UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

Current Report

Pursuant to Section 13 or 15(d) of

The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) February 4, 2009

LIQUIDITY SERVICES, INC.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code (202) 467-6868

N/A

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01.  Entry into a Material Definitive Agreement.

On February 4, 2009, Liquidity Services, Inc. (the “Company”) and the Defense Reutilization and Marketing Service of the U.S. Department of Defense (the “DRMS”) entered into Supplemental Agreement 1 (the “Supplemental Agreement”) to the Surplus Usable Property Sales Contract (Sales Contract Number 08-0001-0001) (the “New Surplus Contract”).   The New Surplus Contract requires that the Company acquire all usable surplus property offered to it by the DRMS. The Supplemental Agreement reduces the price at which the Company will acquire this usable surplus property to a fixed percentage of approximately 1.8% of the DRMS’ original acquisition value.  The New Surplus Contract originally set this price at 3.26% of the DRMS’ original acquisition value.  The Company expects to commence operations under the New Surplus Contract immediately.

The New Surplus Contract, originally awarded to the Company on July 31, 2008, was filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission (the “SEC”) on August 6, 2008 (the “August 8-K”).  The other provisions of the New Surplus Contract described in Item 1.01 of the August 8-K remain unchanged.  The Supplemental Agreement, attached hereto as Exhibit 10.1, contains certain other modifications to the New Surplus Contract which are not material to the Company.

The Company and the DRMS are also parties to a contract under which the Company has the exclusive right to manage and sell substantially all DRMS scrap property (the “Scrap Contract”).  The Scrap Contract was filed as Exhibit 10.2 to the Company’s Registration Statement on Form S-1 (Registration No. 333-129656), filed with the SEC on November 14, 2005.  As described in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2008, filed with the SEC on December 8, 2008, the Company depends on its contracts with the DRMS for a significant portion of its revenue.

Item 9.01.  Financial Statements and Exhibits.

(d)  Exhibits

The following exhibit is filed as part of this report:

10.1 Supplemental Agreement 1 (Sales Contract Number 08-0001-0001)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

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Exhibit Index

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Exhibit 10.1

WHEREAS, Contract 08-0001-0001, General Statement of Contract, sixteenth paragraph, states: “The Contractor is required to participate in the Government’s Federal Asset Sales (eFAS) Program whereby the Contractor agrees to integrate all sales being conducted by the Contractor to the website, GovSales.gov, a Real and Personal Property Portal that facilitates the sale for all Government Agencies. Required quarterly reports reflecting Contractor sales performance must be provided to the GSA GovSales Planning Office.”

WHEREAS, Contract 08-0001-0001, Article Nine, Section 6 states: “Federal Asset Sales (FAS) Requirements – Contractor is required to transmit all active sales information for each property to the eFAS/GovSales.gov portal using one of the following methods:

·                  Property Listings in CSV format transmitted via SFTP

·                  Property Listings in XML format transmitted via web service/SOAP

On a quarterly basis, the Contractor is required to provide the following post sales data to the GovSales Planning Office:

·                  Total Number of Assets Sold – Assets sold equals number of individual assets sold not number of lots sold

·                  Total Number of Assets Posted on GovSales.gov Portal

·                  Gross Revenue Received – Revenue equals sales proceeds

·                  Percentage of Personal Property Assets Sold Equal to Greater than Market Value - This metric only applies to FSG 14 (Aircraft); FSG 19 (Boats); FSG 23 (Motor Vehicles including cars, trucks, buses, and motorcycles; and FSG 2420 (Wheeled Tractors)

·                  Cycle Time – Time that an asset leaves the RTD process through payment

·                  Total Net Sales Revenue – Proceeds minus costs

·                  Implementation Guide Provided”

WHEREAS DRMS Form 1427 (Notice of Award, Statement, and Release Document) reflects that the Up-Front Property Payment (Bid Percentage) is 2.2577%.

