ATER 10-K & 10-Q changes, risk factors and insider trading
Aterian, Inc. · Nasdaq · Electric Housewares & Fans · CIK 1757715 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “If our products experience any recalls, product liability claims, or government, customer or consumer concerns about product safety, our reputation and operating results could be harmed.”
New heading “Any failure by us or our vendors to comply with product safety, consumer protection or other laws, or our standard vendor terms and conditions, or to provide safe factory conditions for our or their workers may damage our reputation and brand and harm our business.”
New heading “The process of evaluating strategic alternatives may be disruptive to our business and may not result in a transaction or other strategic outcome.”
New heading “The Company’s use of artificial intelligence technologies may not achieve intended results and could expose us to operational, competitive, regulatory, and reputational risks that may adversely affect our business, financial condition, and results of operations.”
New heading “The proposed Nasdaq minimum market value rule could result in the immediate suspension and delisting of our common stock without a cure period.”
Removed heading “We no longer qualify as an “emerging growth company” as of December 31, 2024 and, as a result, we are no longer able to avail ourselves of certain reduced disclosure requirements applicable to emerging growth companies.”
Largest changes
“In February 2026, we announced a voluntary recall in coordination with the CPSC for approximately 195,000 units of our PurSteam Mighty Lil Steamers and Elite Travel Steamers due to reports of hot water expelling from the nozzle. We have incurred, and expect to continue to incur, costs related to this recall, including refund payments and legal expenses. As a result of this recall, a putative class action complaint, Sarah Brannon v. Aterian, Inc., was filed against us on March 6, 2026, in the U.S. District Court for the District of New Jersey. …”see in full comparison
“The proposed Nasdaq minimum market value rule could result in the immediate suspension and delisting of our common stock without a cure period.”see in full comparison
“Throughout 2025, the U.S. trade environment underwent a period of unprecedented volatility characterized by the implementation of a broad “reciprocal” tariff regime. Utilizing the International Emergency Economic Powers Act (IEEPA), the administration imposed steep duties on nearly all imported goods, including a baseline 10% global tariff and targeted rates on major trading partners like China that reached historic highs before a late-year temporary truce. …”see in full comparison
“The products we sell to our clients are subject to regulation by the CPSC, the Federal Trade Commission (“FTC”) and similar state and international regulatory authorities. As a result, such products could be in the future subject to recalls and other remedial actions, including the manner in which we market our products. Product safety or labeling concerns may require us to voluntarily remove selected merchandise from our inventory. …”see in full comparison
“Over the past several years, the U.S. government has taken a number of trade actions that impact or could impact our operations, including imposing tariffs on certain goods imported into the United States. As the majority of our products are imported into the United States from China, many of our products are subject to the tariffs imposed under Section 301 of U.S. trade law that have been applied to separate lists of Chinese goods imported into the United States, beginning during the Trump Administration and continuing in the Biden Administration. …”see in full comparison
“If our products experience any recalls, product liability claims, or government, customer or consumer concerns about product safety, our reputation and operating results could be harmed.”see in full comparison
Full comparison: every changed paragraph (68)
We have historically operated at a loss and we may never achieve or sustain continuous profitability or positive cash flows. FurtherFurther, we and our independent registered public accounting firm have expressed substantial doubt about our ability to continue as a going concern.
We have experienced significant after-tax losses for the years ended December 31, 20242025 and 2023.2024. In addition, our costs have increased historically and may increase further in future periods, which could negatively affect our future operating results and ability to achieve and sustain long-term ongoing profitability. For example, we may need to continue to expend substantial financial and other resources on the ideation, sourcing and development of products, our technology infrastructure, research and development, sales and marketing, international expansion and general administration, including expenses related to being a public company. We have had to rely on a combination of cash flow from operations and new capital in order to sustain our business. DespiteEven the fact thatthough we have raised significant capital, there can be no assurance that we will ever achieve long-term continuous profitability. Even if we do, there can be no assurance that we will be able to maintain or increase profitability on a quarterly or annual basis. Failure to achieve or sustain profitability could have a material adverse effect on our business.
Our growth strategy has resulted in operating losses and negative cash flows from operations that raise substantial doubt about our ability to continue as a going concern. Our independent registered public accounting firm included an explanatory paragraph in its report on our consolidated financial statements as of and for the year ended December 31, 2024,2025, that raised substantial doubt about our ability to continue as a going concern. If we are unable to continue as a going concern or maintain our financial covenants with our lenders, we may have to make significant changes to our operating plan, such as delay expenditures, reduce investments in new products, reduce our salesales and distribution infrastructure, or significantly reduce our business. Further, if we are unable to continue as a going concern, we may be forced to liquidate our assets and the values we receive for our assets in liquidation or dissolution could be significantly lower than the values reflected in our financial statements.
We cannot assure you that our products will continue to compete favorably or that we will be successful in the face of increasing competition and from new products and enhancements introduced by existing competitors or new companies entering the markets in which we operate. We sell our products primarily on marketplaces and primarily on Amazon in the U.S. Unlike traditional brick and mortar retailers, the customer who is shopping on marketplaces has a significant number of competing products to select from as there are limited barriers to entry. In addition, the Internet facilitates competitive entry and comparison shopping, which enhances the ability of new and existing businesses to compete against us. A number of our current and potential competitors have greater resources, longer histories, and/or greater brand recognition. As a result, they may be able to secure better terms from vendors and devote more resources to technology, infrastructure, fulfillment, and marketing than we may be able to. In addition, some of our competitors aggressively discount their products in order to gain market share, which has resulted in pricing pressures, reduced profit margins and lost market share. Further, social proof for products sold on marketplaces in the form of product ratings and reviews is highly important to our success. In this regard, the majority of our active brands were acquired in late 2020 and early 2021, and their brand reputations may be impacted by the original owners’ or founders’ new business ventures, personal reputations, or public conduct. Although we have no material ongoing business relationships with the original owners of our brands, their actions, if perceived negatively, could adversely impact our brands’ reputations, social proof, and/or net revenue. In certain instances, we have been unable to maintain such social proof, and we may be unable to maintain such social proof in the future, or competitors may be able to attain better social proof for their products which could result in reduced market share and have a material impact on our operating results.
Amazon and other marketplaces frequently launch their own private-label products that compete directly with our highest-volume SKUs. These marketplaces have access to superior consumer data and can provide their own products with preferential search placement and advertising rates that we cannot match, which may permanently depress our margins on those products.
Our financial projections are highly subjective in nature and our future financial results could vary significantly from our projections from quarter-to-quarter and also from quarter-to-quarter.annually.
From time to time, we may provide financial projections to our shareholders, lenders, investment community, and other stakeholdersstakeholders. and theseThese projections are highly subjective. Our quarterly revenue and other operating results have varied in the past and are likely to continue to vary significantly from quarter-to-quarter in the future. It is difficult for us to accurately predict the demand for many of our products, or the amount and timing of our future revenue and operating results. Our projections are based on management’s best estimate of sales using historical sales data and other relevant information available at the time. These projections are highly subjective since product sales can fluctuate substantially. Additionally, changes in consumer demand, affected by competitors, transportation, supplier lead times, costs and availability, raw material costs and availability, and other factors could make our inventory management and sales forecasting more difficult. Further, we base our expense levels and investment plans on sales estimates. A significant portion of our expenses and investments are fixed, and we are not able to adjust our spending quickly if our sales are less than expected. Due to these and other factors described elsewhere in this section, our future operating results could vary materially from our projections and from quarter-to-quarter. Further, we believe that quarter-to-quarter comparisons of our operating results are not necessarily meaningful. Moreover, our operating results may not meet the expectations of our equity research analysts or investors. If this occurs, the trading price of our common stock could fall substantially, either suddenly or over time.
In the past, we have not always accurately forecasted consumer demand for our products resulting in inventory shortages, excess inventory write offswrite-offs and lower gross margins. We are exposed to significant inventory risks that have or may adversely affect our operating results, financial condition, and cash flows as a result of seasonality, new product launches, rapid changes in product cycles and pricing, defective merchandise, shrinkage, changes in customer demand and consumer spending patterns, changes in consumer tastes with respect to our products, spoilage, adverse actions taken by marketplaces to remove our products, and other factors. Demand for products can change significantly between the time inventory is ordered and the date of sale. In addition, when we begin selling a new product, it may be difficult to establish vendor relationships, determine appropriate product or component selection, and accurately forecast demand. We carry a broad selection of products and at times we are unable to sell our products in sufficient quantities or to meet demand during the relevant selling seasons. Any one of the inventory risk factors set forth above may adversely affect our operating results, financial condition, and cash flows.
On February 28, 2026, the United States and Israel initiated major combat operations in Iran, which has led to immediate retaliatory strikes against U.S. military installations and commercial interests in the Persian Gulf. This conflict has resulted in heightened volatility in global energy markets and may lead to significant disruptions in shipping routes, particularly through the Strait of Hormuz. Sustained conflict in the region could result in spiked freight insurance premiums, fuel surcharges, and delays in inbound shipments from our Asian suppliers. If we are unable to mitigate these costs, our operating results and financial condition would be adversely affected.
