciation and amortization expense increased $0.5 million, or 11.2%, due to an increase in amortization of capitalized software related to the continued development and enhancement of our e-commerce platform and tools.

Other operating expenses. Other operating expenses increased $0.9 million, or 178.0%, primarily related to the $1.1 million loss following the full satisfaction and discharge of JTC's indebtedness to the Company. Refer to the discussion in Note 2 — Summary of Significant Accounting Policies.

Interest and other income, net. Interest and other income, net increased $0.3 million due the effect of changes in foreign exchange rates.

Provision for income taxes. Provision for income taxes increased $0.4 million due to the impact of foreign, state, and local taxes and permanent tax adjustments, as well as the increase in our Income from operations.

Liquidity and Capital Resources

~~Historically, our primary~~Our operational cash needs ~~have been~~primarily relate to working capital, ~~(including~~including staffing costs, technology expenses and capital used for inventory ~~purchases),~~purchases, which we have funded ~~primarily~~ through existing cash balances and cash generated from operations. From time to time, we may use our capital resources for other activities, such as contract start-up costs, joint ventures, share repurchases and acquisitions. As of ~~December 31, 2017,~~June 30, 2021, we had ~~approximately $96.8~~$112.7 million in ~~cash. Throughout the quarter, we have continued to advance the design~~Cash and ~~development~~cash equivalents.

Most of our ~~LiquidityOne~~sales are recorded subsequent to receipt of payment authorization, utilizing credit cards, wire transfers, and PayPal, an Internet based payment system, as methods of payments. As a result, we are not subject to significant collection risk, as goods are generally not shipped before payment is received.

The COVID-19 pandemic has caused the Company's GMV and revenues to fluctuate, and the Company initially implemented cost control measures to protect against the uncertainties created by the severe economic restrictions in its initial phases. From a cash flow perspective, the Company employed working capital management practices, primarily in the form of temporary extensions to vendor payment terms, and also experienced accumulation in its payables to sellers balance due to COVID-19 restrictions, which continue to be a factor in certain countries, causing some buyer delays in their ability to pick up purchased assets.

We expect to continue to invest in enhancements to our e-commerce technology platform, marketplace capabilities and tools for data-driven product recommendations, omni-channel behavioral marketing, predictive analytics, and the implementation of integrated services ~~and analytical tools to empower~~for our ~~clients to maximize bottom-line return, and transform their supply chain into~~RSCG segment.

We did not record a ~~high-performing business function. During the fourth quarter of fiscal year 2017, we launched our Network International energy marketplace~~provision for deferred U.S. tax expense on the ~~new LiquidityOne platform, and during fiscal 2018,~~undistributed earnings of foreign subsidiaries because we plan to launch further marketplaces onto the platform. We will continue to incur additional costs throughout the duration of this initiative to implement the new platform and educate our employees and clients about the initiative.

The effects of the international provisions of the Tax Cuts and Job Act (“the Act”), which establish a territorial tax system and subject certain foreign earnings on which US tax is currently deferred to a one-time transition tax is uncertain. Based on a preliminary analysis, the Company has not recorded any provisional amounts in the financial statements for the three months ending December 31, 2017 and will re-evaluate its existing accounting positionintend to indefinitely reinvest ~~unremitted~~the earnings of these foreign ~~earnings.~~subsidiaries outside the United States. The amount of such ~~unremitted~~undistributed foreign earnings was ~~approximately $8.4~~$7.0 million as of ~~December 31, 2017.~~June 30, 2021. As of ~~December 31, 2017,~~June 30, 2021 and September 30, ~~2017, approximately $17.4~~2020, $21.8 million and ~~$14.9~~$19.5 million, respectively, of ~~cash~~Cash and cash equivalents was held ~~overseas~~outside of the U.S.

We ~~are~~have been authorized to repurchase issued and outstanding shares of our common stock under a share repurchase program approved by our Board of Directors. Share repurchases may be made through open market purchases, privately negotiated transactions or otherwise, at times and in such amounts as management deems appropriate. The timing and actual number of shares repurchased will depend on a variety of factors including price, corporate and regulatory requirements and other market conditions. The repurchase program may be discontinued or suspended at any time and will be funded using our available cash.

