1235468--12/8/2008--LIQUIDITY_SERVICES

related topics

{system, service, information}

{customer, product, revenue}

{acquisition, growth, future}

{regulation, change, law}

{product, market, service}

{personnel, key, retain}

{property, intellectual, protect}

{stock, price, operating}

{regulation, government, change}

{condition, economic, financial}

{provision, law, control}

{loss, insurance, financial}

{operation, international, foreign}

{product, liability, claim}

{competitive, industry, competition}

We depend on contracts with the United States Department of Defense for a significant portion of our revenue, and if our relationship with this customer is disrupted, we would experience a significant decrease in revenue and income. We could experience a significant decrease in our revenue and earnings under our new Surplus Contract, which contains certain terms that are different from those of the current Surplus Contract. Unfavorable findings resulting from a government investigation or audit could subject us to a variety of penalties and sanctions, could negatively impact our future operating results and could force us to adjust previously reported operating results. The success of our business depends on our ability to successfully obtain a supply of merchandise for our buyers and to attract and retain active professional buyers to create sufficient demand for our sellers. We may not be able to compete successfully against existing or future competitors. If we fail to manage our growth effectively, our operating results could be adversely affected. Our business depends on the continued growth of the Internet and e-commerce. Our quarterly operating results have fluctuated in the past and may do so in the future, which could cause volatility in our stock price. Our operating results depend on our websites, network infrastructure and transaction processing systems. Service interruptions or system failures could negatively affect the demand for our services and our ability to grow our revenue. If we do not respond to rapid technological changes or upgrade our systems, we could fail to grow our business and our revenue could decrease. Shipment of merchandise sold in our marketplaces could be delayed or disrupted by factors beyond our control and we could lose buyers and sellers as a result. A significant interruption in the operations of our customer service system or our distribution centers could harm our business and operating results. If we fail to accurately predict our ability to sell merchandise in which we take inventory risk and credit risk, our margins may decline as a result of lower sale prices from such merchandise. A protracted global recession could have a material adverse effect on our operating income, financial condition, cash flows and the trading price of our stock. We may be unable to adequately protect or enforce our intellectual property rights, which could harm our reputation and negatively impact the growth of our business. Our inability to use software licensed from third parties or our use of open source software under license terms that interfere with our proprietary rights could disrupt our business. Assertions that we infringe on intellectual property rights of others could result in significant costs and substantially harm our business and operating results. If we do not retain our senior management, we may not be able to achieve our business objectives. If we are unable to attract and retain skilled employees, we might not be able to sustain our growth. Our international operations subject us to additional risks and challenges that could harm our business and our profitability. We may make acquisitions that require significant resources and could be unsuccessful. We may need additional financing in the future, which may not be available on favorable terms, if at all. We face legal uncertainties relating to the Internet in general and to the e-commerce industry in particular and may become subject to costly government regulation. Our auction business may be subject to a variety of additional costly government regulations. Certain categories of merchandise sold on our marketplaces are subject to government restrictions. Our business may be harmed if third parties misappropriate our clients' confidential information. If we fail to comply with increasing levels of regulation relating to privacy, our business could suffer harm. If one or more states successfully assert that we should collect sales or other taxes on the sale of our merchandise or the merchandise of third parties that we offer for sale on our websites, our business could be harmed. Fraudulent activities involving our websites and disputes relating to transactions on our websites may cause us to lose clients and affect our ability to grow our business. False or defamatory statements transmitted through our services could harm our reputation and affect our ability to attract clients. Our stock price has been volatile, and your investment in our common stock could suffer a decline in value. Some provisions of our charter, bylaws and Delaware law inhibit potential acquisition bids that you may consider favorable.

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1235468--12/8/2008--LIQUIDITY_SERVICES_INC