WHEREAS Contract 08-0001-0001, Item Description, Item 1, third paragraph, first sentence, states: “The Government will decide items to be sold to the Contractor regardless of Federal Supply Class (FSC), location, or demilitarization code.”

WHEREAS Contract 08-0001-0001, Article Six, Section 1(C) CONTRACTOR’S RIGHT TO NON-DELIVERY ORDER ITEMS, third sentence states: “The Government will decide items to be sold to the Contractor regardless of FSC, location, or demilitarization code.”

WHEREAS Contract 08-0001-0001, Item Description, Item 1, third paragraph, first sentence, states: “The Government guarantees to issue the Contractor the lesser of either 130,000 line items of property annually or issue to the Contractor, property with an annual acquisition value of $600,000,000 under this contract.”

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WHEREAS Contract 08-0001-0001, Article 8, Section 3 PROPERTY ASSURANCE CONTRACTOR DE-INCENTIVES, states: “De-Incentives will apply to the Contractor with regard to conducting a resale of items after DRMS has identified it as controlled or DEMIL required and placed the item on the DNS or DCC List. De-Incentives will apply in that DRMS will charge the Contractor 50% of the acquisition value of any item DRMS has identified to the Contractor as not eligible for sale based on the item commodity or demilitarization code, yet DRMS finds it for sale on the Contractor’s website.”

WHEREAS Contract 08-0001-0001, Article 12, Section 4(B), DRMS VERIFICATION OF ASSURANCE PROCESS states: “The DRMS Verification Office will conduct daily reviews of the items that the Contractor is offering for sale to ensure items appearing on the DNS List or DCC List are not being sold. De-Incentives will apply in that DRMS will charge the Contractor 50% of the acquisition value of any item DRMS has identified to the Contractor as not eligible for sale based on the item commodity or demilitarization code, yet DRMS finds it for sale on the Contractor’s website.”

WHEREAS Contract 08-0001-0001, Article 12, Section 5, CONTRACTOR WEB BASED APPLICATION, first sentence states: “Contractor must develop a web-based application for use on this contract with regard to reviewing property for accurate coding and sales eligibility.”

WHEREAS General Statements of Contract, fifth paragraph, states: “The successful bidder commits to purchase property issued under this contract on a Delivery Order for a thirty-six (36) month performance period commencing from the date of submission of the initial Delivery Order to the Contractor. DRMS may unilaterally exercise options to extend the performance period for up to an additional twenty-four (24) months via two twelve month options, based on Government requirements.”

WHEREAS Contract 08-0001-0001, Article 4, Section 1, PERFORMANCE PERIOD, first sentence states: “Subject to the early cancellation option provisions and the Termination for Convenience of the Government provisions, the Government shall provide property for a thirty-six (36) month period from the date of the initial delivery order to Contractor.”

WHEREAS General Statements of Contract, fourth paragraph, last sentence states: “Recycling Control Point (RCP) DLA Depot property will be issued to the Contractor at one of four DRMS Controlled Property Centers (CPCs) currently located at Columbus, OH; Norfolk, VA; Huntsville, AL; and Stockton, CA.”

NOW THEREFORE, it has been determined that the following actions will serve the best interest of the Government and Contractor:

Contract 08-0001-0001, General Statement of Contract, sixteenth paragraph, is changed to read, “The Contractor is required to participate in the Government’s Federal Asset Sales (eFAS) Program whenever acting as a sales broker when reselling non-DRMS asset Government property, whereby the Contractor agrees to integrate all sales being conducted by the Contractor to the website, GovSales.gov, a Real and Personal Property Portal that facilitates the sale for all Government Agencies.

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Required quarterly reports reflecting Contractor sales performance must be provided to the Sales Contracting Officer.”