As of the fiscal year ended September 30, 2020, we had $6.1 million of remaining share repurchase authorization. On March 8, 2021, our Board of Directors authorized an additional $10 million of share repurchases of the Company's outstanding shares of common stock through March 31, 2023. We ~~did not repurchase~~repurchased 647,583 shares for $12.0 million and 957,079 shares for $16.1 million under this program during the three and six months ended ~~December~~March 31, ~~2017 or 2016.~~2021, respectively. As of ~~December~~March 31, ~~2017,~~2021, we ~~may~~had no remaining authorization to repurchase ~~an additional $10.1 million in~~ shares under this program.

~~Most~~On May 3, 2021, the Company's Board of Directors authorized a new stock repurchase plan (the “May 3, 2021 Stock Repurchase Plan”) of up to $15 million of our ~~sales are recorded subsequent to receipt~~outstanding shares of payment authorization, utilizing credit cards, wire transfers and PayPal, an Internet based payment system, as methods of payments. As a result, we are not subject to significant collection risk, as goods are generally not shipped before payment is received.common stock through June 30, 2023. We made no repurchases under the May 3, 2021 Stock Repurchase Plan during the three months ended June 30, 2021.

Changes in Cash Flows: ~~Three~~Nine Months Ended ~~December 31, 2017~~June 30, 2021 Compared to ~~Three~~the Nine Months Ended ~~December 31, 2016~~June 30, 2020

Net cash provided by operating activities was ~~$3.5~~$54.3 million and $9.2 million for the ~~three~~nine months ended ~~December 31, 2017, as compared to net cash used by operating activities of $5.0 million for the three months ended December 31, 2016.~~June 30, 2021 and 2020, respectively. The ~~$8.5~~$45.1 million increase in cash provided by operations between periods was attributable to ~~improved profitability~~$31.2 million of higher Net income as ~~well as~~adjusted for non-cash items; changes in payables to sellers, driven by increasing transactions volumes; changes to accounts payable, accrued expenses and other liabilities driven by the management of working capital; and partially offset by a $6.6 million increase in inventory driven by the continued growth in our RSCG and CAG segments. Our working capital ~~improvements primarily from collections~~accounts are subject to natural variations depending on the rate of ~~receivables~~change of our transaction volumes, the timing of cash receipts and ~~sales of inventory.~~

~~Net cash used~~payments, and variations in ~~investing activities was $1.0 million~~our transaction volumes related to settlements between our buyers and sellers. However, there have been no significant changes to the working capital requirements for the three months ended December 31, 2017, and $2.3 million for the three months ended December 31, 2016. Net cash used in investing activities for the three months ended December 31, 2017 consisted primarily of expenditures for capitalized software, purchases of equipment, and leasehold improvements.Company.

Net cash provided by investing activities was $0.9 million for the nine months ended June 30, 2021, and $28.9 million for the nine months ended June 30, 2020. The $(28.0) million decrease in cash provided by investing activities was driven by a $(30.0) million net impact of maturities of Short-term investments during the nine months ended June 30, 2020 as the Company transitioned to using cash equivalent money market funds in its treasury strategy. This activity was partially offset by a $1.8 million increase in proceeds from the JTC promissory note during the nine months ended June 30, 2021 due to receipt of $3.5 million during the three months ended June 30, 2021 as a result of the Company entering into the First Amendment to the Forbearance Agreement with JTC as discussed in Note 2 - Summary of Significant Accounting Policies.

Net cash (used in) financing activities was $(19.4) million for the nine months ended June 30, 2021, and $(1.8) million for the nine months ended June 30, 2020. The $(17.6) million increase in cash used in financing activities was ~~zero for the three months ended December 31, 2017,~~primarily driven by $16.1 million in common stock repurchases and a $3.0 million increase in taxes paid associated with net ~~cash provided by financing activities was $0.03 million for the three months ended December 31, 2016. Net cash provided by~~

~~financing activities for the three months ended December 31, 2016 consisted~~settlement of stock compensation awards, primarily ~~of proceeds~~ from the ~~exercise~~vesting of ~~common stock options.~~awards with market conditions due to the achievement of increases in the Company's share price.

