As filed with the Securities and Exchange Commission on May 28, 2010

Registration No. 333-165557

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Amendment No. 2

FORM S-1

REGISTRATION STATEMENT

Under

The Securities Act of 1933

IRONPLANET, INC.

(Exact Name of Corporation as Specified in Its Charter)


Delaware	7389	04-3450136
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification No.)

4695 Chabot Drive, Suite 102

Pleasanton, California 94588

(925) 225-8800

(Address, including zip code and telephone number, including area code, of Registrant’s principal executive offices)

Gregory J. Owens

Chairman and Chief Executive Officer

IronPlanet, Inc.

4695 Chabot Drive, Suite 102

Pleasanton, California 94588

(925) 225-8800

(Name, address, including zip code and telephone number, including area code, of agent for service)

Copies to:


John V. Bautista, Esq. Karen A. Dempsey, Esq. Orrick Herrington & Sutcliffe LLP 1000 Marsh Road Menlo Park, California 94025 Telephone: (650) 614-7400 Facsimile: (650) 614-7401		Jeffrey D. Saper, Esq. Robert G. Day, Esq. Wilson Sonsini Goodrich & Rosati Professional Corporation 650 Page Mill Road Palo Alto, California 94304 Telephone: (650) 493-9300 Facsimile: (650) 493-6811

Approximate date of commencement of proposed sale to the public: As soon as practicable following the effectiveness of this Registration Statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box: o

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, please check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer o		Accelerated filer o		Non-accelerated filer x (Do not check if a smaller reporting company)		Smaller reporting company o

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. We and the selling stockholders may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED MAY 28, 2010

Preliminary Prospectus

shares

Common Stock

This is the initial public offering of shares of common stock of IronPlanet, Inc. Prior to this offering, there has been no public market for our common stock. We are offering shares, and the selling stockholders identified in this prospectus, are offering shares of our common stock. We will not receive any proceeds from the sale of shares of common stock by the selling stockholders. The initial public offering price is expected to be between $ and $ per share.

We have applied to list our common stock on The NASDAQ Global Market under the symbol “IRON.”

Investing in our common stock involves a high degree of risk. See “Risk Factors” beginning on page 9.


	Per share	Total

Initial public offering price	$	$
Underwriting discounts and commissions	$	$
Proceeds to IronPlanet, before expenses	$	$
Proceeds to the selling stockholders, before expenses	$	$

To the extent the underwriters sell more than shares of common stock, the selling stockholders have granted the underwriters an option to purchase up to additional shares of common stock, at the initial public offering price less the underwriting discounts and commissions, to cover over allotments. The underwriters can exercise this option at any time within 30 days of this prospectus.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the shares of common stock to purchasers on , 2010.


J.P. Morgan	Deutsche Bank Securities


Cowen and Company	Piper Jaffray	Needham & Company, LLC

, 2010

TABLE OF CONTENTS


	Page

Prospectus Summary		1
Risk Factors		9
Special Note Regarding Forward-Looking Statements and Industry Data		23
Use of Proceeds		24
Dividend Policy		24
Capitalization		25
Dilution		27
Selected Consolidated Financial and Other Data		29
Management’s Discussion and Analysis of Financial Condition and Results of Operations		33
Business		61
Management		75
Compensation Discussion and Analysis		81
Executive Compensation		90
Certain Relationships and Related Transactions		101
Principal and Selling Stockholders		104
Description of Capital Stock		106
Shares Eligible for Future Sale		111
Material U.S. Federal Income Tax and Estate Tax Consequences to Non-U.S. Holders		113
Underwriting		116
Legal Matters		120
Experts		120
Where You Can Find Additional Information		120
Index to Consolidated Financial Statements		F-1
EX-1.1
EX-23.1
EX-99.1

You should rely only on the information contained in this prospectus or in any free writing prospectus prepared by or on behalf of us and delivered or made available to you. Neither we, the selling stockholders nor the underwriters have authorized anyone to provide you with information that is different from that contained in this prospectus or contained in any free writing prospectus prepared by or on behalf of us and delivered or made available to you. We and the selling stockholders are offering to sell, and seeking offers to buy, shares of common stock only in jurisdictions where offers and sales are permitted. The information in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our common stock. Our business, financial condition, results of operations and prospects may have changed since that date.

No action is being taken in any jurisdiction outside the United States to permit a public offering of our common stock or possession or distribution of this prospectus in that jurisdiction. Persons who come into possession of this prospectus in a jurisdiction outside the United States are required to inform themselves about and to observe any restrictions as to this offering and the distribution of this prospectus applicable to that jurisdiction.

Until , 2010, all dealers that buy, sell or trade in our common stock, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotment or subscriptions.

PROSPECTUS SUMMARY

The following summary highlights information contained elsewhere in this prospectus. It does not contain all of the information that may be important to your investment decision. Before deciding whether to buy shares of our common stock, you should read this summary and the more detailed information in this prospectus, including the sections captioned “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes.

Overview

We are a leading online marketplace for used heavy equipment. We believe that the online channel is increasingly becoming a preferred method for used heavy equipment transactions, and our long-term goal is to be the leading global marketplace for used heavy equipment and other capital assets. Our exclusively online model allows us to match supply and demand globally for used heavy equipment, while achieving greater reach, price performance and efficiency relative to the fragmented network of brokers, dealers and physical auction houses that have traditionally served this market. In 2009, our online marketplace connected over 1,600 unique sellers to over 7,600 unique buyers, from among 14,500 unique bidders located across 92 countries, who bought approximately 30,000 individual pieces of equipment.

As a marketplace, our customers are both sellers and buyers of used heavy equipment. Sellers and buyers include a broad mix of equipment owners ranging from large multi-national corporations to sole proprietors. These include original equipment manufacturers, or OEMs, re-marketing and finance organizations, construction and contracting companies, equipment rental companies, farming and mining companies and equipment dealers. Today, equipment sold through our marketplace is used primarily in the construction, mining and agriculture industries.

For sellers, our solutions are designed to maximize price performance, minimize time requirements and reduce sales-related expenses as compared to traditional methods. For buyers, we believe that our marketplace increases selection and market transparency, while reducing the time and investment required to search for, identify, evaluate and procure equipment. A key element of our online marketplace is our proprietary inspection and report process, which we refer to as our IronClad Assurance. Our IronClad Assurance provides buyers with confidence and trust in the condition of the equipment listed in our marketplace. To increase supply in our marketplace, we employ a direct salesforce to assist existing and prospective equipment sellers. To increase demand in our marketplace, we use our technology along with our marketplace operations group to attract buyers to our online marketplace, stimulate bidding activity and assist them in their buying process.

We generate revenue principally from sellers through commissions, as well as listing and inspection fees. We also generate revenue from buyers through transaction fees. Our revenue is dependent on the total gross merchandise volume, or GMV, of equipment sold through our marketplace. We grew GMV from $342 million in 2008 to $458 million in 2009, an increase of 34%. We grew our revenue from $35.0 million in 2008 to $54.7 million in 2009, an increase of 56%. Over the same period, we grew Adjusted EBITDA from $2.6 million in 2008 to $7.3 million in 2009, an increase of 181%. Compared to the first quarter of 2009, in the first quarter of 2010 we grew GMV from $92 million to $130 million, or 41%, and revenue from $10.3 million to $16.2 million, or 57%, and Adjusted EBITDA changed from negative $0.2 million to $1.6 million. For a discussion of Adjusted EBITDA and a reconciliation of net income to Adjusted EBITDA, see note 4 to “Selected Consolidated Financial and Other Data.”

Industry Background

The market for heavy equipment is large, established and global. Demand for heavy equipment is driven by worldwide economic development, government stimulus and spending on infrastructure, and a continual need by equipment operators to replace and upgrade their equipment. This equipment is used in key sectors of the economy, such as the construction, mining and agriculture industries. Heavy equipment assets generally have long useful lives, driven by manufacturing durability, generally limited product changes and broad industry application. This longevity and durability gives rise to a large global stock of functional used equipment. According to research we commissioned by Manfredi & Associates, a market research firm that specializes in the heavy equipment industry, the average value of the worldwide fleet of used heavy equipment

was estimated to be more than $500 billion between 2006 and 2008, of which over $100 billion was resold annually. The market for secondary sales of heavy equipment has been characterized by disparate sellers and buyers and, as a result, local brokers and OEM-branded dealers have controlled much of the market historically. While these businesses serve a necessary function, their limited geographic footprint, narrow service offering and lack of scale and transparency create inefficiencies for both sellers and buyers.

The development of the Internet and e-commerce has given rise to the online marketplace as a more efficient channel for buying and selling used heavy equipment. The online channel matches supply with demand across geographies, reduces the time and costs for sellers and buyers to transact and avoids the limitations of physical proximity. We believe that the online channel will become the preferred platform for buying and selling used heavy equipment throughout the world.

Market Opportunity

Sellers and buyers of used heavy equipment are burdened with significant challenges and inefficiencies using traditional channels. We believe that there is a significant opportunity for an online marketplace for used heavy equipment that better matches supply and demand, and reduces the cost, time and friction associated with buying and selling equipment. To be successful, a company with this model must ensure the integrity of its marketplace and build trust on the part of both sellers and buyers as to the accuracy, legitimacy and certainty of transactions. Moreover, the marketplace must provide sufficient liquidity to ensure enough demand for sellers and supply for buyers.

Our Solution

Our online marketplace is designed to meet the needs of used heavy equipment sellers and buyers globally. We believe that our online marketplace solutions and processes offer distinct benefits to both sellers and buyers of used heavy equipment, providing substantial advantages compared to traditional used heavy equipment sales channels. Key advantages of our online model include the following.

Key Benefits for Sellers


	•	Global Reach. We provide sellers access to our global pool of active buyers, increasing marketplace transparency, liquidity and price realization. During 2009, our North American Featured Marketplace events, which are scheduled public online auction events typically held once a week, attracted on average more than 800 unique bidders based in 28 countries.

	•	Flexible, Turn-Key Solutions. We provide sellers the flexibility to choose from a number of marketplace solutions, which enables sellers to choose the format that best suits their business, liquidity and inventory needs.

	•	Continuous Market Access. We provide sellers with regular market access regardless of where their equipment is located. Our Featured Marketplace is held typically once a week and our Daily Marketplace operates 365 days a year.

	•	Cost Efficiency. Our field-based sales and inspections teams help limit the time and resources required of sellers to prepare items for sale. Our process also allows sellers to avoid unnecessary sales-related transportation and “make-ready” costs.

	•	Transaction Speed and Certainty. We have designed our marketplace offering to minimize the end-to-end sales process time. In particular, our online solution eliminates the need for sellers to transport equipment to physical sites for sale, and our field inspection reports and our IronClad Assurance reduce the time buyers require to evaluate equipment.

Key Benefits for Buyers


	•	Broad Selection. We provide buyers with a broad selection of equipment across multiple geographies, industries, manufacturers, price points and equipment condition. During 2009, our North American Featured Marketplace events on average included over 600 items across a range of industrial uses, price points, OEM brands and product quality parameters.


	•	Quality Assurance. We have created a proprietary inspection process to provide buyers with confidence in the condition of the equipment listed in our marketplace. Buyers can access and evaluate our detailed inspection reports online, and our IronClad Assurance instills trust in the accuracy of these inspection reports.

	•	Convenience. Buyers are able to search, identify, evaluate and procure equipment at any time through our convenient, user friendly website. Our model is designed to minimize the need for involvement throughout the process, as well as reduce the total time necessary to successfully procure equipment.

	•	Cost-Efficient Process. We enable buyers to search, identify, evaluate and bid for equipment online, reducing costs required to search for and bid on equipment located in physically disparate locations.

	•	Market Fairness and Transparency. We enforce strict rules among sellers and buyers that provide for open and transparent bidding activity. We believe that these rules encourage buyers to participate with greater confidence in the process.

IronPlanet Competitive Advantages

We believe that our business model provides us a number of competitive advantages that enhance our ability to continue to grow our business and expand our profitability, including our:


	•	scale, network effect and marketplace liquidity;

	•	proprietary inspection process and IronClad Assurance;

	•	capital-efficient business model;

	•	direct relationships with sellers; and

	•	portable and flexible business model.

Our Strategy

We seek to become the leading platform for buying and selling used heavy equipment by expanding our market coverage and offering a superior service. Key elements of our strategy include the following:


	•	increase penetration in our key North American market;

	•	integrate into the business processes of large, regular sellers;

	•	continue our expansion into international markets;

	•	strengthen our brand and enhance the user experience; and

	•	invest in technology and infrastructure to improve services and operating efficiency.

Risks Associated with our Business

Our business, financial and operating performance and growth prospects are subject to a number of risks, which you should understand before making an investment decision. These risks are discussed more fully in the section entitled “Risk Factors” following this prospectus summary. These risks include, among others:


	•	our ability to increase the supply of and demand for used heavy equipment for sale in our marketplace;

	•	our ability to grow, integrate, manage and retain our salesforce and inspection services personnel;

	•	our ability to continue to establish and expand the IronPlanet brand and the acceptance of our IronClad Assurance;

	•	competition, particularly from larger, established companies with greater financial resources and name recognition;

	•	our ability to retain our high volume sellers;


	•	a decline in the global economy or in used heavy equipment prices;

	•	volatility in our annual and quarterly results of operations;

	•	our performance on guarantee and purchase arrangements; and

	•	risks associated with international operations and emerging markets.

Corporate Information

We were incorporated in Delaware on January 6, 1999, under the name Federal Sales Corp. We changed our name to IronPlanet.com, Inc. on November 2, 1999, and changed our name to IronPlanet, Inc. on November 18, 2009. Our principal executive offices are located at 4695 Chabot Drive, Suite 102, Pleasanton, California 94588, and our telephone number is (925) 225-8800. Our website is www.ironplanet.com. The information on, or that can be accessed through, our website is not part of this prospectus.

In this prospectus, the terms “we,” “us,” “our,” and “IronPlanet” refer to IronPlanet, Inc. and its subsidiaries.

The marks “IronPlanet^®,” “IronClad Assurance^®,” and our logo are our registered trademarks. All other trademarks and trade names appearing in this prospectus are the property of their respective owners.

The Offering


Common stock offered:

By us		shares

By the selling stockholders		shares

Total		shares

Overallotment option		The underwriters have an option to purchase additional shares of common stock from the selling stockholders to cover overallotments. The underwriters can exercise this option at any time within 30 days from the date of this prospectus.

Common stock to be outstanding after this offering		shares

Use of proceeds		We intend to use the proceeds from this offering for general corporate purposes. We will not receive any of the proceeds from the sale of shares by the selling stockholders. See “Use of Proceeds.”

Proposed NASDAQ Global Market symbol		IRON

Risk factors		See “Risk Factors” beginning on page 9 of this prospectus and the other information in this prospectus for a discussion of the risks you should consider before deciding to invest.

The number of shares of our common stock outstanding after this offering is based on 22,225,368 shares of our common stock outstanding as of March 31, 2010, and excludes, as of March 31, 2010:


	•	an aggregate of 6,735 shares of common stock available for issuance under our 1999 Stock Plan;


	•	1,632,500 additional shares of common stock, subject to increase on an annual basis, reserved for issuance under our 2010 Equity Incentive Plan, which will become effective upon completion of this offering;


	•	3,994,154 shares of common stock issuable upon the exercise of outstanding options to purchase our common stock granted pursuant to our 1999 Stock Plan at a weighted average exercise price of $2.05 per share; and


	•	360,943 shares of common stock issuable upon exercise of outstanding warrants at a weighted average exercise price of $8.00 per share.

Unless otherwise noted, all information in this prospectus reflects or assumes the following:


	•	a 1-for-2 reverse stock split of our common stock and preferred stock to be effected immediately prior to the effectiveness of the registration statement of which this prospectus forms a part;


	•	no exercise of the overallotment option by the underwriters;

	•	no exercise of options or warrants outstanding as of March 31, 2010;


	•	the conversion of all of our outstanding preferred stock into an aggregate of 17,523,274 shares of our common stock upon completion of this offering (which will occur automatically pursuant to the terms of our certificate of incorporation only if this offering results in aggregate gross proceeds to us of not less than $20 million and a price-per-share to the public of not less than $12.00 per share); and


	•	the filing of our amended and restated certificate of incorporation, in connection with the consummation of this offering.

Summary Consolidated Financial and Other Information

The following tables summarize consolidated financial and other data for the periods indicated. The consolidated statements of operations data for each of the three years ended December 31, 2007, 2008 and 2009, are derived from, and qualified by reference to, our audited consolidated financial statements included elsewhere in this prospectus. The consolidated statements of operations data for each of the three months ended March 31, 2009 and 2010, and the consolidated balance sheet data as of March 31, 2010, are derived from, and qualified by reference to, our unaudited consolidated financial statements included elsewhere in this prospectus. The unaudited interim financial statements have been prepared on the same basis as the annual consolidated financial statements, and in the opinion of management, reflect all adjustments, which include only normally recurring adjustments, necessary to present fairly our financial position and results of operations and cash flows for the three months ended March 31, 2009 and March 31, 2010. The results of the three months ended March 31, 2010 are not necessarily indicative of the results to be expected for the year ending December 31, 2010 or for any other interim period or for any other future year. You should read all of this information in conjunction with our consolidated financial statements and the accompanying notes and the information under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained elsewhere in this prospectus. Our historical results are not necessarily indicative of results to be expected for future periods.


	Year Ended December 31,								Three Months Ended March 31,
	2007		2008			2009			2009			2010
	(in thousands, except per share data)

Consolidated Statements of Operations Data:
Revenue	$	22,030	$	34,989		$	54,674		$	10,312		$	16,208
Cost of revenue (1)		5,508		7,508			11,978			2,488			3,496

Gross profit		16,522		27,481			42,696			7,824			12,712
Operating expenses (1):
Sales and marketing		10,093		16,991			23,890			5,303			7,798
Technology		1,426		1,692			2,781			665			930
General and administrative		4,394		7,026			10,865			2,520			3,411

Total operating expenses		15,913		25,709			37,536			8,488			12,139

Income (loss) from operations		609		1,772			5,160			(664	)		573
Interest income		669		413			64			37			2
Other non-operating expense (1)		—		(21	)		(1,072	)		(234	)		(551	)

Income (loss) before taxes		1,278		2,164			4,152			(861	)		24
Income tax provision (benefit) (2)		110		313			(8,696	)		23			452

Net income (loss)	$	1,168	$	1,851		$	12,848		$	(884	)	$	(428	)

Net income (loss) per share:
Basic	$	0.44	$	0.63		$	3.94		$	(0.28	)	$	(0.11	)

Diluted	$	0.06	$	0.08		$	0.54		$	(0.28	)	$	(0.11	)

Weighted average shares outstanding:
Basic		2,665		2,961			3,260			3,126			3,918

Diluted		20,900		21,981			23,724			3,126			3,918

Pro forma net income (loss) per share (unaudited):
Basic						$	0.60					$	(0.02	)

Diluted						$	0.54					$	(0.02	)

Pro forma weighted average shares outstanding (unaudited):
Basic							21,356						21,934

Diluted							23,724						21,934


	As of March 31, 2010
						Pro Forma as
	Actual			Pro Forma (3)		Adjusted (4)
	(in thousands)

Consolidated Balance Sheet Data:
Cash and cash equivalents	$	42,636		$	42,636
Working capital (5)		25,492			26,006
Total assets		68,216			68,216
Total liabilities		33,601			33,087
Convertible preferred stock		52,278			—
Total stockholders’ equity (deficit)		(17,663	)		35,129


	Year Ended December 31,								Three Months Ended March 31,
	2007		2008			2009			2009			2010
	(in thousands)

Other Financial and Operating Data:
Adjusted EBITDA (6)	$	1,611	$	2,649		$	7,298		$	(164	)	$	1,557
Adjusted EBITDA less capital expenditures (6)		837		1,205			5,641			(321	)		1,339

Gross Merchandise Volume (7):
North America	$	231,210	$	337,940		$	412,874		$	82,037		$	116,738
International		—		3,611			45,556			9,675			13,086

Total	$	231,210	$	341,551		$	458,430		$	91,712		$	129,824

Revenue:
North America	$	22,030	$	34,691		$	49,517		$	9,444		$	14,449
International		—		298			5,157			868			1,759

Total	$	22,030	$	34,989		$	54,674		$	10,312		$	16,208

Adjusted EBITDA (6):
North America	$	1,611	$	5,598		$	10,420		$	799		$	2,551
International		—		(2,949	)		(3,122	)		(963	)		(994	)

Total	$	1,611	$	2,649		$	7,298		$	(164	)	$	1,557


(1)		Includes stock-based compensation as follows:


	Year Ended December 31,						Three Months Ended March 31,
	2007		2008		2009		2009		2010
	(in thousands)

Cost of revenue	$	53	$	38	$	47	$	9	$	41
Sales and marketing expenses		34		105		148		31		78
Technology expenses		10		35		809		203		419
General and administrative expenses		620		191		288		71		160
Other non-operating expense*		—		21		935		234		474

Total stock-based compensation	$	717	$	390	$	2,227	$	548	$	1,172


	*	Related to an equity award held by a terminated employee. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Comparison of the Years Ended December 31, 2007, 2008 and 2009—Other Non-Operating Expense” for more information.


(2)		Reflects the one-time release of substantially all of our U.S. federal and state net deferred tax valuation allowance in the fourth quarter of 2009. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Components of Our Results of Operations—Income Tax Provision (Benefit)” for more information.


(3)		Reflects on a pro forma basis the conversion of all outstanding shares of our convertible preferred stock as of March 31, 2010 into 17,523,274 shares of our common stock (which will occur automatically pursuant to the terms of our certificate of incorporation only if this offering results in aggregate gross proceeds to us of not less than $20 million and a price-per-share to the public of not less than $12.00 per share).


(4)		Reflects on a pro forma basis the conversion described in note 3 above and, on an adjusted basis, the receipt by us of the estimated net proceeds from the sale of shares of common stock by us in this offering at an assumed initial public offering price of $ per share, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.

(5)		Working capital is defined as current assets minus current liabilities.


(6)		We define Adjusted EBITDA as net income adjusted for stock-based compensation, depreciation and amortization, interest income and income tax provision. We define Adjusted EBITDA less capital expenditures as Adjusted EBITDA less capital expenditures. See note 4 to “Selected Consolidated Financial and Other Data” for more information and a reconciliation of Adjusted EBITDA and Adjusted EBITDA less capital expenditures to net income calculated in accordance with accounting principles generally accepted in the United States, or U.S. GAAP.


(7)		Gross Merchandise Volume, or GMV, represents the total value of all items sold in our marketplace, excluding our Private Marketplace, during a period. It is not a measure of our financial performance or revenue and is not presented in our consolidated financial statements. Our definition of GMV may differ from that used by other participants in our industry. We believe that revenue, which is the most directly comparable measure in our statement of operations, and certain other financial and operating data, are best understood by considering their relationship to GMV. Revenue represents the revenue we earn in the course of conducting transactions through our marketplace from seller commissions, seller listing and inspection fees and buyer transaction fees.

RISK FACTORS

You should carefully consider the following risk factors and all other information contained in this prospectus before purchasing our common stock. Investing in our common stock involves a high degree of risk. If any of the following risks actually occur, our business, financial condition, and operating results could be seriously harmed. In addition, the trading price of our common stock could decline due to the occurrence of any of these risks, and you may lose all or a part of your investment. Please read “Special Note Regarding Forward-Looking Statements and Industry Data.”

Risks Related to Our Business and Industry

The success of our business depends on our ability to increase the supply of and demand for used heavy equipment for sale in our marketplace, and we may not be successful in doing so.

The success of our online marketplace and our growth prospects depend on our ability to provide a liquid marketplace for the sale and purchase of used heavy equipment. We believe that an increased supply of used heavy equipment would allow us to attract and retain active buyers to purchase the equipment and would support the continued growth of our gross merchandise volume, or GMV, and revenue. Increasing the supply of and demand for used heavy equipment in our marketplace depend on various factors, including:


	•	developing and retaining an effective salesforce that sources used heavy equipment from a variety of sellers;

	•	increasing awareness of and confidence in our brand among sellers and buyers of used heavy equipment;

	•	general economic conditions and the related impact on prices of used heavy equipment, which affects sellers’ willingness to supply and buyers’ willingness to purchase equipment for sale in our marketplace; and

	•	competition from other operators of used heavy equipment disposition channels, many of whom have greater financial resources and name recognition than we do.

If we do not increase the supply of and demand for used heavy equipment available for sale in our online marketplace, or if we do not otherwise attract a sufficient number of new sellers, our GMV and revenue would likely be adversely affected.

If we fail to grow, integrate, manage and retain our salesforce, our growth prospects and results of operations may be adversely affected.

Our continued growth, expansion and ability to increase the supply of used heavy equipment in our marketplace depends in large part on the efforts of our salesforce. Our salesforce’s efforts are the principal drivers of the volume of equipment sold in our marketplace. We have rapidly increased our salesforce in recent years, and intend to further expand our salesforce in North America and internationally. As a result of this rapid expansion, a significant portion of our salesforce has limited tenure with us. Less experienced sales persons are generally less productive than those with experience. Our growth prospects and operating results will be adversely affected if we do not successfully accomplish the following:


	•	hire and retain a sufficient number of qualified sales personnel with the aptitude, skills and understanding to obtain a steady stream of quality used heavy equipment for sale in our marketplace;

	•	adequately train our salesforce in the use and benefits of all our services, thereby making them more effective in attracting customers to our marketplace; and

	•	increase our salesforce’s knowledge of the equipment that is sold in our marketplace and our customers.

As we expand into markets outside of North America, our revenue may be adversely impacted, as we do not have a substantial history of providing our solutions in foreign markets, in adapting to different local cultures or in complying with standards or regulatory policies necessary to successfully compete in those

markets. We will therefore need to invest significant resources to build our salesforce and operations in such markets. In addition, as we expand our presence into industries that are relatively new to us, such as the mining and agricultural industries, our salesforce may lack the skills and experience necessary to attract sellers and buyers. Development of our salesforce takes time and significant resources. If we are unable to timely expand into new markets or if we ultimately fail in our efforts, our growth prospects may be adversely affected.

We may not succeed in continuing to establish and expand the IronPlanet brand, which could prevent us from continuing to acquire customers and increase our GMV and revenue.

A significant component of our business strategy is continuing to establish and expand our IronPlanet brand and maintaining the confidence and trust that we believe distinguishes our IronClad Assurance. Without a strong brand we believe it will be difficult to attract sellers of used heavy equipment to our marketplace and attract active buyers for that equipment. If we do not continue to establish and expand our brand, or if our brand is harmed by our actions or otherwise, we may fail to build the critical mass of sellers and buyers required to support the continued growth of our GMV and revenue. Promoting and positioning our brand will depend, among other things, on our ability to:


	•	expand and strengthen our salesforce’s efforts to provide a consistent supply of used heavy equipment;

	•	expand and strengthen our inspection services department to provide consistently accurate inspection reports, which serve as the basis for our IronClad Assurance;

	•	establish and maintain a relationship of trust with our customers, especially through our IronClad Assurance; and

	•	develop and improve the functionality and efficiency of our website, technology infrastructure and marketplace operations.

Our ability to provide a high quality and efficient customer experience is also dependent on external factors over which we may have little or no control, including, without limitation, the reliability and performance of the equipment sold in our marketplace and the performance of third-party carriers who transport purchased equipment on behalf of buyers. If our customers are dissatisfied with the accuracy of our detailed inspection reports, or do not receive the equipment they purchased in a timely manner or in the condition that they expect, our customers may stop using our online marketplace to purchase equipment. In addition, the reputation of our IronClad Assurance may be harmed, which may cause us to lose sellers and buyers. Our failure to provide our customers with high quality and efficient customer experiences could substantially harm our reputation and adversely impact our efforts to develop IronPlanet as a trusted brand. The failure of our brand promotion activities could adversely affect our ability to attract new customers and maintain customer relationships, and, as a result, adversely affect our GMV, revenue and business.

Competition in the market for used heavy equipment could adversely affect our growth prospects and results of operations.

Most sales of used heavy equipment continue to be conducted offline through dealers, brokers and individual end-user to end-user sales. The auction market in which we compete is highly fragmented and intensely competitive and the majority of such auctions are conducted in the traditional offline manner. We compete directly for potential purchasers of industrial equipment with other national and regional auction companies. Our indirect competitors include original equipment manufacturers, or OEMs, and independent equipment dealers, rental companies and brokers, as well as traditional and online listing services.

Many of the national and regional auction companies with whom we compete have longstanding and personal ties with sellers and buyers of used heavy equipment in the regions in which they operate, have significantly greater financial and marketing resources and name recognition than we do, and have traditionally offered sellers guarantees on a large percentage of equipment sales, which is attractive to many sellers. Such ties may make it more difficult for us to gain market acceptance in certain regions or may require us to reduce our commissions or assume greater risk in guarantee or purchase arrangements in order to increase market

share. Such commission reductions or increased risk could aversely affect our business and results of operations.

Our existing and future competitors may succeed in entering and establishing successful operations in new geographic markets prior to our entry into those markets. Traditional competitors may also start to compete against us by offering online auction services. For example, in 2008 certain Caterpillar dealers began to provide online auction services for used heavy equipment. If we are unable to compete successfully our growth prospects and results of operations may be adversely affected.

If our high volume sellers stop selling used heavy equipment through our marketplace, or sell significantly lower volumes of equipment, our business would be harmed.

A significant amount of equipment sold in our marketplace is supplied by a limited number of high volume equipment sellers. Approximately 39.5%, 38.9%, 37.5% and 35.0% of our GMV was attributable to equipment listed and sold by our ten largest sellers in 2007, 2008, 2009 and the first quarter of 2010, respectively. Caterpillar Financial Services Corporation and its corporate affiliates are our largest sellers and collectively accounted for 22.0%, 15.5%, 11.9% and 7.7% of our revenue in 2007, 2008, 2009 and the first quarter of 2010, respectively. In addition, certain of these high volume sellers are affiliated with holders of our preferred stock, including Caterpillar Financial Services Corporation, Komatsu Financial and Volvo Financial Services and their respective corporate affiliates, and Ring Power Corporation. Upon completion of this offering and applicable lock-up periods, the entities affiliated with these sellers may sell their stockholdings. If these sellers no longer hold stock in our company, they may have less incentive to sell their equipment through our marketplace. If these, or other, high volume sellers stop selling equipment through our marketplace, or sell significantly lower volumes, our GMV and revenue would be adversely impacted.

A decline in used heavy equipment prices could adversely affect our revenue.

The price of used heavy equipment could significantly decline based on a number of factors, especially recessionary economic conditions. Low equipment prices may cause potential sellers to be more reluctant to list their equipment for sale through our marketplace. For example, in the fourth quarter of 2008, used heavy equipment prices declined significantly, across virtually all categories, models and manufacturers, which coincided with the general economic and financial market crisis. As a result, equipment owners deferred decisions to sell equipment and the selling prices of equipment sold in our marketplace was significantly reduced. Decreased selling prices for used heavy equipment impacts our revenue, as a significant portion of our revenue consists of seller commissions and buyer transaction fees, which are based on the final selling price of equipment.

The current prolonged economic downturn has adversely affected and is likely to continue to adversely affect the heavy equipment and construction industries, as well as many of our customers, and could adversely affect our revenue and results of operations.

The current economic downturn has been characterized by, among other things, a general tightening in credit markets, lower levels of liquidity, increases in default and bankruptcy rates, and depressed levels of activity in industries such as residential and commercial construction, mining and agriculture. These factors have likely had a negative impact on the operations, financial condition and liquidity of many of our customers and, as a result, these market factors may continue to negatively impact the volume of equipment listed for sale in our marketplace and the prices of equipment sold in our marketplace, thereby having a further negative impact our revenue and our ability to grow our business. If our sellers choose not to sell their assets as a result of current economic conditions, our buyers are unable to purchase equipment based on their inability to obtain sufficient financing or are unwilling to do so given the prevailing market climate, or if our customers are in general financial distress, our operations may be negatively impacted and our GMV and revenue from our marketplace may decrease. Although governments have proposed and approved measures to aid economic recovery, including economic stimulus legislation and assistance to real estate developers and others, such measures may not have the desired effect and as such measures eventually diminish, or cease, industries in which participants in our marketplace compete may experience further economic difficulties. If the economic downturn continues for an extended period of time or worsens, our revenue and results of operations could be adversely impacted.