Our Credit Facility contains various restrictions and covenants that could limit our operating flexibilityflexibility, and we may be unable to refinance or repay our Credit Facility. We also rely on credit export insurance for our vendors in China, the unavailability of which could have a material adverse impact on our business, operating results, financial condition, and cash flows.
On March 25, 2025, the Company amended the Credit Facility to add repurchases of the Company’s common stock of up to $1.5 million per year, consisting of up to $1.5 million in repurchases allowed during the period from March 25, 2025 through December 22, 2025, and up to an additional $1.5 million allowed during the period from December 23, 2025 through the maturity date, subject to certain liquidity and compliance conditions.
On August 29, 2025, the Company amended the Credit Facility to include a reduction to the Minimum Credit Party Liquidity covenant to $5.0 million. Upon the Company’s delivery of a Liquidity Certificate evidencing liquidity of at least $6.8 million, the Minimum Liquidity Covenant Reduction Period will terminate and the covenant will increase to $6.8 million thereafter, and an Availability Reserve of $2.8 million during the Minimum Liquidity Covenant Reduction Period and $1.0 million thereafter.
On March 13, 2026, the Company and its subsidiaries entered into Amendment No. 5 to its Credit and Security Agreement with MidCap Funding IV Trust. Under the terms of the amendment, the Company’s minimum liquidity covenant was reduced from $5.0 million to $3.5 million during the Minimum Liquidity Covenant Reduction Period. This reduction period commenced on the Fifth Amendment Effective Date and is subject to extension at the Company's option on a weekly basis through May 9, 2026, provided it remains in compliance with certain fee payment obligations.
Our long-term success depends on our ability to develop and commercialize a continuing stream of new products, to expand both to new marketplaces and geographies and to leverage new technologies we may incorporate into our business. We have entered and expect to continue to enter new product categories and both new marketplaces and geographies for which we have limited or no experience. In part we rely on Amazon’s global reviews program for success in our international expansion. If that program were to be limited, reduced or discontinued, our international expansion would be negatively affected. We also in part rely on our ability to include new products as variations to existing listings on Amazon. If that strategy were no longer possible for whatever reason, our ability to launch new products could be materially affected. That strategy could also have unanticipated or unexpected negative consequences. Our efforts to grow our business place significant strain on our management, personnel, operations, systems, financial resources, and internal financial control and reporting functions, among other things. We have limited personnel and resources and have reduced headcount significantly in recent years. In order to accomplish our growth goals, our team is required to focus on such growth ventures and reallocate their time and other resources, creating risk in all aspects of our business. We face the risk that we will be unable to disrupt incumbents and that our competitors will introduce new and better products that compete with us. There are numerous uncertainties inherent in successfully developing and commercializing new products on a continuing basis and new product launches may not deliver expected growth in sales or operating results. Any new product that we develop and market may not be introduced in a timely or cost-effective manner, may contain defects, errors, quality or other issues, or may not achieve the market acceptance necessary to generate sufficient revenue or may never become profitable. If we are unable to develop and introduce a continuing stream of competitive new products, it may have an adverse effect on our business, operating results, financial condition, and cash flows. Our failure to successfully execute on our growth initiatives can negatively impact our financial results, financial condition, and cash flows.
We have $269.3 million net operating loss carryforwards as of December 31, 2025, which have a full valuation allowance against them. In general, under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), a corporation that undergoes an ownership change, which is generally defined as a greater than 50-percentage-point cumulative change by value in the equity ownership of certain stockholders over a rolling three-year period, is subject to limitations on its ability to utilize its pre-change net operating losses (“NOLs”) to offset post-change taxable income. Our existing NOLs may be subject to limitations arising from previous ownership changes, and if we undergo an ownership change, our ability to utilize NOLs could be further limited by Section 382 of the Code and similar state provisions. Future changes in our stock ownership, some of which may be outside of our control, could result in an ownership change under Section 382 of the Code. Furthermore, our ability to utilize NOLs of companies that we may acquire in the future may be subject to limitations. There is also a risk that due to regulatory changes, such as limitations on the use of NOLs, our existing NOLs could expire, decrease in value or otherwise be unavailable to offset future income tax liabilities. For example, the Tax Cuts and Jobs Act resulted in a reduction in the economic benefit of the NOLs and other deferred tax assets available to us. For these reasons, we may not be able to realize a tax benefit from the use of our NOLs, even if we attain profitability. We have not performed a detailed analysis to determine whether an ownership change under Section 382 of the Code has occurred. The effect of a Section 382 ownership change would be the imposition of an annual limitation on the use of net operating loss carryforwards attributable to periods before the change. Any limitation may result in expiration of all, or a portion of the NOLs or other tax attributes, before utilization.
In addition, the IRS is currently conducting an examination of our U.S. federal income tax return for the 2023 fiscal year. While we believe our tax positions and the resulting net operating losses reported for that period are supportable, the final outcome of this examination is uncertain. Any adverse adjustments resulting from this audit could significantly reduce our available net operating loss carryforwards or other tax attributes, which would limit our ability to offset future taxable income and could have a material adverse effect on our financial condition.
Our business has undergone significant leadership transitions and a fundamental shift in our operating model that may adversely affect our results of operations and financial condition. Since July 2023, we have experienced several changes in our executive leadership, including the resignation of our founding CEO , a period of Co-CEO leadership , and the eventual appointment of Arturo Rodriguez as our sole CEO in June 2024. More recently, our Chief Technology Officer resigned effective November 3, 2025. In connection with these transitions, we have rationalized our product offering to focus on the more profitable categories and completed the move from a proprietary technology infrastructure to a model that relies entirely on third-party tools and marketplace data. We have also significantly reduced our workforce to align with our current scale. Managing these leadership vacancies while navigating a smaller organizational structure entails numerous risks, including potential operational disruptions, a decline in profitability, and negative impacts on employee morale. These changes may also divert management’s attention from other business concerns, which could have a material adverse effect on our operating results, financial condition, and cash flows.
If our products experience any recalls, product liability claims, or government, customer or consumer concerns about product safety, our reputation and operating results could be harmed.
Our products are subject to regulation by the U.S. Consumer Product Safety Commission (the “CPSC”) and similar state and international regulatory authorities, and these products sold on our platform could be subject to involuntary recalls and other actions by these authorities. Concerns about product safety including concerns about the safety of products manufactured in developing countries, could lead us to recall selected products. Recalls and government, customer or consumer concerns about product safety could harm our reputation and reduce sales, either of which could have a material adverse effect on our business, results of operations, financial condition and prospects.
In February 2026, we announced a voluntary recall in coordination with the CPSC for approximately 195,000 units of our PurSteam Mighty Lil Steamers and Elite Travel Steamers due to reports of hot water expelling from the nozzle. We have incurred, and expect to continue to incur, costs related to this recall, including refund payments and legal expenses. As a result of this recall, a putative class action complaint, Sarah Brannon v. Aterian, Inc., was filed against us on March 6, 2026, in the U.S. District Court for the District of New Jersey. The complaint alleges various violations, including breach of implied warranty, unjust enrichment, and violations of the New Jersey Products Liability Act. While the Company ceased selling these steamers in 2024, the defense of this existing litigation, and the potential for additional product liability or class action lawsuits, could result in significant legal expenses, settlements, or judgments. Furthermore, these developments could damage the reputation of the PurSteam brand, leading to a loss of consumer trust and a permanent decline in revenue for this product line.
We may be subject to product liability claims if people or property are harmed by the products we sell. Some of the products we sell may expose us to product liability claims and litigation (including class actions) or regulatory action relating to safety, personal injury, and death or environmental or property damage.
Although we maintain liability insurance, we cannot be certain that our coverage will be adequate for liabilities actually incurred or that insurance will continue to be available to us on economically reasonable terms, or at all. In general, our agreements with members of our supply chain do not indemnify us from product liability for a particular product, and some members of our supply chain may not have sufficient resources or insurance to satisfy their indemnity and defense obligations.
Any failure by us or our vendors to comply with product safety, consumer protection or other laws, or our standard vendor terms and conditions, or to provide safe factory conditions for our or their workers may damage our reputation and brand and harm our business.
The products we sell to our clients are subject to regulation by the CPSC, the Federal Trade Commission (“FTC”) and similar state and international regulatory authorities. As a result, such products could be in the future subject to recalls and other remedial actions, including the manner in which we market our products. Product safety or labeling concerns may require us to voluntarily remove selected merchandise from our inventory. Such recalls or voluntary removal of merchandise can result in, among other things, suspension of our seller accounts on Amazon and other online marketplaces, lost sales, diverted resources, potential harm to our reputation and increased client service costs and legal expenses, which could have a material adverse effect on our operating results.
Some of the products we sell may expose us to product liability claims and litigation or regulatory action relating to personal injury or environmental or property damage. Although we maintain liability insurance and have implemented a quality assurance program that includes obtaining necessary certifications, we cannot be certain that our coverage will be adequate for liabilities actually incurred or that insurance will continue to be available to us on economically reasonable terms or at all. In addition, our agreements with our vendors in general do not indemnify us from product liability for a particular vendor’s products or our vendors may not have sufficient resources or insurance to satisfy their indemnity and defense obligations.