Capital ~~Expenditures.~~expenditures. Our capital expenditures consist primarily of capitalized software, computers and purchased software, office equipment, furniture and fixtures, and leasehold improvements. ~~Capitalized software includes costs associated with our LiquidityOne platform.~~ The timing and volume of such capital expenditures in the future will be affected by the addition of new ~~customers~~sellers or buyers or expansion of existing ~~customer~~seller or buyer relationships. We intend to fund those expenditures primarily from our existing cash balances and operating cash flows. Our capital expenditures for the ~~three~~nine months ended ~~December 31, 2017~~June 30, 2021 were ~~$1.0~~$3.5 million. As of ~~December 31, 2017,~~June 30, 2021, we had no significant outstanding commitments for capital expenditures.

~~We believe that our existing cash and cash equivalents will be sufficient to meet our anticipated cash needs for at least the next 12 months.~~ Our future capital requirements will depend on many factors including our rate of revenue growth, the timing and extent of spending to support development efforts, the expansion of sales and marketing activities, the development and deployment of new marketplaces, the introduction of new value-added services and the costs to establish additional distribution centers. Although we are currently not a party to any definitive agreement with respect to potential investments in, or acquisitions of, complementary businesses, products or technologies, we may enter into these types of arrangements in the future, which could also require us to seek additional equity or debt financing. The sale of additional equity securities or convertible debt securities would result in additional dilution to our stockholders. Additional debt would result in increased interest expense and could result in covenants that would restrict our operations. There is no assurance that such financing, if required, will be available in amounts or on terms acceptable to us, if at all.

Off-Balance Sheet Arrangements

We do not have any transactions, ~~obligations~~agreements or ~~relationships~~other contractual arrangements that could be considered material off-balance sheet arrangements.

Item 3.Quantitative and Qualitative Disclosures ~~about~~About Market Risk.

Interest rate sensitivity. ~~We had no debt as~~ As of ~~December 31, 2017, and thus~~June 30, 2021, we do not have any ~~related interest rate exposure.~~debt, and we are not holding any short-term investments, but we do hold $40.0 million of cash and cash equivalents in money market funds. Changes in yields on the money market funds are not expected to have a significant impact to our consolidated results of operations. Our investment policy requires us to invest funds in excess of current operating requirements. The principal objectives of our investment activities are to preserve principal, provide liquidity and maximize income consistent with minimizing risk of material loss.

Exchange rate sensitivity. ~~We consider our exposure to foreign~~ Because of the number of countries and currencies we operate in, movements in currency exchange ~~rate fluctuations to be minimal, as approximately 13.4% percent~~rates may affect our results. We report our operating results and financial condition in U.S. dollars. Our U.S. operations earn revenues and incur expenses primarily in U.S. dollars. Outside the United States, we predominantly generate revenues and expenses in the local currency. When we translate the results and net assets of these operations into U.S. dollars for reporting purposes, movements in exchange rates will affect reported results and net assets. Volatile market conditions arising from the COVID-19 pandemic may result in significant changes in exchange rates, which could affect our ~~sales are denominated~~results of operations expressed in ~~foreign currencies. We have not engaged in any hedging or other derivative transactions to date.~~U.S. dollars.

Item 4. Controls and Procedures.

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer ~~and Chief Accounting Officer,~~(Principal Financial Officer), as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

During the ~~quarter~~three months ended ~~December 31, 2017, as part of~~June 30, 2021, no change occurred in our ~~LiquidityOne platform project, we continued to roll out a new enterprise resource planning system to additional areas of the company. The roll-out resulted in changes to certain~~ internal controls over financial ~~reporting. There has not occurred any further change in our internal control over financial~~ reporting that ~~has~~ materially affected, or is reasonably likely to materially affect, our internal ~~control~~controls over financial reporting.

As of ~~December 31, 2017,~~June 30, 2021, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer ~~our Chief Financial Officer,~~ and our Chief ~~Accounting~~Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our Chief Executive Officer ~~Chief Financial Officer,~~ and Chief ~~Accounting~~Financial Officer concluded that our disclosure controls and procedures were effective and were operating to provide reasonable assurance that the information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and to provide reasonable assurance that such information is accumulated and communicated to our management, including our principal executive officer ~~principal financial officer,~~ and principal ~~accounting~~financial officer, as appropriate to allow timely decisions regarding required disclosure.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