Our annual and quarterly revenue and results of operations are difficult to forecast and subject to fluctuations, and, as a result, we may fail to meet the expectations of securities analysts and investors, which could cause volatility and a decline in the trading price of our common stock.

Our results of operations could vary significantly from quarter to quarter and from year to year. In the past, we have seen an increase in sales in the second quarter, when many of our buyers typically prepare for construction projects, and also the fourth quarter, when our sellers often sell equipment prior to the end of the year. These trends, however, may differ materially from our expectations, and we may experience unanticipated fluctuations in our GMV and our revenue. Our customers often do not have consistent, long-term visibility into their used heavy equipment needs, and as a result, it is difficult for us to accurately forecast our GMV and to appropriately plan for expenses. If we fail to accurately forecast our GMV or appropriately plan for expenses, our quarterly or annual results of operations may be adversely impacted. Additional factors that could affect our quarterly or annual operating results include:


	•	our ability to increase and effectively deploy our salesforce;

	•	our ability to consistently offer a broad selection of equipment in our marketplace;

	•	an overall reduction in demand for used heavy equipment in industries such as construction or a saturation in supply of certain types of equipment;

	•	our customers’ inventory levels;

	•	foreign currency exchange rate fluctuations;

	•	the effect of macroeconomic conditions; and

	•	increased competition in our industry.

If our results of operations fall below the expectations of industry or securities analysts or investors, it could cause volatility and a decline in the trading price of our common stock.

We may incur losses as a result of our guarantee and purchase arrangements, which would adversely affect our results of operations.

Although a substantial majority of our business is currently conducted on a straight commission basis, we have occasionally responded to, and will continue to respond to, requests from sellers to provide guarantee or purchase arrangements, pursuant to which we agree to:


	•	guarantee a minimum level of sale proceeds to the seller, regardless of the final selling price of the equipment in our marketplace; or

	•	purchase the equipment outright and then sell it in our marketplace.

Equipment sold pursuant to a guarantee arrangement comprised 13.5%, 9.3%, 6.2% and 9.7% of our GMV in 2007, 2008, 2009 and the first quarter of 2010, respectively. Purchased equipment that was later resold through our marketplace comprised approximately 2.1%, 2.2%, 1.6% and 7.1% of GMV in 2007, 2008, 2009 and the first quarter of 2010, respectively. The level of guaranteed proceeds or purchase price in these transactions is based on appraisals performed on equipment by our personnel. We assume more risk with these types of contracts than in our straight commission arrangements. Inaccurate appraisals or precipitous declines in demand or pricing of a particular type or types of equipment could result in our appraisal values exceeding the proceeds obtained though the sale of such equipment through our marketplace. If the selling prices are less than the amount that we guarantee or the purchase price we paid for equipment, we will incur a loss. For example, the selling prices of equipment sold under guarantee arrangements in the fourth quarter of 2008 were significantly reduced as a result of an unexpected and significant price decline for used heavy equipment, which coincided with the general economic and financial market crisis. Consequently, we incurred a loss of $0.05 million on the sale of such equipment in the fourth quarter of 2008, which adversely impacted our results of operations in that period. If we incur similar losses in future periods associated with the guarantee or purchase contracts we enter into, our results of operations would be adversely affected.

We may be unsuccessful in expanding our operations internationally, which could adversely affect our results of operations.

In 2008 and 2009, we began expanding our presence outside of North America. In 2008, we held our first Asia-Pacific marketplace event, primarily focused in Australia, and in 2009, we held our first European marketplace event. In 2008, 2009 and the first quarter of 2010, revenue attributable to markets outside North America accounted for approximately 0.9%, 9.4% and 10.9%, respectively, of our total revenue and we expect to increase our international presence. Based on current international market demands, we have recently reallocated certain resources in our Asia-Pacific operations from Australia to other regions in the Asia-Pacific arena. Our ability to continue our international expansion involves various risks, including the possibility that returns on such investments will not be achieved in the near future, or ever, and the difficulty of competing in markets with which we are unfamiliar.

Our international operations may also fail due to other risks inherent in foreign operations, including:


	•	cultural differences, including potential ambivalence toward online marketplaces, which may make it more difficult for potential foreign customers to understand our value proposition;

	•	varied, unfamiliar and unclear legal and regulatory restrictions, including different legal and regulatory standards applicable to Internet services, communications, privacy, data protection, auctioneering, vehicle dealer licensing, professional selling, and distance selling;

	•	strains on our financial and other systems to properly administer VAT and other taxes;

	•	unexpected changes in international regulatory requirements and tariffs;


	•	legal, political or systemic restrictions on the ability of U.S. companies to do business in foreign countries;

	•	difficulty in localizing our website for language and country-specific business requirements and regulations;


	•	difficulties in staffing and managing foreign operations;

	•	import and export restrictions;

	•	potential adverse tax consequences;

	•	foreign currency exchange rate fluctuations;

	•	differing intellectual property laws that may not provide sufficient protection for our intellectual property; and

	•	controls or other restrictions on foreign currency.

Our current and any future international expansion plans will require significant management attention and resources and may be unsuccessful. We may find it impossible or too expensive to continue to expand internationally or we may be unsuccessful in our attempt to do so, and our business, growth prospects and results of operations could be adversely impacted.

Expanding our business into particular emerging markets may present additional regulatory risks beyond those associated with more developed international markets.

In addition to the numerous risks inherent in doing business in international markets that are discussed above, we may face additional challenges in certain markets that place restrictions on the export or import of used equipment, require direct partnership with local or government-run companies, impose tariffs that may make imported used equipment less attractive to buyers or adopt an online marketplace model more slowly. In addition, from time to time, the U.S. Congress may consider enacting legislation that could result in the imposition of protectionary quotas and tariffs on imports from certain countries into which we would like to expand. If those countries that are affected by such quotas and tariffs change their existing policies to retaliate and penalize the United States or businesses from the United States, our revenue could be further adversely impacted. If we are unsuccessful in expanding into these emerging markets, our growth prospects and results of operations may be adversely affected.

Our business depends on the continued growth and confidence in the Internet as a medium for buying and selling used heavy equipment.

The Internet is a relatively new medium for buying and selling used heavy equipment. Many sellers and buyers of used heavy equipment still conduct their business through traditional offline channels. These sellers and buyers may be hesitant to use the Internet as a medium for buying and selling used heavy equipment. In addition, concerns about integrity, fraud and privacy, Internet service disruptions and other problems may also discourage potential customers from participating in our online marketplace. Although we have developed processes and policies that encourage customers to have confidence in our online marketplace, we may not be successful in our efforts, and from time to time market participants may engage in dishonest market practices. Any negative impression, even if inaccurate, of how our marketplace events are conducted may diminish the trust that our customers place in the efficiency and quality of our marketplace and may drive away potential customers from using our marketplace. If traditional sellers and buyers of used heavy equipment are unwilling to conduct business on our website we may be unable to continue to attract new customers, which could adversely affect our GMV, revenue and results of operations.

Our auditors identified a material weakness in our internal controls over financial reporting. Failure to establish and maintain an effective system of internal controls in the future could result in material misstatements in our financial statements.

In connection with the audit of our 2009 financial statements and preparation of the registration statement of which this prospectus forms a part, our auditors identified a material weakness in our system of internal control over financial reporting. The Public Company Accounting Oversight Board’s Auditing Standard No. 5 defines a material weakness as a deficiency, or combination of deficiencies, in internal controls over financial reporting, such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected on a timely basis. The material weakness that was identified related to a lack of effective internal controls over the accounting and reporting of stock-based compensation grants, forfeitures and modifications, and their related impact on stock-based compensation expense. Specifically, we did not have effective controls in place to identify and account for modifications to equity based awards in connection with a non-routine employment separation and we failed to account for a modification to an option grant following an employee’s termination in August 2007. We have added resources and established new procedures to ensure the identification, communication, approval and appropriate accounting and reporting of any non-standard stock option grants or modifications. Since 2007, we have also hired additional personnel with financial reporting expertise, including a chief financial officer and a controller. Management believes that these additional control procedures that have been implemented will mitigate the risks associated with the material weakness identified. We cannot guarantee, however, that we will not have additional material weaknesses in the future.

If we fail to manage our growth effectively, our operating results could be adversely affected.

We have expanded our operations rapidly since our inception in 1999. We may attempt to expand our business into new equipment categories or increase our presence in existing categories. For example, part of our strategy is to increase our presence in the market for used mining and agricultural equipment, and we may also seek to gain a presence in certain categories outside of heavy equipment. There can be no assurance that our attempts at expanding our business will be successful. If we are unable to effectively implement our growth strategy or lose focus on our existing customers and markets, our reputation and ability to generate revenue from new or existing customers could be adversely affected. If our attempts at expansion are unsuccessful for any reason or if we lose focus on the used heavy equipment market, our results of operations may be adversely affected.

If one or more U.S. states or foreign jurisdictions successfully assert that we should collect or should have collected sales or other taxes on the sale of equipment, we could be subject to liability for past sales and our results of operations could be adversely affected.

Generally, U.S. state and local sales tax laws require all retailers to collect and remit sales taxes and file tax returns. Sales tax laws and rates vary greatly from state to state, and from country to country. Due to our

role as an auction company, we are obligated to collect state and local sales tax from buyers and remit the sales tax to the appropriate taxing authorities, based on a buyer’s location, unless there is a valid exemption from sales tax available to the buyer. Certain sales tax exemptions that are regularly applicable in our business include exemptions related to resellers, export sales, agriculture, manufacturing, and forestry equipment, and motor vehicles. Based on our review of relevant tax laws and on certifications provided to us by buyers, a substantial portion of our marketplace transactions are exempt from U.S. state and local sales taxes. From time to time we are audited by tax authorities to assess whether we have collected sales tax on applicable transactions. Occasionally these audits have found that we have exempted certain transactions from sales tax that were not qualified to be exempted. Such findings, and any other successful assertion by one or more U.S. states or foreign countries that we should have collected sales or other taxes on the sale of equipment, could result in fines or subsequent sales tax assessments, which may adversely affect our results of operations.

Proposed future U.S. federal income tax legislation could negatively impact our effective tax rate.

President Obama’s administration has announced proposed future tax legislation that could substantially modify the rules governing the U.S. taxation of certain non-U.S. subsidiaries. These potential changes include, but are not limited to (1) limitations on the ability to claim and utilize foreign tax credits; and (2) deferral of interest expense deductions until non-U.S. earnings are repatriated to the United States. Each of these proposals would be effective for taxable years beginning after December 31, 2010. Details of the proposal remain unknown, although if any of these proposals are enacted into law, they could negatively impact our effective tax rate.

Fluctuations in the value of the U.S. dollar and fluctuating foreign currencies could decrease bidding activity in our marketplace and may negatively impact our business, results of operations and financial position.

Equipment in our U.S. marketplace is priced in U.S. dollars, but attracts foreign bidders. All bidders at our U.S. marketplace events must bid for and purchase equipment in U.S. dollars. Increases in the value of the U.S. dollar relative to the bidders’ local currencies may reduce the prices they are willing to pay for equipment in our marketplace or discourage them from participating in our marketplace. A decrease in bidding activity or in bidders may adversely affect the liquidity of our marketplace, which in turn could adversely affect our revenue and results of operations.

In addition, with respect to our recent international expansion, a portion of our business is now denominated in Euro and Australian dollars and as a result, fluctuations in foreign currencies may have an additional impact on our business, results of operations and financial position. Equipment in our European marketplace is priced in Euros and equipment in our Asia-Pacific marketplace is priced in Australian dollars. Significant fluctuations in those currencies could reduce the prices that bidders in those marketplace events are willing to pay for equipment in international marketplace or discourage them from participating in our international marketplace.

Both the value of the U.S. dollar and foreign currency exchange rates have fluctuated and may continue to fluctuate. Conducting business in currencies other than U.S. dollars subjects us to fluctuations in currency exchange rates that could adversely affect our results of operations. Fluctuations in the value of the U.S. dollar relative to other currencies affect our revenue, cost of revenue and operating expenses, and result in foreign currency transaction gains and losses. Currently, we are not a party to any hedging transactions intended to reduce our exposure to exchange rate fluctuations for our international operations. We may seek to enter into hedging transaction in the future, but we may be unable to enter into those transactions successfully, on acceptable terms or at all. We cannot predict whether or not we will incur foreign exchange losses in the future. Further, significant foreign exchange fluctuations resulting in a decline in the Euro or Australian dollar may decrease the value of our foreign assets, as well as decrease our revenue and earnings from our foreign subsidiaries, which would reduce our profitability and adversely affect our financial position.

Our business operations may be subject to a number of U.S. federal laws and regulations including export control regulations.

Our business operations may be subject to a number of U.S. federal laws and regulations, including the Export Administration Regulations, or EAR, maintained by the U.S. Department of Commerce, trade and

economic sanctions maintained by the Treasury Department’s Office of Foreign Assets Control, or OFAC, and the International Traffic in Arms Regulations, maintained by the Department of State. If we fail to comply with these laws and regulations, we could be exposed to claims for damages, financial penalties, reputational harm, incarceration of our employees or restrictions on our operations. Although we have implemented procedures whereby we monitor, on an automatic and manual basis, the potential sellers and buyers and restrict business from certain countries pursuant to OFAC regulations, we can offer no assurances that such procedures will be effective.

Although we believe that we have never sold equipment to Cuba, Iran, North Korea, Sudan or Syria whether through affiliates, distributors, or other direct or indirect arrangements, and we have never made any effort to attract consignors or bidders from any country listed above, it is possible that some equipment purchased in our marketplace events was sold or will be sold to persons or entities that re-exported or will re-export such equipment to these countries. We continue to conduct a review of the business activities involving Cuba, Iran, North Korea, Syria, and Sudan and monitor the sellers and buyers in our marketplace to restrict access from individuals or companies from these countries. We may not be successful in our efforts, however. If we do identify violations of U.S. sanctions laws, however, we could be exposed to administrative or criminal penalties which, in certain circumstances, could be material. Any action on the part of the U.S. Department of Commerce, OFAC, or the U.S. Department of State could have a negative impact on our reputation which might decrease stockholder value.

Uncertainty exists in the application of various laws and regulations to our business. New laws or regulations applicable to our business, or expansion or interpretation of existing laws and regulations to apply to our business, could subject us to monetary liabilities and limitations on our business practices, and could increase administrative costs or adversely affect our business.

Our operations are subject to regulation, supervision and licensing under various U.S., foreign and international authorities, agencies, statutes and ordinances, which, among other things, require us to obtain and maintain certain licenses, permits and qualifications. Although we do not believe that existing laws or regulations materially and adversely impact us, our business could be significantly affected by changes in law or governmental regulations or different interpretations or applications of existing laws or regulations.

We also operate in a regulatory climate in which there is uncertainty as to the application of various laws and regulations to our business. Our operations may be subjected to adoption, expansion or interpretation of various laws and regulations, and compliance with these laws and regulations may require us to obtain appropriate licenses at an undeterminable and possibly significant initial and annual expense. These additional expenditures may increase future expenses, thereby potentially reducing our future profitability. There can be no assurance that future laws or regulations or interpretations or expansions of existing laws or regulations will not impose requirements on Internet commerce that could substantially harm our business, growth prospects, results of operations, and financial condition. The adoption of additional laws or regulations may decrease the popularity or impede the expansion of e-commerce, restrict our present business practices, require us to implement costly compliance procedures or expose us and/or our customers to potential liability, which, in turn, could adversely affect our results of operations.

We, for example, may be considered to “operate” or “do business” in states or other jurisdictions where our customers conduct their business, resulting in regulatory action. In addition, we are currently subject to money laundering regulations, vehicle brokerage and auction laws, and may in the past have been subject to regulations in various jurisdictions. If any jurisdiction’s regulatory requirements impose jurisdiction-specific requirements on us or include us within an industry-specific regulatory scheme, we may be required to modify our marketplace and other activities in, or directed to, that jurisdiction in a manner that may undermine the attractiveness of our events to potential sellers and buyers. If we are found to have been in violation of any such regulations, we could be exposed to financial liability, including substantial fines which could be imposed on a per transaction basis, and disgorgement of our profits. In addition, if we determine that the licensing and related requirements are or become overly burdensome, we may elect to terminate operations in certain jurisdictions. In each case, our business, growth prospects, results of operations and financial condition could be materially and adversely affected.

We may be unable to adequately protect or enforce our intellectual property rights, which could harm our reputation and adversely affect our growth prospects.

We regard our proprietary technologies and intellectual property as integral to our success. We protect our proprietary technology through a combination of trade secrets, third-party confidentiality and non-disclosure agreements and additional contractual restrictions on disclosure and use, and patent, copyright and trademark laws.

We currently are the registered owners of several Internet domain names in the United States and internationally. As we seek to protect our domain names in an increasing number of jurisdictions, we may not be successful in doing so in certain jurisdictions. Our competitors may adopt trade names or domain names similar to ours, thereby impeding our ability to promote our marketplace and possibly leading to customer confusion. In addition, we could face trade name or trademark or service mark infringement claims brought by owners of other registered or unregistered trademarks or service marks, including trademarks or service marks that may incorporate variations of our marketplace names. Any claims related to our intellectual property or customer confusion related to our marketplaces could damage our reputation and adversely affect our growth prospects.

The legal means we use to protect our proprietary technology and intellectual property do not afford complete protection and may not adequately protect our rights or permit us to gain or keep any competitive advantage. We cannot guarantee that any of our present or future intellectual property rights will not lapse or be invalidated, circumvented, challenged or abandoned; our intellectual property rights will provide competitive advantages to us; our ability to assert our intellectual property rights against potential competitors or to settle current or future disputes will not be limited by our agreements with third parties; any of our pending or future patent applications will be issued or have the coverage originally sought; our intellectual property rights will be enforced in jurisdictions where competition may be intense or where legal protection may be weak. We also may allow certain of our registered intellectual property rights, or our pending applications or registrations for intellectual property rights, to lapse or to become abandoned if we determine that obtaining or maintaining the applicable registered intellectual property rights is not worthwhile.

Further, although it is our practice to enter into confidentiality agreements and intellectual property assignment agreements with our employees and contractors, such agreements may not be enforceable or may not provide meaningful protection for our trade secrets or other proprietary information in the event of unauthorized use or disclosure or other breaches of the agreements. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy, reverse engineer, or otherwise obtain and use our products or technology. We cannot be certain that we will be able to prevent unauthorized use of our technology or infringement or misappropriation of our intellectual property, particularly in foreign countries where the laws may not protect our proprietary rights as comprehensively as in the United States, if at all. Effective patent, copyright, trademark, service mark, trade secret and domain name protection is expensive to maintain. Litigation may be necessary to enforce our intellectual property rights, to protect our trade secrets or to determine the validity and scope of the proprietary rights of others, which could result in substantial costs and diversion of our resources. If competitors are able to use our technology or develop proprietary technology similar to ours or competing technologies, our ability to compete effectively and our growth prospects could be adversely affected.

We have in the past, and could in the future be subject to claims which could adversely affect our reputation and results of operations.

In the normal course of our business, we may be involved in various legal proceedings. We may be subject to claims that arise from our marketplace, including claims that inspection reports issued in connection with our IronClad Assurance were inaccurate or incomplete, or we may be subject to other claims incidental to our services, such as claims made regarding the title of the equipment. Any claim brought against us, with or without merit, could be costly to defend or arbitrate and could result in adverse judgments or settlement payments that may be substantial and could adversely affect our reputation and results of operations.

We recently repurchased shares from a former executive officer who has commenced litigation against us disputing such repurchase, and if we are unable to resolve this litigation in our favor, such litigation may adversely impact our results of operations.

On March 11, 2010, we repurchased 633,542 shares of Series A-1 convertible preferred stock from Reza Bundy Saadlou, our former president and chairman. We repurchased the shares at a price of $0.10 per share, for an aggregate repurchase price of $63,354, pursuant to rights embodied in a June 2001 separation agreement and mutual release with Mr. Saadlou. On April 2, 2010, Mr. Saadlou filed suit against us in Alameda County Superior Court in California, alleging that we did not have the right to repurchase such shares and seeking damages. On April 23, 2010, we concurrently filed a demand for arbitration with the American Arbitration Association and a motion to stay the litigation and to compel arbitration. This lawsuit may be a distraction to management and may potentially lead to us incurring significant legal fees and costs, the issuance of additional shares and the payment of damages, which may adversely impact our results of operations.

If we do not respond to technological changes or upgrade our website and technology systems, our growth prospects and results of operations could be adversely affected.

To remain competitive, we must continue to enhance and improve the functionality and features of our website and marketplace. Although we currently do not have specific plans for any upgrades that would require significant capital investment, in the future we will need to improve and upgrade our technology, transaction processing systems and network infrastructure in order to allow our business to grow in both size and scope. Without such improvements, our operations might suffer from unanticipated system disruptions, slow transaction processing, unreliable service levels, or impaired quality or delays in reporting accurate information regarding our marketplace events, any of which could negatively affect our reputation and ability to attract and retain sellers and buyers. We may also face material delays in introducing new services, products and enhancements. If competitors introduce new products and services using new technologies or if new industry standards and practices emerge, our existing websites and our proprietary technology and systems may become obsolete. In addition, the expansion and improvement of our systems and infrastructure may require us to commit substantial financial, operational and technical resources, with no assurance our business will increase. If we fail to respond to technological change or to adequately maintain, expand, upgrade and develop our systems and infrastructure in a timely fashion our growth prospects and results of operations could be adversely impacted.

System interruptions that impair access to our website or the efficiency of our marketplace events would damage our reputation and brand and adversely affect our results of operations.

The satisfactory performance, reliability and availability of our website and network infrastructure are critical to our reputation, our ability to attract and retain both sellers and buyers for our online marketplace and our ability to maintain adequate customer service levels. Any systems interruption that results in the unavailability of our website could result in negative publicity, damage our reputation and brand and adversely affect our results of operations. We may experience temporary system interruptions for a variety of reasons, including security breaches and other security incidents, viruses, telecommunication and other network failures, power failures, software errors or an overwhelming number of visitors trying to reach our website during periods of strong demand, such as during our marketplace events. We rely upon third-party co-location providers for our data centers, and we are dependent on these third parties to provide continuous power, cooling, Internet connectivity and physical security for our servers. In the event that these third-party providers experience any interruption in operations or cease business for any reason, or if we are unable to agree on satisfactory terms for continued hosting relationships, we would be forced to enter into a relationship with other service providers or assume some hosting responsibilities ourselves. Although we operate two data centers in an active/standby configuration for geographic and vendor redundancy, a system disruption at the active data center could result in a noticeable disruption to our website until all website traffic is redirected to the standby data center. Even a disruption as brief as a few minutes could have a negative impact on marketplace activities and could therefore result in a loss of revenue. Because some of the causes of system interruptions may be outside of our control, we may not be able to remedy such interruptions in a timely manner, or at all.

Our business is subject to online security risks, including security breaches and misappropriation of our customers’ confidential information.

We collect limited confidential information in connection with the user registration and other marketplace-related processes on our website and, in particular, in connection with processing and remitting payments to and from our customers. Although we maintain security features on our website, our security measures may not detect or prevent hacker interceptions, break-ins, security breaches and other disruptions that may jeopardize the security of information stored in and transmitted by our website. We rely on encryption and authentication technology licensed from third parties to provide the security and authentication to effectively secure transmission of the confidential information that we process for our customers, and such technology may fail to function properly or may be compromised or breached. Additionally, as described above, we use third-party co-location vendors for our data centers, and their security measures may not prevent security breaches and other disruptions that may jeopardize the security of information stored in and transmitted through their systems. A party that is able to circumvent our security measures could misappropriate proprietary information, cause interruption in our operations, damage or misuse our website, and misuse the information that they misappropriate. We may be required to expend significant capital and other resources to protect against such security breaches or to alleviate problems caused by such breaches. These issues are likely to become more difficult as we expand our operations. If any compromise of our security were to occur, we may lose customers and our reputation, business, financial condition and operating results could be harmed by the misappropriation of confidential customer information. Any compromise of security may result in us being out of compliance with U.S. federal and state and international laws and we may be subject to lawsuits, fines, criminal penalties, statutory damages, and other costs. Any failure, or perceived failure, by us to comply with our posted privacy policies or with any regulatory requirements or orders or other federal, state, or international privacy or consumer protection-related laws and regulations, could result in proceedings or actions against us by governmental entities or others, subject us to significant penalties and negative publicity, may adversely affect our results of operations.

We depend on key personnel to operate our business, and if we are unable to retain our current personnel or hire additional personnel our ability to develop and successfully market our business could be harmed.

We believe our future success will depend in large part upon our ability to attract and retain highly skilled managerial, technical, finance, and sales and marketing personnel. All of our U.S. officers and other employees are at-will employees, which means they may terminate their employment relationship with us at any time, and their knowledge of our business and industry would be extremely difficult to replace. In addition, the loss of any key employees or the inability to attract or retain qualified personnel could delay the development and introduction of, and harm our ability to sell, our solutions and harm the market’s perception of us. Qualified individuals are in high demand, and we may incur significant costs to recruit them. We may be unable to recruit and retain suitably qualified individuals who are capable of meeting our growing sales, operational and managerial requirements, or may be required to pay increased compensation in order to do so. If we are unable to recruit and retain the qualified personnel we need to succeed, our business could be harmed.

Volatility or a decline in our stock price may also affect our ability to recruit and retain key employees. Our named executive officers have become, or will soon become, vested in a substantial amount of stock or stock options. Employees may be more likely to leave us if the shares they own or the shares underlying their options have significantly appreciated in value relative to the original purchase prices of the shares or the exercise prices of the options, or if the exercise prices of the options that they hold are significantly above the market price of our common stock. In addition, to retain such employees we may have to issue increased amounts of equity, which would dilute existing stockholders and could adversely affect the trading price our common stock. If we are unable to retain our employees, our business, results of operations and financial condition could be harmed.

Future acquisitions could disrupt our business and adversely affect of results of operations.

Our success will depend, in part, on our ability to expand our offerings and markets and grow our business in response to changing technologies, customer demands and competitive pressures. In some circumstances, we may determine to do so through the acquisition of complementary businesses, solutions or

technologies rather than through internal development. The identification of suitable acquisition candidates can be difficult, time-consuming and costly, and we may not be able to successfully complete identified acquisitions. Furthermore, even if we successfully complete an acquisition, we may not be able to successfully assimilate and integrate the business, technologies, solutions, personnel or operations of the company that we acquired, particularly if key personnel of an acquired company decide not to work for us. In addition, we may issue equity securities to complete an acquisition, which would dilute our stockholders’ ownership and could adversely affect the trading price of our common stock. Acquisitions may also involve the entry into geographic or business markets in which we have little or no prior experience. Consequently, we may not achieve anticipated benefits of the acquisitions which could adversely affect our results of operations.

Risks Related to This Offering and Our Common Stock

An active, liquid and orderly trading market for our common stock may not develop, our share price may be volatile and you may be unable to sell your shares at or above the offering price.

Prior to this offering, there has not been a public market for our common stock. We cannot predict the extent to which a trading market will develop or how liquid that market might become. The initial public offering price for our shares will be determined by negotiations between us and representatives of the underwriters and may not be indicative of prices that investors in the market will be willing to buy and sell our shares following this offering. If you purchase shares of our common stock, you may not be able to resell those shares at or above the initial public offering price. If an active public market does not develop or is not sustained, it may be difficult for you to sell your shares of common stock at a price that is attractive to you, or at all. The market price of shares of our common stock could be subject to wide fluctuations in response to many risk factors listed in this section and others beyond our control, including:


	•	actual or anticipated fluctuations in our key operating metrics, financial condition and operating results;

	•	fluctuations in the price of used and new heavy equipment;

	•	changes in conditions in the industries in which participants in our marketplace compete;

	•	the availability of credit to participants in our marketplace;

	•	rating downgrades by securities analysts who follow us, or our failure to meet securities analysts’ projections for our results;

	•	our announcement of actual or anticipated results that fail to meet market expectations;

	•	fluctuations in the valuation of companies perceived by investors to be comparable to us;

	•	price and volume fluctuations in the stock market on a whole;

	•	sales or expected sales of additional common stock by us, and our officers, directors and significant stockholders;

	•	announcements from, or results of operations of, our competitors; or

	•	market conditions or trends in our industry or in the economy in general.

Furthermore, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These broad market and industry fluctuations, as well as general economic, political and market conditions such as recessions, interest rate changes or international currency fluctuations, may cause the market price of shares of our common stock to decline. If the market price of shares of our common stock after this offering does not exceed the initial public offering price, you may not realize any return on your investment in us and may lose some or all of your investment. In the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future.

Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could seriously harm our business.

If securities or industry analysts do not publish research or reports about our business, or if they publish negative evaluations of our common stock, our stock price and trading volume could decline.

The trading market for our common stock will be influenced by the research and reports that securities or industry analysts publish about us or our business. If securities or industry analysts initiate coverage and one or more of the analysts who cover us downgrade our stock or publish inaccurate or unfavorable research about our business, our stock price would likely decline. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, demand for our stock could decrease, which might cause our stock price and trading volume to decline.

Our principal stockholders, executive officers and directors own a significant percentage of our stock and will continue to have significant control of us after the offering and could delay or prevent a change in corporate control.

Following the completion of this offering, our executive officers and directors, and entities that are affiliated with them, will beneficially own an aggregate of approximately % of our outstanding common stock (or approximately % of our outstanding common stock assuming exercise of the underwriters’ overallotment option in full). As a result, these stockholders, acting together, may be able to control our management and affairs and matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, such as mergers, consolidations or the sale of substantially all of our assets. Consequently, this concentration of ownership may have the effect of delaying or preventing a change of control, including a merger, consolidation or other business combination involving us, or discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control, even if such a change of control would benefit our other stockholders.

Our stock price could decline due to the large number of shares of our common stock eligible for future sale.

Sales of substantial amounts of our common stock in the public market following this offering, or the perception that these sales could occur, could cause the market price of our common stock to decline. Based on shares outstanding as of March 31, 2010, upon completion of this offering, we will have outstanding shares of common stock (or outstanding shares of common stock assuming exercise of the underwriters’ overallotment option in full). All of the shares sold pursuant to this offering will be immediately tradable without restriction under the Securities Act unless held by “affiliates,” as that term is defined in Rule 144 under the Securities Act. The representatives of the underwriters may, in their sole discretion and at any time without notice, release all or any portion of the securities subject to lock-up agreements.

After the lock-up agreements pertaining to this offer expire and based on shares outstanding as of March 31, 2010, an additional shares will be eligible for sale in the public market. In addition, shares underlying options that are either subject to the terms of our equity compensation plans or reserved for future issuance under our equity compensation plans will become eligible for sale in the public market to the extent permitted by the provisions of various option agreements, the lock-up agreements and Rules 144 and 701 under the Securities Act. As resale restrictions end, the market price of our common stock could decline if the holders of those shares sell them or are perceived by the market as intending to sell them.

Holders of approximately shares, or %, of our common stock will have rights, subject to some conditions, to require us to file registration statements covering the sale of their shares or to include their shares in registration statements that we may file for ourselves or other stockholders. We also intend to register the offer and sale of all shares of common stock that we may issue under our equity compensation plans. Once we register the offer and sale of shares for the holders of registration rights and option holders, they can be freely sold in the public market upon issuance, subject to the lock-up agreements described in the section of this prospectus captioned “Underwriting.”

In addition, in the future, we may issue additional shares of common stock or other equity or debt securities convertible into common stock in connection with a financing, acquisition, litigation settlement,

employee arrangement or otherwise. Any such issuance could result in substantial dilution to our existing stockholders and could cause the trading price of our common stock to decline.

Our charter documents and Delaware law could prevent a takeover that stockholders consider favorable and could also reduce the market price of our stock.

Our amended and restated certificate of incorporation and our bylaws contain provisions that could delay or prevent a change in control of our company. These provisions could also make it more difficult for stockholders to elect directors and take other corporate actions. These provisions include:


	•	providing for a classified board of directors with staggered, three-year terms;

	•	not providing for cumulative voting in the election of directors;

	•	authorizing the board to issue, without stockholder approval, preferred stock with terms and rights superior to those of common stock;

	•	permitting an amendment of our amended and restated certificate of incorporation only through a super-majority vote of the stockholders;

	•	prohibiting stockholder action by written consent;

	•	limiting the persons who may call special meetings of stockholders; and

	•	requiring advance notification for stockholder director nominations and other proposals.