Contract 08-0001-0001, Article Nine, Section 6, is changed to read, “Federal Asset Sales (FAS) Requirements – Contractor is required to transmit all active sales information for each non-DRMS asset Government property resold whenever acting as a sales broker for the Government to the eFAS/GovSales.gov portal using one of the following methods:

·                  Property Listings in CSV format transmitted via SFTP

·                  Property Listings in XML format transmitted via web service/SOAP

On a quarterly basis, the Contractor is required to provide the following post sales data to the Sales Contracting Officer:

·                  Total Number of Assets Sold – Assets sold equals number of individual assets sold not number of lots sold

·                  Total Number of Assets Posted on GovSales.gov Portal

·                  Gross Revenue Received – Revenue equals sales proceeds

·                  Percentage of Personal Property Assets Sold Equal to Greater than Market Value -

This metric only applies to FSG 14 (Aircraft); FSG 19 (Boats); FSG 23 (Motor Vehicles including cars, trucks, buses, and motorcycles; and FSG 2420 (Wheeled Tractors)

·                  Cycle Time – Time that an asset leaves the RTD process through payment

·                  Total Net Sales Revenue – Proceeds minus costs

·                  Implementation Guide Provided”

DRMS Form 1427 (Notice of Award, Statement, and Release Document) is changed to reflect that the Up-Front Property Payment (Bid Percentage) is 0.8000%.

Contract 08-0001-0001, Item Description, Item 1, third paragraph, first sentence is changed to read: “The Government will decide items to be sold to the Contractor regardless of Federal Supply Class (FSC), location, demilitarization code. or property condition. The Contractor has the contractual obligation to purchase cell property issued on a delivery order. However, the following FSCs will not be issued under this contract unless mutually agreed upon by both DRMS and the Contractor:

7025 – ADP Input/Output and Storage Devices

7010 – ADPE System Configuration

5805 – Telephone and Telegraph Equipment

5831 – Intercommunication and Public Address Systems, Airborne”

Contract 08-0001-0001, Article Six, Section 1(C) CONTRACTOR’S RIGHT TO NON-DELIVERY ORDER ITEMS, first sentence is changed to read: “The Government will decide items to be sold to the Contractor regardless of FSC, location, demilitarization code, or property condition. The Contractor has the contractual obligation to purchase all property issued on a delivery order.

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However, the following FSCs will not be issued under this contract unless mutually agreed upon by both DRMS and the Contractor:

7025 – ADP Input/Output and Storage Devices

7010 –ADPE System Configuration

5805 – Telephone and Telegraph Equipment

5831 – Intercommunication and Public Address Systems, Airborne”

Contract 08-0001-0001, Item Description, Item 1, third paragraph, first sentence, is changed to read: “Based on the deletion of FSCs 7025, 7010, 5805, and 5831 from this contract, the Government guarantees to issue the Contractor the lesser of either 124,000 line items of property annually or issue to the Contractor property with an annual acquisition value of $570,000,000 under this contract.”

Contract 08-0001-0001, Article 8, Section 3 PROPERTY ASSURANCE CONTRACTOR DE-INCENTIVES, is changed to add the following sentences at the end of the existing section: “De-Incentives applicable to property issued from a Controlled Property Center (CPC), or any Recycling Control Point (RCP) property issued from a DLA Depot, are waived until further notice by the Government. The Government will provide a five working day notice to Contractor reinstating the de-incentives for the property cited above. The de-incentives listed in this section continue to apply to all other property under this contract.”

Contract 08-0001-0001, Article 12, Section 4(B), DRMS VERIFICATION OF ASSURANCE PROCESS is changed to add the following sentences at the end of the existing section: “De-Incentives applicable to property issued from a Controlled Property Center (CPC) or any Recycling Control Point (RCP) property issued from a DLA Depot, are waived until further notice by the Government. The Government will provide a five working day notice to Contractor reinstating the de-incentives for the property cited above. The de-incentives listed in this section continue to apply to all other property under this contract.”

Contract 08-0001-0001, Article 12, Section 5 CONTRACTOR WEB BASED APPLICATION, first sentence is changed to read: “Contractor must develop a web-based application for use on this contract with regard to reviewing property for accurate coding and sales eligibility. The Government agrees that reasonable costs for Government requested enhancements to the web-based application throughout the term of the contract will be compensated to the Contractor by the Government throughout the term of the contract. Contractor is required to submit the costs associated with the Government requested enhancement and have written approval for cost compensation from the SCO prior to completing the enhancement.”