~~Howard v. Liquidity Services, Inc., et al., Civ. No. 14-1183 (D.D.C. 2014).~~

~~On July 14, 2014, Leonard Howard filed a putative class action complaint~~Information regarding the Company's legal proceedings may be found in the United States District Court for the District of Columbia (the ‘‘District Court’’) against our company and our chief executive officer, chief financial officer, and chief accounting officer, on behalf of stockholders who purchased our common stock between February 1, 2012, and May 7, 2014. The complaint alleged that the defendants violated Sections 10(b) and 20(a)Note 12 of the Securities Exchange Act of 1934 by, among other things, misrepresenting our growth initiative, growth potential, and financial and operating conditions, thereby artificially inflating its stock price, and sought unspecified compensatory damages and costs and expenses, including attorneys’ and experts’ fees. On October 14, 2014, the Court appointed Caisse de Dépôt et Placement du Québec and the Newport News Employees’ Retirement Fund as co-lead plaintiffs. The plaintiffs filed an amended complaint on December 15, 2014, which alleges substantially similar claims, but which does not name the chief accounting officer as a defendant. On March 2, 2015, we moved to dismiss the amended complaint for failure to state a claim or plead fraud with the requisite particularity. On March 31, 2016, the Court granted that motion in part and denied it in part. Only the claims relatedaccompanying Notes to the alleged misrepresentation regarding the Company’s retail division were not dismissed. On May 16, 2016, we answered the amended complaint. Plaintiffs’ class certification was granted on September 6, 2017. The scheduling order in this action requires that fact discovery be completed by April 9, 2018, and that expert discovery be completed by October 1, 2018.Unaudited Consolidated Financial Statements.

~~We believe the allegations in the amended complaint are without merit and cannot estimate a range of potential liability, if any, at this time.~~

~~In re Liquidity Services, Inc. Derivative Litigation, Civ. No. 2017-0080-JTL (Del. Ch.).~~

On February 2, 2017, plaintiff David Girardi filed a putative derivative complaint in the Court of Chancery of the State of Delaware (the “Court of Chancery”), and on February 7, 2017, plaintiff Harold Slingerland filed a putative derivative complaint in the Court of Chancery. On March 9, 2017, plaintiffs Girardi and Slingerland filed a consolidated putative derivative complaint in the Court of Chancery, purportedly on our behalf. The consolidated complaint names as defendants our chief executive officer and chief financial officer, as well as certain other individuals who served on our Board of Directors between 2012 and 2014, and seeks recovery from those individuals, not from us. The complaint asserts that, among other things, the defendants breached their fiduciary duties to us and our stockholders by causing or allowing us to make the same misstatements that are alleged in the amended complaint in the Howard action, and for alleged trading in our securities while in possession of material non-public information. On November 27, 2017, the Court of Chancery granted the defendants’ motion to dismiss.

Following the dismissal of the putative derivative action discussed above, former plaintiffs Girardi and Slingerland sent us a letter dated January 5, 2018 (the “Shareholder Demand”) demanding that the Board of Directors take action to remedy purported breaches of fiduciary duties allegedly related to the claims asserted in the above-discussed securities class action and derivative actions. We acknowledged the Shareholder Demand on January 22, 2018. Our Board of Directors has delegated evaluation of the Shareholder Demand to the Audit Committee of the Board of Directors.

Item 1A. Risk Factors.

In addition to the other information set forth in this report, you should carefully consider the factors set forth in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended September 30, ~~2017,~~2020, which could materially affect our business, financial condition or future results. The risks described in our Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Unregistered Sales of Equity Securities

None during the period covered by this report.

Use of Proceeds

Not applicable.

Issuer Purchases of Equity Securities

There was no share repurchase activity during the three months ended June 30, 2021.

We have been authorized to repurchase issued and outstanding shares of our common stock under a share repurchase program approved by our Board of Directors. Share repurchases may be made through open market purchases, privately negotiated transactions or otherwise, at times and in such amounts as management deems appropriate. The timing and actual number of shares repurchased will depend on a variety of factors including price, corporate and regulatory requirements and other market conditions. The repurchase program may be discontinued or suspended at any time and will be funded using our available cash.

As of June 30, 2021, the Company had $15 million of remaining authorization to repurchase shares under the May 3, 2021 Stock Repurchase Plan.

Separate from the share repurchase program, our stock incentive plans allow for participants to exercise stock options by surrendering shares of common stock equivalent in value to the exercise price due. No shares of common stock were surrendered by participants in the exercise of stock options during the three months ended June 30, 2021.