In addition, the provisions of Section 203 of the Delaware General Corporate Law govern us. These provisions may prohibit large stockholders, in particular those owning 15% or more of our outstanding voting stock, from merging or combining with us for a certain period of time.

These and other provisions in our amended and restated certificate of incorporation, our bylaws and under Delaware law could discourage potential takeover attempts, reduce the price that investors might be willing to pay for shares of our common stock in the future and result in the market price being lower than it would be without these provisions. See “Description of Capital Stock—Preferred Stock” and “Description of Capital Stock—Effect of Certain Provisions of Our Amended and Restated Certificate of Incorporation and Bylaws and the Delaware Anti-Takeover Statute.”

Our management will have broad discretion in the use of the net proceeds from this offering and may not use the net proceeds effectively.

Our management will have broad discretion in the application of the net proceeds of this offering and you will not have the opportunity, as part of your investment decision, to assess whether we are using our net proceeds appropriately. We expect to use the proceeds for general corporate purposes and cannot specify with certainty the uses to which we will apply the net proceeds we will receive from this offering. Until the net proceeds we receive are used, they may be placed in investments that do not produce income or that lose value. If our net proceeds are used for purposes that do not enhance stockholder value, we may fail to achieve expected financial results, which could cause the price of our common stock to decline.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA

This prospectus contains forward-looking statements that are based on our management’s beliefs and assumptions and on information currently available to our management. The forward-looking statements are contained principally in “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business” and “Compensation Discussion and Analysis.” Forward-looking statements include information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, industry environment, potential growth opportunities, potential market opportunities and the effects of competition. Forward-looking statements include all statements that are not historical facts and can be identified by terms such as “anticipates,” “believes,” “could,” “seeks,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts, “projects,” “should,” “would” or similar expressions and the negatives of those terms.

The forward-looking statements contained in this prospectus reflect our views as of the date of this prospectus about future events and are subject to risks, uncertainties, assumptions and changes in circumstances that may cause events or our actual activities or results to differ significantly from those expressed in any forward-looking statement. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future events, results, actions, levels of activity, performance or achievements. Readers are cautioned not to place undue reliance on these forward-looking statements. A number of important factors could cause actual results to differ materially from those indicated by the forward-looking statements, including, but not limited to, those factors described in “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These factors include, among others:


	•	our ability to increase the supply of quality used heavy equipment for sale in our marketplace;

	•	our ability to grow, integrate, manage and retain our salesforce;

	•	our ability to continue to establish and expand the IronPlanet brand;

	•	competition, particularly from larger, established companies with greater financial resources and name recognition;

	•	our ability to retain our high volume sellers;

	•	a decline in the global economy or in used heavy equipment prices;

	•	volatility in our annual and quarterly results of operations;

	•	our performance on guarantee and purchase arrangements; and

	•	risks associated with international operations and emerging markets.

All of the forward-looking statements we have included in this prospectus are based on information available to us on the date of this prospectus. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

This prospectus contains various estimates related to our industry, including market size and growth rates. These estimates have been included in studies published or produced by market researchers and other firms, including Manfredi & Associates, Inc. and The Freedonia Group Incorporated. These estimates have been produced by industry analysts based on trends to date, their knowledge of technologies and markets and customer research, but these are forecasts only and are subject to inherent uncertainty.

USE OF PROCEEDS

We estimate that the net proceeds from the sale of the shares of common stock that we are offering will be approximately $ million, after deducting underwriters’ discounts and commissions and estimated offering expenses payable by us and assuming an initial public offering price of $ per share (the midpoint of the range set forth on the cover of this prospectus). A $1.00 increase or decrease in the assumed initial public offering price of $ per share would increase or decrease the net proceeds to us from this offering by approximately $ million, assuming the number of shares offered by us, as indicated on the cover page of this prospectus, remains the same and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. We will not receive any of the proceeds from the sale of common stock by the selling stockholders.

The principal purposes of this offering are to create a public market for our common stock, to obtain additional equity capital and to facilitate future access to the public markets. We intend to use the net proceeds from this offering for general corporate purposes. If the opportunity arises, we may use a portion of the net proceeds from this offering to acquire or invest in businesses, products or technologies that are complementary to our own. We are not currently a party to any agreements or commitments for any acquisitions, and we have no current understandings with respect to any acquisitions.

Management’s plans for the proceeds of this offering are subject to change due to unforeseen events and opportunities, and the amounts and timing of our actual expenditures depend on several factors, including our expansion plans and the amount of cash generated or used by our operations. We cannot specify with certainty the particular uses for the net proceeds to be received upon completion of this offering. Accordingly, our management team will have broad discretion in using the net proceeds of this offering. Pending the use of the net proceeds, we intend to invest the net proceeds in short-term, investment-grade, interest-bearing instruments.

DIVIDEND POLICY

We have never declared or paid any cash dividends on our common stock. We do not anticipate paying cash dividends on our capital stock in the foreseeable future and intend to retain all available funds and any future earnings for use in the operation and expansion of our business.

CAPITALIZATION

The following table summarizes our cash and cash equivalents and capitalization as of March 31, 2010:


	•	on an actual basis (after giving effect to the 1-for-2 reverse split of our common stock and preferred stock);


	•	on a pro forma basis reflecting the conversion of all outstanding shares of our convertible preferred stock on a one-for-one basis into an aggregate of 17,523,274 shares of our common stock effective immediately prior to the completion of this offering (which will occur automatically pursuant to the terms of our certificate of incorporation only if this offering results in aggregate gross proceeds to us of not less than $20 million and a price-per-share to the public of not less than $12.00 per share); and


	•	on a pro forma as adjusted basis to further reflect:


	•	the sale of shares of common stock by us in this offering at an assumed initial public offering price of $ per share, the midpoint of the estimated price range set forth on the cover page of this prospectus;


	•	the filing of our amended and restated certificate of incorporation; and


	•	the application of the estimated net proceeds from this offering as described under the section captioned, “Use of Proceeds.”

You should read the information in this table in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the accompanying notes appearing elsewhere in this prospectus.


	As of March 31, 2010
							Pro Forma
	Actual			Pro Forma			as Adjusted
	(in thousands)

Cash and cash equivalents	$	42,636		$	42,636		$

Convertible preferred stock, $0.001 par value: 21,250,000 shares authorized, 17,523,274 shares issued and outstanding, actual; 21,250,000 shares authorized, no shares issued and outstanding pro forma; no shares authorized, issued or outstanding, pro forma as adjusted	$	52,278		$	—		$
Stockholders’ equity (deficit):
Preferred stock, $0.001 par value: no shares authorized, issued or outstanding, actual and pro forma; 5,000,000 authorized, no shares issued or outstanding, pro forma as adjusted		—			—
Common stock and additional paid-in capital, $0.001 par value: 36,750,000 shares authorized, 4,702,094 shares issued and outstanding, actual; 36,750,000 shares authorized, 22,225,368 shares issued and outstanding, pro forma; 100,000,000 shares authorized, shares issued and outstanding, pro forma as adjusted		7,414			60,206
Accumulated other comprehensive loss		(194	)		(194	)
Accumulated deficit		(24,883	)		(24,883	)

Total stockholders’ equity (deficit)		(17,663	)		35,129

Total capitalization	$	34,615		$	35,129		$

The number of shares in the table above excludes, as of March 31, 2010:


	•	an aggregate of 6,735 shares of common stock available for issuance under our 1999 Stock Plan;


	•	1,632,500 additional shares of common stock, subject to increase on an annual basis, reserved for issuance under our 2010 Equity Incentive Plan, which will become effective upon completion of this offering;


	•	3,994,154 shares of common stock issuable upon the exercise of outstanding options to purchase our common stock granted pursuant to our 1999 Stock Plan at a weighted average exercise price of $2.05 per share; and


	•	360,943 shares of common stock issuable upon exercise of outstanding warrants at a weighted average exercise price of $8.00 per share.

DILUTION

If you invest in our common stock, you will experience immediate and substantial dilution in the pro forma as adjusted net tangible book value per share of our common stock after this offering.

As of March 31, 2010, net tangible book value was $ , or $ per share of common stock. Our pro forma net tangible book value as of March 31, 2010 was $ , or $ per share of common stock. Pro forma net tangible book value per share represents total tangible assets less total liabilities, divided by the number of shares of common stock outstanding after giving effect to the conversion of all outstanding shares of our convertible preferred stock on a one-for-one basis into an aggregate of 17,523,274 shares of our common stock effective immediately prior to the completion of this offering (which will occur automatically pursuant to the terms of our certificate of incorporation only if this offering results in aggregate gross proceeds to us of not less than $20 million and a price-per-share to the public of not less than $12.00 per share), for a total of shares of common stock. After giving effect to the issuance and sale by us of shares of our common stock in this offering at the assumed initial public offering price of $ per share (the mid-point of the estimated range shown on the cover page of this prospectus), and after deducting the underwriting discounts and commissions and our estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of March 31, 2010 would have been $ million, or $ per share. This represents an immediate increase in net tangible book value of $ per share to our existing stockholders and an immediate dilution of $ per share to our new investors purchasing shares of common stock in this offering. The following table illustrates this dilution on a per share basis:


Assumed initial public offering price		$
Pro forma net tangible book value per share as of March 31, 2010	$

Increase per share attributable to new investors
Pro forma as adjusted net tangible book value per share after this offering

Dilution per share to new investors		$

The following table sets forth as of March 31, 2010, on a pro forma as adjusted basis described above, the difference between the number of shares of common stock purchased from us, the total consideration paid, and the average price per share paid by existing stockholders, and the number of shares of common stock purchased from us, the total consideration paid, and the average price per share paid by investors purchasing shares in this offering, based on an assumed initial public offering price of $ per share and before deducting underwriting discounts and commissions and estimated offering expenses payable by us:

Total Shares

Total Consideration

Average Price

Number

Percent

Amount

Percent

Per Share

Existing stockholders

New investors

Total

If the underwriters’ overallotment option is exercised in full, the number of shares held by the new investors will be increased to , or approximately % of the total number of shares of our common stock outstanding after this offering. A $1.00 increase (decrease) in the assumed initial public offering price of $ per share would increase (decrease) total consideration paid by new stockholders by $ million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same.

The tables and calculations above are based on 22,225,368 shares of common stock issued and outstanding as of March 31, 2010, and exclude, as of March 31, 2010:


	•	an aggregate of 6,735 shares of common stock available for issuance under our 1999 Stock Plan;


	•	1,632,500 additional shares of common stock, subject to increase on an annual basis, reserved for issuance under our 2010 Equity Incentive Plan, which will become effective upon completed of this offering;


	•	3,994,154 shares of common stock issuable upon the exercise of outstanding options to purchase our common stock granted pursuant to our 1999 Stock Plan at a weighted average exercise price of $2.05 per share; and


	•	360,943 shares of common stock issuable upon exercise of outstanding warrants at a weighted average exercise price of $8.00 per share.

SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

The consolidated statements of operations data for each of the three years ended December 31, 2007, 2008 and 2009, and the consolidated balance sheet data as of December 31, 2008 and 2009, have been derived from our audited consolidated financial statements included elsewhere in this prospectus. The consolidated statements of operations data for the years ended December 31, 2005 and 2006 and the consolidated balance sheet data as of December 31, 2005, 2006 and 2007 are derived from our audited consolidated financial statements not included in this prospectus. Revenue and operating expenses in the consolidated statements of operations data for the years ended December 31, 2005 and 2006 have been reclassified by us to present the data on a consistent basis with the data for the years ended December 31, 2007, 2008 and 2009. The consolidated statements of operations data for each of the three months ended March 31, 2009 and 2010, and the consolidated balance sheet data as of March 31, 2010, are derived from our unaudited condensed consolidated financial statements included elsewhere in this prospectus. The unaudited interim financial statements have been prepared on the same basis as the annual consolidated financial statements, and in the opinion of management, reflect all adjustments, which include only normally recurring adjustments, necessary to present fairly our financial position and results of operations and cash flows for the three months ended March 31, 2009 and March 31, 2010. The results of the three months ended March 31, 2010 are not necessarily indicative of the results to be expected for the year ending December 31, 2010 or for any other interim period or for any other future year. You should read the consolidated financial and other data set forth below in conjunction with our consolidated financial statements and the accompanying notes and the information under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained elsewhere in this prospectus. Our historical results are not necessarily indicative of results to be expected for future periods.


	Year Ended December 31,														Three Months Ended March 31,
	2005			2006			2007		2008			2009			2009			2010
	(in thousands, except per share data)

Consolidated Statements of Operations Data:
Revenue	$	11,066		$	14,937		$	22,030	$	34,989		$	54,674		$	10,312		$	16,208
Cost of revenue (1)		4,160			4,652			5,508		7,508			11,978			2,488			3,496

Gross profit		6,906			10,285			16,522		27,481			42,696			7,824			12,712
Operating expenses (1):
Sales and marketing		6,031			6,543			10,093		16,991			23,890			5,303			7,798
Technology		1,159			1,331			1,426		1,692			2,781			665			930
General and administrative		1,761			2,551			4,394		7,026			10,865			2,520			3,411

Total operating expenses		8,951			10,425			15,913		25,709			37,536			8,488			12,139

Income (loss) from operations		(2,045	)		(140	)		609		1,772			5,160			(664	)		573
Interest income		227			288			669		413			64			37			2
Other non-operating expense (1)		2			—			—		(21	)		(1,072	)		(234	)		(551	)

Income (loss) before taxes		(1,816	)		148			1,278		2,164			4,152			(861	)		24
Income tax provision (benefit) (2)		1			4			110		313			(8,696	)		23			452

Net income (loss)	$	(1,817	)	$	144		$	1,168	$	1,851		$	12,848		$	(884	)	$	(428	)

Net income (loss) per share:
Basic	$	(0.65	)	$	0.05		$	0.44	$	0.63		$	3.94		$	(0.28	)	$	(0.11	)

Diluted	$	(0.65	)	$	0.01		$	0.06	$	0.08		$	0.54		$	(0.28	)	$	(0.11	)

Weighted average shares outstanding:
Basic		2,797			2,825			2,665		2,961			3,260			3,126			3,918

Diluted		2,797			20,923			20,900		21,981			23,724			3,126			3,918

Pro forma net income (loss) per share:
Basic												$	0.60						(0.02	)

Diluted												$	0.54						(0.02	)

Pro forma weighted average shares outstanding:
Basic													21,356						21,934

Diluted													23,724						21,934


																As of
	As of December 31,															March 31,
	2005			2006			2007			2008			2009			2010
	(in thousands)

Consolidated Balance Sheet Data:
Cash and cash equivalents	$	11,778		$	16,290		$	17,638		$	30,968		$	30,402		$	42,636
Working capital (3)		8,753			8,558			11,445			15,998			23,892			25,492
Total assets		16,212			18,334			20,499			36,303			57,287			68,216
Total liabilities		7,681			9,839			9,160			19,547			24,100			33,601
Convertible preferred stock		47,424			47,424			48,395			51,341			52,341			52,278
Total stockholders’ equity (deficit)		(38,893	)		(38,928	)		(37,055	)		(34,585	)		(19,154	)		(17,663	)


	Year Ended December 31,														Three Months Ended March 31,
	2005			2006			2007		2008			2009			2009			2010
	(in thousands)

Other Financial and Operating Data:
Adjusted EBITDA (4)	$	(1,954	)	$	26		$	1,611	$	2,649		$	7,298		$	(164	)	$	1,557
Adjusted EBITDA less capital expenditures (4)		(2,087	)		(280	)		837		1,205			5,641			(321	)		1,339

Gross Merchandise Volume (5):
North America	$	130,432		$	163,124		$	231,210	$	337,940		$	412,874		$	82,037		$	116,738
International		—			—			—		3,611			45,556			9,675			13,086

Total	$	130,432		$	163,124		$	231,210	$	341,551		$	458,430		$	91,712		$	129,824

Revenue:
North America	$	11,066		$	14,937		$	22,030	$	34,691		$	49,517		$	9,444		$	14,449
International		—			—			—		298			5,157			868			1,759

Total	$	11,066		$	14,937		$	22,030	$	34,989		$	54,674		$	10,312		$	16,208

Adjusted EBITDA (4):
North America	$	(1,954	)	$	26		$	1,611	$	5,598		$	10,420		$	799		$	2,551
International		—			—			—		(2,949	)		(3,122	)		(963	)		(994	)

Total	$	(1,954	)	$	26		$	1,611	$	2,649		$	7,298		$	(164	)	$	1,557


(1)		Includes stock-based compensation as follows:


	Year Ended December 31,										Three Months Ended March 31,
	2005		2006		2007		2008		2009		2009		2010
	(in thousands)

Cost of revenue	$	—	$	4	$	53	$	38	$	47	$	9	$	41
Sales and marketing expenses		—		12		34		105		148		31		78
Technology expenses		—		1		10		35		809		203		419
General and administrative expenses		—		9		620		191		288		71		160
Other non-operating expense*		—		—		—		21		935		234		474

Total stock-based compensation	$	—	$	26	$	717	$	390	$	2,227	$	548	$	1,172


*		Related to an equity award held by a terminated employee. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Comparison of the Years Ended December 31, 2007, 2008 and 2009—Other Non-Operating Expense” for more information.


(2)		Reflects the one-time release of substantially all of our U.S. federal and state net deferred tax valuation allowance in the fourth quarter of 2009. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Components of Our Results of Operations—Income Tax Provision (Benefit)” for more information.

(3)		Working capital is defined as current assets minus current liabilities.

(4)		We define Adjusted EBITDA as net income adjusted for stock-based compensation, performance warrants, interest income, income tax provision and depreciation and amortization. We define Adjusted EBITDA less capital expenditures as Adjusted EBITDA less capital expenditures.

		Management believes that the use of Adjusted EBITDA facilitates more useful period to period comparisons of operations, and also facilitates comparisons with our peer companies, many of which use similar non-GAAP financial measures to supplement their GAAP results. Management believes that it is useful to exclude certain non-cash charges, such as depreciation and amortization and stock-based compensation, from Adjusted EBITDA because (a) the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations and (b) such expenses can vary significantly between periods as a result of full amortization of previously acquired tangible and intangible assets or the timing of new stock-based awards. We use Adjusted EBITDA in conjunction with traditional GAAP operating performance measures as part of our overall assessment of our performance, for planning purposes, including the preparation of our annual operating budget, to evaluate the effectiveness of our business strategies, in connection with determination of our annual bonus incentive plan and in communications with our board of directors concerning our financial performance. We do not place undue reliance on Adjusted EBITDA as our only measure of operating performance.

		Adjusted EBITDA less capital expenditures is a key measure used in our internal operating reports and allows us to evaluate the capital efficiency of our business model. Management believes that Adjusted EBITDA less capital expenditures is useful to investors as a supplemental measure to evaluate our operating performance and to facilitate comparisons with our peer companies with respect to capital efficiency many of which use similar non-GAAP financial measures.

		Adjusted EBITDA and Adjusted EBITDA less capital expenditures should not be considered substitutes for other measures of financial performance reported in accordance with GAAP. There are limitations to using non-GAAP financial measures, including that other companies may calculate these measures differently than we do, that they do not reflect our future requirements for capital expenditures, and that they do not reflect changes in, or cash requirements for, our working capital. Management compensates for the inherent limitations associated with using the Adjusted EBITDA and Adjusted EBITDA less capital expenditures measures through disclosure of such limitations, presentation of our financial statements in accordance with GAAP and reconciliation of Adjusted EBITDA and Adjusted EBITDA less capital expenditures to the most directly comparable GAAP measure, which is net income.


		A reconciliation of net income to Adjusted EBITDA and Adjusted EBITDA less capital expenditures is presented below:


																Three Months Ended
	Year Ended December 31,															March 31,
	2005			2006			2007			2008			2009			2009			2010
	(in thousands)

Net income (loss)	$	(1,817	)	$	144		$	1,168		$	1,851		$	12,848		$	(884	)	$	(428	)
Stock-based compensation		—			26			717			390			2,227			548			1,172
Performance warrants **		—			—			—			—			136			—			78
Interest income		(227	)		(288	)		(669	)		(413	)		(64	)		(37	)		(2	)
Depreciation and amortization		89			140			285			508			847			186			285
Income tax provision (benefit)		2			4			110			313			(8,696	)		23			452

Adjusted EBITDA		(1,953	)		26			1,611			2,649			7,298			(164	)		1,557
Capital expenditures		134			306			774			1,444			1,657			157			218

Adjusted EBITDA less capital expenditures	$	(2,087	)	$	(280	)	$	837		$	1,205		$	5,641		$	(321	)	$	1,339


**		Reflects the mark-to-market accounting for the Series A and Series C convertible preferred stock warrants classified as liability awards. See Note 1 to the consolidated financial statements included elsewhere in this prospectus for more information regarding classification of the convertible preferred stock warrants.


(5)		Gross Merchandise Volume, or GMV, represents the total value of all items sold in our marketplace, excluding our Private Marketplace, during a period. It is not a measure of our financial performance or revenue and is not presented in our consolidated financial statements. Our definition of GMV may differ from that used by other participants in our industry. We believe that revenue, which is the most directly comparable measure in our statement of operations, and certain other financial and operating data, are best understood by considering their relationship to GMV. Revenue represents the revenue we earn in the course of conducting transactions through our marketplace from seller commissions, seller listing and inspection fees and buyer transaction fees.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis by our management of our financial condition and results of operations in conjunction with our consolidated financial statements and the accompanying notes included elsewhere in this prospectus. This discussion and other parts of this prospectus contain forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in “Risk Factors.”

Overview

We are a leading online marketplace for used heavy equipment. Our exclusively online model allows us to match supply and demand globally for used heavy equipment, while achieving greater reach, price performance and efficiency than traditional models. We offer multiple online marketplace solutions for sellers and buyers of used heavy equipment. Our primary solution is our Featured Marketplace, which is a scheduled public online auction typically held once a week, during which prospective buyers bid on a wide variety of equipment for sale. Other solutions offered include our Private Marketplace, our Daily Marketplace and our One-Owner Marketplace, each designed to meet the specific needs of used heavy equipment sellers.

As a marketplace, our customers are both sellers and buyers of used heavy equipment. Sellers and buyers include a broad mix of equipment owners ranging from large multinational corporations to sole proprietors. These customers include a mix of equipment owners, such as original equipment manufacturers, or OEMs, re-marketing and finance organizations, construction and contracting companies, equipment rental companies, farming and mining entities and equipment dealers. Sellers typically provide equipment to sell in our marketplace on a consignment basis. We typically do not take title, ownership or possession of equipment, and consigned equipment remains in the possession of the seller until a sale transaction is completed through our marketplace. We believe that sellers are attracted to our marketplace due to the cost and time efficiencies of our online solutions and the global audience of buyers that participate regularly in our marketplace.

We generate revenue from sellers through commissions, listing and inspection fees, and from buyers through transaction fees. We assist sellers in the listing, inspection and marketing of equipment, and in payment processing. For these services, we charge sellers a commission tied to the final selling price of equipment sold, and we charge sellers a listing and inspection fee related to our assistance in listing equipment and conducting an inspection. We provide buyers with a wide selection of equipment, detailed inspection reports, transparent bidding functionality, payment processing and customer support assistance throughout their search, evaluation and bidding activities. For these services, we charge buyers a transaction fee tied to the final selling price of equipment purchased.

We were formed in 1999 and have grown by adding sales and operations personnel to attract additional sellers and buyers to our marketplace. As part of our growth strategy, over the last three years we have expanded outside North America, expanded the breadth of our marketplace solutions and expanded into additional equipment categories. In 2008, we held our first Asia-Pacific marketplace event, primarily focused in Australia, and in 2009, we held our first European marketplace event. Our current international expansion efforts and resources are primarily focused on expanding our European marketplace events, and to a lesser extent, our Asia-Pacific marketplace events. Over time, we have added our Private Marketplace solution and substantially increased our Daily Marketplace activities, and have also added heavy equipment categories such as mining and agricultural equipment.

We have achieved substantial growth in our business in recent years. We grew our gross merchandise volume, or GMV, from $231 million in 2007 to $458 million in 2009. We grew our revenue from $22.0 million in 2007 to $54.7 million in 2009. Over the same period, we grew Adjusted EBITDA from $1.6 million in 2007 to $7.3 million in 2009. Compared to the first quarter of 2009, in the first quarter of 2010 we grew GMV from $92 million to $130 million, or 41%, and revenue from $10.3 million to $16.2 million, or 57%, and Adjusted EBITDA changed from negative $0.2 million to $1.6 million. For a discussion of Adjusted EBITDA and a reconciliation of net income to Adjusted EBITDA, see note 4 to “Selected Consolidated Financial and Other Data.”

We manage our business in two geographic segments: North America, which includes the United States, Canada and Mexico, and International, which includes Europe and Asia-Pacific. Segment revenue is determined based on which segment conducts the marketplace event. Currently our international segment is not profitable as our marketplace activities in Europe and Asia-Pacific have not yet generated revenue in excess of total current operating expenses. For more information regarding our segments, please see “—Results of Operations” and Note 10 to the consolidated financial statements included elsewhere in this prospectus.

We believe that our investment in our technology platform, the increase in the breadth of our marketplace solutions and our geographic expansion have provided a foundation for a scalable business model, which will allow us to continue to grow our business, expand into additional equipment categories, further penetrate existing markets and enter new markets without the need for significant capital investments in real estate or technology infrastructure.

Key Business Metrics

We regularly monitor several key operating and financial metrics to help us evaluate trends, establish budgets, measure the effectiveness of our sales and marketing efforts and assess operational efficiency. The following is a summary of those key metrics.


	•	Gross Merchandise Volume. Gross merchandise volume, or GMV, represents the total value of all items sold in our marketplace, excluding our Private Marketplace, during a period. We use GMV as a key measure of the scale and growth of our business, and as one measure of the level of liquidity achieved by our marketplace.

	•	Revenue Rate. Revenue rate is the revenue derived from our marketplace, excluding our Private Marketplace, divided by total GMV during a period. This revenue rate is comprised of our seller commissions, seller listing and inspection fees, and buyer transaction fees. We use this as a key measure of the effectiveness of our sales organization and of the value our marketplace provides to both sellers and buyers of equipment.

	•	Total Sellers. Total sellers is the number of unique sellers during a period. We use this as a measure of the reach and liquidity of our marketplace, and as a measure of the effectiveness of our salesforce in attracting new sellers and growing our business. The number of international sellers is a measure of the global reach and liquidity of our marketplace, and our effectiveness in growing our business internationally.

	•	Total Bidders. Total bidders is the number of unique bidders during a period. We use total bidders, and bidders by geography, as measures of the reach and liquidity of our marketplace. The number of international bidders we attract to our marketplace is a measure of the global reach of our business.


										Three Months Ended
	Year Ended December 31,									March 31,
	2007			2008			2009			2009			2010
	(dollars in thousands)

Gross Merchandise Volume:
North America	$	231,210		$	337,940		$	412,874		$	82,037		$	116,738
International		—			3,611			45,556			9,675			13,086

Total	$	231,210		$	341,551		$	458,430		$	91,712		$	129,824

Revenue Rate:
North America		9.0	%		9.9	%		11.7	%		11.5	%		12.2	%
International		—			8.3			11.3			9.0			13.4
Overall		9.0			9.8			11.7			11.0			12.3
Sellers:
North America		682			1,024			1,407			409			610
International		—			41			211			42			149

Total		682			1,065			1,618			451			759

Bidders:
North America		6,420			8,460			11,105			4,386			4,772
International		732			1,784			3,462			1,124			1,827

Total		7,152			10,244			14,567			5,510			6,599

Trends Affecting Our Business

Our business is affected by a number of key global economic and heavy equipment market trends as follows.


	•	Global Economic Cycles. Economic and infrastructure development cycles impact the quantity of supply and pricing of used heavy equipment. We believe that our business benefits in periods of economic expansion and is relatively insulated in periods of economic contraction. In periods of economic expansion, marketplace activity grows and, as demand outpaces supply, pricing typically increases. In periods of economic contraction, there may be greater quantities of used equipment offered for sale, due to lack of project activity. While greater supply levels in periods of contraction may negatively affect equipment pricing, lower pricing attracts certain types of buyers, and the timely disposal of idle equipment is important to many sellers, contributing to marketplace activity.

	•	Pricing of Used Heavy Equipment. Pricing can affect supply and demand of equipment offered for sale. When pricing moves significantly, there may be temporary imbalances between supply and demand that might affect the unit volumes of equipment that are sold in our marketplace. Additionally, our revenue is directly related to the final selling price of equipment sold in our marketplace, so general pricing of used heavy equipment directly affects our revenue.

	•	Cross-Border Sales of Used Heavy Equipment. Standardization of equipment manufacturing and usage has contributed to increased cross-border sales of used heavy equipment. This trend has contributed to the expansion of our business globally. Our business depends in part on the continued openness of most international markets for used heavy equipment, and is impacted by currency exchange rates, which can affect bidding interest by international buyers.

	•	Continued Penetration of the Online Channel for Used Heavy Equipment. Our business has benefited from the continued development and acceptance of the online channel for used heavy equipment transactions, and will continue to be affected by the general perception and development of online marketplaces. We expect that the online format of our marketplace will continue to gain acceptance among sellers and buyers of equipment, and will help us to further penetrate the used heavy equipment market.


	•	Mix of Equipment Supply from Sellers. As a marketplace, the mix of used equipment that we sell reflects the type of equipment that sellers offer for sale during a period. This equipment mix may change, as may the mix of sellers, in a given period. For example, in 2008 and 2009, many equipment rental companies chose to reduce their rental fleets in response to slowing demand. Accordingly, rental companies offered increased amounts of smaller model used equipment for sale as they adjusted their fleet makeup. The mix of equipment available for sale will affect our average selling price, which in turn will affect our revenue, gross profit, and income from operations during a period.

Key Components of Our Results of Operations

Revenue

We derive revenue primarily from seller commissions, seller listing and inspection fees, and buyer transaction fees, in each case related to the listing on, and sale of equipment through, our marketplace.


	•	Seller Commissions. We earn commissions from sellers upon completion of an equipment sale. Seller commissions are earned under a straight commission arrangement, a guarantee arrangement or a purchase arrangement, each of which are as discussed more fully below. Seller commissions are our primary source of revenue and are typically deducted from the purchase price of equipment. In 2009, seller commissions represented approximately 60% of our total revenue.

	•	Seller Listing and Inspection Fees. We earn listing and inspection fees from sellers upon completion of an equipment sale. Such fees are based on the type and size of equipment listed. Listing and inspection fees are generally deducted from the purchase price of equipment. In 2009, seller listing and inspection fees represented approximately 17% of our total revenue.

	•	Buyer Transaction Fees. We earn buyer fees from individual buyers who purchase equipment in our marketplace. Buyer fees are based on the final selling price of each piece of equipment, subject to a maximum dollar amount. In 2009, buyer transaction fees represented approximately 21% of our total revenue.

We consider sellers that utilize our marketplace as “consigners,” because the equipment is sold under an agency relationship. Sellers maintain physical possession of the equipment at their location, maintain title to, and are contractually obligated to maintain insurance on, the equipment up to and through buyer acceptance of the equipment. Following the conclusion of a sale through our marketplace, sellers release the equipment to the buyer and receive the entirety of the proceeds from the sale of the equipment, less the agreed seller commissions and fees.

Our primary form of commission arrangement with sellers is a straight commission arrangement. Under such an arrangement, sellers provide equipment to our marketplace for sale to buyers and agree to commission rates that are based on the final selling prices of the equipment provided. The commission rate may vary based on the selling price of each individual piece, based on our standard commission rate structure or based on an agreed upon fixed commission rate with the seller. Certain large sellers have commission rate arrangements that cover all pieces of equipment sold during a defined period, typically fixed rates for an annual period or longer. Certain of these annual or long-term contracts have volume thresholds that govern the commission rate charged to the seller.

In certain situations, we respond to requests from sellers and offer to guarantee minimum sales proceeds to sellers on certain consignments of equipment and earn a commission based on the sales price of such equipment sold in our marketplace. In these arrangements, which we refer to as guarantee arrangements, we are obligated to pay the agreed upon minimum amount if the consigned equipment in the aggregate sells for less than the minimum price. Should the consigned equipment sell above the minimum price in the aggregate, we are generally entitled to a share of the excess proceeds and our share of the excess proceeds, if any, is also included in seller commission revenue. During the years ended December 31, 2007, 2008 and 2009 and the three months ended March 31, 2010, equipment sold pursuant to a guarantee arrangement comprised approximately 13.5%, 9.3%, 6.2% and 9.7% of GMV, respectively.