The process of evaluating strategic alternatives may be disruptive to our business and may not result in a transaction or other strategic outcome.
On December 8, 2025, our Board of Directors announced a formal process to evaluate a range of strategic alternatives aimed at maximizing shareholder value, which may include a potential sale of assets, a merger, a business combination, or other strategic transactions. There can be no assurance that this evaluation process will result in any definitive offer or transaction, or that any transaction, if pursued, will be consummated on favorable terms or at all. The process of exploring these alternatives is time-consuming and involves significant costs, including legal, accounting, and advisory fees, which we will incur regardless of the eventual outcome. This process may also divert the attention of our senior management and key personnel from our day-to-day operations and the execution of our long-term business strategy, including our omni-channel expansion and product development goals. Furthermore, the uncertainty regarding our future ownership or corporate structure may impair our ability to attract, retain, and motivate qualified employees, or may cause our customers, vendors, and strategic partners to delay or defer decisions to do business with us. Such uncertainty could also lead to increased volatility in the market price of our common stock as a result of market speculation or rumors. If we are unable to successfully complete a strategic transaction that creates value for our stockholders, or if the process itself results in significant operational disruptions or loss of key personnel, our business, financial condition, and results of operations could be materially and adversely affected.
Our future success depends on our continuing ability to attract, motivate and retain well qualified employees. Competition for well-qualified employees in all aspects of our business is intense globally. The loss of one or more of our key personnel or our inability to promptly identify a suitable successor to a key role, including through a succession plan, could have an adverse effect on our business. Further, the Company recently announced a restructuring whereby a number of employee positions with the Company were terminated, which could have a negative effect on our ability to retain and motivate our personnel. Additionally, the uncertainty resulting from our announcement that we are exploring strategic alternatives may create significant anxiety regarding our future direction and ownership, which could lead to increased employee attrition and further hinder our ability to attract and motivate key personnel. Each of our executive officers, key personnel and other employees could terminate their employment relationship with us at any time. Moreover, we rely on stock-based compensation as a method to attract, retain and motivate our employees. If our common stock continues to be volatile or depressed, we may be unable to attract, retain and motivate employees, and if this occurs, it could have a material adverse effect on our business, operating results, financial condition, and cash flows. We do not currently maintain key person life insurance policies on any member of our senior management team or any other key employees.
We have $241.7 million net operating loss carryforwards as of December 31, 2024, which have a full valuation allowance against them. In general, under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), a corporation that undergoes an ownership change, which is generally defined as a greater than 50-percentage-point cumulative change by value in the equity ownership of certain stockholders over a rolling three-year period, is subject to limitations on its ability to utilize its pre-change net operating losses (“NOLs”) to offset post-change taxable income. Our existing NOLs may be subject to limitations arising from previous ownership changes, and if we undergo an ownership change, our ability to utilize NOLs could be further limited by Section 382 of the Code and similar state provisions. Future changes in our stock ownership, some of which may be outside of our control, could result in an ownership change under Section 382 of the Code. Furthermore, our ability to utilize NOLs of companies that we may acquire in the future may be subject to limitations. There is also a risk that due to regulatory changes, such as limitations on the use of NOLs, our existing NOLs could expire, decrease in value or otherwise be unavailable to offset future income tax liabilities. For example, the Tax Cuts and Jobs Act resulted in a reduction in the economic benefit of the NOLs and other deferred tax assets available to us. For these reasons, we may not be able to realize a tax benefit from the use of our NOLs, even if we attain profitability. We have not performed a detailed analysis to determine whether an ownership change under Section 382 of the Code has occurred. The effect of a Section 382 ownership change would be the imposition of an annual limitation on the use of net operating loss carryforwards attributable to periods before the change. Any limitation may result in expiration of all, or a portion of the NOLs or other tax attributes, such as research and development credit carryforwards, before utilization.
During the year ended December 31, 2023, the Company implemented a strategy of rationalizing certain less profitable products and reducing its product offering. Further, on July 26, 2023, Yaniv Sarig resigned as CEO of Aterian, and Arturo Rodriguez and Joseph Risico were promoted to Co-CEOs of Aterian. Further on June 26, 2024, Mr. Risico resigned and Mr. Rodriguez was promoted to sole CEO. As a result of this change in leadership, we enacted a number of strategic initiatives that could impact certain aspects of how we currently do business including a further rationalization of our product portfolio to improve our operations and potential future profitability, a change in our technology infrastructure and a reduction of our workforce. This reduction in our product portfolio has led to and will continue to lead to a decline in revenue in upcoming quarters. Executing on any of these decisions is complex and entails a number of potential risks, including but not limited to uncertainties, disruptions and challenges in our business and business model, a decline in revenues and profitability, market share erosion, inventory write-offs and other restructuring related charges, impacts to our relationships with our various vendors and could potentially impact employee morale. Further, pursuing or completing any such strategic initiative could divert management’s attention, and otherwise disrupt our operations which could adversely affect our operating results, financial condition, and cash flows.
The Company’s use of artificial intelligence technologies may not achieve intended results and could expose us to operational, competitive, regulatory, and reputational risks that may adversely affect our business, financial condition, and results of operations.
Our business is increasingly subject to risks associated with third-party artificial intelligence technologies and algorithmic dependencies. While we have made use of Generative AI in areas such as customer service and software development, our completed transition to a model relying entirely on third-party tools has made us disproportionately dependent on external, AI-driven algorithms for search optimization and advertising. These third-party AI systems often function as 'black boxes,' and any updates or shifts in the underlying models used by marketplaces like Amazon or search engines like Google could suddenly de-prioritize our product listings or increase our customer acquisition costs without notice. Furthermore, as competitors increasingly adopt more effective AI-based solutions or use Generative AI to create high volumes of synthetic marketing content and automated product reviews, our 'social proof' and market share could be diluted. There can be no assurance that these third-party AI initiatives will be successful or that they will not lead to unintended consequences that materially and adversely affect our business, financial condition, and results of operations.
Marketplaces are increasingly deploying AI-powered shopping agents, such as Amazon's Rufus, which change the way products are discovered and recommended to consumers. These AI agents utilize proprietary algorithms that may prioritize different data points than traditional search results. If our products are not optimized for these AI agents, or if the agents' recommendations favor competitors or marketplace-owned brands, our organic traffic and sales could decline substantially.
The development, implementation, and oversight of AI technologies involve complexities and potential challenges. Errors, biases, or flaws in AI algorithms, whether developed internally or provided by third parties, could result in inaccurate responses to customers, poor user experiences, or inappropriate or misleading content. These issues could negatively impact our brand reputation, customer trust, and overall business performance.
Additionally, AI is an area of rapid technological advancement and evolving competition. Other e-commerce companies may adopt or develop more effective AI-based solutions, which could place us at a competitive disadvantage. Moreover, the legal and regulatory landscape surrounding AI continues to develop. Emerging laws or regulations could impose new compliance obligations, require changes to how we deploy or monitor AI, or result in unforeseen costs or operational disruptions.
We also rely in part on third-party vendors that integrate AI into the tools and services they provide to us. Because we may have limited visibility or control over these systems, any technical errors, data privacy issues, or regulatory noncompliance by such vendors could negatively affect our operations.
Any of these factors, whether related to internal AI use, reliance on third-party systems, competitive developments, or regulatory changes, could materially and adversely affect our business, financial condition, and results of operations.
In the summer of 2021, the Company received informal notice from a third-party alleging patent infringement with respect to certain transfer paper products sold by the Company.
In February 2022, the Company received a notice disputing the Company’s calculation of the earn-out payment to be paid to the prior owners of a transfer paper business acquired by the Company. A motion to compel arbitration was filed in the Southern District of New York on September 14, 2022, which was granted on May 18, 2023. The parties engaged an independent accountant to resolve the dispute, as required by the PPD Stock Purchase Agreement and the Southern District of New York. In February 2024, the independent accountant ruled in favor of the Company and determined that the Company owes no earn-out. Therefore, the Company believes it has no liability to the sellers.
Over the past several years, the U.S. government has taken a number of trade actions that impact or could impact our operations, including imposing tariffs on certain goods imported into the United States.
Throughout 2025, the U.S. trade environment underwent a period of unprecedented volatility characterized by the implementation of a broad “reciprocal” tariff regime. Utilizing the International Emergency Economic Powers Act (IEEPA), the administration imposed steep duties on nearly all imported goods, including a baseline 10% global tariff and targeted rates on major trading partners like China that reached historic highs before a late-year temporary truce. These actions were compounded by expanded Section 232 duties on industrial metals and the elimination of “de minimis” exemptions for low-value imports, significantly increasing our landed costs and requiring frequent adjustments to our pricing and sourcing strategies. While these measures were the primary drivers of trade policy for much of the year, their legal foundation remained a point of intense litigation until early 2026.