Item 5. Other Information.

None

Item 6. Exhibits.



Exhibit No.		Description
~~3.1~~2.1		Stock Purchase Agreement, dated July 10, 2018, by and among the Company, Machinio, Corp., the stockholders of Machinio, Corp., and Shareholder Representative Services., LLC., incorporated herein by reference to Exhibit 2.1 to the Company's Quarterly Report on 10-Q, filed with SEC on August 2, 2018.
3.1		Fourth Amended and Restated Certificate of Incorporation, incorporated herein by reference to Exhibit 3.1 to Amendment No. 2 to the Company’s Registration Statement on Form S-1 (Registration No. 333-129656), filed with the SEC on January 17, 2006.
3.2		Amended and Restated Bylaws dated August 2, 2016,.incorporated herein by reference to Exhibit 3.2 to the Company's Quarterly Report on 10-Q, filed with SEC on August 4, 2016.
~~10.1~~31.1		~~Executive Employment Agreement, dated January 10, 2018, by and between Roger Gravley and the Company.#~~
~~31.1~~	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.
31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.
~~31.3~~32.1		~~Certification of Chief Accounting Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.~~
~~32.1~~	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
~~32.3~~101		~~Certification of Chief Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~
~~101~~	The following materials from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended ~~December 31, 2017,~~June 30, 2021, formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income (Loss), (iv) Consolidated Statement of Stockholders' Equity, (v) Consolidated Statements of Cash Flows, and ~~(iv)~~(vi) Notes to the Unaudited Consolidated Financial Statements.
104		Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

~~# Designates management or compensation plans.~~

SIGNATURES

Pursuant to the requirements ~~of Section 13 or 15(d)~~ of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly ~~authorized on February 1, 2018.~~authorized.



LIQUIDITY SERVICES, INC.
		(Registrant)


~~By:~~August 5, 2021	By:	/s/ William P. Angrick, III
		William P. Angrick, III
		Chairman of the Board of Directors
		and Chief Executive Officer


~~By:~~August 5, 2021	By:	/s/ Jorge A. Celaya
		Jorge A. Celaya
	~~Executive Vice President and~~	Chief Financial Officer


~~By:~~	~~/s/ Michael Sweeney~~
	~~Michael Sweeney~~
	~~Vice President and Chief Accounting Officer~~


		June 30, 2021						September 30, 2020
(dollars in thousands)	Useful Life (in years)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Contract intangibles	6	$	3,100	$	(1,550)	$	1,550	$	3,100	$	(1,162)	$	1,938
Technology	5	2,700		(1,620)		1,080		2,700		(1,215)		1,485
Patent and trademarks	7 - 10	2,350		(1,203)		1,147		2,329		(994)		1,335
Total intangible assets		$	8,150	$	(4,373)	$	3,777	$	8,129	$	(3,371)	$	4,758



ý(Mark One)
☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF ~~1934.~~1934



	December 31, 2017			September 30, 2017
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	96,766		$	94,348
Accounts receivable, net of allowance for doubtful accounts of $685 and $668 at December 31, 2017 and September 30, 2017, respectively	7,442			11,598
Inventory	17,053			20,736
Prepaid taxes	2,517			2,466
Prepaid expenses and other current assets	4,878			9,774
Total current assets	128,656			138,922
Property and equipment, net	16,531			16,793
Intangible assets, net	425			427
Goodwill	45,466			45,388
Net deferred long-term tax assets	962			962
Other assets	12,809			12,737
Total assets	$	204,849		$	215,229
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	11,509		$	13,099
Accrued expenses and other current liabilities	26,469			30,193
Distributions payable	2,388			3,081
Payables to sellers	25,377			24,383
Total current liabilities	65,743			70,756
Deferred taxes and other long-term liabilities	6,584			11,837
Total liabilities	72,327			82,593
Commitments and contingencies (Note 12)	0			0
Stockholders’ equity:
Common stock, $0.001 par value; 120,000,000 shares authorized; 31,889,679 shares issued and outstanding at December 31, 2017; 31,503,349 shares issued and outstanding at September 30, 2017	29			29
Additional paid-in capital	228,626			227,264
Accumulated other comprehensive loss	(6,482		)	(6,431		)
Retained earnings (accumulated deficit)	(89,651		)	(88,226		)
Total stockholders’ equity	132,522			132,636
Total liabilities and stockholders’ equity	$	204,849		$	215,229