Periodically, as an accommodation to certain sellers and to maintain the liquidity and efficiency of our marketplace, we may purchase and temporarily take title to equipment that is then listed and sold through our marketplace in the same manner as consigned equipment. This occurs when either (1) a buyer has defaulted on a transaction, in which case we may elect to take the equipment into inventory and pay the seller, or (2) when we have purchased equipment outright from a seller in advance of a marketplace event, generally from a seller who desires immediate liquidity. Sellers maintain physical possession of the equipment at their location and are contractually obligated to maintain insurance on the equipment up to and through buyer acceptance of the equipment. Revenue from such subsequent sales reflects the net profit or loss on the sale of these purchased items. We believe that in the case of default transactions, such transactions are an extension of our original arrangement with our sellers, and in the case of purchase transactions, such transactions are ancillary to our primary consignment model with sellers. Because we typically hold this purchased equipment for only a brief period of time before it is resold, and because the market for this equipment is relatively stable over such short time periods, we do not believe that there is significant inventory and price risk associated with these transactions. During the years ended December 31, 2007, 2008 and 2009 and the three months ended March 31, 2010, purchased equipment that was later resold through our marketplace comprised approximately 2.1%, 2.2%, 1.6% and 7.1% of GMV, respectively. We realized a net profit of approximately $200,000 on the sale of purchase equipment during the year ended December 31, 2007, a net loss of $58,000 during the year ended December 31, 2008, and a net profit of $579,000 and $2.2 million during the year ended December 31, 2009 and the three months ended March 31, 2010, respectively. Purchased equipment is reflected as inventory on our balance sheet until it is sold.

Cost of Revenue

Cost of revenue includes the cost of performing comprehensive inspections of equipment to be sold in our marketplaces. These comprehensive inspections provide the basis for our detailed inspection reports and our IronClad Assurance and are generally performed at the seller’s physical location. Expenses include payroll costs and related benefits for our employees that perform and manage field inspection services and the related inspection report preparation and quality assurance, fees paid to contractors who also perform field inspections, related travel and incidental costs for our inspection service organization, and office and occupancy costs for our inspection services personnel. Cost of revenue also includes costs for our customer support, marketplace operations, site operations and title and lien investigation functions. Significant components of these costs include employee compensation, facilities costs, depreciation of equipment and hosting expenses.

As the number of items in our marketplace grows, we will require more people to inspect equipment and assist sellers with listing their equipment. We expect that our cost of revenue will remain generally stable as a percentage of revenue over time although over short term periods such costs as a percentage of revenue may fluctuate as the average selling price and volume of equipment sold in our marketplace fluctuates.

Operating Expenses

Sales and Marketing. Sales and marketing expenses consists of employee-related expenses and advertising costs. Employee related expenses include payroll and related benefits costs for employees dedicated to sales and marketing efforts, related travel, training, and other incidental costs incurred by sales and marketing personnel and outside advertising costs. Payroll costs includes sales commissions earned by sales personnel based on seller commissions earned by us from sellers of equipment. Advertising costs include costs of promotions and advertising pieces in various industry trade journals and periodicals for specific marketplace events, costs of paid search engine advertising, costs of email and occasional direct mail campaigns to website registrants and costs of participation in trade events. Sales and marketing expense is the largest component of our operating expenses.

We intend to hire additional sales and marketing personnel, and to expand our marketing efforts worldwide in order to add new customers, increase our penetration in existing core markets, and expand our business in new markets. As such, we expect sales and marketing expenses to increase in absolute dollars in future periods.

Technology. Technology expenses include employee salaries and benefits, outside contractor costs, travel, amortization of software and hardware costs and other ancillary costs related to our information technology and website operations group. These expenses also include the lease and operations costs related to our third-party data centers, from which our website is hosted, and various technology license fees related to outside technology applications that we employ in the delivery of our website and in our internal operations.

We expect to continue to invest in our technology platform for our marketplace events and our website, and we expect technology expenses to increase in absolute dollars in future periods.

General and Administrative. General and administrative expenses refer to the cost of our executive, finance and human resources functions and include the following types of costs in general and administrative expenses: employee salaries, bonuses and benefits, travel and entertainment costs, office space leases and related occupancy costs, professional fees including audit, accounting, tax, legal and other consulting fees, general office supplies and other general costs related to operating our business.

We expect our general and administrative expenses to increase in future periods as we continue to grow our business, and to increase when we become a publicly traded company. Our accounting, auditing, legal, insurance and personnel-related expenses for officers and directors are expected to increase as we institute and monitor a more comprehensive corporate compliance function, implement more comprehensive board and board committee governance functions, maintain and review a more detailed system of internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002, and prepare and distribute related reports.

Interest Income

Interest income consists of income earned on our cash, cash equivalents, and short-term investments. We have generally invested our cash in short-term investment grade and guaranteed instruments, whose investment yields are generally tied to short-term credit markets.

Income Tax Provision (Benefit)

We are subject to federal and state taxes in the United States as well as in other tax jurisdictions or countries in which we conduct business. Earnings from our non-U.S. activities are subject to local country income tax and may be subject to current U.S. income tax.

As of December 31, 2009, we had $16.5 million of federal and $25.7 million of California state net operating loss carry-forwards available to reduce future taxable income. These net operating loss carryforwards begin to expire in 2020 and 2014 for federal and state tax purposes, respectively. Our ability to use our net operating loss carryforwards to offset any future taxable income could be subject to limitations attributable to equity transactions that would result in a change of ownership as defined by Section 382 of the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code.

At December 31, 2009, we had a total deferred gross tax asset of approximately $11.8 million, primarily comprised of our accumulated net operating loss carryforwards. Our net deferred tax assets consist primarily of net operating loss carryforwards generated before we achieved profitability. During the fourth quarter of 2009, we concluded that it was more likely than not that we would be able to realize the benefit of certain of these deferred tax assets in the future. Consequently, we recognized a net tax benefit of $9.1 million in the fourth quarter of 2009, resulting primarily from the release of all of the U.S. federal and state net deferred tax valuation allowance. We based this conclusion on historical and projected operating performance, as well as our expectations that our operations will generate sufficient taxable income in future periods to be able to realize a portion of the tax benefits associated with the deferred tax assets. We continue to maintain a full valuation allowance on our foreign deferred tax assets. We will continue to assess the need for a valuation allowance on our deferred tax assets by evaluating both positive and negative evidence that may exist. Any adjustment to the deferred tax asset valuation allowance would be recorded in the income statement of the periods that the adjustment is determined to be required.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP. These principles require us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, expenses, cash flows and related disclosures. These estimates and assumptions are based on judgments that we believe are reasonable under the circumstances at the time made, and reflect historical experience and various other factors. We evaluate our estimates and assumptions on an ongoing basis. However, actual results may differ from these estimates and assumptions, and to the extent there are material differences between these estimates and our actual results, our future financial statements may be affected.

We believe that of our significant accounting policies described in Note 1 to our consolidated financial statements included in this prospectus, the following policies and estimates involve a greater degree of judgment and complexity. Accordingly, we believe these are the most critical to fully understand our financial condition and results of operations.

Revenue Recognition

Marketplace Revenue. We record revenue from marketplace events upon the sale of equipment, typically at the conclusion of a marketplace event when bidding is concluded and a winning bid is established, at which time all significant terms of the sale transaction are known and a determination can be made that the sale is complete. Revenue is recorded net of an allowance for collapse sales, which is an estimate by management of transactions that are expected to collapse or default based on our historical experience with similar buyers. Our historical overall collapse sale experience factor has been approximately 3% to 4% of total GMV. When an estimate for sales expected to default cannot be made, revenue is recognized when the equipment is accepted by the buyer and the proceeds are considered collectible. We regularly review our default sales experience factor, and conditions that might affect current levels of default sales, as part of our preparation of periodic financial statements.

Guarantee Arrangements. Net gains and losses on guarantee arrangements are recorded as revenue at the time the gain or loss is realized, which is typically at the conclusion of a marketplace event when a determination can be made that the sale of such equipment is complete. Net gains and losses are calculated in total for the entire lot of consigned equipment, and not on individual pieces of equipment. If certain pieces of equipment in a guarantee arrangement are unsold in a marketplace event, and are carried over to a subsequent event, we record commission revenue, and any overage related to excess proceeds, only to the extent that the commission and any gain amount for the lot is fixed or determinable based on the items sold. Losses on guarantee arrangements are provided for when the loss is probable and can be reasonably estimated.

Purchased Equipment. Periodically, as an accommodation to certain sellers, we may purchase and temporarily take title to equipment that is then listed and sold through our marketplace in the same manner as consigned equipment. We record revenue from the sale of such purchased equipment upon the sale of the equipment in a marketplace event, typically at the conclusion of a marketplace event when a determination can be made that the sale of such equipment is complete. We believe that in the case of default transactions, such transactions are an extension of our original arrangement with our sellers, and in the case of purchase transactions, such transactions are ancillary to our primary consignment model with sellers. We do not take custody of the equipment in these transactions and they are offered for sale in a manner consistent with other equipment consigned for sale in our marketplace. Accordingly, we record the net gain or loss on the sale of inventory items as revenue in a similar manner as our primary consignment arrangements. Inventory is stated at the lower of cost or market, with cost being determined on a specific identification basis. Losses are provided for based on specific market data related to individual items.

Income Taxes

We account for income taxes using the liability method. Deferred tax assets and liabilities are measured based on differences between the financial reporting and tax bases of assets and liabilities using enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse.

We make estimates and judgments about our future taxable income that are based on assumptions that are consistent with our plans and estimates. Should the actual amounts differ from our estimates, the amount of our valuation allowance, if any, could be materially impacted. Any adjustment to the deferred tax asset valuation allowance would be recorded in the income statement of the periods that the adjustment is determined to be required.

Under current tax law, if cash and cash equivalents and investments held outside the United States are distributed to the United States in the form of dividends or otherwise, we may be subject to additional U.S. income taxes (subject to an adjustment for foreign tax credits) and foreign withholding taxes.

Stock-Based Compensation

We grant our employees, directors and consultants options for common stock. We account for our share-based payment awards by recording compensation costs for all stock-based payment awards made to employees, directors and consultants that are ultimately expected to vest based upon the awards’ estimated grant date fair value. We estimate potential forfeitures and recognize compensation cost only for those equity awards expected to vest. The estimate of forfeitures will be adjusted over the requisite service period to the extent that actual forfeitures differ, or are expected to differ, from the prior estimates. Changes in estimated forfeitures will be recognized in the period of change and will impact the amount of stock compensation expenses to be recognized in future periods.

The fair value of each award is estimated on the date of the grant and amortized over the requisite service period. For all option awards granted subsequent to January 1, 2006, we have used the Black-Scholes option pricing model to estimate the fair value of stock-based payment awards on the date of grant. Determining the fair value of stock-based awards at the grant date under this model requires judgment, including estimating the value per share of our common stock, volatility, expected term and risk-free interest rate. The assumptions used in calculating the fair value of stock-based awards represent our best estimates based on management judgment and subjective future expectations. These estimates involve inherent uncertainties. If any of the assumptions used in the Black-Scholes model significantly change, stock-based compensation for future awards may differ materially from the awards granted previously. Key assumptions utilized in estimating the fair values of stock-based payment awards are as follows:


	2008	2009	Q1 2010

Volatility	58%	55% - 58%	61.9% - 67%
Expected life in years	6	6	6
Risk-free interest rate	2.75% - 3.32%	2.11% - 2.80%	2.68% - 2.84%
Dividend yield	—	—	—

We recorded non-cash stock-based compensation expenses related to employee stock options granted of approximately $2.2 million for the year ended December 31, 2009, and $1.2 million for the three months ended March 31, 2010. We had compensation costs not yet recognized of $1.0 million and $3.0 million related to unvested stock options at December 31, 2009 and March 31, 2010, respectively.

Valuation of Common Stock

We have historically granted stock options at exercise prices believed to be equal to the fair value of the common stock underlying such options as determined by our board of directors, with input from management, on the date of grant. Because our common stock is not currently publicly traded, our board of directors exercises significant judgment in determining the fair value of our common stock and historically has relied in part on independent, third-party valuations. Members of our board of directors and management team have extensive business, financial and investing experience. In assessing the fair value of our common stock as of option grant dates, our board of directors considered numerous objective and subjective factors including:


	•	our financial position and historical operating and financial performance as well as progress to date against planned budgets;

	•	our financial projections and future prospects;


	•	consideration received in connection with the issuance of shares of preferred stock to outside investors in arm’s-length transactions and the rights, privileges and preferences of our preferred stock;

	•	any recent privately negotiated sales of our securities to third parties;

	•	the current lack of marketability of our common stock as a private company;

	•	the likelihood of achieving a liquidity event for the shares of common stock underlying the options, given prevailing market conditions;

	•	the stock price performance of comparable public companies;

	•	other input from management regarding our financial condition and results of operations; and


	•	valuations of our common stock performed as of December 31, 2008, June 30, 2009, September 30, 2009, December 31, 2009 and February 8, 2010.

As of each stock option grant date listed below, our board of directors believes it made a thorough evaluation of the relevant factors to determine the fair value of our common stock and accordingly set the exercise price of the options granted equal to the fair value of our common stock determined as of such date. On each option grant date, our board of directors considered the most recent valuation of our common stock as one of several factors in estimating the fair value of our common stock. In addition, our board of directors considered changes in our financial condition and results of operations that had occurred subsequent to the previous valuation date as well as the then current general economic and market conditions as described more fully below, as well as other objective and subjective factors described above. Based on these considerations, our board of directors also determined that no significant change in our business or expectations of future business had occurred as of each grant date since the most recent valuation that would have warranted a materially different determination of value of our common stock than that suggested by the valuation. The valuations were consistent with the guidance and methods outlined in the AICPA Practice Aid Valuation of Privately-Held-Company Equity Securities Issued as Compensation, or AICPA Practice Aid, for all option grant dates listed below.

In connection with the preparation of our consolidated financial statements for the year ended December 31, 2009, to be included in this prospectus, we reassessed our estimate of fair value of our common stock for financial reporting purposes using a different valuation methodology than that employed during 2009, and at such time obtained additional, retrospective valuations. Specifically, we determined that it was more appropriate to perform retrospective valuations of our common stock as of June 30, 2009, September 30, 2009 and December 31, 2009, using the probability weighted expected return method, or PWERM, rather than the option-pricing method used for the earlier valuations. The PWERM is generally considered to be a more sound method to determine fair value of an enterprise that has reasonable expectations of a liquidity event. Given our board of directors’ and management’s evolving outlook in the second half of 2009 that a public offering might be more viable in the future based on our improving financial performance and prospects, and the generally improving conditions in the capital markets, we determined the PWERM was a more appropriate methodology with which to assess fair value of our common stock during this period. In addition, the contemporaneous valuation as of February 8, 2010 was performed using the PWERM, which was considered the most appropriate method as of that date. For the valuations prior to June 30, 2009, we determined that there were not reasonable expectations of a near term liquidity event and the option pricing method previously used to determine fair value remained appropriate.

As a result of such reassessment, we subsequently revised the fair value of our common stock for financial reporting purposes for option grants made from February 5, 2009 through January 19, 2010, which resulted in these option grants having exercises prices below the subsequently determined fair value per share.

From January 1, 2009 through March 31, 2010, we granted stock options with exercises prices and fair value assessments as follows:


					Fair Value
					Per Common
	Common Shares				Share for Financial		Intrinsic Value
	Underlying Options		Exercise Price		Reporting Purposes		Per Underlying
Grant Date	Granted		Per Share		at Grant Date		Common Share

February 5, 2009		131,000	$	1.54	$	1.82	$	0.28
May 7, 2009		78,725		1.54		2.68		1.14
August 27, 2009		145,700		2.26		3.62		1.36
January 19, 2010		191,650		4.50		4.66		0.16
February 11, 2010		490,500		6.24		6.24		—
February 26, 2010		150,000		6.24		6.24		—

The aggregate intrinsic value of vested and unvested stock options as of March 31, 2010, based on the initial public offering price of $ per share, which is the midpoint of the range set forth on the cover page of the prospectus, was $ million and $ million, respectively.

In conducting the valuations of our common stock we used a two-step methodology. First we estimated the fair value of our company as a whole, commonly referred to as our enterprise value, and then we allocated the enterprise value to each element of the capital structure, including our common stock, in order to determine the fair value of a single share of common stock. This approach is consistent with the methods outlined in the AICPA Practice Aid.

Fair Value Inputs

In our December 31, 2008, contemporaneous valuation, the average of the results suggested by the income approach and market approach valuation methods was used to estimate enterprise value, with each method weighted equally, which was then allocated to the various securities that comprise our capital structure using the option-pricing method. The equal weighting of the income and market approaches reflects our belief that both these valuation methods provide a reasonable estimate of our enterprise value and are equally reliable.

The income approach involves applying appropriate risk-adjusted discount rates to cash flows, based on our forecasted revenue and expenses, which quantified the present value of our future economic benefits. Forecasted future cash flows were discounted to their present value using a rate corresponding to our estimated weighted average cost of capital. The discount rate reflects the risk inherent in cash flows and the market rates of return available from alternative investments of similar type and quality as of the valuation date. Our weighted average cost of capital reflects our estimated cost of equity, as we did not have any outstanding debt during the relevant periods and there were no plans to include debt as part of our long-term capital structure. Our estimated cost of equity was determined by calculating the average cost of equity for a peer group of publicly-traded companies considered to be reasonably comparable to us. The weighted average cost of capital used in our December 31, 2008 contemporaneous valuation was 25%.

The market approach involves analyzing multiples of financial metrics based on acquisition and/or trading multiples of a peer group of companies, which were then applied to our projected revenues to derive an indication of value. The multiple used in our December 31, 2008 contemporaneous valuation was 1.1x.

The resulting enterprise value obtained by averaging the values calculated under the income approach and the market approach was then discounted for lack of marketability for being a private company, using a marketability discount of 37%. The enterprise value was then allocated to the various securities that comprise our capital structure, using the option-pricing method, as described in the AICPA Practice Aid. The option-pricing method involves making assumptions regarding the anticipated timing of a potential liquidity event, such as an initial public offering, and estimates of the volatility of our equity securities. The anticipated timing of a potential liquidity event was based on the plans of our board of directors and management at that time. Estimating the volatility of the share price of a privately-held company is complex because there is no readily

available market for our shares. Our board of directors estimated the volatility of our stock based on available information on the volatility of stocks of publicly-traded companies in our industry determined to be reasonably comparable to us. Our December 31, 2008 contemporaneous valuation assumed a risk free interest rate of 1.0%, four year term to a liquidity event and a volatility rate of 58%. Based on such valuation and other objective and subjective factors, our board of directors determined that the fair value of our common stock as of December 31, 2008 was $1.54.

Our retrospective valuations performed as of June 30, 2009, September 30, 2009, December 31, 2009, as well as our contemporaneous valuation performed as of February 8, 2010, used the PWERM to estimate fair value, rather than the option pricing method used previously, as an initial public offering in the near term became more likely. The PWERM involves analyzing the probability weighted present value of expected future values considering various possible future liquidity events, such as an initial public offering, merger or liquidation of the company, as well as the respective rights of common and preferred holders. For each of the possible future liquidity events, our board of directors and management estimated a range of future equity values based on the market approach over a range of possible event dates. The estimated values under each scenario were then discounted for lack of marketability, and a probability-weighted value per share of common stock was then determined.

When estimating value under the initial public offering scenario, we determined our enterprise value by applying current revenue, EBITDA and EBIT multiples of companies similar to us that had recently completed an initial public offering to our projected revenue, EBITDA and EBIT. We used the following multiples under this scenario:

Valuation

Revenue Multiple

EBITDA Multiple

EBIT Multiple

June 30, 2009

2.9

9.9

10.9

September 30, 2009

3.0

10.2

13.3

December 31, 2009

3.0

10.2

13.3

February 8, 2010

2.8

9.7

13.9

When estimating value under the merger scenario, we analyzed business combinations involving companies in industries similar to the one in which we compete. We determined our enterprise value by applying current revenue, EBITDA and EBIT multiples related to such transactions to our projected revenue, EBITDA and EBIT. We used the following multiples under this scenario:

Valuation

Revenue Multiple

EBITDA Multiple

EBIT Multiple

June 30, 2009

1.4

11.8

14.0

September 30, 2009

1.4

12.0

14.4

December 31, 2009

1.5

12.2

15.5

February 8, 2010

1.3

11.5

14.9

When estimating value under the liquidation scenario, we analyzed unprofitable or poorly performing companies in industries similar to the one in which we compete. We determined our enterprise value by applying current revenue multiples of these companies to our projected revenue. For our valuations as of June 30, 2009, September 30, 2009, December 31, 2009 and February 8, 2010 we used a projected revenue multiple of 0.85x, 0.85x, 0.98x and 1.0x, respectively.

The enterprise value under each scenario was determined by applying the multiples described above to our corresponding projected financial metrics for the 12-month period following a range of assumed timing of such event, which was then discounted to determine the present value. The discount rates used for our valuations as of June 30, 2009, September 30, 2009, December 31, 2009 and February 8, 2010, were 25%, 25%, 26% and 26%, respectively.

The assumed probability for each future liquidity event and marketability discount used under the PWERM, and the resulting fair value determined, for each valuation are as follows:


	IPO			Merger			Liquidation			Marketability			Fair Value
Valuation	Probability			Probability			Probability			Discount			Determined

June 30, 2009		30	%		65	%		5	%		22	%	$	3.18
September 30, 2009		40			55			5			21			3.88
December 31, 2009		50			45			5			19			4.66
February 8, 2010		65			30			5			12			6.24

Grant Date Fair Value Assessments

Following the retrospective valuations as of June 30, 2009, September 30, 2009 and December 31, 2009, the revised fair value of our common stock for financial reporting purposes as of February 5, 2009, May 7, 2009 and August 27, 2009, corresponding to option grant dates, was derived based on linear interpolations between the valuations performed between December 31, 2008 and December 31, 2009. Linear interpolations were considered appropriate because there were no individually significant factors, events, or changes in our business between the subsequent valuation dates that would impact the fair value determination between the subsequent valuation dates. Based on this process, we determined that the revised fair value of our common stock for financial reporting purposes was $1.82, $2.68 and $3.62 as of the option grant dates of February 5, 2009, May 7, 2009 and August 27, 2009, respectively.

Although we considered the June 2009 sale of approximately $1.0 million of our Series C convertible preferred stock in the June 2009 and subsequent valuations, we concluded that the price of the Series C convertible preferred stock was not an appropriate indicator of value because it was a different security with significantly superior rights and preferences to our common stock, was issued to strategic partners, and investors in the Series C convertible preferred stock financing were also issued warrants to acquire additional shares of Series C convertible preferred stock.

The fair value of our common stock for financial reporting purposes as of the January 19, 2010 option grant date was determined to be $4.66, which corresponds to the retrospective valuation performed as of December 31, 2009. Our board of directors concluded that there was no significant change in our business or expectations of future business as of January 19, 2010 since the December 2009 valuation that would have warranted a materially different determination of value of our common stock.

The fair value of our common stock for financial reporting purposes as of the February 11 and February 26, 2010 option grant dates was determined to be $6.24, which corresponds to the contemporaneous valuation performed as of February 8, 2010. Our board of directors concluded that there were no significant changes in our business or expectations of future business as of February 11 or February 26, 2010 since the February 8, 2010 valuation that would have warranted a materially different determination of value of our common stock as of either of those dates.

Changes in Fair Value Assessments

At noted above, at each option grant date in 2009 and in 2010, our board of directors considered the objective and subjective factors discussed above, including the valuations. The primary reasons for the changes in the fair value of our common stock during this period and between each valuation date are summarized as follows:

June 30, 2009 Valuation. The increase in fair value determination from $1.54 as of December 31, 2008 to $3.18 as of June 30, 2009, was due primarily to improvements in our financial performance in the second quarter of 2009, improved prospects for our future financial performance, and improvements in the overall capital markets and fair values of peer group companies used to estimate fair value of our common stock. Specifically, our board of directors considered that during the first and second quarters of 2009, we sequentially increased revenue by 13.6% and 36.7% over the fourth quarter of 2008 and substantially increased net income from negative $0.9 million in the first quarter of 2009 to $1.8 million in the second quarter of 2009. Additionally, our change to the PWERM as part of our fair value reassessment also contributed to a

higher determination of value. The PWERM was considered more appropriate given our board of directors’ increased interest in pursuing a public offering of common stock if capital market conditions continued to improve. The assigned probability of an initial public offering was considered reasonable at that time, given a level of uncertainty that existed about the sustainability of the recovery of the capital markets, and the fact that we had sustained operating losses in recent quarters.

September 30, 2009 Valuation. The increase in fair value determination from $3.18 as of June 30 2009 to $3.88 as of September 30, 2009, was due primarily to continued improvements in our financial performance in the third quarter of 2009, including a 16.3% increase in net income from the prior quarter, continued improved prospects for our future financial performance, and continued improvements in the overall capital markets and fair values of peer group companies used to estimate fair value of our common stock. Additionally, we modified input assumptions to the PWERM model to reflect our view at the time of such valuation that an initial public offering was more likely than in June 2009 even though we had not begun substantive discussions with potential underwriters as of that date.

December 31, 2009 Valuation. The increase in fair value determination from $3.88 as of September 30 2009 to $4.66 as of December 31, 2009, was due primarily to continued improvements in our financial performance in the fourth quarter of 2009, continued improved prospects for our future financial performance, and continued improvements in the overall capital markets and fair values of peer group companies used to estimate fair value of our common stock. Our full year 2009 results of operations also reflected substantial increases in revenue of 56.3% compared to 2008, which positively impacted our forecasted revenues for subsequent periods. Additionally, we modified input assumptions to the PWERM model to reflect our view at the time of such valuation that an initial public offering was more likely to occur than in September 2009, and to reflect that we had begun to have substantive discussions with potential underwriters about the prospects for such an offering.

February 8, 2010 Valuation. The increase in fair value determination from December 31 2009, to February 8, 2010, from $4.66 to $6.24 was due primarily to continued improvements in our financial performance in January 2010, continued improved prospects for our future financial performance, and continued improvements in the overall capital markets and fair values of peer group companies used to estimate fair value of our common stock. Specifically, there were a number of initial public offerings that had recently been executed and favorably received by the market. Additionally, we modified input assumptions to the PWERM model to reflect our view at the time of such valuation that an initial public offering was more likely than in December 2009, and to reflect that we had begun to prepare for an initial public offering with underwriters and other advisors.

Results of Operations

The following tables summarize key components of our results of operations for the periods indicated, both in dollars and as a percentage of revenue:


									Three Months Ended
	Year Ended December 31,								March 31,
	2007		2008			2009			2009			2010
	(in thousands)

Consolidated Statements of Operations Data:
Revenue	$	22,030	$	34,989		$	54,674		$	10,312		$	16,208
Cost of revenue		5,508		7,508			11,978			2,488			3,496

Gross profit		16,522		27,481			42,696			7,824			12,712
Operating expenses:
Sales and marketing		10,093		16,991			23,890			5,303			7,798
Technology		1,426		1,692			2,781			665			930
General and administrative		4,394		7,026			10,865			2,520			3,411

Total operating expenses		15,913		25,709			37,536			8,488			12,139

Income from operations		609		1,772			5,160			(664	)		573
Interest income		669		413			64			37			2
Other non-operating expense		—		(21	)		(1,072	)		(234	)		(551	)

Income before taxes		1,278		2,164			4,152			(861	)		24
Income tax provision (benefit)		110		313			(8,696	)		23			452

Net income	$	1,168	$	1,851		$	12,848		$	(884	)	$	(428	)


										Three Months Ended
	Year Ended December 31,									March 31,
	2007			2008			2009			2009			2010
	(% of revenue)

Consolidated Statements of Operations Data:
Revenue		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
Cost of revenue		25.0			21.5			21.9			24.1			21.6

Gross profit		75.0			78.5			78.1			75.9			78.4
Operating expenses:
Sales and marketing		45.8			48.5			43.7			51.4			48.1
Technology		6.5			4.8			5.1			6.4			5.7
General and administrative		19.9			20.1			19.9			24.4			21.0

Total operating expenses		72.2			73.4			68.7			82.3			74.9

Income from operations		2.8			5.1			9.4			(6.4	)		3.5
Interest income		3.0			1.2			0.1			0.4			0.0
Other non-operating expense		—			(0.1	)		(1.9	)		(2.3	)		(3.4	)

Income before taxes		5.8			6.2			7.6			(8.3	)		0.1
Income tax provision (benefit)		0.5			0.9			(15.9	)		0.3			2.8

Net income		5.3	%		5.3	%		23.5	%		(8.6	)%		(2.6	)%

Comparison of the Three Months Ended March 31, 2009 and 2010

Revenue


	Three Months Ended March 31,
	2009		2010		% Change
	(dollars in thousands)

Revenue	$	10,312	$	16,208		57.2	%

Total revenue increased $5.9 million in the three months ended March 31, 2010 compared to the three months ended March 31, 2009. Of this increase, $5.0 million was attributable to our North American operations and $0.9 million was attributable to our European operations while revenue from our Asia Pacific operations remained flat. Of the increase related to our North American operations, $3.9 million was due to an increase in GMV, $0.8 million was due to an increase in our revenue rate and $0.3 million was attributable to an increase in both GMV and revenue rate. The increase in GMV in North America was driven by significant increases in both the total number of units sold as well as the average sales price per unit. Additionally we increased the level of purchased equipment transactions in the three months ended March 31, 2010 compared to the same period in 2009, which accounted for approximately $2.2 million of the increase in revenue. The increase in revenue rate was attributable to higher seller commission rates and enhanced commission and gain performance on purchased equipment transactions in the period. Of the $0.9 million increase related to our European operations, $0.3 million was due to an increase in GMV, $0.4 million was due to an increase in our revenue rate and $0.2 million was attributable to an increase in both volume and revenue rate. The increase in European GMV was the result of a significant increase in units sold offset by a decrease in average sales price per unit which reflect a shift in the mix of equipment sold in Europe.

Cost of Revenue and Gross Profit


	Three Months Ended March 31,
	2009			2010			% Change
	(dollars in thousands)

Cost of revenue	$	2,488		$	3,496			40.5	%

Percentage of revenue		24.1	%		21.6	%
Gross profit	$	7,824			12,712			62.5	%

Percentage of revenue		75.9	%		78.4	%

Our cost of revenue increased $1.0 million in the three months ended March 31, 2010 compared to the three months ended March 31, 2009. This was attributable to the increase in the number of units sold in our marketplace during the three months ended March 31, 2010 over the same period in 2009, which resulted in a corresponding greater number of units that were inspected, and the associated higher staffing costs, outside contractor costs, travel, and other ancillary costs in our inspection department. Of this increase in our cost of revenue, $0.9 million was attributable to our North American operations and $0.1 million was attributable to our European operations, which commenced in early 2009. The decrease in total cost of revenue as a percentage of revenue was attributable to general leverage and efficiencies with certain fixed costs in this area, and improved efficiency in our European cost of sales area.

Operating Expenses

Sales and Marketing


	Three Months Ended
	March 31,
	2009			2010			% Change
	(dollars in thousands)

Sales and marketing	$	5,303		$	7,798			47.0	%

Percentage of revenue		51.4	%		48.1	%

Our sales and marketing expenses increased $2.5 million in the three months ended March 31, 2010 compared to the three months ended March 31, 2009. The increase is attributable to a $1.7 million increase in our North American operations, a $0.7 million increase in our European operations and a $0.1 million increase in our Asia-Pacific operations. The increase in our North American operations was due to increases in headcount, sales commissions, travel related expenses, and other sale and marketing expenses of $0.7 million, $0.6 million, $0.2 million and $0.2 million, respectively. The increase in our European operations was attributable to increases in travel related expenses, marketing activities, and higher payroll-related expenses due to an increase in headcount. The increased sales and marketing expenses were incurred as we continued to expand our market presence. As a percentage of revenue, sales and marketing expenses declined in the three months ended March 31, 2010 compared to the three months ended March 31, 2009 primarily due to higher revenues and increased effectiveness of our marketing campaigns.

Technology


	Three Months Ended March 31,
	2009			2010			% Change
	(dollars in thousands)

Technology	$	665		$	930			39.8	%

Percentage of revenue		6.4	%		5.7	%

Technology expenses increased $0.3 million in the three months ended March 31, 2010 compared to the three months ended March 31, 2009. The largest component of this increase was a $0.2 million increase in stock-based compensation expenses. The remaining increase related to expenses incurred in connection with the continuing development and maintenance of our website, additional internal technology applications and technology support for increased personnel.