On February 20, 2026, the U.S. Supreme Court ruled in Learning Resources Inc. v. Trump that the International Emergency Economic Powers Act does not authorize the President to impose sweeping revenue-raising tariffs. While this decision invalidated several broad reciprocal tariffs previously in effect, the administration immediately transitioned to imposing a 10% baseline tariff under Section 122 of the Trade Act of 1974, effective February 24, 2026. These Section 122 tariffs are subject to a 150-day limit unless extended by Congress. Significant uncertainty remains regarding whether Congress will approve such extensions or if the administration will seek alternative, more restrictive statutory authorities. Any failure to maintain these exemptions or the imposition of new, higher duties could materially increase our cost of goods sold and decrease our profit margins.
These tariff actions, along with the potential for retaliatory measures, create uncertainty and may increase our product costs, disrupt our supply chain, and adversely affect our competitive position. In particular, continued or escalated trade and political tensions with China or other key trading partners could result in retaliatory restrictions that impair our ability to source products and components from contract manufacturers or service providers operating in those countries. Any sustained increase in tariffs, or the imposition of additional trade barriers, could materially and adversely affect our business, financial condition, and results of operations.
In addition to the tariff measures described above, changes in U.S. or foreign trade policy may create ongoing uncertainty in international trade relations. Future actions by the United States or other governments — including the imposition, increase, or extension of tariffs, quotas, or other trade restrictions, or changes to existing trade agreements or policies — could occur at any time and without notice. Any such actions, whether unilateral or in response to geopolitical or economic developments, could reduce demand for our products, increase our costs, disrupt our supply chain, reduce our profitability, or otherwise have a material adverse effect on our business, financial condition, and results of operations.
Over the past several years, the U.S. government has taken a number of trade actions that impact or could impact our operations, including imposing tariffs on certain goods imported into the United States. As the majority of our products are imported into the United States from China, many of our products are subject to the tariffs imposed under Section 301 of U.S. trade law that have been applied to separate lists of Chinese goods imported into the United States, beginning during the Trump Administration and continuing in the Biden Administration. A number of lawsuits and other legal challenges with respect to the Section 301 tariff actions have been filed and remain pending, which could result in changes to the tariffs.
Changes in U.S. trade policy have created ongoing uncertainties in international trade relations, and it is unclear what future actions governments will or will not take with respect to tariffs or other international trade agreements and policies. During his campaign, President Trump expressed various intentions to impose tariffs on imports, including 60% tariffs on goods imported from China, 25% tariffs on goods imported from Mexico and between 10% and 20% tariffs on other imports. President Trump has instituted an additional 20% tariffs on imports from China currently and China has declared certain retaliatory tariffs but it is unclear what action his administration will take next with respect to these tariffs. Ongoing or new trade wars or retaliatory trade measures taken by China or other countries in response or other governmental action related to tariffs or international trade agreements or policies could reduce demand for our products and services, increase our costs, reduce our profitability, adversely impact our supply chain or otherwise have a material adverse effect on our business and results of operations.
We are continually evaluating the impact of the current and any possible new tariffs on our supply chain, costs and sales and are considering strategies to mitigate such impact, including reviewing sourcing options in the US and other regions, filing requests for exclusion from the tariffs for certain product lines and working with our suppliers. We can provide no assurance that any strategies we implement to mitigate the impact of such tariffs or other trade actions will be successful or that doingany sonewly sourced products will notbe impactof the same quality and cost of ourthose productspreviously orsourced our ability to bring them in in a timely manner.elsewhere. Given the uncertainty regarding the scope and duration of these trade actions by the U.S. government or other countries, as well as the potential for additional trade actions, the impact on our operations and results remains uncertain.
We no longer qualify as an “emerging growth company” as of December 31, 2024 and, as a result, we are no longer able to avail ourselves of certain reduced disclosure requirements applicable to emerging growth companies.
As of December 31, 2024, we no longer qualify as an emerging growth company within the meaning of Section 2(a) of the Securities Act, as modified by the JOBS Act. As such, we are subject to certain disclosure and compliance requirements that apply to other public companies but did not previously apply to us due to our status as an emerging growth company.
The market price and trading volume of our common stock has at times experienced substantial price volatility. There has been, and we expect will continue to be, significant volatility in the market price and trading volume of our common stock. In certain instances, these fluctuations have been unrelated or disproportionate to our operating performance, financial condition, and cash flows. In addition, the market price of our common stock may be, and we believe has been, significantly impacted by investors covering large short positions in our common stock. In addition, there are many other factors that have caused and may continue to cause the market price of our common stock to fluctuate, including: our announcement of our Board’s temporary suspension of our share repurchase program, actual or anticipated variations in our quarterly operating results, or the operating results, financial condition, and cash flows of companies perceived to be similar to us; deterioration and decline in general economic, industry and/or market conditions; changes in estimates of our financial results or recommendations by equity research analysts, including any decision by equity research analysts to initiate or discontinue coverage; announcements by us or our competitors of significant acquisitions, strategic alliances or joint ventures; and changes in our capital structure, such as future issuances of securities or the incurrence of additional debt.
If our existing stockholders sell a large numbernumbers of shares of our common stock, or the public market perceives that those existing stockholders might sell shares of common stock, the market price of our common stock could decline significantly. Existing stockholder sales might also make it more difficult for us to sell additional equity securities at a time and price that we deem appropriate, or at all.
On April 24, 2023,the Company received a notice from The Nasdaq Stock Market LLC (“Nasdaq”) indicating that, based upon the closing bid price of the Company’s common stock, par value $0.0001 per share (“Common Stock”), for the last 30 consecutive business days, the Company was not currently in compliance with the requirement to maintain a minimum bid price of $1.00 per share for continued listing on The Nasdaq Capital Market, as set forth in Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Notice”). In response to the potential risk of delisting, the Company’s stockholders approved granting the Board discretionary authority to implement a reverse stock split, and on March 20, 2024, the Company effected a 1-for-12 reverse stock split of its common stock. The Company subsequently regained compliance with Nasdaq’s minimum bid price requirement in April 2024, and the matter was closed.
On December 9, 2025, the Company received a notice from Nasdaq indicating that, based upon the closing bid price of the Company’s common stock, par value $0.0001 per share, for the last 30 consecutive business days, the Company is not currently in compliance with the requirement to maintain a minimum bid price of $1.00 per share for continued listing on The Nasdaq Capital Market, as set forth in Nasdaq Listing Rule 5550(a)(2).
The Bid Price Notice has no immediate effect on the continued listing status of the Common Stock on The Nasdaq Capital Market, and, therefore, the Company's listing remains fully effective.
The Company is provided a compliance period of 180 calendar days from the date of the Bid Price Notice, or until June 8, 2026, to regain compliance with the minimum closing bid requirement, pursuant to Nasdaq Listing Rule 5810(c)(3)(A). If at any time before June 8, 2026, the closing bid price of the Common Stock closes at or above $1.00 per share for a minimum of 10 consecutive business days, subject to Nasdaq’s discretion to extend this period pursuant to Nasdaq Listing Rule 5810(c)(3)(H) to 20 consecutive business days, Nasdaq will provide written notification that the Company has achieved compliance with the minimum bid price requirement, and the matter would be resolved. If the Company does not regain compliance during the compliance period ending June 8, 2026, then Nasdaq may grant the Company a second 180 calendar day period to regain compliance, provided the Company meets the continued listing requirement for market value of publicly-held shares and all other initial listing standards for The Nasdaq Capital Market, other than the minimum closing bid price requirement, and notifies Nasdaq of its intent to cure the deficiency during the second compliance period.
The Company will continue to monitor the closing bid price of its Common Stock and seek to regain compliance with all applicable Nasdaq requirements within the allotted compliance periods. If the Company does not regain compliance within the allotted compliance periods, including any extensions that may be granted by Nasdaq, Nasdaq will provide notice that the Common Stock will be subject to delisting. The Company would then be entitled to appeal that determination to a Nasdaq hearings panel. There can be no assurance that the Company will regain compliance with the minimum bid price requirement during the 180-day compliance period, secure a second period of 180 days to regain compliance or maintain compliance with the other Nasdaq listing requirements.
On April 24, 2023, we received a letter from the Listing Qualifications Staff of The Nasdaq Stock Market LLC (“Nasdaq”) indicating that, based upon the closing bid price of our common stock for the last 30 consecutive business days, the Company was not in compliance with the requirement to maintain a minimum bid price of $1.00 per share for continued listing on The Nasdaq Capital Market (the “Bid Price Notice”). The Bid Price Notice provided a compliance period of 180 calendar days from the date of the Bid Price Notice, or until October 23, 2023, to regain compliance with the minimum closing bid requirement, pursuant to Nasdaq Listing Rule 5810(c)(3)(A). Following a request we made on October 13, 2023, on October 24, 2023, we received a letter from Nasdaq granting the Company an additional 180 days, or until April 22, 2024, to regain compliance with the minimum closing bid requirement. On April 8, 2024, Aterian, Inc. (the “Company”) received written notice (the “Compliance Notice”) from Nasdaq informing the Company that it has regained compliance with Nasdaq Listing Rule 5450(a)(1) which requires that companies listed on Nasdaq maintain a minimum bid price of $1.00 per share. Nasdaq notified the Company in the Compliance Notice that from March 22, 2024 to April 5, 2024 the closing bid price of the Company’s common stock had been $1.00 per share or greater and, accordingly, the Company had regained compliance with Nasdaq Listing Rule 5450(a)(1) and that the matter was now closed.