Contract 08-0001-0001, General Statements of Contract, fifth paragraph, is changed to read: “The successful bidder commits to purchase property issued under this contract on a Delivery Order for a thirty-six (36) month performance period commencing with Delivery Order 5. DRMS may unilaterally exercise options to extend the performance period for up to an additional twenty-four (24) months via two twelve month options, based on Government requirements.”

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Contract 08-0001-0001, Article 4, Section 1, PERFORMANCE PERIOD, first sentence is changed to read: “Subject to the early cancellation option provisions and the Termination for Convenience of the Government provisions, the Government shall provide property for a thirty-six (36) month period from the date of Delivery Order 5.”

General Statements of Contract, fourth paragraph, last sentence is changed to read: “Recycling Control Point (RCP) DLA Depot property will be either issued to the Contractor at one of four DRMS Controlled Property Centers (CPCs) currently located at Columbus, OH; Norfolk, VA; Huntsville, AL; and Stockton, CA., or be shipped by the Government at Government expense to Contractor’s warehouses located at Columbus, OH and Oklahoma City, OK, at the Government’s discretion.”

The Government and the Contractor agree to stay (tolling any applicable statutes of limitation or similar equitable periods to the fullest extent possible) all known and unknown, asserted or unasserted claims existing as of the date of this contract modification and related to Contract Number 99-0001-0002 and Contract Number 08-0001-0001 (the “Claims”) for a period of 18 months commencing on the date this modification is signed (the “18 month period”). If Contract Number 08-0001-0001 remains in effect at the end of the 18 month period, then the Contractor and its affiliates agree to waive and release fully and finally the Claims cited above against the Government, except that nothing in this release shall waive or release any claims of the Contractor or its affiliates against the Government for non-payment under the payment provisions of Contract Number 99-0001-0002 for work performed, services provided, or costs incurred or for costs and damages (if any) associated with Kormendi/Gardner Partners v. Surplus Acquisition Venture, LLC and Government Liquidation, LLC presently pending in the United States District Court for the District of Columbia. If Contract No. 08-0001-0001 remains in effect at the end of the 18 month period then the Government agrees to waive the Claims cited above regardless of whether the Claims are against the Contractor or its affiliates. The Contractor and Government further agree that this Modification constitutes complete and final satisfaction for both parties arising from the changes to Contract Number 08-0001-0001 as set forth herein.

The Government will monitor the property pool delivered under Contract Number 08-0001-0001 such that the acquisition value of the property delivered in the FSCs listed below, as a group, does not exceed 60% of the acquisition value of the total property delivered over the term of this contract. If the acquisition value of the property delivered in the FSCs listed below exceeds 60% of the acquisition value of the total property delivered under the contract on a trailing 12 month basis (for the purposes in this modification: trailing 12 months represents 12 consecutive months previous to any Delivery Order issued by the Government applicable on the 13th month of performance and thereafter), the Government may choose to continue delivering the FSCs listed below and waive the 0.8% upfront bid price, for the FSCs listed below starting with the first Delivery Order of the 13th month of this contract as modified; or the Government may choose not to deliver some or all of the FSCs listed below until the acquisition value of the property, in the FSCs listed below, has dropped below 60% of the acquisition value of the total property delivered under the contract on a trailing 12 month basis. At any time during contract performance, the Government may choose to exclude and then reinclude property from the FSCs listed below, or issue such property with or without all or a portion of the 0.8% upfront bid price. Property from the FSCs listed below, if delivered without the full upfront bid

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price, will be excluded from calculations of the percent of property delivered for the purposes of meeting the acquisition value ratio calculated above, and has no impact on the Government’s minimum delivery requirement. For purposes of this paragraph, the Government’s Delivery Orders and adjustments therein represent the official record.

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