General and Administrative Expenses


	Three Months Ended March 31,
	2009			2010			% Change
	(dollars in thousands)

General and administrative expenses	$	2,520		$	3,411			35.4	%

Percentage of revenue		24.4	%		21.0	%

General and administrative expenses increased $0.9 million in the three months ended March 31, 2010 compared to the three months ended March 31, 2010. This increase was driven in part by a $0.6 million increase in professional fees related to our preparations to become a public company. The remaining $0.3 million increase was attributable to increases in executive, finance and administrative department personnel costs, including an increase in personnel to support our business.

Interest Income


	Three Months Ended March 31,
	2009			2010			% Change
	(dollars in thousands)

Interest income	$	37		$	2			(94.6	)%

Percentage of revenue		0.4	%		0.0	%

Interest income decreased $35,000 in the three months ended March 31, 2010 compared to the three months ended March 31, 2009. The decrease was primarily attributable to a decline in the average yield on our interest bearing accounts during the period.

Other Non-Operating Expense


	Three Months Ended March 31,
	2009			2010			% Change
	(dollars in thousands)

Other non-operating expense	$	(234	)	$	(551	)		135.5	%

Percentage of revenue		(2.3	)%		(3.4	)%

Other non-operating expense reflects the impact of non-cash stock-based compensation expense recorded in connection with a single option grant to a former employee for periods subsequent to his service obligation and changes in fair value related to Series A and Series C convertible preferred stock performance warrants classified as liabilities.

Income Tax Provision (Benefit)


	Three Months Ended March 31,
	2009			2010			% Change
	(dollars in thousands)

Income tax provision (benefit)	$	23		$	452			n.m.

Percentage of revenue		0.3	%		2.8	%

We recorded an income tax provision of $23,000 and $452,000 for the three months ended March 31, 2009 and 2010, respectively. The 2010 amount represents the estimated annual effective tax rate of 43.3% applied to our $1.0 million domestic taxable income for the three months ended March 31, 2010. Foreign losses of $1.0 million for the same period were not recorded as tax benefit due to the uncertainty surrounding our ability to use our foreign net operating loss carryforwards. The tax provision for the three months ended March 31, 2009 is primarily attributable to minimum corporate taxes.

Comparison of the Years Ended December 31, 2007, 2008 and 2009

Revenue


	Year Ended December 31,						2007-2008			2008-2009
	2007		2008		2009		% Change			% Change
	(dollars in thousands)

Revenue	$	22,030	$	34,989	$	54,674		58.8	%		56.3	%

Total revenue increased $19.7 million in 2009 compared to 2008. Of the increase, $14.8 million was attributable to our North American operations, $4.6 million was attributable to our European operations, which commenced in early 2009, and $0.3 million was attributable to our Asia-Pacific operations. Of the $14.8 million North American revenue increase, $8.2 million was attributable to an increase in GMV, $5.4 million was

attributable to an increase in our revenue rate, and $1.4 million was attributable to an increase in both volume and revenue rate, offset by a decline in other revenue of $0.2 million. The increase in GMV in North America was driven by a significant increase in the total number of units sold. The increase in units was offset by a decrease in the average sales price per unit which reflected both a shift in the mix of equipment sold as well as a general decline in pricing levels for used heavy equipment in 2009 from 2008. The increase in revenue rate in 2009 was due to an increase in our seller commission, listing fee, and buyer transaction fee rates, and by lower average selling prices per unit compared to 2008, as these individual revenue rate components are all proportionately higher on lower priced units. Additionally, we increased seller commission rates for certain sellers in 2009, we increased our buyer transaction fee schedule at the beginning of 2009, and our overall seller commission rate was positively impacted by better performance on our guarantee arrangements in 2009 compared to 2008.

Total revenue increased $13.0 million in 2008 compared to 2007. Of the increase, $12.7 million was attributable to our North American operations, and $0.3 million was attributable to our Asia-Pacific operations, which commenced in Australia in early 2008. Of the $12.7 million North American revenue increase, $9.0 million was attributable to an increase in GMV volume, $2.5 million was attributable to an increase in our revenue rate, $1.0 million was attributable to an increase in both volume and revenue rate, and $0.2 million was attributable to an increase in other revenue. The increase in GMV in North America was driven by a significant increase in total units sold. The increase in units was offset by a decrease in the average sales price per unit, which reflected both a shift in the mix of equipment sold as well as a general decline in pricing levels for used heavy equipment in 2008 from 2007. The increase in revenue rate in 2008 was due to an increase in our seller commission, listing fee, and buyer transaction fee rates, and by lower average selling prices per unit compared to 2007, as these individual revenue rate components are all proportionately higher on lower priced units. Our overall seller commission rate was also positively impacted by a slight increase in our commission rates charged to certain sellers, offset by the negative impact of performance on guarantee arrangements in the fourth quarter of 2008. Additionally, our listing fee rate was positively impacted by a slight increase in our listing fee rate schedule implemented at the beginning of 2008, and by improved recovery of listing fees from sellers.

Cost of Revenue and Gross Profit


	Year Ended December 31,									2007-2008			2008-2009
	2007			2008			2009			% Change			% Change
	(dollars in thousands)

Cost of revenue	$	5,508		$	7,508		$	11,978			36.3	%		59.5	%

Percentage of revenue		25.0	%		21.5	%		21.9	%
Gross profit	$	16,522		$	27,481		$	42,696			66.3	%		55.4	%

Percentage of revenue		75.0	%		78.5	%		78.1	%

Our cost of revenue increased $4.5 million in 2009 compared to 2008. This was attributable to the increase in the number of units sold in our marketplace during 2009, and the corresponding greater number of units that were inspected, and the associated higher staffing costs, outside contractor costs, travel, and other ancillary costs in our inspection department. Of this increase in our cost of revenue, $3.0 million was attributable to our North American operations, $1.4 million was attributable to our European operations, which commenced in early 2009, and $0.1 million was attributable to our Asia-Pacific operations.

Our cost of revenue increased $2.0 million in 2008 compared to 2007. This was attributable to the increase in the number of units sold in our marketplace during 2008, and the corresponding greater number of units that were inspected, and the associated higher staffing costs, outside contractor costs, travel, and other ancillary costs in our inspection department. Of the increase in our cost of revenue, $1.9 million was attributable to our North American operations and $0.1 million was attributable to our Asia-Pacific operations, which commenced in early 2008.

Operating Expenses

Sales and Marketing


	Year Ended December 31,									2007-2008			2008-2009
	2007			2008			2009			% Change			% Change
	(dollars in thousands)

Sales and marketing	$	10,093		$	16,991		$	23,890			68.3	%		40.6	%

Percentage of revenue		45.8	%		48.5	%		43.7	%

Our sales and marketing expenses increased $6.9 million in 2009 compared to 2008. Of this increase, $4.7 million was attributable to a net increase in sales personnel in 2009, and $1.1 million was attributable to increased sales commission expense. The remaining increase of $1.1 million was attributable to outside marketing expenses, resulting from an increase in marketplace event advertising and promotion, an increase in search engine advertising costs in order to continue to build our registration base and buyer community, and a general increase in other marketing activities. Additionally, of the total increase in sales and marketing in 2009, $2.9 million was attributable to our European operations, which commenced in early 2009. As a percent of revenue, sales and marketing expenses declined in 2009 primarily due to higher revenues and increased effectiveness of our marketing campaigns.

Our sales and marketing expenses increased $6.9 million in 2008 compared to 2007. Of this increase, $4.7 million was attributable to a net increase in sales personnel in 2008, and $1.1 million was attributable to increased sales commission expense. The remaining increase of $1.1 million was attributable to outside marketing expenses, resulting from an increase in marketplace event advertising and promotion, a general increase in marketing and advertising costs in order to continue to build our registration base and buyer community. Additionally, of the total increase in sales and marketing in 2008, $0.8 million was attributable to our Asia-Pacific operations, which commenced in early 2008. As a percent of revenue, sales and marketing expenses increased in 2008 primarily due to the ramp up of sales personnel who had yet to reach full productivity levels.

Technology


	Year Ended December 31,									2007-2008			2008-2009
	2007			2008			2009			% Change			% Change
	(dollars in thousands)

Technology	$	1,426		$	1,692		$	2,781			18.7	%		64.4	%

Percentage of revenue		6.5	%		4.8	%		5.1	%

Technology expenses increased $1.1 million in 2009 compared to 2008. The largest component of this increase was an $0.8 million increase in stock-based compensation expenses. The remaining increase related to expenses incurred in connection with the continuing development and maintenance of our website, additional internal technology applications and technology support for increased personnel.

Technology expenses increased $0.3 million in 2008 compared to 2007. This increase was generally attributable to an increase in internal personnel and outside contractor expenses, related to the continuing development and maintenance of our website, and our internal technology.

General and Administrative Expenses


	Year Ended December 31,									2007-2008			2008-2009
	2007			2008			2009			% Change			% Change
	(dollars in thousands)

General and administrative	$	4,394		$	7,026		$	10,865			59.9	%		54.6	%

Percentage of revenue		19.9	%		20.1	%		19.9	%

General and administrative expenses increased $3.8 million in 2009 compared to 2008. Of this increase, $2.6 million was attributable to an increase in executive, finance and administrative department personnel costs, including an increase in personnel to support our business growth and an increase in personnel for our European operations. The remaining increase of $1.2 million was attributable to occupancy and facilities, including new facilities in Europe.

General and administrative expenses increased $2.6 million in 2008 compared to 2007. Of this increase, $1.5 million was attributable to an increase in executive, finance and administrative department personnel costs, including an increase in personnel to support our business growth and an increase in personnel related to our Asia-Pacific operations. Of the remaining increase, $1.0 million was attributable to professional fees related to the general growth of our business, the launch of our operations in Asia-Pacific and organizational expenses in advance of the launch of our European operations; $0.5 million was attributable to occupancy and facilities, including new facilities in Australia. These increases were offset in part by a one-time $0.4 million stock-based compensation charge recorded in 2007 in connection with the severance agreement of one of our former executive officers.

Interest Income


	Year Ended December 31,									2007-2008			2008-2009
	2007			2008			2009			% Change			% Change
	(dollars in thousands)

Interest income	$	669		$	413		$	64			(38.3	)%		(84.5	)%

Percentage of revenue		3.0	%		1.2	%		0.1	%

Net interest income decreased $0.3 million in 2009 compared to 2008. This decrease was attributable to a decline in the average yield on our interest bearing accounts during the period, offset in part by higher overall cash balances.

Net interest income decreased $0.3 million in 2008 compared to 2007. This decrease was attributable to a decline in the average yield on our interest bearing accounts during the period, offset in part by higher overall cash balances.

Other Non-Operating Expense


	Year Ended December 31,									2007-2008			2008-2009
	2007			2008			2009			% Change			% Change
	(dollars in thousands)

Other non-operating expense	$	—		$	(21	)	$	(1,072	)		—	%		n.m.

Percentage of revenue		—	%		(0.1	)%		(1.9	)%

Other non-operating expense reflects the impact of non-cash stock-based compensation expense recorded in connection with the ongoing variable accounting for a single option grant to a former employee for periods subsequent to his service obligation and changes in fair value related to Series A and Series C convertible preferred stock performance warrants classified as liabilities.

Income Tax Provision (Benefit)


	Year Ended December 31,									2007-2008			2008-2009
	2007			2008			2009			% Change			% Change
	(dollars in thousands)

Income tax provision (benefit)	$	110		$	313		$	(8,696	)		184.5	%		n.m.

Percentage of revenue		0.5	%		0.9	%		(15.9	)%

We recorded an income tax provision in 2007 and 2008 and a benefit in 2009. In 2007 and 2008, we offset our taxable income through the utilization of net operating loss carryforwards; accordingly, our tax provisions in both periods were primarily attributable to minimum corporate taxes. In the fourth quarter of 2009, we determined that it would be more likely than not that remaining cumulative U.S. federal and state net operating losses and other deferred tax benefits, which had previously been fully reserved, would be realizable. Thus, in the fourth quarter we reversed the valuation allowances and recorded a net tax benefit of $9.1 million.

Unaudited Quarterly Results of Operations Data

The following tables set forth our unaudited quarterly consolidated statements of operations data and our unaudited statements of operations data as a percentage of revenue for each of the nine quarters ended March 31, 2010. We have prepared the quarterly data on a consistent basis with the audited consolidated financial statements included in this prospectus, and the financial information reflects all necessary adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of this data. The results of historical periods are not necessarily indicative of the results of operations for a full year or any future period.


	For the Three Months Ended,
	Mar 31,		Jun 30,		Sep 30,			Dec 31,			Mar 31,			Jun 30,			Sep 30,			Dec 31,			Mar 31,
	2008		2008		2008			2008			2009			2009			2009			2009			2010
	(in thousands, except per share data)


Consolidated Statements of Operations Data:
Revenue	$	7,344	$	9,792	$	8,775		$	9,078		$	10,312		$	14,097		$	15,287		$	14,978		$	16,208
Cost of revenue		1,467		1,833		1,923			2,285			2,488			2,988			3,235			3,267			3,496

Gross profit		5,877		7,959		6,852			6,793			7,824			11,109			12,052			11,711			12,712
Operating Expenses:
Sales and marketing		3,910		3,859		3,963			5,259			5,303			5,643			6,084			6,860			7,798
Technology		370		472		406			444			665			691			722			703			930
General and administrative		1,236		1,515		2,098			2,177			2,520			2,596			2,779			2,970			3,411

Total operating expenses		5,516		5,846		6,467			7,880			8,488			8,930			9,585			10,533			12,139

Income (loss) from operations		361		2,113		385			(1,087	)		(664	)		2,179			2,467			1,178			573
Interest income		126		90		107			90			37			8			6			13			2
Other non-operating expense		—		—		(11	)		(10	)		(234	)		(234	)		(234	)		(370	)		(551	)

Income (loss) before taxes		487		2,203		481			(1,007	)		(861	)		1,953			2,239			821			24
Income tax provision (benefit)		72		152		68			21			22			193			193			(9,104	)		452

Net income (loss)	$	415	$	2,051	$	413		$	(1,028	)	$	(883	)	$	1,760		$	2,046		$	9,925		$	(428	)

Net income (loss) per share
Basic	$	0.14	$	0.70	$	0.14		$	(0.34	)	$	(0.28	)	$	0.56		$	0.62		$	2.88		$	(0.11	)

Diluted	$	0.02	$	0.10	$	0.02		$	(0.34	)	$	(0.28	)	$	0.08		$	0.08		$	0.40		$	(0.11	)


	For the Three Months Ended,
	Mar 31,			Jun 30,			Sep 30,			Dec 31,			Mar 31,			Jun 30,			Sep 30,			Dec 31,			Mar 31,
	2008			2008			2008			2008			2009			2009			2009			2009			2010
	(% of revenue)

Consolidated Statements of Operations Data:
Revenue		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
Cost of revenue		20.0			18.7			21.9			25.2			24.1			21.2			21.2			21.8			21.6

Gross profit		80.0			81.3			78.1			74.8			75.9			78.8			78.8			78.2			78.4
Operating Expenses:
Sales and marketing		53.2			39.4			45.2			57.9			51.4			40.0			39.8			45.8			48.1
Technology		5.0			4.8			4.6			4.9			6.4			4.9			4.7			4.7			5.7
General and administrative		16.8			15.5			23.9			24.0			24.4			18.4			18.2			19.8			21.0

Total operating expenses		75.1			59.7			73.7			86.8			82.3			63.3			62.7			70.3			74.9

Income (loss) from operations		4.9			21.6			4.4			(12.0	)		(6.4	)		15.5			16.1			7.9			3.5
Interest income		1.7			0.9			1.2			1.0			0.4			0.1			—			0.1			0.0
Other non-operating expense		—			—			(0.1	)		(0.1	)		(2.3	)		(1.7	)		(1.5	)		(2.5	)		(3.4	)

Income (loss) before taxes		6.6			22.5			5.5			(11.1	)		(8.3	)		13.9			14.6			5.5			0.1
Income tax provision (benefit)		1.0			1.6			0.8			0.2			0.3			1.4			1.3			(60.8	)		2.8

Net income (loss)		5.7	%		20.9	%		4.7	%		(11.3	)%		(8.6	)%		12.5	%		13.4	%		66.3	%		(2.6	)%


	For the Three Months Ended,
	Mar 31,			Jun 30,			Sep 30,			Dec 31,			Mar 31,			Jun 30,			Sep 30,			Dec 31,			Mar 31,
	2008			2008			2008			2008			2009			2009			2009			2009			2010
	(dollars in thousands)

Other Financial and Operating Data:
Adjusted EBITDA	$	532		$	2,299		$	628		$	(810	)	$	(164	)	$	2,687		$	2,991		$	1,784		$	1,556
Adjusted EBITDA less capital expenditures		412			1,604			272			(1,083	)		(321	)		2,385			2,759			818			1,338
Gross Merchandise Volume		77,617			91,305			76,355			96,274			91,712			119,642			122,919			124,157			129,824
Revenue rate		9.0	%		10.4	%		10.9	%		9.1	%		11.0	%		11.4	%		12.2	%		11.9	%		12.3	%

The following table presents a reconciliation of Adjusted EBITDA and Adjusted EBITDA less capital expenditures to net income, the most comparable GAAP measure, for each of the periods indicated. For additional information, please see the discussion of Adjusted EBITDA and Adjusted EBITDA less capital expenditures in note 4 to “Selected Financial Consolidated Financial and Other Data.”


	For the Three Months Ended,
	Mar 31,			Jun 30,			Sep 30,			Dec 31,			Mar 31,			Jun 30,			Sep 30,			Dec 31,			Mar 31,
	2008			2008			2008			2008			2009			2009			2009			2009			2010
										(in thousands)

Net income (loss)	$	415		$	2,051		$	413		$	(1,028	)	$	(884	)	$	1,760		$	2,046		$	9,926		$	(428	)
Stock-based compensation		73			85			104			128			548			546			540			593			1,172
Performance warrants		—			—			—			—			—			—			—			136			78
Interest income		(126	)		(90	)		(107	)		(90	)		(37	)		(8	)		(6	)		(13	)		(2	)
Depreciation and amortization		98			101			150			159			187			196			218			246			285
Income tax provision (benefit)		72			152			68			21			22			193			193			(9,104	)		452

Adjusted EBITDA		532			2,299			628			(810	)		(164	)		2,687			2,991			1,784			1,557

Capital expenditures		120			695			356			273			157			302			232			966			218

Adjusted EBITDA less capital expenditures	$	412		$	1,604		$	272		$	(1,083	)	$	(321	)	$	2,385		$	2,759		$	818		$	1,338

Our quarterly revenue has generally continued to increase as we have increased the number of marketplace events held over the past nine quarters and the GMV sold in such events. Our revenue has also increased as a result of the commencement of our operations internationally. In the first quarter of 2008, we held our first Asia-Pacific marketplace event and in the first quarter of 2009 we held out first European marketplace event. Historically, GMV has generally been highest during the second and fourth quarters. We generally conduct more marketplace events during these quarters than during the first and third quarters, because sellers of equipment tend to be more active in these periods to prepare for heavier construction project activity during spring through late fall. However, this quarterly seasonality pattern may not always occur due to the timing and duration of global economic cycles, level of global development activity and the impact on traditional supply and demand patterns for used heavy equipment. In addition, our volume of equipment for sale, and related revenue, is dependent upon the timing of activity such as fleet upgrades and realignments, contractor retirements, and the completion of major construction and development projects, among other things. Revenue Rate is impacted by a number of factors, including equipment and seller mix and the performance of guarantee or purchase arrangements during the period. These factors are generally not predictable and are usually unrelated to fiscal quarters, making quarter-to-quarter comparisons difficult.

During the fourth quarter of 2008, used heavy equipment prices declined significantly across virtually all categories, models and manufacturers. This used equipment price decline generally coincided with a severe dislocation in the credit markets and a decrease in activity in the commercial and residential construction markets. The effect of this price decline on our business was two-fold: first, equipment owners deferred decisions to sell equipment in the face of significantly depressed market prices and uncertainty regarding pricing recovery; and second, the selling prices of equipment sold in our marketplace during most of the fourth quarter were significantly reduced. Additionally, the selling prices of equipment sold under guarantee arrangements during the fourth quarter 2008 were significantly reduced, and our performance on such guarantee arrangements was negatively impacted. In total, we estimate the negative revenue impact of the dramatic price decline in fourth quarter of 2008 was approximately $2.2 million. Conversely, during each of the third quarter of 2009 and the first quarter of 2010, our financial results were positively impacted by performance on guarantee arrangements during that quarter, as the selling prices of equipment sold in our marketplace were higher, which resulted in increases in GMV and revenue.

Our cost of revenue increased sequentially each quarter of 2008 and 2009 and the first quarter of 2010 as we continued to increase the number of units sold in our marketplace and add additional personnel to assist with the listing and inspections process. Gross margin decreased in the fourth quarter 2008 due to the decrease in equipment pricing in that quarter, which negatively impacted our revenue. Gross margin in the first quarter 2009 was negatively impacted by the startup costs associated with launching our European operations.

Our operating expenses increased sequentially in each quarter of 2008 and 2009 and the first quarter of 2010 due to the growth in our sales and marketing, technology and general and administrative headcount to support the corresponding growth in our business and in GMV. Operating expenses increased in the fourth quarter 2008 due to the addition of sales personnel and pre-launch marketing expenditures related to our European operations. Operating expenses increased in the fourth quarter 2009 and the first quarter of 2010 due to an increase in our legal, accounting and other professional costs related to this offering. In addition, during the fourth quarter we typically incur additional expenses related to employee training and certain marketing and promotional activities, which are considered period costs.

Our other non-operating expense in 2008 and 2009 and the first quarter of 2010 was the result of a non-cash stock-based compensation expense recorded in connection with the ongoing variable accounting for a single option grant to a former employee for periods subsequent to his service obligation, as well as changes in the fair value of preferred stock warrants which are classified as a liability. The increase in 2009 and the first quarter of 2010 was attributable to an increase in our common and preferred-stock valuation.

Prior to the fourth quarter of 2009, our income tax provisions were primarily attributable to minimum corporate taxes, as we offset our taxable income through the utilization of net operating loss carryforwards. In the fourth quarter of 2009, we determined that it would be more likely than not that remaining cumulative net operating losses and other deferred tax benefits related to our U.S. operations, which had previously been fully

reserved, would be realizable. Thus, in the fourth quarter of 2009 we reversed the valuation allowances and recorded a tax benefit of $9.1 million.

Adjusted EBITDA decreased $0.2 million in the first quarter of 2010 compared to the fourth quarter of 2009, primarily as a result of increased sales and marketing expenses related to additional sales headcount and increases in our legal, accounting and other professional expenses related to this offering. Adjusted EBITDA decreased $1.2 million in the fourth quarter of 2009 compared to the third quarter of 2009. This was a result of a decline in revenue primarily related to a decline in our revenue rate, increased sales and marketing expenses related to additional sales headcount, and employee training and marketing and promotional activities that we typically incur in the fourth quarter. Adjusted EBITDA also exhibited significant declines in both the fourth quarter of 2008 and the first quarter of 2009 primarily as a result the decline in heavy equipment pricing that occurred during this period, as well as start up expenses related to the launch of our European operations.

Liquidity and Capital Resources

At March 31, 2010, our total cash position, consisting of cash and cash equivalents, was $42.6 million, of which $22.2 million related to marketplace payables on our balance sheet. Our net cash balance was invested primarily in short-term investment grade and guaranteed instruments, whose investment yields were generally tied to short term credit markets. We do not enter into investments for trading or for speculative purposes.

Since inception we have financed our business through a series of private placements of equity securities, primarily in 1999 and 2000, and through cash generated from operations. In addition, during 2007, 2008, and part of 2009, we had a line of credit facility in place with a financial institution that provided us the ability to borrow up to $10 million, subject to certain terms and conditions, to facilitate the purchase of equipment to sell in our marketplace. We did not have any borrowings under this facility during this period, and were in compliance with all covenants during this period. This facility expired in 2009, and we chose to not renew this facility due to our expectation that we would not need to access the facility in the foreseeable future due to the adequacy of our existing and anticipated cash resources. We may choose to renew this facility, or a similar facility, in the future.

We have experienced increases in our total cash expenditures in the last several years in connection with the overall growth in our business and related growth in personnel and outside costs. In 2008 and 2009 this included expenditures related to the launch of our Asia-Pacific and European operations. We anticipate that our total cash expenditures will increase in the future. However, we believe our existing cash balances and cash generated from our operations will be sufficient to meet our anticipated cash needs for at least the next 12 months.

The following table sets forth, for the periods presented, our summary consolidated statements of cash flows data.


										Three Months Ended
	Year Ended December 31,									March 31,
	2007			2008			2009			2009			2010
	(in thousands)

Consolidated Statements of Cash Flows Data:
Net cash provided by (used in):
Operating activities	$	1,089		$	11,599		$	(277	)	$	(1,001	)	$	11,436
Investing activities		(774	)		(1,444	)		(1,657	)		(157	)		(218	)
Financing activities		1,033			3,192			1,308			34			1,199
Effect of exchange rate changes on cash and cash equivalents		—			(17	)		60			(18	)		(182	)

Increase (decrease) in cash and cash equivalents	$	1,348		$	13,330		$	(566	)	$	(1,142	)	$	12,235


	As of December 31,						As of March 31,
	2007		2008		2009		2009		2010
	(in thousands)

Working capital	$	11,445	$	15,998	$	23,892	$	15,915	$	25,492

Net Cash Provided by (Used for) Operating Activities

In the three months ended March 31, 2010, we generated $11.4 million of cash from our operations. This was the result of a net loss of $0.6 million, adjusted for non-cash charges, consisting primarily of stock-based compensation of $1.2 million, charges related to performance-based preferred stock warrants of $0.3 million and depreciation and amortization of $0.3 million. Net cash provided by operations was impacted further by an increase in net amounts due to sellers of $6.0 million, which was due to an increase in overall sales activity in the quarter, including an increase in sales activity in Europe, a decrease in inventory of $5.0 million related to a purchased equipment transaction in the quarter and an increase in accrued expense and accounts payable of $3.0 million. The $3.0 million increase in accounts payable was due to increases of $0.7 million for accrued professional fees, $0.6 million in accrued commissions, $0.5 million to reflect liability treatment for preferred stock warrants, $0.4 million in sales tax payable, $0.3 million in accrued income taxes payable and $0.5 million of other accrued expenses. This was offset by an increase in accounts receivable of $2.0 million, an increase in prepaid expenses of $1.6 million primarily related to increases in prepaid offering costs and an increase in VAT receivables due from tax authorities in Europe of approximately $0.4 million. Other net working capital changes were approximately $0.6 million related to the overall growth of our business.

In the three months ended March 31, 2009, we used approximately $1.0 million of cash in our operations. This was the result of a net loss of $0.9 million, adjusted for non-cash charges consisting primarily of stock based compensation of $0.5 million and depreciation and amortization of $0.2 million. Net cash used by operations was impacted further by an increase in net amounts due to sellers of $4.7 million, which was due to an increase in overall sales activity in the quarter, an increase of $0.4 million in accrued expense and trade payables, and a decrease in inventory of $0.3 million. This was offset by an increase in accounts receivable of $5.7 million, which was the result of the proximity of our final marketplace events to the quarter end for first quarter of 2009. By comparison, there were no marketplace events in the final 12 days of 2008. The timing and size of marketplace events within our normal 7 to 10 day collection cycle immediately prior to a balance sheet date has a direct impact on our accounts receivable balance. Other net working capital changes were approximately $0.1 million related to the overall growth of our business.

During 2009, we used approximately $0.3 million of cash in our operations. This was a result of net income of $12.9 million, adjusted for non-cash charges, which consisted primarily of an income tax benefit of $9.2 million, offset by stock based compensation of $2.2 million and depreciation and amortization of $0.8 million. Net cash used for operations was further impacted by an increase in net amounts due sellers of $3.6 million and an increase in accrued sales and use taxes of $0.5 million. This was offset by an increase in VAT receivables due from tax authorities in Europe of approximately $3.7 million related to European operations, which commenced in 2009, an increase of $5.5 million in inventory related to an equipment purchase agreement entered into just prior to December 31, 2009, and an increase of $2.5 million in accounts receivable. This increase in accounts receivable was attributable to the launch of our European operations, which accounted for approximately $1.2 million of the increase; an increase in receivables from certain private marketplace and buyer customers with specific payment terms, which accounted for approximately $0.8 million of the increase; and an increase in overall marketplace activity transacted in the last 15 days of December 2009 compared to the same period in 2008, which accounted for the remaining $0.5 million of the increase in accounts receivable. Other net working capital changes were approximately $0.5 million related to the overall growth of our business.

During 2008, we generated approximately $11.6 million of cash from our operations. This was a result of net income of approximately $1.9 million, adjusted for non cash charges, primarily depreciation and amortization of approximately $0.5 million, stock-based compensation of $0.4 million, an increase in net amounts due sellers of $8.7 million, and other net working capital changes of approximately $0.1 million

related to the growth of our business. The increase in amounts due sellers at December 31, 2009 relates to the growth of our business, and the timing of collection of proceeds from buyers related to equipment sales, prior to remittance to sellers.

During 2007, we generated approximately $1.1 million of cash from our operations. This was a result of net income of $1.2 million, adjusted for non cash charges; primarily depreciation and amortization of $0.3 million, stock-based compensation of $0.7 million, a decrease in amounts due sellers of approximately $2.0 million. Other working capital changes, in total, were approximately $0.9 million related to the growth of our business.

Net Cash Used for Investing Activities

Our investing activities have consisted primarily of purchases of capital equipment and fixed assets used in our operations.

In the three months ended March 31, 2010 we purchased network and IT equipment for our website operations of approximately $0.1 million and we spent an additional $0.1 million on software development activities for our website operations which costs were capitalized.

In the three months ended March 31, 2009 we purchased network and IT equipment for our website operations of approximately $0.2 million.

In 2009, we purchased network and IT equipment and related application and database software for our website operations of approximately $0.9 million. Additional fixed asset purchases of approximately $0.4 million related to personal computing equipment for employees, as well as furniture, fixtures, leasehold improvements. Further, we spent approximately $0.4 million on software development activities for our website operations which were capitalized.

In 2008, we purchased network and IT equipment and related application and database software for our website operations for approximately $0.6 million. Additional fixed asset purchases of approximately $0.5 million related to personal computing equipment for employees, as well as furniture, fixtures and leasehold improvements. Further, we spent approximately $0.3 million on software development activities for our website operations which were capitalized.

In 2007, we purchased network and IT equipment and related software for our website operations of approximately $0.3 million. Additional fixed asset purchases of approximately $0.5 million related to personal computing equipment for employees, as well as furniture, fixtures and leasehold improvements.

Net Cash Provided by Financing Activities

In the three months ended March 31, 2010 we received proceeds of $1.3 million related to the exercise of stock options to purchase our common stock. We also repurchased preferred stock from our former president and chairman for $0.1 million.

In 2009, we sold Series C convertible preferred equity securities for approximately $1.0 million, net of related transaction expenses. Additionally, we received proceeds of approximately $0.3 million in 2009 related to the exercise of stock options to purchase our common stock.

In 2008, we sold, in separate transactions, Series C convertible preferred equity securities to two investors, for approximately $2.9 million, net of related transaction expenses. Additionally, we received proceeds of approximately $0.2 million in 2008 related to the exercise of stock options to purchase our common stock.

In 2007, we sold Series B convertible preferred equity securities for approximately $1.0 million, net of related transaction costs. Additionally, we received proceeds of approximately $0.1 million in 2008 related to the exercise of stock options to purchase our common stock.

Contractual Obligations

We lease our primary office space in Pleasanton, California and other locations under various non-cancelable operating leases for office space and data center facilities that expire between 2010 and 2013. We have no debt obligations. Additionally, all property and equipment has been purchased for cash, and

accordingly we have no capital lease obligations. We have no material long-term purchase obligations outstanding with any vendors or third parties.