In the future, if our Common Stock fallsfails belowto regain the continuedminimum listingclosing standardbid price of $1.00 per share or otherwise fails to satisfy any of the Nasdaq continued listing requirements, and if we are unable to cure such deficiency during any subsequent cure period, our Common Stock could be delisted from the Nasdaq. If our Common Stock ultimately were to be delisted for any reason, we could face significant material adverse consequences, including:
The proposed Nasdaq minimum market value rule could result in the immediate suspension and delisting of our common stock without a cure period.
On January 13, 2026, Nasdaq filed a proposed rule change with the SEC (File No. SR-NASDAQ-2026-004) that would establish a new continued listing requirement. Under the proposal, companies listed on the Nasdaq Global and Capital Markets would be required to maintain a minimum Market Value of Listed Securities (“MVLS”) of at least $5 million.
Management's Discussion & Analysis (MD&A)
Removed heading “Research and Development Expenses”
Removed heading “Impairment loss on Intangibles”
Removed heading “Change in fair market value of warrant liabilities”
Largest changes
“Our 2025 results have been impacted by recent changes to U.S. trade policy, including the imposition and expansion of tariffs on imports, specifically from China. A substantial portion of our products are sourced from China, and as such, the increased tariff rates have materially raised our cost of goods sold and have placed pressure on our margins. …”see in full comparison
“The Company has completed two restructuring programs over the last two years to reduce operating costs and right size the workforce to align with the scale of our streamlined operations. In addition, we have reduced our SKU count to focus on profitable products that are core to the Company’s strategy. During February 2024, we extended the term with Midcap Credit Facility until December 2026 (See Note 9, Credit Facility, Term Loans and Warrants) and amended key terms which will add more flexibility to liquidity and strengthen our balance sheet. …”see in full comparison
“Trade Policy—During 2025, the U.S. government announced a series of new tariff policies affecting imports from several countries, including China. While these actions impact a range of global trade flows, the new tariffs targeting imports from China are the most significant for our business. As a result of these tariffs, we experienced an increase in our cost of goods sold during the year ended December 31, 2025. In response, we implemented targeted price increases across affected product categories to partially offset the higher input costs. …”see in full comparison
“During 2025, the U.S. government announced a series of new tariff policies affecting imports from several countries, including China. While these actions impact a range of global trade flows, the new tariffs targeting imports from China are the most significant for our business. As a result of these tariffs, we experienced an increase in our cost of goods sold during the year ended December 31, 2025. In response, we implemented targeted price increases across affected product categories to partially offset the higher input costs. …”see in full comparison
“In December 2025, the Company announced that its Board of Directors had initiated a process to explore strategic alternatives to maximize shareholder value. This announcement constituted a triggering event under ASC 350, Intangibles—Goodwill and Other, requiring the Company to perform an interim impairment assessment of its definite-lived brand intangible assets. The Company estimated the fair value of its definite-lived brand assets using market-based inputs, including indicative valuations from market participants obtained during the strategic alternative process. …”see in full comparison
“Gross profit decreased to 56.8% for the year ended December 31, 2025 from 62.1% for the year ended December 31, 2024. The decrease in gross profit was due primarily to product mix, as well as higher cost of goods sold resulting from the impact of newly implemented tariffs, partially offset by the benefit of price increases taken to mitigate these costs. …”see in full comparison
Full comparison: every changed paragraph (62)
We are a technology-enabled consumer products company that predominantly operates through online retail channels such as Amazon, Walmart, and Target and its own direct to consumer websites. The Company operates its owned brands, which were either incubated or purchased, selling products in multiple categories, including home and kitchen appliances, kitchenware, air quality appliances, health and beauty products and essential oils.
During the year ended December 31, 2023, the Company enacted a strategy to reduce the number of SKUs it sells and is no longer pursuing future sales of SKUs that are either not profitable or not core to the Company’s strategy.
Net Revenue—We derive our revenue from the sale of consumer products, primarily in the U.S. We sell products directly to consumers through online retail channels and through wholesale channels. Direct-to-consumer sales (i.e., direct net revenue), which is currently the majority of our revenue, is done through various online retail channels. We sell on Amazon.com, Walmart.com, Target.com and our own websites, with substantiallythe alllarge majority of our sales being made through Amazon.com. For all of our sales and distribution channels, revenue is recognized when control of the product is transferred to the customer (i.e., when our performance obligation is satisfied), which typically occurs at the shipment date.
During 2025, the U.S. government announced a series of new tariff policies affecting imports from several countries, including China. While these actions impact a range of global trade flows, the new tariffs targeting imports from China are the most significant for our business. As a result of these tariffs, we experienced an increase in our cost of goods sold during the year ended December 31, 2025. In response, we implemented targeted price increases across affected product categories to partially offset the higher input costs. These pricing actions, however, contributed to a decline in unit volumes as consumer demand responded to the higher retail prices. We have implemented a range of mitigation strategies to address the impact of these tariffs on our supply chain and margins. These efforts include diversifying sourcing outside of China, renegotiating supplier terms, redesigning certain products to reduce tariff exposure, and implementing selective price increases where appropriate. We continue to evaluate additional structural and operational measures to further reduce tariff-related exposure.
Research and Development Expenses—Research and development expenses include compensation and employee benefits for technology development employees, travel-related costs and fees paid to outside consultants related to the development of our intellectual property. During the year ended December 31, 2024, the Company shifted its technology platform away from a fully internally developed model to an integrated third party model. For the year ended December 31, 2024, technology and employee related costs have been presented in general and administrative costs on the Consolidated Statement of Operations.
General and Administrative Expenses—General and administrative expenses include cash and stock compensation and employee benefits for executive management, finance administration, legal, technology, and human resources, facility costs, insurance, travel, professional service fees, and other general overhead costs, including the costs of being a public company. For the year ended December 31, 2023, technology and employee-related costs were classified within research and development expenses. For the year ended December 31, 2024, these costs have been presented within general and administrative expenses.
Net revenue decreased $43.5$30.1 million, or 30.5%,30.4%, during the year ended December 31, 20242025 to $99.1$69.0 million, compared to $142.6$99.1 million for the year ended December 31, 2023.2024. The decrease in net revenue was primarily attributable to a decrease in direct net revenue of $41.1$31.6 million, or 29.7%,32.4%, related to the newly implemented tariffs which wasincreased primarilyour relatingcost of goods sold, prompting us to raise prices to mitigate the impact. These pricing actions, combined with the broader challenging macroeconomic environment, led to a reduction in ourunit productvolume offeringas dueconsumer todemand oursoftened SKUat rationalization,elevated competitiveprice pricing pressure and other competitive dynamics on marketplaces.levels.
Every category of business had a reduction in sales compared to the prior year primarily related to the newly implemented tariffs which increased our cost of goods sold, prompting us to raise prices to mitigate the impact. These pricing actions, combined with the broader challenging macroeconomic environment, led to a reduction in unit volume as consumer demand softened at elevated price levels.
Every category of business had a reduction in sales compared to the prior year primarily relating to the SKU rationalization that took place during the year ended December 31, 2024 and softness in consumer demand due the macroeconomic environment. In addition, there were competitive pricing pressures coupled with certain key products losing their prominent positioning on Amazon due to competition, specifically in the kitchen appliance businesses. These factors resulted in a reduction of units sold and a reduction in certain retail sales prices.
Cost of goods sold decreased by $34.7$7.7 million fromto $72.3$29.8 million for the year ended December 31, 20232025 tofrom $37.6 million for the year ended December 31, 2024 primarily from reduced sales volume. The decrease in cost of goods sold was primarily attributable to a decrease of $27.6$9.5 million in cost of goods sold from our direct businessesbusinesses, andpartially aoffset decreaseby an increase of $7.1$1.8 million in cost of goods sold from our wholesale businesses.
Gross profit decreased to 56.8% for the year ended December 31, 2025 from 62.1% for the year ended December 31, 2024. The decrease in gross profit was due primarily to product mix, as well as higher cost of goods sold resulting from the impact of newly implemented tariffs, partially offset by the benefit of price increases taken to mitigate these costs. During the year ended December 31, 2025, the Company accrued approximately $0.4 million for estimated costs associated with a product recall and related remediation activities involving certain houseware appliances that the Company ceased selling during the year ended December 31, 2024. These costs are included in cost of goods sold on the Consolidated Statement of Operations.
Gross profit increased from 49.3% for the year ended December 31, 2023 to 62.1% for the year ended December 31, 2024. The increase in gross profit was primarily due to a reduction in liquidation of high priced excess inventory at reduced prices compared to the prior year.