	Three Months Ended December 31,
	2017			2016
Revenue	$	40,280		$	47,980
Fee revenue	20,863			22,816
Total revenue	61,143			70,796
Costs and expenses from operations:
Cost of goods sold	27,631			32,271
Seller distributions	3,312			4,548
Technology and operations	18,100			21,892
Sales and marketing	8,310			9,987
General and administrative	7,572			9,857
Depreciation and amortization	1,211			1,429
Other operating expenses (income)	1,459			(928		)
Total costs and expenses	67,595			79,056
Loss from operations	(6,452		)	(8,260		)
Interest and other (income) expense, net	(425		)	34
Loss before provision for income taxes	(6,027		)	(8,294		)
(Benefit) provision for income taxes	(4,815		)	103
Net loss	$	(1,212	)	$	(8,397	)
Basic and diluted loss per common share	$	(0.04	)	$	(0.27	)
Basic and diluted weighted average shares outstanding	31,876,603			31,261,603



Goodwill (in thousands)	CAG		GovDeals		Total
Balance at September 30, 2017	21,657		23,731		45,388
Translation adjustments	78		—		78
Balance at December 31, 2017	$	21,735	$	23,731	$	45,466



	Future Amortization
Years ending September 30,	(in thousands)
2018 Remaining nine months	$	58
2019	71
2020	69
2021	58
2022 and thereafter	169
Total	$	425



	Options		Weighted- Average Exercise Price
Options outstanding at September 30, 2016	1,708,487		$	13.91
Options granted	232,845		9.18
Options exercised	(12,421	)	7.41
Options canceled	(223,938	)	13.00
Options outstanding at September 30, 2017	1,704,973		13.43
Options granted	531,300		4.65
Options exercised	—		—
Options canceled	(225,516	)	12.39
Options outstanding at December 31, 2017	2,010,757		11.23
Options exercisable at December 31, 2017	1,109,171		15.30



	Restricted Shares		Weighted- Average Fair Value
Unvested restricted shares at September 30, 2016	2,661,245		$	9.34
Restricted shares granted	849,352		8.78
Restricted shares vested	(748,266	)	11.04
Restricted shares canceled	(571,900	)	9.81
Unvested restricted shares at September 30, 2017	2,190,431		8.42
Restricted shares granted	77,600		3.66
Restricted shares vested	(386,330	)	9.19
Restricted shares canceled	(280,997	)	10.18
Unvested restricted shares at December 31, 2017	1,600,704		7.70


~~Level 1~~	~~Quoted market prices in active markets for identical assets or liabilities;~~


~~Level 2~~	~~Inputs other than Level 1 inputs that are either directly or indirectly observable; and~~


~~Level 3~~	~~Unobservable inputs developed using estimates and assumptions developed by the Company, which reflect those that a market participant would use.~~


1.	~~Organization~~


2.	~~Summary of Significant Accounting Policies~~


3.	~~Significant Contracts~~


6.	~~Income Taxes~~



	Level 3 Assets

Balance at September 30, 2017	$	491
Acquisition of financial assets	—
Settlements	(375		)
Change in fair value of financial assets	(110		)
Balance at December 31, 2017	$	6



	Three Months Ended December 31,
Qualified Defined Benefit Pension Plan	2017			2016
	(dollars in thousands)
Service cost	$	—		$	—
Interest cost	166			144
Expected return on plan assets	(252		)	(204		)
Settlement cost	(4		)	—
Total net periodic (benefit)	$	(90	)	$	(60	)



(in thousands)	Liability Balance at September 30, 2017		Business Realignment Expenses		Cash Payments			Liability Balance at December 31, 2017
Employee severance and benefit costs:
CAG	793		751		(207		)	1,337
Corporate & Other	399		474		(737		)	136
Total employee severance and benefit costs	$	1,192	$	1,225	$	(944	)	$	1,473
Occupancy costs:
CAG	—		94		(55		)	39
Corporate & Other	1,988		28		(331		)	1,685
Total occupancy costs	$	1,988	$	122	$	(386	)	$	1,724
Total business realignment	$	3,180	$	1,347	$	(1,330	)	$	3,197