The following table summarizes our principal contractual obligations as of December 31, 2009:


	Payments Due by Period
			Less than		1-3		3-5		More than
	Total		1 Year		Years		Years		5 Years
	(in thousands)

Operating leases	$	1,324	$	425	$	899	$	—	$	—

In the normal course of our business, we will, in certain situations, guarantee an equipment seller a minimum level of proceeds in connection with the sale through our marketplace of that seller’s equipment. At December 31, 2009, outstanding guarantees under contract for equipment totaled $0.3 million, which was offset by the proceeds that we received from the sale of the related equipment through our marketplace. We do not record any liability in our financial statements with respect to these guarantee arrangements, and they are not reflected in the contractual obligations table above.

Off-Balance Sheet Arrangements

As of March 31, 2010, we did not have any off-balance sheet arrangements.

Recently Issued Accounting Standards

In June 2009, the FASB issued an update to ASC 810, Consolidation, which modifies how a company determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. The modification clarifies that the determination of whether a company is required to consolidate an entity is based on, among other things, an entity’s purpose and design and a company’s ability to direct the activities of the entity that most significantly impact the entity’s economic performance. This modification to ASC 810 requires an ongoing reassessment of whether a company is the primary beneficiary of a variable interest entity. It also requires additional disclosures about a company’s involvement in variable interest entities and any significant changes in risk exposure due to that involvement. This modification to ASC 810 is effective for fiscal years beginning after November 15, 2009 and is effective for us on January 1, 2010. We expect this modification may have an impact on our financial position and results of operations in future periods, but the nature and magnitude of the specific effects will depend upon the nature, terms and size of the transactions we consummate in the future.

In October 2009, the FASB issued an amendment to ASC 605-25, Multiple Element Arrangements, which modifies how a company separates consideration in multiple-delivery arrangements. The amendment establishes a selling price hierarchy for determining the selling price of a deliverable. The amendment also clarifies the allocation of revenue is based on entity-specific assumptions rather than assumptions of a marketplace participant. The amendment also eliminates the residual method of allocating revenue and requires the use the relative selling price method. This amendment to ASC 605-25 is effective for new revenue arrangements entered into or modified in fiscal years beginning after June 15, 2010. Early adoption is permitted. The adoption of this amendment is not expected to have a material impact on our consolidated financial statements.

In October 2009, the FASB issued an amendment to ASC 985-605, Software-Revenue Recognition, which modifies the accounting model for revenue arrangements that include both tangible products and software elements. This amendment to ASC 985-605 is effective for new revenue arrangements entered into or modified in fiscal years beginning after June 15, 2010. Early adoption is permitted. We do not sell products that include both tangible products and software elements, therefore this amendment will not impact our consolidated financial statements.

Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Sensitivity

During 2007, 2008, and 2009, we did not have any borrowings outstanding under our line of credit arrangements, and thus were not subject to interest rate risk related to borrowings. During these periods, we did have substantial cash balances on hand with financial institutions, which generally were invested in short-term investment grade and guaranteed instruments, whose investment yields were generally tied to short-term credit markets. Our yields on these short-term instruments were affected by the overall decline in short-term interest rates in 2009 compared to 2008, and in 2008 compared 2007. Our average yields on invested cash balances were approximately 3.9% in 2007, 1.7% in 2008, and 0.4% in 2009.

Currency Exchange Rate Sensitivity

In 2008, we commenced operations in the Asia-Pacific region, based in Australia, where our transactions are denominated in Australian dollars. In 2009, we commenced operations in Europe, where our transactions are denominated in Euros. We utilize the U.S. dollar as our reporting currency and accordingly translate our international business unit results into U.S. dollars for reporting purposes. We incurred a negative net foreign currency translation adjustment of $17,000 in 2008, and a positive net foreign currency translation adjustment of $48,000 in 2009, primarily related to our intercompany funding arrangements with our international business units. Additionally, because we sell to a significant number of international used equipment buyers, a significant change in currency exchange rates may materially affect the participation of our international buyers in our marketplace formats, and consequently the equipment pricing levels realized.

BUSINESS

Overview

We are a leading online marketplace for used heavy equipment. We believe that the online channel is increasingly becoming a preferred method for used heavy equipment transactions, and our long-term goal is to be the leading global marketplace for used heavy equipment and other capital assets. Our exclusively online model allows us to match supply and demand globally for used heavy equipment, while achieving greater reach, price performance and efficiency relative to the fragmented network of brokers, dealers and physical auction houses that have traditionally served this market. In 2009, our online marketplace connected over 1,600 unique sellers to over 7,600 unique buyers, from among 14,500 unique bidders, located across 92 countries, who bought approximately 30,000 individual pieces of equipment.

We offer multiple online marketplace solutions for sellers and buyers of used heavy equipment. Our primary solution is our Featured Marketplace, which is a scheduled public online auction typically held once a week, during which prospective buyers bid on a wide variety of equipment for sale. Other solutions offered include our Private Marketplace, our Daily Marketplace and our One-Owner Marketplace, each designed to meet the specific needs of used heavy equipment sellers. Our online-only model allows us to be flexible and capital efficient when developing new marketplace solutions and when expanding into new geographies, customer segments and product categories.

We generate revenue principally from sellers through commissions, as well as listing and inspection fees. We also generate revenue from buyers through transaction fees. Our revenue is dependent on the total gross merchandise volume, or GMV, of equipment sold through our marketplace. We grew our GMV from $342 million in 2008 to $458 million in 2009, an increase of 34%. We grew our revenue from $35.0 million in 2008 to $54.7 million in 2009, an increase of 56%. Over the same period, we grew Adjusted EBITDA from $2.6 million in 2008 to $7.3 million in 2009, an increase of 181%. Compared to the first quarter of 2009, in the first quarter of 2010 we grew GMV from $92 million to $130 million, or 41%, and revenue from $10.3 million to $16.2 million, or 57%, and Adjusted EBITDA changed from negative $0.2 million to $1.6 million. For a discussion of Adjusted EBITDA and a reconciliation of net income to Adjusted EBITDA, see note 4 to “Selected Consolidated Financial and Other Data.”

Industry Background

The market for heavy equipment is large, established and global. Demand for heavy equipment is driven by worldwide economic development, government stimulus and spending on infrastructure, and a continual need by equipment operators to replace and upgrade their equipment. This equipment is used in key sectors of the economy, such as the construction, mining and agriculture industries. Examples of such heavy equipment include tractors, excavators, backhoes, wheel loaders, motor graders and dump trucks manufactured by companies such as Caterpillar Inc., Deere & Company, Komatsu Ltd. and Volvo Construction Equipment.

According to The Freedonia Group Incorporated, or Freedonia, an international business research company, manufacturers’ sales of heavy equipment in the construction and mining industries in 2008 were $108 billion and $45 billion, respectively. According to Freedonia, manufacturers’ sales of heavy equipment in the agriculture industry in 2007, the most recent period with data available, was $93 billion, and combined spending in these industries is expected to grow to $314 billion by 2013. We believe that the geographic distribution within the construction equipment market is representative of the overall heavy equipment market, and according to Freedonia, worldwide construction equipment demand in 2008 was distributed 35% in Asia-Pacific, 29% in North America, 21% in Western Europe and 15% in the rest of the world.

Large and Active Market for Used Heavy Equipment

There is a large and active secondary market for used heavy equipment. Heavy equipment assets generally have long useful lives, driven by manufacturing durability and generally limited product changes and broad industry application. Over the course of its useful life, a piece of heavy equipment may be resold multiple times. This longevity and durability gives rise to a large global stock of functional used equipment. The price differential between new and used equipment values presents a compelling economic case for buyers of used equipment, who appreciate equipment at different stages of its lifecycle. This in turn provides equipment owners a market to continually sell and upgrade their assets, which is important to capital intensive businesses seeking to manage their fleet size and inventory. Additionally, the development of global standards in equipment manufacturing methods and industrial practices has facilitated a market for used heavy equipment that spans across diverse geographic markets and industrial segments, as the utility for such used heavy equipment has become much broader. The long-term fundamental needs for infrastructure development and increased economic activity in developing markets have driven the demand for used heavy equipment in these markets, since new equipment is generally less affordable, particularly large and specialized heavy equipment. Collectively, these factors have contributed to increasing global demand for used heavy equipment, and for buying and selling used heavy equipment across geographies.

According to research we commissioned by Manfredi & Associates, a market research firm that specializes in the heavy equipment industry, the average value of the worldwide fleet of used heavy equipment was estimated to be more than $500 billion between 2006 and 2008, of which over $100 billion was resold annually. The market for secondary sales has been characterized by disparate sellers and buyers and, as a result, local brokers and OEM-branded dealers have controlled much of the market historically. While these businesses serve a necessary function, their limited geographic footprint, narrow service offering and lack of scale and transparency create inefficiencies for both sellers and buyers.

Established Auction Channel for Used Heavy Equipment

Auctions are an established channel for buying and selling used heavy equipment. According to research we commissioned with Manfredi & Associates, approximately $10 billion of used heavy equipment was sold through the auction channel annually between 2006 and 2008. We believe the auction channel is compelling due to a number of factors, including the ability of auctions to better match large pools of supply and demand for used equipment, the attractiveness to sellers looking to achieve timely liquidity and dispose of large pools of equipment in one event, and the attractiveness to buyers to choose from a broad selection of equipment from a variety of manufacturers. In addition, we believe the heavy equipment auction business benefits in periods of economic expansion, as buying and selling activity grows, and remains relatively insulated in periods of economic contraction, as value pricing is important to buyers and timely disposal of idle equipment is important to many sellers.

Growing Online Marketplace for Used Heavy Equipment

The development of the Internet and e-commerce has given rise to the online marketplace as a more efficient channel for buying and selling used heavy equipment. The online channel improves upon the benefits of physical auctions in matching supply with demand across geographies, and reducing the time and costs for sellers and buyers to transact and avoiding the limitations of physical proximity. We believe the online channel will become the preferred platform for the buying and selling of used heavy equipment throughout the world.

Market Opportunity

Sellers and buyers of used heavy equipment are burdened with significant challenges and inefficiencies using traditional channels.

Challenges for Sellers

Equipment sellers face a number of challenges as they seek to maximize price realization and minimize the required time, effort and resources associated with the sales process. Key challenges for sellers include the following.


	•	Limited Buyer Reach. Historically, sellers have only been able to reach a narrow set of buyers, such as those located near sellers or traditional intermediaries. This limited reach creates an imperfect market and may adversely impact the sale price.

	•	Lack of Turn-Key Solutions. Sellers are required to invest significant time and attention in the sales process because traditional channels have not successfully offered a comprehensive and efficient solution.

	•	Lack of Regular and Continuous Access to Buyers. Sellers are constrained by lengthy sales cycles associated with traditional used heavy equipment sales channels and the timing of regional auctions.

	•	Unnecessary Cost Requirements. Sellers often face costs that reduce their net proceeds, such as the potentially significant expenses associated with transporting equipment to an intermediary’s site and the costs of preparing equipment for sale that certain intermediaries may require.

	•	Payment Delays and Transaction Uncertainty. Sellers are concerned that funds will be collected and delivered in a timely manner. Sellers also risk broken sales when the equipment does not match buyer expectations.

Challenges for Buyers

Buyers face a number of challenges as they seek to locate specific equipment at a reasonable price, evaluate the condition of used equipment and minimize the costs and time constraints of procuring equipment. Key challenges for buyers include the following.


	•	Lack of Selection. Buyers are generally limited to the available selection from local broker and dealer, or at infrequent regional auctions.

	•	Limited Ability to Assess Product Quality. Buyers have limited resources to assess the condition of used heavy equipment and critical components, which is problematic because the performance of used heavy equipment can vary dramatically based on prior usage and ownership. As heavy equipment assets are generally significant capital expenditures for important operating activities, the cost of business interruption from equipment failure can be significant.

	•	Significant Time Commitment. Buyers spend significant time searching for, identifying, evaluating, and procuring equipment. Attending traditional sales channel events and tracking down equipment is inconvenient and time consuming.

	•	Significant Cost Requirements. Costs associated with searching for and evaluating the performance of equipment can be substantial and are borne by the buyer. Traveling to sellers’ locations and events is also costly and potentially unproductive for the buyer.

	•	Lack of Market Transparency. Due to the fragmented and regional nature of traditional used heavy equipment sales channels, these markets operate with price inefficiencies. Markets often lack transparency and buyers have limited data to make informed buying decisions.

We believe that there is a significant opportunity for an online marketplace for used heavy equipment that better matches supply and demand, and reduces the cost, time and friction associated with buying and selling equipment. To be successful, a company with this model must ensure the integrity of its marketplace and build

trust for both sellers and buyers as to the accuracy, legitimacy and certainty of transactions. Moreover, the marketplace must provide sufficient liquidity to ensure enough demand for sellers and supply for buyers.

Our Solution


	•	an efficient means of matching supply and demand globally;

	•	significant numbers of sellers and buyers;

	•	significantly reduced geographic constraints;

	•	reduced time and expense required of sellers to locate and reach equipment buyers and of buyers to identify, evaluate and procure equipment assets;

	•	enhanced trust and confidence of buyers in the condition of the equipment purchased; and

	•	enhanced levels of market transparency.

By attracting significant numbers of geographically dispersed sellers and buyers to our marketplace, we believe we have built a network effect that increases the value of our services to all participants in our marketplace. Furthermore, we believe this value continues to increase over time as the size of our marketplace, and the resulting supply of and demand for used heavy equipment, grows.

Key Benefits for Sellers

Our solutions are designed to meet the needs of used heavy equipment sellers by providing the following.


	•	Global Reach. We provide sellers access to our global pool of active buyers, increasing marketplace transparency, liquidity and price realization. Our marketing efforts are designed to drive traffic to our marketplace and demand for our sellers’ equipment. Our marketplace operations group bolsters the level and depth of buyer interest for specific auction events and items, and solicits, engages and informs potential buyers to stimulate demand in advance of and during a marketplace event. During 2009, our North American Featured Marketplace attracted on average over 800 unique bidders based in 28 countries per event.

	•	Flexible, Turn-Key Solutions. We provide sellers the flexibility to choose from a number of marketplace solutions, as well as the ability to leverage our technology platform to manage their own Private Marketplace. This range of solutions enables sellers to choose a solution which best suits their business, cash and inventory needs. In addition to our Featured Marketplace, we offer tailored marketplace solutions for different seller requirements, including our One-Owner Marketplace, our


		Daily Marketplace and our Private Marketplace. Because specialty equipment assets attract different sets of buyers, and not all equipment is suited for the Featured Marketplace, we believe our different solutions give sellers flexibility in choosing the best venue to attract the right buyers for their equipment.


	•	Continuous Market Access. We provide sellers with regular market access regardless of where their equipment is located. Our Featured Marketplace is held typically once a week and our Daily Marketplace operates 365 days a year. Such frequency provides equipment owners the opportunity to use IronPlanet as an asset and inventory management tool, rather than as an ad hoc selling channel. Large fleet owners can schedule asset dispositions regularly and precisely based on their corporate asset life cycle management schedules and not be tied to infrequent service provider schedules. Furthermore, they can better manage large fleet reductions by selling assets systematically and regularly.

	•	Cost Efficiency. Our field-based sales and inspections teams help limit the time and resources required of sellers to prepare items for sale. Our process allows sellers to avoid sales-related transportation costs, which can be significant for large pieces of equipment. Furthermore, we generally do not require sellers to incur “make ready” expenditures prior to sale, but make recommendations on improvements or repairs that will likely enhance the net proceeds of the equipment being sold.

	•	Transaction Speed and Certainty. We have designed our marketplace offering to minimize the end-to-end sales process time. In particular, our online solution eliminates the need for sellers to transport equipment to physical sites for sale, and our field inspection reports and IronClad Assurance reduce the time buyers require to evaluate equipment, shortening the total sales process. In addition, we have designed our payments process to give buyers an incentive to pay sooner, and our secure payments process ensures that sellers receive payment for their equipment in a timely and safe manner.

Key Benefits for Buyers

Our solutions are designed to meet the needs of used heavy equipment buyers by providing the following:


	•	Broad Selection. We provide buyers with a broad selection of equipment across multiple geographies, industries, manufacturers, price points and equipment condition. As our seller community grows, we are able to provide buyers with increasing value through greater equipment selection. During 2009, our North American Featured Marketplace events on average included over 600 items across a range of industrial uses, price points, OEM brands and product quality parameters.

	•	Quality Assurance. We have created a proprietary inspection process to provide buyers with confidence in the condition of equipment listed in our marketplace. Buyers can access and evaluate our detailed inspection reports online for any piece of equipment, and our IronClad Assurance instills trust in the accuracy of these inspection reports.

	•	Convenience. Buyers are able to search, identify, evaluate and procure equipment at any time through our convenient, user-friendly website. Our model is designed to minimize the need for involvement throughout the process, as well as reduce the total time necessary to successfully procure equipment.

	•	Cost-Efficient Process. We enable buyers to search, identify, evaluate and bid for equipment online, reducing costs required to search for and bid on equipment located in physically disparate locations.

	•	Market Fairness and Transparency. We enforce strict rules among sellers and buyers that provide for open and transparent bidding activity. Sellers are prohibited from manipulating outcomes through shill bidding or buy-backs. Furthermore, our automated system prevents last second “close-out” bids by automatically extending the auction period until all bidding is exhausted. We believe these rules encourage buyers to participate with greater confidence in the process.

Our online marketplace meets the needs of used heavy equipment sellers and buyers by matching global supply and demand for used heavy equipment, while eliminating the constraints, inefficiencies and costs associated with traditional methods of conducting used heavy equipment transactions.

IronPlanet Competitive Advantages

We believe our business model provides us a number of competitive advantages that enhance our ability to continue to grow our business and expand our profitability.


	•	Scale, Network Effect and Marketplace Liquidity. Our online marketplace has achieved significant scale and is an active and liquid market for used heavy equipment. In 2009, our online marketplace connected over 1,600 unique sellers to over 7,600 unique buyers, from among over 14,500 unique bidders, located across 92 countries, who bought approximately 30,000 individual pieces of equipment totaling $458 million in GMV. As the liquidity of our marketplace continues to increase, as the numbers of sellers and buyers in our marketplace grows, and as our geographic coverage expands, we benefit from a network effect. We believe the value of our marketplace to both sellers and buyers increases as we add more users. More registrants to the marketplace allows for more prospective bidding, which yields higher price realization for sellers. More sellers produces a larger number and greater variety of listings, which makes the marketplace more attractive for buyers.

	•	Proprietary Inspection Process and IronClad Assurance. We believe that our proprietary inspection process and detailed inspection reports are comprehensive, accurate and valuable to participants in our marketplace. In addition, our IronClad Assurance is a key differentiating factor for our marketplace and provides benefits to both sellers and buyers. Sellers benefit from more active bidding by a wider group of prospective buyers, resulting in higher price realization, while buyers benefit from accurate and reliable information that allows them to bid with confidence.

	•	Capital-Efficient Business Model. We operate entirely as an online marketplace, and, accordingly, we require minimal physical footprint. We do not require real estate or other significant capital outlays to enter new markets. Our website can be efficiently localized to facilitate expansion to new international markets, and can be easily adapted to new asset categories. This provides us significant flexibility to efficiently scale our business and enter new markets with minimal capital expenditure requirements.

	•	Direct Relationships with Sellers. We believe that cultivating strong relationships with sellers and having insight into their situations and requirements is critical to generating heavy equipment supply volume to our marketplace. We have a dedicated salesforce of experienced professionals from the heavy equipment industry, focused on fostering relationships with the key decision-makers of our customers and of other large equipment owners. Our salesforce maintains regular communication with potential sellers and strives to understand their inventory management, liquidity and cash needs associated with a sale.

	•	Portability of Our Business Model. We have developed a business model and processes that can be efficiently transferred to other asset categories, beyond our current heavy equipment segments. Such business model characteristics include our exclusively online operations, with no need for physical facilities, our proprietary inspection process, and our flexible marketplace technology platform. For example, we have begun preliminary efforts to expand into recreation equipment, and have recently held marketplace events featuring such equipment for which we used our existing website at no substantial additional development costs. Though we have no current plans to expand our business to include other specific asset categories, we continue to evaluate opportunities and may do so in the future.

We believe the combination of our reach and relationships with sellers and buyers, our technology and ability to leverage the Internet, our inspection reports and IronClad Assurance, and our growing brand recognition positions us to become the leading marketplace for used heavy equipment.

Our Strategy


	•	Increase Penetration in Our Key North American Market. We believe our core North American used equipment market will continue to grow and that we have the opportunity to further penetrate this fragmented market. We intend to continue to enhance the quality and productivity of our salesforce in


		North America and to add new sales personnel to cover more regions and increase our coverage within each region. We also intend to invest in marketing efforts and to expand our Featured, One-Owner, Daily and Private Marketplaces to attract additional heavy equipment sellers and to further deepen our relationships with existing sellers. We also intend to focus on adding equipment supply in the agriculture and mining categories, and we will evaluate selectively adding new asset categories to our marketplace.


	•	Focus on Key Customer Segments. We believe our solutions are particularly well suited for, and provide unique benefits to, certain sellers who have large fleets and regularly dispose of equipment. These sellers include equipment rental, financial services, and large industrial companies. We intend to hire additional sales personnel focused on integrating our marketplace solutions into the business processes of these large accounts segments and other global companies that regularly buy and sell heavy equipment. These companies represent a meaningful portion of the overall global used equipment volume and we believe that our online marketplace provides considerable benefits to these sellers compared to traditional sales channels.

	•	Continue Our Expansion into International Markets. Our exclusively online model provides us the ability to rapidly grow our international footprint with minimal capital investment. While we are able to serve buyers globally from our U.S. operation, we have recently expanded our operations into new international markets to attract and better service sellers of heavy equipment in these markets, and to obtain more equipment globally to satisfy buyer demand. In 2008 we launched our Asia-Pacific operations by adding sales and customer service personnel in Australia, and in 2009 we began our European operations. We expect to continue to add resources in Europe in the near term and deploy our solution to additional international markets in the next several years.

	•	Strengthen our Brand and Enhance the User Experience. The trust that our customers place in our brand is essential to our business model, and our ability to protect and strengthen our brand is critical to our success. Our proprietary IronClad Assurance is a key element of our trusted relationship with sellers and buyers. We plan to continue to develop and enhance awareness of our IronClad Assurance and to strengthen and expand our brand globally through marketing and promotional activities and the continued hiring and training of inspection services personnel. We also plan to further develop our website and platform to provide a more compelling experience for sellers and buyers on our marketplace by adding new data, analytics and communications features to create a more efficient and intuitive purchasing experience and to empower sellers and buyers with tools to help them make purchase decisions.

	•	Invest in Technology and Infrastructure to Improve Services and Operating Efficiency. We will continue to invest in our technology, operations and processes to maintain our state-of-the-art online delivery infrastructure and improve our overall operating efficiency for our online marketplace. This will also include continued investments in transaction processes, and in further automating various components of our inspection services, our listing services, our marketplace operations and our back-office and settlement services.

Products and Services

We have built a scalable and flexible online marketplace with multiple selling solutions to meet the diverse needs of sellers and buyers. Our marketplace solutions include the following.


	•	Featured Marketplace. Our primary solution is the Featured Marketplace, where sellers list used heavy equipment during a scheduled event that takes place entirely online and is typically conducted weekly in North America and monthly in Europe and Australia. During 2009, our North American Featured Marketplace events on average included over 600 items across a range of industrial uses, price points, OEM brands and product quality parameters. Featured Marketplace events follow an auction format in which equipment is sold on an “unreserved” basis to the highest bidder, with a minimum bid price. Items are typically listed on the website for a two week preview period before the scheduled Featured Marketplace event. All registered bidders on our website can participate in our Featured Marketplace events and bid on items for sale. There are no participation fees or bid fees charged to bidders and bidding activity is conducted entirely online.

	•	One-Owner Marketplace. Our One-Owner Marketplace is conducted like our Featured Marketplace, but targets sales of equipment by a single owner in a single event. Often times these are entire liquidations of a fleet of equipment due to the retirement of a contractor, or financial liquidation of a business. These events are available to our entire global registration base. This solution is well suited to deliver optimal results in such circumstances due to the global reach of our marketplace.

	•	Daily Marketplace. Our Daily Marketplace solution includes equipment pieces listed for sale, with a reserve price, which are available on our website for a defined period of time, typically one week. Buyers can place a bid or purchase equipment immediately at a designated price, referred to as the Win it Now price. The Daily Marketplace solution usually includes brokering activity on the part of our marketplace operations team, which reaches out to prospective buyers to solicit bids that at a minimum meet sellers reserve requirements. This solution is well suited to specialty assets or situations where sellers have minimum requirements.

	•	Private Marketplace. Our Private Marketplace solution is offered to large industrial, rental companies and OEM equipment sellers who want to offer equipment assets to a select group of potential buyers, such as their dealers. We offer the Private Marketplace solution as a private-label solution and provide sellers the opportunity to conduct online sales using their own brand. For Private Marketplaces, we host and manage a separate website for each seller, utilizing our technology platform. This solution provides an efficient, turn-key selling platform for customers who want to limit access to a private bidding audience.

We have developed proprietary inspection, listing and transaction processes and systems to provide a broad range of value-added services for sellers and buyers using our marketplace. We provide these services to differentiate our product offerings, to provide an efficient experience to users and to ensure the successful completion of the highest number of transactions in our marketplace.

Services Provided to Sellers


	•	Equipment Pricing and Market Evaluation. Our experienced sales team members provide sellers with preliminary pricing estimates based on current market conditions. Our centralized equipment pricing group of dedicated personnel monitors used equipment market activity and overall equipment output and demand data, and maintains our pricing database in order to provide sellers with the most accurate price estimates.

	•	Listing Services. We provide sellers services to summarize and present their equipment for sale in our marketplace solutions. Equipment is evaluated based on the make, model and year of manufacture, features and overall condition. Our customer service organization works with sellers in resolving lien status with lien holders and establishing lien payoff amounts and timing, and also manages the physical collection of titles to be transferred to buyers.

	•	Inspection Services. Our inspection services department conducts detailed onsite evaluations of most large pieces of equipment sold in most of our marketplace under our IronClad Assurance program. Inspections are typically scheduled with the seller four weeks in advance of the equipment being offered for sale in our marketplace solutions. This turn-key service requires minimal seller involvement. Inspection reports are made available to prospective buyers in our marketplace.

	•	Improvement Recommendations. While we do not require make ready expenses to prepare equipment for sale, our field inspectors and sales personnel will make suggestions on repairs or improvements that are likely to enhance the net proceeds for the seller.

	•	Funds Settlement. We collect sale proceeds directly from buyers and remit funds to the respective sellers. For transactions for which a local, state, VAT or other similar tax is due, we include taxes in the collection amount due from the buyer, and remit it to the applicable local tax authority on behalf of the seller.

Services Provided to Buyers


	•	Equipment Inspection Report. We provide detailed inspection reports on equipment for sale in upcoming marketplace solutions available to prospective buyers when the equipment is listed. The inspection reports contain:


	•	make, model, and year of manufacture;

	•	feature summary;

	•	engine hour summary, mileage summary, tread and undercarriage summary, as applicable;

	•	overall condition assessment; and

	•	third-party analysis of engine oil, hydraulic fluid, other fluid samples.


	•	IronClad Assurance. IronClad Assurance is our commitment to buyers of the accuracy and completeness of our inspection reports. If a buyer discovers that a piece of equipment is not in substantially the condition described in the inspection report, subject to certain conditions, we refund the full purchase price and reimburse the buyer’s transportation costs. This proprietary inspection and report process instills trust in buyers, enabling them to bid on equipment in our marketplace with confidence in the condition and quality of the used heavy equipment they may purchase.

	•	Customer Service. We provide prospective buyers with services such as confirming features of equipment in upcoming marketplace solutions, assisting the buyer in their search or alerting a buyer if a piece of equipment is available for sale.


	•	Referral Services. We offer referral services for qualified transportation and financial service providers, who quote terms for equipment financing and transport services directly to buyers.

Marketplace Operations

We market equipment for sale in one of our Featured Marketplaces for the two weeks leading up to the scheduled event, as well as during the event itself. During the equipment preview period leading up to the event, we have a dedicated marketplace operations team that contacts buyers, markets upcoming equipment and solicits bids from prospective bidders. These representatives monitor our website traffic and the level of interest on items for sale and then target their call campaigns based on the specific interest expressed by buyers. As of March 31, 2010, we employed 17 persons in our marketplace operations group in three call centers, located in Pleasanton, California, Dublin, Ireland, and Brisbane, Australia, collectively speaking 13 languages.

Customers

IronPlanet is a marketplace, therefore we consider both equipment sellers and buyers to be our customers. In 2009, we sold equipment from more than 1,600 unique sellers in 29 countries to over 7,600 unique buyers in 92 countries.

Sellers

Our base of sellers has expanded and diversified rapidly. During 2007, 2008, 2009 and the first quarter of 2010, our ten largest individual sellers accounted for 44.3%, 40.7%, 37.5% and 35.0% of our revenue, respectively. In 2009, we sold equipment for over 1,600 sellers located in 29 countries, up from approximately 1,100 sellers located in three countries in 2008. Caterpillar Financial Services Corporation and its corporate affiliates are our largest sellers and collectively accounted for 22.0%, 15.5%, 11.9% and 7.7% of our revenue in 2007, 2008, 2009 and the first quarter of 2010, respectively. Our sellers come from a diverse range of business sizes and types, and typical sellers include:


	•	OEM re-marketing and finance organizations who sell equipment regularly as part of the OEMs overall brand management, dealer support and regular business activities;

	•	regional, national and multi-national construction and contracting companies who dispose of large quantities of equipment on a recurring basis as part of ongoing fleet management activities or who are winding down large projects;

	•	national equipment rental companies who sell large quantities of equipment on a regular basis;

	•	large industrial companies who sell large quantities of equipment on a regular basis;

	•	local and national finance companies who sell off-lease or repossessed assets on a one-time, periodic or regular basis;

	•	large dealers who sell excess and trade-in inventory on a regular basis;

	•	small dealers and local rental companies who may periodically sell excess inventory;

	•	small contractors and construction companies who liquidate an entire fleet of equipment due to owner retirement or business wind-down;

	•	farm owners who sell their equipment; and

	•	local and state governments managing their fleets.

The majority of sellers who use our marketplace execute our standard equipment listing form available on our website. The listing form allows the seller to identify the equipment to be sold on our marketplace, requires that the seller agree to our terms and conditions which are also available on our website, and describes certain payment terms associated with participating in our marketplace events. We also currently have relationships with over 100 frequent sellers of equipment in our marketplace who we refer to as preferred providers, and with whom we enter into preferred provider agreements. Because these preferred providers typically sell high volumes of equipment in our marketplace, these individually-negotiated agreements provide

for seller commission rates that are more favorable than our standard commission rates as well the waiver of certain fees for some preferred providers. In 2009, each of our top 10 sellers was a party to a preferred provider agreement with us. See “Certain Relationships and Related Transactions — Preferred Provider Agreements” for additional disclosure regarding certain of these preferred provider agreements.

Buyers

We have a broad international base of equipment buyers. We attract many of the same categories of equipment industry participants from our seller base for our buyer base. Our buyer base is primarily comprised of small and mid-sized contractors, industrial and manufacturing entities and equipment dealers and brokers.

As of March 31, 2010, we had over 560,000 registered users on our website and we are currently averaging 10,000 new registrations per month. We believe that the continued increase in registered users contributes to increased bidding activity and the effectiveness of our marketplace. In 2009, our weekly auctions attracted an average of over 600 unique bidders per event, and we sold equipment to over 7,600 unique buyers in 92 countries, an increase from approximately 5,300 unique buyers in 62 countries in 2008.

In order for a registered user to become a qualified bidder in our marketplace, the user must request bidding privileges from us. Our bidding privilege approval process allows us to review credit and business considerations of potential bidders and requires potential bidders to re-affirm their agreement to our marketplace terms and conditions. We typically do not enter into any additional agreements with bidders in connection with our marketplace events.

Sales and Marketing

We have a direct salesforce organized by geographic region and specific industry and seller categories. Our sales representatives are responsible for developing relationships with equipment sellers in their territory or market segment, and for sourcing equipment to be sold in our marketplace. They are also involved in the preliminary evaluation of equipment condition, target price setting of equipment values and monitoring of our equipment listing processes. Our sales representatives are compensated on a fixed salary plus a variable commission or a bonus arrangement. Commissions are awarded based on seller commissions earned by us. As of March 31, 2010, we employed 121 sales representatives and sales managers.