Sales and distribution variable expenses which included e-commerce platform commissions, online advertising and logistics expenses (i.e., variable sales and distribution expense),expenses, decreased to $41.5 million for the year ended December 31, 2025 from $56.0 million for the year ended December 31, 2024 from $81.9 million for the year ended December 31, 2023.2024. This decrease is primarily attributable to the decrease in the volume of products sold during the year ended December 31, 2024,2025, as our e-commerceecommerce platform commissions, online advertising, selling and logistics expenses decreased to $44.6$32.4 million forduring the year ended December 31, 20242025 as compared to $68.9$44.6 million in the prior year.year period.
Our sales and distribution fixed costs (e.g., salary and office expenses) including stock-based compensation decreased to $9.0 million for the year ended December 31, 2025, from $11.4 million for the year ended December 31, 2024, from $13.0 million for the year ended December 31, 2023.2024. This decrease is primarily attributable to alower decreasestock-compensation inexpense of $1.4 million, lower headcount expense of $1.6$1.3 million, aand decreaselower in stock-based compensationmiscellaneous expenses of $0.7 million and a decrease in restructuring costs of $0.4$0.6 million, partially offset by anhigher increaserestructuring in expenses related to a new Amazon Seller Programcosts of $0.8$0.9 million.
As a percentage of net revenue, sales and distribution expenses decreasedincreased to 60.1% for the year ended December 31, 2025, from 56.5% for the year ended December 31, 2024, from 57.5% for the year ended December 31, 2023.2024. E-commerce platform commissions, online advertising, selling and logistics expenses included within sales and distribution expenses, as a percentage of net revenue, were 47.0% for the year ended December 31, 2025 as compared to 45.0% for the year ended December 31, 2024 as compared to 48.3% for the year ended December 31, 2023.2024. This decreaseincrease in sales and distribution expenses as a percentage of revenue is primarily due to product mix and aan decreaseincrease in logisticsmarketing costs.
Research and Development Expenses
During the year ended December 31, 2024, the Company shifted its technology platform away from a fully internally developed model to an integrated third party model. Therefore, beginning with the year ended December 31, 2024, technology and employee related costs have been presented in general and administrative costs on the Consolidated Statements of Operations.
The decrease in general and administrative expenses was primarily the result of a decrease of $2.3$4.0 million in depreciationstock-compensation and amortization,expense, a decrease of $0.9$1.6 million in insuranceheadcount expenses,expense, and a decrease of $0.6$0.4 million in professionalother fees,miscellaneous costs, partially offset by an increase of $0.5 million in stock-compensationrestructuring expense of $1.2 million.costs.
Impairment loss on Intangibles
Certain asset groups experienced a significant decrease in sales and contribution margin during the year ended December 31, 2023. This was considered a triggering event for the year ended December 31, 2023. Based on the analysis of comparing the undiscounted cash flow to the carrying value of the asset group, one group tested indicated that the assets may not be recoverable. There was no impairment loss on intangibles during the year ended December 31, 2024.
The decrease in interest expense, net of $0.5$0.1 million is primarily relatingrelated to a decrease in interest expense of $0.9$0.3 million due to lower average borrowings and ana increasedecrease in interest income of $0.4$0.2 million compared to the prior period due to lower average borrowings.period.
In December 2025, the Company announced that its Board of Directors had initiated a process to explore strategic alternatives to maximize shareholder value. This announcement constituted a triggering event under ASC 350, Intangibles—Goodwill and Other, requiring the Company to perform an interim impairment assessment of its definite-lived brand intangible assets. The Company estimated the fair value of its definite-lived brand assets using market-based inputs, including indicative valuations from market participants obtained during the strategic alternative process. Based on this assessment, the Company determined that the carrying value of certain brand intangible assets exceeded their estimated fair value. Accordingly, the Company recorded a non-cash impairment charge of approximately $3.8 million during the fourth quarter of 2025. The impairment charge is included within impairment loss on intangibles on the Consolidated Statement of Operations.
Change in fair market value of warrant liabilities
The 20232025 and 2024 activity is related to the change in fair market value of the warrant liabilities from the common stock warrants from our March 2022 equity raise of capital. The change in fair value of warrant liabilities during the year ended December 31, 20242025 primarily relates to the reduced share price compared to the prior period.
Net cash used in operating activities was $13.4$10.9 million for the year ended December 31, 2023, resulting2025, primarily fromdriven ourby net cash losses from operations of $28.9$10.8 million,million offsetand bya an$0.1 inflowmillion outflow from changes in working capitalcapital, ofmainly $15.5related million fromto changes in accounts receivable, purchases of inventoryinventory, and payments of accounts payable. The reduction of gross inventory of $26.4 million from December 31, 2022 to December 31, 2023 primarily relates to the liquidation of high priced excess inventory and a reduction of purchases for the period.
Net cash used in investing activities was $0.2$0.1 million for the year ended December 31, 2023, resulting2025, primarily fromrelated the remaining payment forto the purchase of Step and Gofixed assets which was acquired during the threeyear months endingended December 31, 2022.2025.
For the year ended December 31, 2023,2025, cash used in financing activities of $11.1$2.5 million primarily from the net repayments for our MidCap credit facility of $10.4$2.9 million,million and repayment of sellernotes notespayable of $0.6$0.1 millionmillion, andpartially offset by net paymentsproceeds offrom insurance financing of $0.1$0.5 million.
As a company in the early commercialization stage of its lifecycle, we are subject to inherent risks and uncertainties associated with the development of our enterprise. In this regard, substantially all of our efforts to date have been devoted to the development and sale of our products in the marketplace, which includes our investment in organic growth at the expense of short-term profitably,profitability, our investment in incremental growth through mergers & acquisitions (“M&A strategy”), our recruitment of management and technical staff, and raising capital to fund the development of our enterprise. As a result of these efforts, we have incurred significant losses and negative cash flows from operations since our inception and expect to continue to incur such losses, at a reduced level, and negative cash flows in the near term. However, we anticipate improvements over time as we work toward achieving a sustainable scale of profitability. We have also experienced declining revenues due to macroeconomic factors, including increased interest rates and reduced consumer discretionary spending, and other factors, and we intend to focus our efforts on a more limited number of products. In addition, our recent financial performance has been adversely impacted by inflationary pressures andpressures, reduced consumer spending.spending, and tariffs.
Our 2025 results have been impacted by recent changes to U.S. trade policy, including the imposition and expansion of tariffs on imports, specifically from China. A substantial portion of our products are sourced from China, and as such, the increased tariff rates have materially raised our cost of goods sold and have placed pressure on our margins. While we have actively pursued mitigation strategies, including supplier negotiations, selective price adjustments, geographic diversification of sourcing and fixed cost reductions, there is significant uncertainty regarding the effectiveness of these mitigation efforts. Moreover, any future changes in tariff policy or implementation of additional trade barriers could further impact our business. These trade-related uncertainties, in conjunction with our existing financial condition, raise concern about our ability to remain in compliance with financial covenants under our credit agreements and may adversely impact our liquidity position.
The Company has completed two restructuring programs over the last two years to reduce operating costs and right size the workforce to align with the scale of our streamlined operations. In addition, we have reduced our SKU count to focus on profitable products that are core to the Company’s strategy. During February 2024, we extended the term with Midcap Credit Facility until December 2026 (See Note 9, Credit Facility, Term Loans and Warrants) and amended key terms which will add more flexibility to liquidity and strengthen our balance sheet. In consideration of these factors, the Company will monitor profitability and cash flow over the next several quarters to evaluate our ability to continue as a going concern.
Nasdaq Listing—On AprilDecember 24,9, 2023,2025, weAterian, Inc. (the “Company”) received a letter from the Listing Qualifications Staff of The Nasdaq Stock Market LLC (“Nasdaq”) indicating that, based upon the closing bid price of ourthe Company’s common stockstock, par value $0.0001 per share (“Common Stock”), for the last 30 consecutive business days, the Company is not currently in compliance with the requirement to maintain a minimum bid price of $1.00 per share for continued listing on The Nasdaq Capital Market, as set forth in Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Notice”). The Bid Price Notice provided a compliance period of 180 calendar days from the date of the Bid Price Notice, or until October 23, 2023, to regain compliance with the minimum closing bid requirement, pursuant to Nasdaq Listing Rule 5810(c)(3)(A). Following a request we made on October 13, 2023, on October 24, 2023, we received a letter from Nasdaq granting the Company an additional 180 days, or until April 22, 2024, to regain compliance with the minimum closing bid requirement (the “Extension Notice”).
The Bid Price Notice has no immediate effect on the continued listing status of the Common Stock on The Nasdaq Capital Market, and, therefore, the Company's listing remains fully effective.
The Company is provided a compliance period of 180 calendar days from the date of the Bid Price Notice, or until June 8, 2026, to regain compliance with the minimum closing bid requirement, pursuant to Nasdaq Listing Rule 5810(c)(3)(A). If at any time before June 8, 2026, the closing bid price of the Common Stock closes at or above $1.00 per share for a minimum of 10 consecutive business days, subject to Nasdaq’s discretion to extend this period pursuant to Nasdaq Listing Rule 5810(c)(3)(H) to 20 consecutive business days, Nasdaq will provide written notification that the Company has achieved compliance with the minimum bid price requirement, and the matter would be resolved. If the Company does not regain compliance during the compliance period ending June 8, 2026, then Nasdaq may grant the Company a second 180 calendar day period to regain compliance, provided the Company meets the continued listing requirement for market value of publicly-held shares and all other initial listing standards for The Nasdaq Capital Market, other than the minimum closing bid price requirement, and notifies Nasdaq of its intent to cure the deficiency during the second compliance period.