Our marketing initiatives focus on supporting our sales organization and driving awareness for our marketplace with sellers and buyers of used equipment. We advertise in trade and vertical publications, as well as a variety of online mediums, including online heavy equipment listing sites, industry trade websites, targeted email lists and search engines. Additionally, we participate in a variety of industry trade shows, associations and other industry forums in order to build overall awareness of IronPlanet and our marketplace solutions.

Our website also serves as a primary marketing vehicle and the destination for sellers and buyers. We are able to gather and analyze data regarding user activity to target and follow-up with potential buyers based on their website usage. We are continually exploring new mediums and techniques to reach potential customers and drive increased transaction volumes.

Competition

The market for buying and selling used heavy equipment is highly fragmented, and we compete with a diverse set of companies to attract both sellers and buyers to our marketplace. Certain of our competitors are much larger than we are, and have greater financial resources and technical, marketing and customer support capabilities than we do. Some of these competitors have been in business substantially longer than us, and have developed strong brand recognition and deep relationships with numerous large sellers and buyers of used equipment. Our primary competition falls into three categories:


	•	National and regional equipment auction companies, including Ritchie Bros. Auctioneers, Alex Lyon & Son Sales Managers and Auctioneers, Inc., Yoder & Frey Auctioneers, Inc., Great American Group, Inc., Euro Auctions, WWA Group, Inc. and Cat Auction Services. These companies typically conduct on-site auctions at regional locations.

	•	OEM and independent equipment dealers, rental companies, and brokers that buy and sell used equipment.


	•	Traditional and online listing services, including eBay, Machinery Trader, Rock and Dirt, and Equipment Trader Online that list used equipment for sale on their websites or in print publications.

We believe that we are well positioned relative to our competitors in our ability to attract sellers and buyers to our marketplace based on a number of factors. We compete to attract sellers on the basis of the frequency of our online marketplace events, the availability of multiple selling solutions in our marketplace, quality of service, the numbers of potential buyers, ability to attract international buyers, the net proceeds realized by sellers and overall liquidity of the marketplace. We compete to attract buyers and engender trust on the basis of the convenience and accessibility of the marketplace, the breadth and quality of equipment available for sale, availability of equipment from different countries, information and resources available to facilitate purchase decisions and the transparency and fairness of the bidding and purchasing process.

Technology and Infrastructure

Since our inception, we have dedicated substantial resources toward developing and maintaining our proprietary online marketplace platform, which we operate through our IronPlanet websites. Our technology expenses for the years ended December 31, 2007, 2008 and 2009, were $1.4 million, $1.7 million and $2.8 million, respectively. Our technology platform and websites are built and generated using a combination of proprietary and third-party software as well as hardware from established technology vendors.

Our development team works closely with our sales and operations teams to develop applications and technologies that can be used across our business to increase the scalability of our operations, add functionality to improve the experience of sellers and buyers on our marketplace, and increase the efficiency of our operations and sales personnel. For example, we have developed technologies that increase the productivity of our inspectors and the completeness of our inspection quality review process. Our specialized inspection data entry software allows our inspectors to use standard tablet computers to quickly complete detailed inspection reports from remote locations, store information on the devices and upload the reports directly to our centralized quality control team over the Internet.

The IronPlanet branded websites and websites that we operate for sellers that utilize our Private Marketplace all run on a technology platform that is designed to be fault-tolerant, with sets of identical application servers connected to a cluster of database servers. All load balancers, firewalls and network devices connecting the servers operate in redundant pairs. The failure of any single component is not expected to affect the overall availability of our website. In addition, for geographic and vendor redundancy, we maintain the same technology platform in two data centers, each capable of handling our website traffic, with one serving as a “hot” standby. These data centers are located in co-location facilities in the Las Vegas, Nevada and Seattle, Washington areas and share data with each other using a high-speed private network connection. Each data center is a secure facility, with high uptime rates achieved using redundant systems such as backup electrical power and multiple points of high-speed Internet connectivity to insure high availability and eliminate single points of failure.

Intellectual Property

We rely on a combination of patents, trademarks, copyrights and trade secrets, as well as on confidentiality agreements, to establish and protect our proprietary rights. The laws, procedures and restrictions provide only limited protection. We currently own one issued patent in the United States which expires in 2021. In addition, we currently have trademarks registered or pending registration in the United States and certain foreign countries for our brand names and slogans used as brands that we use in our business. We also rely on copyright laws to protect computer programs related to our websites and our proprietary technologies, although to date we have not registered for statutory copyright protection. We have registered numerous Internet domain names in the United States and in foreign countries related to our business in order to protect our proprietary interests. Furthermore, we endeavor to enter into agreements with our employees and contractors and with parties with which we do business in order to limit access to and disclosure of our proprietary information, as well as to clarify rights to intellectual property associated with our business.

Regulatory Matters

Our business is subject to regulation, supervision and licensing under various U.S. federal and state, foreign and international agencies and statutes, which, among other things, may require us to obtain and maintain certain licenses and qualifications. Regulations that may apply to us include those related to conducting auctions, brokering sales of motor vehicles, anti-money laundering and processing payments.

We continue to evaluate U.S. federal, state and foreign regulations regarding the applicability of laws, if any, related to the conduct of our online marketplace events. The State of California requires us to post a bond, as an auction company, and we have done so. We are also registered as an Internet Auction Listing Service in the State of Illinois. We hold an auctioneer’s license in Ireland as well as auctioneer’s licenses in various Australian states and territories. As of the date of this prospectus, we do not believe we are required to obtain an auctioneer license in any other U.S. state or foreign country where we may be subject to regulation; however, we continue to evaluate regulations and are in communication with some U.S. states seeking clarification as to whether such states’ regulations might be applicable to our business.

As of the date of this prospectus, we are registered in California as a California Vehicle Dealer to permit the sale to our California retail customers of “on-road” equipment, and we hold motor vehicle dealer licenses in several Australian states and territories. We currently do not believe we are required to obtain additional licenses or registrations in other U.S. states or foreign countries where we do not have a physical presence; however, we continue to evaluate regulations and are in communication with some U.S. states seeking clarification as to whether such states’ regulations might require us to register as a motor vehicle dealer.

As our business operations may involve individuals and countries outside of the U.S., we are required to comply with a number of U.S. federal laws and regulations, and may be required to comply with certain E.U. directives, such as those related to money laundering and terrorism. Given that bids can be submitted to us online from any location, we have implemented procedures pursuant to which we identify and restrict business from certain countries in order to comply with the trade sanctions programs administered by the U.S. Department of the Treasury’s Office of Foreign Assets Control, or OFAC, and other export controls administered by the U.S. Department of Commerce.

We believe that the nature and conduct of our services exclude us from certain laws and licensing regulations applicable to bill payers, money transmitters, check sellers, issuers of payment instruments, or similar non-bank payment businesses. Given the continuously evolving regulatory environment governing the Internet and sales conducted using the Internet, however, our analysis is subject to significant uncertainty, and there can be no assurances that governmental authorities will agree with our interpretations. Changes in applicable laws and regulations, interpretations of existing laws and regulations, or new laws and regulations could force us to cease doing business in certain jurisdictions, adversely affect our ability to do business with certain customers, increase our expenses, or otherwise adversely affect our results of operations.

Employees

As of March 31, 2010, we had 262 employees, of which 55 were based in our corporate headquarters at Pleasanton, California, 20 were based in Atlanta, Georgia, 17 were based in Ft. Worth, Texas, 16 were based in Dublin, Ireland, four were based in Brisbane, Australia, and 148 were based in various locations throughout the U.S., Europe and Australia. We consider our current relationship with our employees to be good. We have never experienced a work stoppage and none of our employees is represented by a labor union or is covered by a collective bargaining agreement.

Facilities

Our U.S. corporate headquarters are located in Pleasanton, California. We also lease additional office space in the U.S., Europe and Asia-Pacific as set forth below. We do not own any real property. We believe that our current facilities have sufficient capacity to meet the projected needs or our business for the next

12 months or that additional space is readily available. The following table lists the locations, lease expiration dates and the square footage of our principal properties as of March 31, 2010:


Location of Property	Lease Expiration Date	Square Footage

Pleasanton, California (U.S.)	August 2013		8,430
Dublin (Ireland)	July 2013		4,153
Atlanta, Georgia (U.S.)	November 2011		3,879
Ft. Worth, Texas (U.S.)	February 2013		3,833
Brisbane (Australia)	September 2010		2,809

Legal Proceedings

From time to time, we have been and may be involved in various legal proceedings arising from our ordinary course of business. Although the outcome of these and other claims cannot be predicted with certainty, management does not currently believe that the ultimate resolution of these matters will have a material adverse effect on our financial condition, cash flows, or results of operations.

On April 2, 2010, Reza Bundy Saadlou, our former president and chairman, filed suit against us in Alameda County Superior Court in California. The complaint alleges that we did not have the right to effect our March 11, 2010 repurchase of 633,542 shares of Series A-1 convertible preferred stock held by Mr. Saadlou. The complaint seeks declaratory relief that would void both the March 11, 2010 repurchase and our contractual right to repurchase such shares and damages. On April 23, 2010, we concurrently filed a demand for arbitration with the American Arbitration Association and a motion to stay the litigation and to compel arbitration. We believe the allegations are without merit, and intend to defend against them vigorously. For additional discussion on this dispute please see the risk factor on page 18.

MANAGEMENT

Executive Officers and Directors

The following table sets forth information about our executive officers and our board of directors as of March 31, 2010.


Name	Age		Position(s)

Gregory J. Owens		49	Chairman and Chief Executive Officer
Michael J. O’Donnell		50	Chief Financial Officer
James J. Jeter		51	Executive Vice President
Jeffrey L. Barca-Hall		52	Senior Vice President, Engineering and Chief Technology Officer
Michael D. Groves		61	Senior Vice President, Sales
Robert L. Evans (1)		57	Director
Arthur Patterson (2)(3)		66	Director
Mark J. Rubash (1)		53	Director
Ted Schlein (2)(3)		45	Director
Roger S. Siboni (1)		55	Director
Stephanie Tilenius (2)(3)		42	Director


(1)		Member of the audit committee.

(2)		Member of the compensation committee.

(3)		Member of the nominating and corporate governance committee.

Gregory J. Owens has served as our chairman and chief executive officer since July 2007. From January 2006 to June 2007, Mr. Owens served as managing director at Red Zone Capital, a Washington, D.C. private equity firm focused on strong revenue growth opportunities. From August 2004 to January 2006, Mr. Owens was an independent consultant. From April 1999 to August 2004, he was chairman and chief executive officer of Manugistics Group, Inc. Prior to that time, Mr. Owens served as global managing partner supply chain management at Accenture where he was a founding member of their supply chain group. Mr. Owens also serves as a director of S1 Corporation, and has formerly served as a director of Serena Software, Inc. Mr. Owens serves on the President’s Advisory Board as well as the College of Management Board of the Georgia Institute of Technology. Mr. Owens holds a Bachelor of Science degree in industrial management from Georgia Institute of Technology. Our board of directors has concluded that Mr. Owens should serve as a director based on his extensive and in-depth knowledge of our business gained from his position as our chief executive officer.

Michael J. O’Donnell has served as our chief financial officer since July 2008. From 2001 through May 2008, Mr. O’Donnell served as chief financial officer and chief operating officer for Procuri, Inc., an on-demand supply management software company, that was acquired by Ariba, Inc. Mr. O’Donnell has 25 years of financial and business management experience, including positions as managing director of Sun Trust Capital Markets, where he led the merger and acquisition advisory group, managing director of Price Waterhouse Corporate Finance, where he led capital markets advisory projects, and senior manager in the Price Waterhouse audit practice. Mr. O’Donnell holds a Bachelor of Science degree in commerce from the University of Virginia.

James J. Jeter has served as our executive vice president since July 2009, and from September 2007 to July 2009 served as our senior vice president, international and new business. From May 2006 to September 2007, Mr. Jeter served as senior principal at PRTM Management Consultants where he helped lead PRTM’s customer experience consulting for Fortune 1000 companies. From October 2004 to May 2006, Mr. Jeter was an independent consultant. From August 1999 to October 2004, Mr. Jeter was senior vice president of marketing for Manugistics, where he executed Manugistics’ global marketing strategies as well as managed their new business development and sales operations initiatives. Mr. Jeter has more than 25 years of experience in sales, marketing, and international business, including two international assignments for Iomega where he

was managing director for their Asia-Pacific and European operations. Mr. Jeter holds a Bachelor of Arts degree from Wake Forest University and a Master of Business Administration from Mercer University.

Jeffrey L. Barca-Hall has served as our senior vice president, engineering and chief technology officer since February 2000. Prior to that time, Mr. Barca-Hall was the chief technology officer for Inprise/Borland Corporation. In that role, Mr. Barca-Hall had responsibility for a research and development organization of more than 250 people producing award-winning software products with combined annual revenue approaching $200 million. Mr. Barca-Hall has many years of experience in software engineering and management with Inprise/Borland, Netscape (prior to its acquisition by America Online), Symantec, Rapid Enterprise, a start-up which Mr. Barca-Hall co-founded, and DataEase. Mr. Barca-Hall holds a Bachelor of Arts degree in engineering sciences from Yale University.

Michael D. Groves has served as our senior vice president, sales since August 2007, and from August 2002 to August 2007 served as one of our regional managers. Prior to joining IronPlanet, Mr. Groves served as vice president and general manager of Forke Brothers and as a division manager of Ritchie Brothers. Mr. Groves also held the position of regional used equipment manager for Nortrax Southeast. Mr. Groves has more than 30 years of experience in equipment sales, including 11 years of auction industry experience.

Robert L. Evans has served as a director since November 2009. Mr. Evans has been the president and chief executive officer and a director of Churchill Downs, Inc. since August 2006. Prior to that time, Mr. Evans served as the managing director of Symphony Technology Group, a strategic holding group focused on the enterprise software and services market, and as president and chief executive officer of Symphony Services Corp., a software product engineering outsourcing services company, from 2002 to 2004. From 1999 to 2001, he served as president and chief operating officer of i2 Technologies/Aspect Development. Mr. Evans also serves as the president of Tenlane Farm, LLC and as a director of ATC Technology Corp. Mr. Evans holds a Bachelor of Arts degree in economics from MacMurray College and a Master of Arts in quantitative economics from Western Illinois University. Our board of directors has concluded that Mr. Evans should serve as a director based on his experience with technology companies and his financial literacy.

Arthur Patterson has served as a director since November 1999. Mr. Patterson has been a general partner at the venture capital firm of Accel Partners since 1983. Mr. Patterson serves as a director of MetroPCS Communications, Inc. and Actuate Corp, in the past five years has served as a director of iPass, Inc. and more than five years ago served as a director of several other public companies. He also serves as a director of several privately held software and services companies. Mr. Patterson holds a Bachelor of Arts degree and a Master of Business Administration from Harvard University. Mr. Patterson was initially appointed to our board of directors in connection with the investment in us made by Accel Partners, who has the right to designate a director as a result of a voting agreement between us and certain of our stockholders. Although this agreement will terminate upon completion of this offering, we expect that Mr. Patterson will continue to serve as a director following such termination, and our board of directors has concluded that Mr. Patterson should serve as a director and a member of the compensation committee based on his experience with entrepreneurial and technology companies and public company executive compensation, and as one our early stage investors, his extensive knowledge of our company.

Mark J. Rubash has served as a director since March 2010. Mr. Rubash has served as chief financial officer of Shutterfly, Inc. since November 2007. Prior to joining Shutterfly, Mr. Rubash was the chief financial officer of Rearden Commerce from August 2007 to November 2007 and previous to that, Mr. Rubash was a senior vice president at Yahoo! Inc. from February 2007 to July 2007. Prior to joining Yahoo!, Mr. Rubash held various senior positions at eBay, Inc. from February 2001 to July 2005. From January 2000 to November 2000, Mr. Rubash was the chief financial officer at Critical Path, Inc. From October 1987 to January 2000, Mr. Rubash was an audit partner at PricewaterhouseCoopers, LLP, where he served as the global leader for their Internet industry practice and practice leader for their Silicon Valley Software Industry Practice. Mr. Rubash also serves as a director of Intuitive Surgical, Inc. and Line 6, Inc., a private company. Mr. Rubash holds a Bachelor of Science degree in accounting from California State University, Sacramento. Our board of directors has concluded that Mr. Rubash should serve as a director and a member of the audit committee based on his experience in corporate finance and accounting and experience in the online marketplace industry.

Ted Schlein has served as a director since November 1999. Mr. Schlein has served as a partner at Kleiner Perkins Caufield & Byers, a venture capital firm, since 1996. From 1986 to 1996, Mr. Schlein served in various executive positions at Symantec Corporation, a provider of Internet security technology and business management technology solutions, most recently as vice president of enterprise products. Mr. Schlein serves as a director of ArcSight, Inc. and has formerly served as a director of Corio, Inc. He also serves as a director of several private companies. Additionally, Mr. Schlein has previously served as the chairman of the National Venture Capital Association. Mr. Schlein holds a Bachelor of Arts degree in economics from the University of Pennsylvania. Mr. Schlein was initially appointed to our board of directors in connection with the investment in us made by Kleiner Perkins, who has the right to designate a director as a result of a voting agreement between us and certain of our stockholders. Although this agreement will terminate upon completion of this offering, we expect that Mr. Schlein will continue to serve as a director following such termination, and our board of directors has concluded that Mr. Schlein should serve as a director and a member of the compensation committee based on based on his experience with entrepreneurial and technology companies and public company executive compensation, and as one our early stage investors, his extensive knowledge of our company.

Roger S. Siboni has served a director since May 2009. Most recently Mr. Siboni served as president and chief executive officer of E.piphany, Inc. from August 1998 to July 2003. From 2003 to October 2005, Mr. Siboni served as chairman of the board for E.piphany. Prior to August 1998, he was with KPMG Peat Marwick for more than 20 years, serving most recently as deputy chairman and chief operating officer. Mr. Siboni serves as a director of ArcSight, Inc., Cadence Design Systems, Inc., Dolby Laboratories, Inc. and infoGROUP, Inc., and has formerly served as a director of Active Software, Inc., Corio, Inc., FileNet, Macromedia and Pivotal Corporation. He also serves as a director of several private companies. Mr. Siboni is also a past chairman of the advisory board for the Walter A. Hass School of Business at the University of California at Berkley. Mr. Siboni holds a Bachelor of Science degree in business administration from the University of California at Berkeley. Our board of directors has concluded that Mr. Siboni should serve as a director and member of the audit committee based on his extensive experience and executive level management in technology and financial management and his financial literacy.

Stephanie Tilenius has served as a director since February 2010. Ms. Tilenius is currently vice president of commerce at Google Inc., where she is responsible for digital content and commerce in the cloud, product search and payments. Prior to joining Google she held various senior management positions at eBay, including senior vice president and general manager of eBay North America and global product at eBay from January 2008 to February 2010, vice president and general manager of PayPal Merchant Services from July 2003 to December 2007, vice president and general manager of eBay Motors from July 2002 to July 2003, and vice president of international from March 2001 to July 2003. Ms. Tilenius holds a Bachelor of Arts degree in economics and a Master of Arts from Brandeis University and a Master of Business Administration from Harvard University. Our board of directors has concluded that Ms. Tilenius should serve as a director based on her experience in the online marketplace industry and in international operations, and her financial literacy.

Board Composition

Our board of directors is currently comprised of seven directors, of whom all but Mr. Owens, our chairman and chief executive officer, qualify as “independent” according to the rules and regulations of The NASDAQ Stock Market.

Upon the closing of this offering, all of our preferred stock will be automatically converted into our common stock and all of the contractual rights to appoint directors will be automatically terminated. In accordance with the certificate of incorporation and the bylaws that will become effective upon the consummation of this offering, our board of directors will be divided into three classes with staggered three-year terms as follows:


	•	the Class I directors will be Mr. Patterson and Mr. Rubash, and their terms will expire at our first annual meeting of stockholders held after the effectiveness of this offering;


	•	the Class II directors will be Mr. Evans and Ms. Tilenius, and their terms will expire at our second annual meeting of stockholders held after the effectiveness of this offering; and

	•	the Class III directors will be Mr. Owens, Mr. Siboni and Mr. Schlein, and their terms will expire at our third annual meeting of stockholders held after the effectiveness of this offering.

At each annual general meeting of the stockholders, the successors to directors whose terms then expire will be elected to serve from the time of election and qualification until the third annual meeting following election. Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one third of the total number of directors. The authorized number of directors may be changed by resolution of the board of directors. Vacancies on the board of directors can be filled by the board of directors.

Our Corporate Governance Guidelines provide that when the chairman of our board of directors also serves as our chief executive officer, as is the case currently with Mr. Owens, the board shall designate a lead independent director responsible for coordinating the activities of the independent directors. Our board of directors has designated Mr. Schlein as our lead independent director.

Board Committees

Our board of directors has established an audit committee, a compensation committee and a nominating and corporate governance committee.

Audit Committee

Our audit committee consists of Mr. Siboni, Mr. Evans and Mr. Rubash, with Mr. Siboni serving as chairperson. Our audit committee oversees our corporate accounting and financial reporting process and internal controls over financial reporting. Our audit committee evaluates the independent registered public accounting firm’s qualifications, independence and performance; engages and provides for the compensation of the independent registered public accounting firm; approves the retention of the independent registered public accounting firm to perform any proposed permissible non-audit services; reviews our consolidated financial statements; reviews our critical accounting policies and estimates and internal controls over financial reporting; and discusses with management and the independent registered public accounting firm the results of the annual audit and the reviews of our quarterly consolidated financial statements. Our board of directors has determined that each of our audit committee members each meets the requirements for independence and financial literacy under the applicable rules and regulations of the SEC and The NASDAQ Stock Market. Our board of directors has determined that Mr. Siboni and Mr. Rubash are each an audit committee financial expert as defined under the applicable rules of the SEC and has the requisite financial sophistication under the applicable rules and regulations of The NASDAQ Stock Market. The audit committee operates under a written charter that satisfies the applicable rules of the SEC and The NASDAQ Stock Market.

Compensation Committee

Our compensation committee consists of Mr. Schlein, Mr. Patterson and Ms. Tilenius, with Mr. Schlein serving as chairperson. Our compensation committee reviews and recommends policies relating to the compensation and benefits of our officers and employees, including reviewing and approving corporate goals and objectives relevant to compensation of our chief executive officer and other senior officers, evaluating the performance of these officers in light of those goals and objectives and setting compensation of these officers based on such evaluations. The compensation committee also administers the issuance of stock options and other awards under our stock plans. Our board of directors has determined that each member our compensation committee meets the requirements for independence under the applicable rules and regulations of the SEC, The NASDAQ Stock Market and the Internal Revenue Code. The compensation committee operates under a written charter.

Nominating and Corporate Governance Committee

Our nominating and corporate governance committee consists of Mr. Patterson, Mr. Schlein and Ms. Tilenius, with Mr. Patterson serving as chairperson. The nominating and corporate governance committee

will be responsible for making recommendations regarding candidates for directorships and the size and composition of our board. In making such recommendations, the nominating and corporate governance committee will consider the skills and experience of the directors or nominees in the context of the needs of our board of directors as well as the directors’ or nominees’ diversity of skills and experience in areas that are relevant to our business and activities. In addition, the nominating and corporate governance committee is responsible for overseeing our corporate governance guidelines and reporting and making recommendations concerning governance matters. Our board of directors has determined that each member of our nominating and corporate governance committee meets the requirements for independence under the applicable rules and regulations of The NASDAQ Stock Market.

Director Compensation

We do not currently provide any compensation to our non-employee directors for service on our board of directors. From time-to-time, we have granted stock options to our non-employee directors as compensation for their services, but prior to this offering we did not have a formal policy in place with respect to such awards. We do, however reimburse our director for their expenses associated with for attending meetings of our board of directors.

Following the completion of this offering, our non-employee directors will be entitled to the following compensation package:


Annual retainer			$20,000
Annual retainer for board committee chairperson
Audit committee			$12,000
Compensation committee			$ 9,000
Nominating and corporate governance committee			$ 5,000
Annual retainer for board committee members
Audit committee			$ 6,000
Compensation committee			$ 4,500
Nominating and corporate governance committee			$ 2,500
Initial equity award for new directors (1)(3)			options to purchase 25,000 shares
Annual award for continuing board members (2)(3)			options to purchase 6,000 shares


(1)		The initial equity award will have an exercise price equal to the fair market value of our common stock on the date of grant and will be subject to vesting over a period of three years in equal annual installments commencing on the date of grant, subject to the non-employee director’s continued service to us through the vesting date.

(2)		The annual equity award for continuing board members will have an exercise price equal to the fair market value of our common stock on the date of grant and will vest as to 100% of the shares subject to the award on the earlier of (a) the one year anniversary of the date of grant of the award and (b) the date immediately preceding the date of the annual meeting of our stockholders for the year following the year of grant for the award, subject to the non-employee director’s continued service to us through the vesting date. A non-employee director will receive an annual option award only if he or she has served on the board of directors for at least the preceding six months.

(3)		All vesting for such awards will terminate, and all such awards will become fully vested, upon a “Change of Control” as defined in the 2010 Equity Incentive Plan.

The following table sets forth information regarding compensation earned by our directors who are not named executive officers during 2009:


	Fees Earned
Name	or Paid in Cash		Option Awards (1)		Total

Robert L. Evans	$	—	$	—	$	—
Arthur Patterson		—		—		—
Ted Schlein		—		—		—
Roger S. Siboni		—		49,812		49,812


(1)		This amount reflects the grant date fair value of each option award computed in accordance with ASC Topic 718. Information regarding the valuation assumptions used in the calculation of this amount are described in Note 7 to the consolidated financial statements.

Compensation Committee Interlocks and Insider Participation

None of the members of our compensation committee is or has at any time during the past year been an officer or employee of ours. None of our executive officers currently serves or in the past year has served as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving on our board or compensation committee.

Code of Business Conduct and Ethics

We have adopted a code of business conduct and ethics that applies to all of our employees, officers and directors, including those officers responsible for financial reporting. The code of business conduct and ethics will be available on our website at www.ironplanet.com. We expect that any amendments to the code, or any waivers of its requirements, will be disclosed on our website.

COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis provides information about the material components of our executive compensation program for:


Name		Position(s)

Gregory J. Owens		Chairman and Chief Executive Officer
Michael J. O’Donnell		Chief Financial Officer
James J. Jeter		Executive Vice President
Jeffrey L. Barca-Hall		Senior Vice President, Engineering and Chief Technology Officer
Michael D. Groves		Senior Vice President, Sales

We refer to these executive officers collectively in this Compensation Discussion and Analysis and the related compensation tables as the “named executive officers.”

Specifically, this Compensation Discussion and Analysis provides an overview of our executive compensation philosophy, the overall objectives of our executive compensation program, and each compensation component that we provide. In addition, we explain how and why our board of directors arrived at specific compensation policies and decisions involving our executive officers during 2009.

This Compensation Discussion and Analysis contains forward-looking statements that are based on our current plans, considerations, expectations, and determinations regarding future compensation programs. The actual compensation programs that we adopt in the future may differ materially from currently planned programs as summarized in this discussion.

Executive Compensation Philosophy and Objectives

We operate in a new and innovative business environment, which seeks to successfully merge and scale the use of technology to offer a global online marketplace for used heavy equipment and other capital assets. This environment is marked by continuing technological advances and rapidly changing market requirements. To succeed in this environment, we must develop and refine new technologies, devise appropriate business models, and demonstrate an ability to quickly identify and capitalize on new marketplace opportunities. To achieve these objectives, we need a highly talented and seasoned team of business and technical professionals.

We compete with many other companies in seeking to attract and retain a skilled management team. To meet this challenge, we have adopted a compensation philosophy designed to offer our executive officers compensation and benefits that are competitive and that meet our goals of attracting, retaining, and motivating highly skilled individuals to help us achieve our financial and strategic objectives.

Our executive compensation program is designed to achieve a number of objectives:


	•	provide competitive total compensation opportunities that enable us to attract, retain and motivate executive officers with the experience and skills to manage the growth of our company and lead us to the next stage of development;

	•	reward sustained stockholder value creation by providing a mix of compensation that emphasizes creating and sustaining an enterprise market valuation consistent with leading Internet platform companies; and

	•	reward achievement of our annual and long-term financial objectives by awarding appropriate levels of cash and equity compensation for consistent achievement (and over-achievement) of our annual operating plan and for achievement of the long-term financial objectives necessary to reaching and maintaining a market valuation consistent with leading Internet platform companies.

Compensation Program Design

The compensation of our executive officers, including our named executive officers, consists of base salary, an annual cash bonus opportunity, equity compensation, and certain post-employment payments and benefits.

The primary component of our executive compensation program to date has been stock options to purchase shares of our common stock. As a privately held company, we have emphasized the use of equity to motivate our executive officers to focus on the growth of our overall enterprise value and, correspondingly, to create sustainable long-term value for our stockholders. We believe that stock options offer our key employees, including our executive officers, a valuable long-term incentive that aligns their interests with the interests of our stockholders.

We offer cash compensation to our executive officers, in the form of base salaries and annual bonus opportunities and, in the case of our senior vice president, sales, commissions, at levels that we believe are competitive compensation packages. Due to our emphasis on equity compensation, however, historically we have offered target total cash compensation opportunities at the lower end of an identified market range as determined in the collective business judgment of our board of directors. Generally, we have structured our annual cash bonus opportunities to focus on the achievement of specific near-term financial and strategic objectives that will further our longer-term growth objectives.

To date, we have not employed any policies or guidelines for allocating compensation between current and long-term compensation, between cash and non-cash compensation, or among different forms of non-cash compensation.

Compensation-Setting Process

Role of the Board and Compensation Committee

Prior to the offering, our board of directors primarily determined the compensation for our named executive officers. Following the offering, the compensation committee of our board of directors will be responsible for overseeing our executive compensation philosophy and administering our executive compensation program, as well as determining and approving the compensation for our executive officers, including the named executive officers. The compensation committee will regularly consult with and report to our full board of directors on its deliberations and actions.

The compensation committee intends to review on a periodic basis our executive compensation program, including any incentive compensation plans, to determine whether they are appropriate, properly coordinated, and achieve their intended purposes, and has the authority to establish and implement any modifications or new plans or programs.

Role of Management

In carrying out its responsibilities, our board of directors has worked with members of our management team, including our chief executive officer. Historically, our management team has assisted the board of directors by providing information on company and individual performance, market data, and management’s perspective and recommendations on compensation matters.

Typically, our chief executive officer has made recommendations to the board regarding the compensation of our employees, including our executive officers (except with respect to his own compensation), and attends that portion of the board meetings in which compensation matters are discussed (except he recuses himself from that portion of board meetings with respect to discussions involving his own compensation).

While our board of directors has solicited and reviewed our chief executive officer’s recommendations and proposals with respect to compensation-related matters, it has only used these recommendations and proposals as one factor in making compensation decisions for our employees, including our executive officers.

Commencing in the fourth quarter of 2009, the compensation committee took a more active role in the decisions regarding cash and equity compensation for our named executive officers, including hiring a compensation consultant (as discussed below) and determining the final bonus amounts for 2009.

Role of Compensation Consultant

The compensation committee is authorized to retain the services of compensation consultants and other advisors from time to time, as it sees fit, in connection with the establishment of cash and equity compensation plans and arrangements and related policies.

In September 2009, the compensation committee engaged Compensia, Inc., a national compensation consulting firm providing executive compensation advisory services, to assist it in developing a set of executive compensation guiding principles, to evaluate the competitiveness of our executive officers’ compensation, and to assist the compensation committee in developing a public company-oriented executive compensation program and a director compensation program. Compensia serves at the discretion of the compensation committee. Compensia did not provide any other services to our company in 2009.

Use of Competitive Data

To assess the competitiveness of our executive compensation program and compensation levels, the compensation committee has instructed Compensia to examine the executive compensation practices during 2009 of a peer group of 14 Internet platform companies. Compensation data for the peer group companies was gathered from public filings and from Compensia’s proprietary compensation databases. This peer group data is to be used to assess current compensation levels and to assist the compensation committee in setting compensation levels for 2010 and thereafter.

The companies comprising the peer group have been selected by our compensation committee, based on Compensia’s determination that the peer group members are similar to the Company in size (as determined by revenue and market capitalization) and product or service similarity.

This peer group is comprised of the following companies:


Bankrate, Inc.		Move, Inc.
Constant Contact, Inc.		OpenTable, Inc.
CoStar Group, Inc.		Shutterfly, Inc.
Internet Brands, Inc.		Stamps.com Inc.
j2 Global Communications, Inc.		TechTarget, Inc.
Liquidity Services, Inc.		The Knot, Inc.
LoopNet, Inc.		Travelzoo Inc.

The compensation committee intends to review our peer group at least annually and make adjustments to its composition as necessary.

Executive Compensation Program Components

The following describes each component of our executive compensation program, the rationale for each component, and how awards are determined.

Base Salary

Base salary represents the most basic, fixed portion of our executive officers’ compensation and is set at a minimum level sufficient to attract, retain, and motivate highly talented executive officers when included as one component of our overall total compensation opportunity.

In past years, our board of directors has reviewed the base salaries of our executive officers, including the named executive officers, at the beginning of the year, taking into consideration our chief executive officer’s base salary recommendations, the scope of the executive officer’s performance, individual contributions, responsibilities, experience, prior salary level, and, in the case of a promotion, position. In the future, we expect the compensation committee to conduct an annual review of each executive officer’s base salary, with

input from our chief executive officer, and to make adjustments as it determines to be reasonable and necessary to reflect the scope of an executive officer’s performance, individual contributions, responsibilities, experience, prior salary level, position (in the case of a promotion), and market conditions, including a review of the compensation policies of our peer group.

The actual base salaries paid to the named executive officers during 2009 are set forth in the Summary Compensation Table below. Mr. Jeter received a base salary increase from $220,000 to $250,000 in 2009 for his performance and to align his base salary with current market rates, based on the judgment and experience of our board members.

Cash Bonuses

In November 2008, our board of directors approved the design and operation, and performance objectives of an annual cash bonus plan for 2009, thereby establishing an overall cash bonus award pool for our executive officers, including the named executive officers, and other key employees.

To ensure alignment with our financial performance and the creation of stockholder value, the size of the overall cash bonus pool was to be based on our actual level of achievement compared against corporate financial objectives for revenue and operating income as reflected in our 2009 operating plan. For these purposes, “adjusted operating income” was our earnings for 2009 before reduction for interest, taxes, depreciation, amortization, non-operating expenses, stock-based compensation expense, and the cash bonus award pool.

Further, awards were to be made only if we achieved at least threshold performance levels for the year for each of these two financial objectives. Our board of directors believed that these conditions and thresholds would encourage our executive officers to manage our business in a cost-effective manner and make decisions that would contribute to revenue growth and overall profitability.

In February 2009, in response to the deepening global economic recession and overall market uncertainty, and the impact on our business and uncertainty of the timing of any recovery, management and our board of directors began to discuss a revised operating plan for 2009. A final revised operating plan for 2009 was approved by our board of directors in May 2009. The revised plan adjusted revenue and adjusted operating income downward to reflect the overall changes in markets and economic outlooks. Additionally, in May 2009, our board of directors approved a revised cash bonus plan for 2009, including changes to the target and threshold levels for revenue and adjusted operating income, and a reduction in the overall size of the target cash bonus award pool. No individual target bonus amounts were established for the named executive officers.

Annual revenue and adjusted operating income were the two corporate financial objectives used to determine the amount of the bonus pool, with annual revenue weighted at 70% and adjusted operating income weighted at 30%. Annual revenue was weighted more heavily than adjusted operating income because, at this point in our development, our board of directors believed that revenue growth was the primary driver of near-term value. The threshold for revenue was set at approximately 89% of target, or $39.5 million, a level our board of directors believed was appropriate based on the position of us and our opportunities in the market. The threshold for adjusted operating income was set at approximately 40% of target, or $2.0 million, an amount that would correspond with the threshold revenue amount, given the high level of operating leverage within our business. Our adjusted annual revenue and adjusted operating income objectives were attainable but remained very challenging in light of the continuing uncertain general economic conditions.

At the target level for annual revenue of $44.2 million and adjusted operating income of $5.0 million, the bonus pool amount was $0.6 million, and the bonus pool was adjusted on a sliding scale for levels of revenue and adjusted operating income starting at the threshold level (bonus pool of $0.2 million), with accelerators for determining the bonus pool amount in the event that revenue and adjusted operating income exceeded the target amounts.

On December 18, 2009, the compensation committee determined the amount of the overall cash bonus award for our executive officers, including our named executive officers, and other key employees for 2009. In making these this determination, the compensation committee evaluated our financial performance and the

level of achievement of operating objectives for the year, and the overall economic environment in which we operated in 2009.

With respect to the corporate financial objectives, the compensation committee determined that we had achieved 123% of our adjusted revenue target of $54.5 million and 145% of our adjusted operating income target of $7.2 million for the year. While these results would have supported a bonus pool of $1.1 million, which is 175% of the target bonus pool, given the uncertain economy, the compensation committee determined to reduce the size of the overall cash bonus pool to $0.9 million, which bonus pool was used for our executive officers, department managers and other key employees who performed exceptionally in 2009.

In allocating this cash bonus pool among plan participants, our chief executive officer formulated recommendations for the compensation committee (except with respect to his own compensation) based on his subjective assessment of each participant’s individual contributions during the year and internal equity between individuals. Even with these recommendations from our chief executive officer, our compensation committee had the sole authority and discretion to determine the bonus amounts for all of our officers and employees, including the bonus amount for our chief executive officer, based on an evaluation of each eligible participant’s contributions to the achievement of our corporate financial goals. Specific quantitative or qualitative performance criteria for individual participants were not established at the beginning of the year, nor were any specific individual performance criteria communicated to any of the participants.

After considering our chief executive officer’s recommendations, the compensation committee approved the amount of the annual cash bonus for each named executive officer as follows:


Name	Actual Bonus Payment

Gregory J. Owens	$	235,000
Michael J. O’Donnell		110,000
James J. Jeter		110,000
Jeffrey L. Barca-Hall		115,000
Michael D. Groves		78,817

The actual bonus payment to Mr. Groves, our senior vice president, sales, in 2009 was comprised of two components. Mr. Groves was paid a sales commission based on achieving specific sales volumes in certain designated sales regions and his commission rate varies based on achieving certain revenue milestones. At target revenue achievement, Mr. Groves’ commission would equal $75,000. For 2009, Mr. Groves’ earnings under his sales commission arrangement were $58,817, of which $14,359 was paid in January 2010. In addition, because Mr. Groves’ sales commission arrangement was not adjusted in 2009 to reflect the revised operating plan implemented in May 2009, the compensation committee awarded Mr. Groves an additional bonus of $20,000 in recognition of his role in our strong sales performance during a difficult and uncertain market environment.

In February 2010, the compensation committee recommended to our board of directors, and in March 2010 our board of directors approved, the parameters for a new 2010 bonus incentive plan to reward our executive officers, including our named executive officers, except with respect to our chief executive officer which was approved by the compensation committee, for the achievement of pre-established financial performance objectives. These parameters provide the minimum, target and maximum levels for revenue and adjusted operating income, which are the financial performance metrics that must be achieved to earn bonuses. The board also determined the 2010 target bonus amount for each named executive officer as a percentage of each officer’s base salary.

Equity Compensation

We use equity awards to motivate and reward our executive officers, including the named executive officers, for long-term corporate performance based on the value of our common stock and to align the interests of our executive officers with those of our stockholders. We believe that stock options, when granted with exercise prices equal to the fair market value of our common stock on the date of grant, provide an

appropriate long-term incentive for our executive officers, because they reward them only to the extent that our stock price grows and stockholders realize value following their grant date.

We have not applied a rigid formula to determine the size of the stock option awards that have been granted to our executive officers. Instead, these awards were determined in the judgment of our board of directors, taking into consideration, among other things, the performance of our company and the executive officer during the past year, the prospective role and responsibility of the executive officer, competitive factors, the amount of equity-based compensation held by the executive officer and portion that is vested or unvested, and the cash compensation received by the executive officer. Based upon these factors, our board of directors determines the size of each stock option award at levels it considers appropriate to create a meaningful opportunity for reward predicated on the creation of long-term stockholder value.

To date, we have not granted any equity awards other than stock options to our executive officers. Typically, our executive officers have received an initial stock option grant at the time of hire, with only periodic additional awards thereafter. In connection with this offering, we expect the compensation committee to oversee the development of a long-term equity incentive plan. While this plan is likely to provide for a variety of different types of equity awards, we expect that, reflecting our focus on long-term growth, the compensation committee will continue to use stock options as our primary form of long-term incentive compensation. We also expect that the compensation committee may elect to grant equity awards to our executive officers on a more frequent (for example, annual) basis than in the past, as it determines to be in the best interests of our company.

There were no equity awards granted to the named executive officers during 2009.

In February 2010, our board of directors granted bonus options to our key employees, including our named executive officers, for their strong performance in exceeding our revenue and adjusted operating income targets for 2009. Each of these options has a vesting commencement date of December 31, 2009 and vests over our standard four-year vesting schedule, with 25% of the option shares vesting upon the completion of twelve months of service following the vesting commencement date and 1/48th of the option shares vesting upon the completion of each of the next 36 months of service.


	Number of Shares
Name	Underlying Options

Gregory J. Owens		46,500
Michael J. O’Donnell		46,500
James J. Jeter		46,500
Jeffrey L. Barca-Hall		37,500
Michael D. Groves		12,500

At the same meeting, our board of directors also authorized the grant of “challenge” options to purchase an aggregate of 100,000 shares of common stock to certain key employees, including our named executive officers, to provide additional incentives to our key employees to achieve certain target and maximum levels of revenue and adjusted operating income for 2010. These challenge options in the aggregate provide our named executive officers with grants at approximately 60% of the annual grants made to officers of our peer companies.

Retirement and Other Benefits

We have established a tax-qualified Section 401(k) retirement savings plan for our executive officers, including the named executive officers, and other employees who satisfy certain eligibility requirements, including requirements relating to age and length of service. Under this plan, participants may elect to make pre-tax contributions, not to exceed the applicable statutory income tax limitation (which was $16,500 in 2009). In addition, we may make discretionary contributions to the plan in any year, up to certain limits. Historically, we have provided a matching contribution equal to 50% of a participant’s salary deferrals, up to a maximum of 2% of a participant’s compensation. Our contributions to the accounts of the named executive officers are shown in the All Other Compensation column of the Summary Compensation Table below. We intend for the plan to qualify under Section 401(a) of the Internal Revenue Code so that contributions by

participants to the plan, and income earned on plan contributions, are not taxable to participants until withdrawn from the plan.

Additional benefits received by our executive officers, including the named executive officers, include medical, dental, and vision benefits, medical and dependent care flexible spending accounts, short-term and long-term disability insurance, accidental death and dismemberment insurance, and basic life insurance coverage. These benefits are provided on the same basis as to all of our full-time employees.

We design our employee benefits programs to be affordable and competitive in relation to the market as well as compliant with applicable laws and practices. We adjust our employee benefits programs as needed based upon regular monitoring of applicable laws and practices and the competitive market.

Except as described in this prospectus, historically we have not provided perquisites or other personal benefits to our executive officers. Currently, we do not view perquisites or other personal benefits as a significant component of our executive compensation program. In the future, however, we may provide such items in limited circumstances, such as where we believe it is appropriate to assist an individual in the performance of his or her duties, to make our executive officers more efficient and effective, and for recruitment, motivation, or retention purposes. All future practices with respect to perquisites or other personal benefits will be approved and subject to periodic review by the compensation committee.

Post-Employment Compensation

The initial terms and conditions of employment of each of the named executive officers were set forth in written offer letters. With the exception of his own offer letter, each of these agreements was negotiated on our behalf by our then-chief executive officer, with the oversight and approval of our board of directors.

In filling these executive positions, our board of directors was aware that it would be necessary to recruit candidates with the requisite experience and skills to manage a growing business in a unique market niche. Accordingly, it recognized that it would need to develop competitive compensation packages to attract qualified candidates in a dynamic labor market. At the same time, our board of directors was sensitive to the need to integrate new executives into the executive compensation structure that it was seeking to develop, balancing both competitive and internal equity considerations.

Each of these employment offer letters provided for an initial base salary, an annual cash bonus opportunity (except that Mr. Owens did not have such bonus opportunity in his offer letter and Mr. Groves had a commission opportunity), and an equity award in the form of a stock option and, in the case of our chief executive officer, a restricted stock award. These employment offer letters also provided the named executive officers with certain cash severance in the event of their termination of employment without cause and certain vesting acceleration upon a termination without cause or a constructive termination following a change in control of our company for Messrs. Owens, O’Donnell, Jeter and Barca-Hall.

In February 2010, we entered into written employment agreements with each of our named executive officers, which set forth the terms of their employment, including their compensation. These employment agreements superseded and replaced the existing employment offer letters with each of our named executive officers. At that time, our board of directors, at the recommendation of the compensation committee, also adopted a standard policy for the payment of severance and change in control benefits to our named executive officers. Under this new policy, the terms and conditions of which are reflected in their written employment agreements, the rights of our named executive officers with respect to specific events, including an involuntary termination of employment or an involuntary termination in connection with or following a change in control of our company, are established on a uniform basis.

Our board of directors adopted this new policy because it serves several objectives. First, this approach is more transparent, both internally and externally. Internal transparency eliminates the need to negotiate separation benefits on a case-by-case basis. It also assures an executive officer that his or her severance benefits are comparable to those of other executives with similar levels of responsibility and tenure. Finally, this approach is easier for us to administer, as it requires less time and expense.

Each of the named executive officers agreed to relinquish the severance payments and benefits otherwise provided in his employment offer letter or otherwise promised by our board of directors in exchange for entering into an employment agreement as described above.

We believe that entering into these employment agreements helps our named executive officers maintain continued focus and dedication to their assigned duties to maximize stockholder value, including in the event that there is a potential transaction that could involve a change in control of our company. The terms of these agreements were determined after review by our board of directors and the compensation committee of our retention goals for each executive and as well as our analysis of Compensia’s survey of the severance and change in control benefits of our peer companies.

For a summary of the material terms and conditions of our new severance and change in control policy, see “Executive Compensation—Potential Payments Upon Termination or Change in Control.”

Other Compensation Policies

Stock Ownership Guidelines

As of the date of this prospectus, we have not implemented a policy regarding minimum stock ownership requirements for our executive officers, including the named executive officers.

Compensation Recovery Policy

As of the date of this prospectus, we have not implemented a policy regarding retroactive adjustments to any cash or equity-based incentive compensation paid to our executive officers and other employees where the payments were predicated upon the achievement of financial results that were subsequently the subject of a financial restatement.

Tax and Accounting Considerations

Deductibility of Executive Compensation

Generally, Section 162(m) of the Internal Revenue Code disallows a tax deduction to any publicly-held corporation for any remuneration in excess of $1 million paid in any taxable year to its chief executive officer and each of its three next most highly-compensated executive officers (other than its chief financial officer). Remuneration in excess of $1 million may be deducted if, among other things, it qualifies as “performance-based compensation” within the meaning of the Internal Revenue Code. In this regard, the compensation income realized upon the exercise of stock options granted under a stockholder-approved stock option plan generally will be deductible so long as the options are granted by a committee whose members are non-employee directors and certain other conditions are satisfied.

As we are not currently publicly-traded, the compensation committee has not previously taken the deductibility limit imposed by Section 162(m) into consideration in setting compensation for our executive officers. We expect that when the compensation committee deems advisable, the compensation committee, will adopt a policy that, where reasonably practicable, we will seek to qualify the variable compensation paid to our executive officers for the “performance-based compensation” exemption from this deductibility limit. As such, in approving the amount and form of compensation for our executive officers in the future, the compensation committee will consider all elements of the cost to us of providing such compensation, including the potential impact of Section 162(m). The compensation committee may, in its judgment, authorize compensation payments that do not comply with the exemptions in Section 162(m) when it believes that such payments are appropriate to attract and retain executive talent.

Taxation of “Parachute” Payments

Sections 280G and 4999 of the Internal Revenue Code provide that executive officers, persons who hold significant equity interests and certain other highly-compensated service providers may be subject to an excise tax if they receive payments or benefits in connection with a change in control of our company that exceeds certain prescribed limits, and that our company (or a successor) may forfeit a deduction on the amounts subject to this additional tax. We did not provide any executive officer, including any named executive officer,

with a “gross-up” or other reimbursement payment for any tax liability that he or she might owe as a result of the application of Sections 280G or 4999 during 2009 and we have not agreed and are not otherwise obligated to provide any executive officer, including any named executive officer, with such a “gross-up” or other reimbursement.

Accounting for Stock-Based Compensation

We follow the Financial Accounting Standards Board’s Accounting Standards Codification, or ASC, Topic 718, Compensation—Stock Compensation, for our stock-based compensation awards. ASC 718 requires companies to calculate the grant date “fair value” of their stock-based awards using a variety of assumptions. This calculation is performed for accounting purposes and reported in the compensation tables below, even though recipients may never realize any value from their awards. ASC 718 also requires companies to recognize the compensation cost of their stock-based awards in their income statements over the period that an employee is required to render service in exchange for the award.

EXECUTIVE COMPENSATION

Summary Compensation Table

The following table presents, for services rendered to us for 2009, summary information regarding the total compensation awarded to, earned by, or paid to each of the named executive officers.

2009 Summary Compensation Table


									Non-Equity
							Option		Incentive Plan		All Other
	Salary		Bonus		Stock		Awards		Compensation		Compensation
Name and Principal Position	($)		($)		Awards ($)		($)		($) (1)		($) (2)		Total ($)

Gregory J. Owens	$	350,000	$	—		—		—	$	235,000	$	2,990	$	587,990
Chairman and Chief Executive Officer
Michael J. O’Donnell		250,000		—		—		—		110,000		2,990		362,990
Chief Financial Officer
James J. Jeter		241,250		—		—		—		110,000		2,990		354,240
Executive Vice President
Jeffrey L. Barca-Hall		244,000		—		—		—		115,000		2,990		361,990
Senior Vice President, Engineering and Chief Technology Officer
Michael D. Groves		225,000		20,000		—		—		58,817		2,990		306,807
Senior Vice President, Sales


(1)		The amounts reported in the Non-Equity Incentive Plan Compensation column for Messrs. Owens, O’Donnell, Jeter and Barca-Hall represent payments made under our 2009 cash bonus plan. The amount reported in the Non-Equity Incentive Plan Compensation column for Mr. Groves represents sales commissions.

(2)		For each of the named executive officers, the amounts reported in the All Other Compensation column represent a matching contribution under our tax-qualified Section 401(k) retirement savings plan of $2,450 and a premium payment of $540 on his life insurance coverage.

Grants of Plan-Based Awards

The named executive officers did not receive any equity awards during 2009.

2009 Grants of Plan-Based Awards Table


	Grant		Estimated Future Payments Under Non-Equity Incentive Plan Awards (1)
Name	Date		Target ($)		Maximum ($)

Gregory J. Owens		—	$	—	$	—
Michael J. O’Donnell		—		—		—
James J. Jeter		—		—		—
Jeffrey L. Barca-Hall		—		—		—
Michael D. Groves		—		75,000		—


(1)		Messrs. Owens, O’Donnell, Jeter and Barca-Hall received bonuses under our 2009 cash bonus plan, which was a performance-based non-equity incentive plan, however, no “individual” threshold, target or maximum awards were established for or communicated to these named executive officers. For Mr. Groves, the target award amount was established under a sales commission arrangement with us.

Outstanding Equity Awards at Year-End

The following table presents, for each of the named executive officers, information regarding outstanding stock options and other equity awards held as of December 31, 2009. The market value of the shares of our

common stock reflected in the table is based upon the fair market value of our common stock on December 31, 2009, as determined by our compensation committee, which was $4.50 per share.

2009 Outstanding Equity Awards at Fiscal Year-End Table


	Option Awards									Stock Awards
																Equity
																Incentive
															Equity	Plan
															Incentive	Awards:
					Equity										Plan	Market or
					Incentive										Awards:	Payout
					Plan										Number of	Value of
					Awards:							Market			Unearned	Unearned
	Number of			Number of	Number of					Number of		Value of			Shares,	Shares,
	Securities			Securities	Securities					Shares or		Shares or			Units or	Units or
	Underlying			Underlying	Underlying					Units of		Units of			Other	Other
	Unexercised			Unexercised	Unexercised	Option				Stock That		Stock That			Rights	Rights
	Options (1)			Options (1)	Unearned	Exercise		Option		Have Not		Have Not			That Have	That Have
	(#)			(#)	Options	Price		Expiration		Vested		Vested			Not Vested	Not Vested
Name	Exercisable			Unexercisable	(#)	($)		Date		(#)		($)			(#)	($)

Gregory J. Owens		238,094	(2)	170,068 (2)	—	$	0.98		11/07/2017		349,308 (7)	$	1,571,886 (8	)	—	$ —
Michael J. O’Donnell		60,975	(3)	129,167 (3)	—		1.64		08/06/2018		—		—		—	—
		9,856	(3)	—	—		1.64		08/06/2018		—		—		—	—
James J. Jeter		56,250	(4)	43,750 (4)	—		0.98		10/31/2017		—		—		—	—
		16,666	(4)	33,334 (4)	—		1.64		08/06/2018		—		—		—	—
Jeffrey L. Barca-Hall		20,000	(4)	—	—		0.60		07/23/2012		—		—		—	—
		100,000	(5)	—	—		0.60		09/17/2015		—		—		—	—
Michael D. Groves		2,969	(5)	—	—		0.60		09/17/2013		—		—		—	—
		3,678	(6)	—	—		0.80		02/02/2015		—		—		—	—
		47,000	(4)	1,188 (4)	—		0.80		05/03/2016		—		—		—	—
		22,810	(4)	7,604 (4)	—		0.80		03/08/2017		—		—		—	—
		11,458	(4)	13,542 (4)	—		1.40		04/30/2018		—		—		—	—
		4,739	(4)	12,761 (4)	—		1.64		11/03/2018		—		—		—	—


(1)		Stock option grants to purchase shares of our common stock are made under the IronPlanet, Inc. 1999 Stock Plan. The exercise price of these options is equal to the fair market value of our common stock on the date of grant. Under the 1999 Stock Plan, the exercise price may be paid in cash, by check, by delivery of a full-recourse promissory note satisfying certain specified conditions, by cancellation of indebtedness, in shares of our common stock having a fair market value on the date of exercise equal to the aggregate exercise price of the shares being purchased, by delivery of a properly-executed exercise notice together with such other documentation as may be required to effect an exercise and delivery to us of the sale or loan proceeds required to pay the exercise price and any applicable taxes, by delivery of an irrevocable subscription agreement for the shares that obligates the optionee to take and pay for the shares not more than 12 months after the date of delivery of the subscription agreement, or by any combination of the foregoing payment methods. In addition, under certain circumstances an option may be exercised through a “net exercise” procedure, whereby the optionee may elect to receive shares of our common stock having an aggregate fair market value on the date of exercise equal to the net value of the portion of the option so exercised as of the exercise date. All stock options granted under the 1999 Stock Plan are subject to service-based vesting requirements.

(2)		These stock options vest over a four-year period at the rate of 1/48th of the shares of common stock underlying the option upon the completion of each month of service following the vesting commencement date of August 1, 2007, subject to continued service through each such vesting date.


(3)		These stock options vest as to 20,833 shares of common stock on December 7, 2008, as to an additional 29,167 shares of common stock on July 7, 2009 and then thereafter at the rate of 1/48th of the shares of common stock underlying the options each month, subject to continued service through each such vesting date.


(4)		These stock options vest over a four-year period at the rate of 1/4th of the shares of common stock underlying the option on the first anniversary of the vesting commencement date and then 1/48th of the shares of common stock underlying the option each month thereafter, subject to continued service through each such vesting date. The respective vesting commencement dates, in descending order, are as follows: September 16, 2007 and August 7, 2008 for James J. Jeter; July 24, 2002 for Jeffrey L. Barca-Hall; January 1, 2006, December 31, 2006, February 6, 2008, and November 13, 2008 for Michael D. Groves.

(5)		These stock options vested as to all of the shares of common stock underlying the option on the third anniversary of the vesting commencement date, subject to continued service through each such vesting date. The respective vesting commencement dates are as follows: February 4, 2003 for Jeffrey L. Barca-Hall; August 2, 2005 for Michael D. Groves.


(6)		This stock option vested as to all of the shares of common stock underlying the option on the first anniversary of the vesting commencement date of January 1, 2005.


(7)		This stock award vests as to 1/48th of the original number of shares of common stock subject to the award (838,338) upon the completion of each month of service following the vesting commencement date of August 1, 2007, subject to continued service through each such vesting date.


(8)		The market value of the shares was calculated by multiplying the number of shares that have not vested by the price per share as of December 31, 2009 of $4.50.

Option Exercises and Stock Vested

The following table presents, for each of the named executive officers, the number of shares of our common stock acquired upon the vesting of restricted stock during the year ended December 31, 2009, and the aggregate value realized upon the vesting of such awards. There were no stock options exercised by any of the named executive officers during 2009. For purposes of the table, the value realized is based upon the fair market value of our common stock on the various vesting dates, as determined by our board of directors or compensation committee.

2009 Option Exercises and Stock Vested Table


	Option Awards				Stock Awards
	Number of Shares				Number of Shares		Value Realized on
	Acquired on		Value Realized on		Acquired on		Vesting
Name	Exercise (#)		Exercise ($)		Vesting (#)		($) (1)

Gregory J. Owens		—	$	—		209,584	$	413,929
Michael J. O’Donnell		—		—		—		—
James J. Jeter		—		—		—		—
Jeffrey L. Barca-Hall		—		—		—		—
Michael D. Groves		—		—		—		—


(1)		The amount reported reflects 104,792 shares that vested when the fair market value of our common stock was $1.54 per share, 52,396 shares that vested when the fair market value of our common stock was $2.26 per share, and 52,396 shares that vested when the fair market value of our common stock was $2.56 per share.

Pension Benefits

We did not sponsor any defined benefit pension or other actuarial plan for the named executive officers during 2009.

Nonqualified Deferred Compensation

We did not maintain any nonqualified defined contribution or other deferred compensation plans or arrangements for the named executive officers.

Employment Agreements

In February 2010, we entered into written employment agreements with each of the named executive officers. These agreements provide for at-will employment and establish the executive’s base salary at the same 2009 base salary rate, eligibility to participate in an incentive bonus plan and standard employee benefit plan participation as of the time of their execution.

These agreements also contain provisions that provide for certain payments and benefits in the event of certain terminations of employment, including a termination of employment following a change in control of the company. For a summary of the material terms and conditions of these provisions, as well as an estimate of the potential payments and benefits payable to the named executive officers under these provisions, see “—Potential Payments Upon Termination or Change in Control” below.

Potential Payments Upon Termination or Change in Control

Each of the named executive officers is eligible to receive certain severance payments and benefits in connection with his termination of employment under various circumstances, including following a change in

control of our company under each officer’s new employment agreements with us. For a summary of the material terms and conditions of the severance and change in control benefits for each named executive officer, see below.

The estimated potential severance payments and benefits payable to each named executive officer in the event of termination of employment as of December 31, 2009 pursuant to his individual employment agreement are also described below.

The actual amounts that would be paid or distributed to the named executive officers as a result of one of the termination events occurring in the future may be different than those presented below as many factors will affect the amount of any payments and benefits upon a termination of employment. For example, some of the factors that could affect the amounts payable include the named executive officer’s base salary and the market price of our common stock. In addition, although we have entered into individual written arrangements to provide severance payments and benefits to the named executive officers in connection with a termination of employment under particular circumstances, we may mutually agree with the named executive officers on severance terms that vary from those provided in the pre-existing arrangements. Finally, in addition to the amounts presented below, each named executive officer would also be able to exercise any vested stock options that he held. For more information about the named executive officers outstanding equity awards as of December 31, 2009, see the table captioned “2009 Outstanding Equity Awards at Year-End Table.”

In addition to the severance payments and benefits described in the named executive officers’ individual employment agreements, these executives are eligible to receive any benefits accrued under our broad-based benefit plans, such as disability benefits and accrued vacation pay, in accordance with those plans and policies.

Involuntary Termination of Employment Not in Connection with Change in Control

In the event of an involuntary termination of employment (defined as either a termination of employment by us without “cause” or by the executive officer for “good reason”) more than two months prior to a change in control:


	•	Mr. Owens will be eligible to receive:


	•	a cash payment equal to 12 months of his base salary as in effect as of the date of termination, payable according to our regular payroll schedule over a 12-month period; and

	•	COBRA premiums for a period of 12 months; and


	•	Messrs. O’Donnell, Jeter, Barca-Hall, and Groves will be eligible to receive:


	•	a cash payment equal to six months of his base salary as in effect as of the date of termination, payable according to our regular payroll schedule over a six-month period; and

	•	COBRA premiums for a period of six months.

Involuntary Termination of Employment in Connection with Change in Control

In the event of an involuntary termination of employment (defined as either a termination of employment by us without “cause” or by the executive officer for “good reason”) within the two-month period prior to or the 12-month period following a change in control:


	•	Mr. Owens will be eligible to receive:


	•	a cash payment equal to 18 months of his (1) base salary as in effect as of the date of termination and (2) average actual bonus for the two years preceding the year in which the termination occurred, collectively payable according to our regular payroll schedule over an 18-month period;

	•	COBRA premiums for a period of 18 months; and

	•	full and immediate vesting of all of the shares of our common stock underlying any then-outstanding unvested stock options and other unvested equity awards; and


	•	Messrs. O’Donnell, Jeter, Barca-Hall, and Groves will be eligible to receive:


	•	a cash payment equal to 12 months of his (1) base salary as in effect as of the date of termination and (2) average actual bonus for the two years preceding the year in which the termination occurred, collectively payable according to our regular payroll schedule over a 12-month period;

	•	COBRA premiums for a period of 12 months; and

	•	in the case of Mr. O’Donnell, full and immediate vesting of all of the shares of our common stock underlying any then-outstanding unvested stock options and other unvested equity awards, and in the case of Messrs. Jeter, Barca-Hall, and Groves full and immediate vesting of half of the shares of our common stock underlying any then-outstanding unvested stock options and other unvested equity awards.

The severance and change in control benefits have a four-year term ending on February 11, 2014 that may be extended upon the mutual agreement of the parties.

Accordingly, the following tables set forth the potential, estimated, payments and benefits to which the named executive officers would have been entitled assuming termination of their employment as of December 31, 2009, as specified under the terms and conditions of their respective employment agreements.

Mr. Owens

Potential Payments and Benefits Upon Termination of Employment


	Involuntary		Involuntary
	Termination of		Termination of
	Employment Not in		Employment in
	Connection with		Connection with
Executive Payments and Benefits (1)	Change in Control		Change in Control (2)

Severance Payments	$	350,000	$	573,750
Accelerated Vesting of Shares and Stock Options		—
COBRA Premiums		24,900		37,350

Total	$	374,900	$


(1)		For purposes of this analysis, Mr. Owens’ compensation is assumed to be as follows: current base salary equal to $350,000, average cash bonus for 2008 and 2007 of $32,500, and outstanding unvested stock options and shares covering 519,376 shares of our common stock.


(2)		Assumes the date of termination of employment of Mr. Owens was December 31, 2009 and is the product of (a) the number of accelerated shares and (b) the fair market value of our common stock determined as the midpoint of the price range set forth on the cover page of this prospectus.

Mr. O’Donnell

Potential Payments and Benefits Upon Termination of Employment


	Involuntary		Involuntary
	Termination of		Termination of
	Employment Not in		Employment in
	Connection with		Connection with
Executive Payments and Benefits (1)	Change in Control		Change in Control (2)

Severance Payments	$	125,000	$	268,750
Accelerated Vesting of Stock Options		—
COBRA Premiums		4,002		8,004

Total	$	129,002	$


(1)		For purposes of this analysis, Mr. O’Donnell’s compensation is assumed to be as follows: current base salary equal to $250,000, average cash bonus for 2008 and 2007 of $18,750, and outstanding unvested stock options covering 129,167 shares of our common stock.


(2)		Assumes the date of termination of employment of Mr. O’Donnell was December 31, 2009 and is the product of (a) the number of accelerated shares and (b) the fair market value of our common stock determined as the midpoint of the price range set forth on the cover page of this prospectus.

Mr. Jeter

Potential Payments and Benefits Upon Termination of Employment


	Involuntary		Involuntary
	Termination of		Termination of
	Employment Not in		Employment in
	Connection with		Connection with
Executive Payments and Benefits (1)	Change in Control		Change in Control (2)

Severance Payments	$	125,000	$	271,250
Accelerated Vesting of Stock Options		—
COBRA Premiums		12,450		24,900

IronPlanet Inc. S-1/A