The Company will continue to monitor the closing bid price of its Common Stock and seek to regain compliance with all applicable Nasdaq requirements within the allotted compliance periods. If the Company does not regain compliance within the allotted compliance periods, including any extensions that may be granted by Nasdaq, Nasdaq will provide notice that the Common Stock will be subject to delisting. The Company would then be entitled to appeal that determination to a Nasdaq hearings panel. There can be no assurance that the Company will regain compliance with the minimum bid price requirement during the 180-day compliance period, secure a second period of 180 days to regain compliance or maintain compliance with the other Nasdaq listing requirements.
Nasdaq notified the Company in the Compliance Notice that from March 22, 2024 to April 5, 2024 the closing bid price of the Company’s common stock had been $1.00 per share or greater and, accordingly, the Company had regained compliance with Nasdaq Listing Rule 5450(a)(1) and that the matter was now closed.
On August 11, 2023, Aterian's shareholders approved discretionary authority to our Board to (A) amend our Amended and Restated Certificate of Incorporation to effect one or more consolidations of the issued and outstanding shares of our common stock, par value $0.0001 per share, pursuant to which the shares of Common Stock would be combined and reclassified at ratios within the range from 1-for-2 up to 1-for-30 and (B) determine whether to arrange for the disposition of fractional interests by stockholders entitled thereto, to pay in cash the fair value of fractions of a share of Common Stock as of the time when those entitled to receive such fractions are determined, or to entitle stockholders to receive from our transfer agent, in lieu of any fractional share, the number of shares of Common Stock rounded up to the next whole number, and to amend our Amended and Restated Certificate of Incorporation in connection therewith.
On March 20, 2024, the Company filed a Certificate of Amendment to its Amended and Restated Certificate of Incorporation of the Company with the Secretary of State of Delaware (the “Certificate of Amendment”) to effect a 1-for-12 reverse stock split (the “Reverse Stock Split”) of the shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock”). The Certificate of Amendment did not decrease the number of authorized shares of Common Stock or change the par value thereof. No fractional shares were issued in connection with the Reverse Stock Split. Any fractional shares that would otherwise have resulted from the Reverse Stock Split were rounded up to the nearest whole number. The Reverse Stock Split impacted all holders of the Common Stock proportionally and did not impact any stockholder’s percentage ownership of Common Stock (except to the extent the Reverse Stock Split results in any stockholder owning fractional shares).
The Common Stock began trading on a Reverse Stock Split-adjusted basis on the Nasdaq on March 22, 2024. All share and per share data in this Annual Report on Form 10-K have been retroactively adjusted to reflect the Reverse Stock Split.
Restructuring—On May 9, 2023, the Company announced a plan to reduce expenses by implementing a reduction in its current workforce impacting approximately 50 employees and 15 contractors, primarily in the Philippines. The Company recognized restructuring charges of $1.6 million for the year ended December 31, 2023.
On February 8, 2024, the Company committed to a fixed cost-cutting plan, including a reduction in workforce which resulted in the termination of approximately 17 employees and 26 contractors globally. The Company recognized restructuring charges of $0.6 million for the year ended December 31, 2024, respectively.
On March 25, 2025 (the “Third Amendment Effective Date”) the Company entered into Amendment No. 3 (the “3rd Amendment”) to the Credit Agreement. Material changes contained in the 3rd Amendment include, among other things, adding repurchase of the Company’s common stock of up to $1.5 million per year, consisting of up to $1.5 million in repurchases allowed during the period from March 25, 2025 through December 22, 2025, and up to an additional $1.5 million allowed during the period from December 23, 2025 through the maturity date, subject to certain liquidity and compliance conditions.
On August 29, 2025 (the “Fourth Amendment Effective Date”) the Company entered into Amendment No. 4 to the Credit Agreement. Material changes contained in Amendment No. 4 include a reduction to the Minimum Credit Party Liquidity covenant to $5.0 million, upon the Company’s delivery of a Liquidity Certificate evidencing liquidity of at least $6.8 million, the Minimum Liquidity Covenant Reduction Period will terminate and the covenant will increase to $6.8 million thereafter, and an Availability Reserve of $2.8 million during the Minimum Liquidity Covenant Reduction Period and $1.0 million thereafter.
On March 13, 2026, the Company and its subsidiaries entered into Amendment No. 5 to its Credit and Security Agreement with MidCap Funding IV Trust. Under the terms of the amendment, the Company’s minimum liquidity covenant was reduced from $5.0 million to $3.5 million during the Minimum Liquidity Covenant Reduction Period. This reduction period commenced on the Fifth Amendment Effective Date and is subject to extension at the Company's option on a weekly basis through May 9, 2026, provided it remains in compliance with certain fee payment obligations.
On March 25, 2025 (the “Third Amendment Effective Date”) the Company entered into Amendment No. 3 (the “Amendment”) to that certain Credit and Security Agreement, dated as of December 22, 2021 (as amended from time to time, the “Credit Agreement”) by and among the Company, certain of its subsidiaries thereto, the lenders thereto (the “Lenders”) and Midcap Funding IV Trust, as administrative agent. Capitalized terms used in this section and not otherwise defined shall have the meanings assigned in the Credit Agreement. Material changes contained in the Amendment include among other things, adding repurchase of the Company’s common stock as a permitted distribution subject to certain conditions:
The outstanding balance on the MidCap credit facility as of December 31, 20232025 and December 31, 2024 was $11.1$4.3 million and $6.9 million, respectively. The Company didhad not$0.2 have anymillion availability on the Midcap credit facility as of December 31, 2024.2025. We are in compliance with the financial covenants contained within the Credit Agreement as of December 31, 2024.2025.
Share Repurchase—On March 14, 2025, the Board of Directors authorized a share repurchase program to acquire up to $3.0 million of the Company’s common stock. The Company may purchase common stock on the open market, through privately negotiated transactions, or by other means including through the use of trading plans intended to qualify under Rule 10b-18 under the Securities Exchange Act of 1934, as amended, in accordance with applicable securities laws and other restrictions. The timing and total amount of stock repurchases will depend upon business, economic and market conditions, corporate and regulatory requirements, prevailing stock prices, and other considerations. The share repurchase program will havehas a term of 24 months and may be suspended or discontinued at any time and does not obligate the company to acquire any amount of common stock. The objective of this program is to repurchase shares of common stock opportunistically when management believes that the Company’s stock is trading below the Company’s determination of long-term fair value. As of May 2, 2025, the Company had temporarily suspended its share repurchase program.
Trade Policy—During 2025, the U.S. government announced a series of new tariff policies affecting imports from several countries, including China. While these actions impact a range of global trade flows, the new tariffs targeting imports from China are the most significant for our business. As a result of these tariffs, we experienced an increase in our cost of goods sold during the year ended December 31, 2025. In response, we implemented targeted price increases across affected product categories to partially offset the higher input costs. These pricing actions, however, contributed to a decline in unit volumes as consumer demand responded to the higher retail prices. We have implemented a range of mitigation strategies to address the impact of these tariffs on our supply chain and margins. These efforts include diversifying sourcing outside of China, renegotiating supplier terms, redesigning certain products to reduce tariff exposure, and implementing selective price increases where appropriate. We have implemented a range of mitigation strategies to address the impact of these tariffs on our supply chain and margins. These efforts include diversifying sourcing outside of China, renegotiating supplier terms, redesigning certain products to reduce tariff exposure, and implementing selective price increases where appropriate. We continue to evaluate additional structural and operational measures to further reduce tariff-related exposure.
Emerging Growth Company Status—As of December 31, 2024, we no longer qualify as an Emerging Growth Company ("EGC") due to the expiration of the five-year eligibility period under the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"). Although the Company is no longer an EGC, we are still eligible for certain scaled disclosure accommodations, including reduced executive compensation disclosures and exemptions from some of the enhanced financial reporting requirements applicable to larger registrants.
As used herein, Contribution margin represents gross profit less e-commerce platform commissions, online advertising, selling and logistics expenses (included in sales and distribution expenses). As used herein, Contribution margin as a percentage of net revenue represents Contribution margin divided by net revenue. As used herein, EBITDA represents net loss plus depreciation and amortization, interest expense, net and provision for income taxes. As used herein, Adjusted EBITDA represents EBITDA plus stock-based compensation expense, changes in fair-market value of warrant liabilities, impairment on intangibles, product remediation costs, restructuring expenses, reserve on barter credits, and other expenses, net. As used herein, Adjusted EBITDA as a percentage of net revenue represents Adjusted EBITDA divided by net revenue. Contribution margin, EBITDA and Adjusted EBITDA do not represent and should not be considered as alternatives to loss from operations or net loss, as determined under GAAP.
In the reconciliation to calculate contribution margin, we add e-commerce platform commissions, online advertising, selling and logistics expenses (“sales and distribution variable expense”) to gross profit to inform users of our financial statements of what our product profitability is at each period prior to fixed costs (such as sales and distribution expenses such as salaries as well as research and development expenses and general administrative expenses). By excluding these fixed costs, we believe this allows users of our financial statements to understand our products performance and allows them to measure our products performance over time.
Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles.GAAP. The preparation of these Consolidated Financial Statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the related disclosures. We base our estimates on historical experience and on other assumptions that we believe to be reasonable under the circumstances. These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Warrant Liabilities—The fair values of the outstanding warrants were measured using the Black Scholes model. Inputs used to determine estimated fair value of the warrant liabilities include the fair value of the underlying stock at the valuation date, the term of the warrants, and the expected volatility of the underlying stock. The significant unobservable input used in the fair value measurement of the warrant liabilities is the estimated term of the warrants. Generally, increases (decreases) in the fair value of the underlying stock and estimated term result in a directionally similar impact to the periodic fair value measurement of the outstanding warrant liabilities, and are recorded within the Change in fair market value of warrant liabilities line item on the statement of operations.
The fair value of warrant liabilities was $1.0 millionzero and $0.1 million at December 31, 20232025 and 2024, which is included in accrued expenses and other current liabilities on the Consolidated Balance Sheets.
In December 2025, the Company announced that its Board of Directors had initiated a process to explore strategic alternatives to maximize shareholder value. This announcement constituted a triggering event under ASC 350, Intangibles—Goodwill and Other, requiring the Company to perform an interim impairment assessment of its definite-lived brand intangible assets. The Company estimated the fair value of its definite-lived brand assets using market-based inputs, including indicative valuations from market participants obtained during the strategic alternative process. Based on this assessment, the Company determined that the carrying value of certain brand intangible assets exceeded their estimated fair value.
Accordingly, the Company recorded a non-cash impairment charge of approximately $3.8 million during the fourth quarter of 2025. The impairment charge is included within impairment loss on intangibles on the Consolidated Statement of Operations. As of December 31, 2025, the remaining balance of intangible assets was $4.4 million.
On March 20, 2023, the Company made certain leadership changes in our essential oil business resulting in a change in strategy and outlook for the business which resulted in a reduced portfolio offering. This reduction in the portfolio was impactful to our essential oil business's future revenues and profitability and as a result the Company made revisions to our internal forecasts. The Company concluded that this change was an interim triggering event for the three months ending March 31, 2023 indicating the carrying value of our essential oil business's long-lived assets including trademarks may not be recoverable. Accordingly, the Company performed an interim impairment test of the trademark and assessed the recoverability of the related intangible assets by using level 3 inputs and comparing the carrying value of an asset group to the net undiscounted cash flow expected to be generated. The recoverability test indicated that certain definite-live trademark intangible assets were impaired. The Company concluded the carrying value of the trademark exceeded its estimated fair value which was determined utilizing the relief-from-royalty method to determine discounted projected future cash flows which resulted in an impairment charge. The Company recorded an intangible impairment charge of $16.7 million during the three months ending March 31, 2023 within impairment loss on intangibles on the consolidated statement of operations.
During the three months ended June 30, 2023, the Company had a substantial decrease in its market capitalization, primarily relating to a decrease in share price. Further, the Company continued to see reduced net revenues across its portfolio due primarily to the then current macroeconomic environment reducing demand for consumer discretionary goods. Finally, during the three months ending June 30, 2023, the Company implemented a strategy of rationalizing certain less profitable products and reducing its product offering, specifically related to its kitchen appliance products. As a result of this rationalization, along with the reduced demand for its products, the Company made certain revisions to its internal forecasts for its Paper business and Kitchen appliance business. The Company concluded that these factors were an interim triggering event for the three months ending June 30, 2023 indicating the carrying value of our Paper and Kitchen appliance business’s long-lived assets, including trademarks, may not be recoverable. Accordingly, the Company performed an interim impairment test of the trademark and assessed the recoverability of the related intangible assets by using level 3 inputs and comparing the carrying value of an asset group to the net undiscounted cash flow expected to be generated. The recoverability test indicated that certain definite-live trademark intangible assets were impaired. The Company concluded the carrying value of the trademark exceeded its estimated fair value which was determined utilizing the relief-from-royalty method to determine discounted projected future cash flows which resulted in an impairment charge. The Company recorded an intangible impairment charge of $22.8 million for the Paper business and Kitchen appliance business during the three months ending June 30, 2023 within impairment loss on intangibles on the consolidated statement of operations.
During the three months ended December 31, 2023, the Company continued to see reduced revenue in its paper business resulting in certain revisions to its internal forecasts. Due to these revisions in forecast due to reduced demand, the Company concluded this was an interim triggering event for the three months ending December 31, 2023 indicating the carrying value of our Paper business’s long-lived assets, including trademarks, may not be recoverable. Accordingly, the Company performed an interim impairment test of the trademark and assessed the recoverability of the related intangible assets by using level 3 inputs and comparing the carrying value of an asset group to the net undiscounted cash flow expected to be generated. The recoverability test indicated that certain definite-live trademark intangible assets were impaired. The Company concluded the carrying value of the trademark exceeded its estimated fair value which was determined utilizing the relief-from-royalty method to determine discounted projected future cash flows which resulted in an impairment charge. The Company recorded an intangible impairment charge of $0.3 million for the Paper business during the three months ending December 31, 2023 within impairment loss on intangibles on the consolidated statement of operations.
These fair value measurements require significant judgements using Level 3 inputs, such as discounted projected future cash flows, which are not observable from the market, directly or indirectly. There is uncertainty in the projected future cash flows used in the Company’s impairment analysis, which requires the use of estimates and assumptions. If actual performance does not achieve the projections, or if the assumptions used in the analysis change in the future, the Company may be required to recognize additional impairment charges in future periods. Key assumptions in the impairment models included a discount and royalty rate. The Company believes our procedures for determining fair value are reasonable and consistent with current market conditions as of December 31, 2024.
While we believe our conclusions regarding the estimates of recoverability of our asset groupings are appropriate, these estimates are subject to uncertainty and by nature include judgments and estimates regarding various factors. These factors include the rate and extent of growth in the markets that our asset groups serve, the realization of future sales price and volume increases, fluctuations in exchange rates, fluctuations in price and availability of key raw materials, fluctuations in discount rate, future operating efficiencies, and strategic alternative processes.
What changed in the latest 10-Q
Risk Factors
New heading “The completion of the Preferred Stock Sale resulted in a change in control, and a single controlling stockholder now exercises overwhelming control over corporate strategy and stockholder decisions.”
New heading “U.S. government trade actions, including the expiration of Section 122 tariffs and the transition to alternative tariff authorities, create ongoing uncertainty that could adversely affect our remaining operations.”
Removed heading “The Aterian Transactions are subject to significant conditions, including stockholder approval; failure to complete these transactions could materially harm our business and our ability to continue as a going concern.”
Removed heading “The strategic investment made by David E. Lazar will result in a change in control and significant dilution of existing stockholders, giving a single investor outsized influence over our corporate strategy.”
Removed heading “Our Credit Facility contains various restrictions and covenants that could limit our operating flexibility, and we may be unable to refinance or repay our Credit Facility. We also rely on credit export insurance for our vendors in China, the unavailability of which could have a material adverse impact on our business, operating results, financial condition, and cash flows.”
Removed heading “U.S. government trade actions could have a material adverse effect on our business, financial position, and results of operation.”
Largest changes
“On April 27, 2026, we entered into an Asset Purchase Agreement with Trademark Global, LLC and a Securities Purchase Agreement with David E. Lazar (collectively, the "Aterian Transactions"); however, there can be no assurance that we will obtain the necessary stockholder approvals or that other closing conditions will be satisfied. These transactions are subject to significant conditions, including the receipt of stockholder approval for the Asset Sale and the issuance of Common Stock upon conversion of the Preferred Stock, as well as our ability to achieve specific contribution margin targets. …”see in full comparison
“Our Credit Facility contains various restrictions and covenants that could limit our operating flexibility, and we may be unable to refinance or repay our Credit Facility. We also rely on credit export insurance for our vendors in China, the unavailability of which could have a material adverse impact on our business, operating results, financial condition, and cash flows.”see in full comparison
“The Aterian Transactions are subject to significant conditions, including stockholder approval; failure to complete these transactions could materially harm our business and our ability to continue as a going concern.”see in full comparison
“On July 22, 2026, the Securities and Exchange Commission (“SEC”) approved a proposed rule change filed by The Nasdaq Stock Market LLC (File No. SR-NASDAQ-2026-004, as modified by Amendment No. 1) establishing a new continued listing requirement under Nasdaq Listing Rules 5450(a)(3) and 5550(a)(6). Under the rule as approved, companies listed on the Nasdaq Global and Capital Markets are required to maintain a minimum Market Value of Listed Securities (“MVLS”) of at least $5.0 million. …”see in full comparison
Oursee in full comparisongrowth strategy has resulted inongoing operating losses and negative cash flowsfrom operations thatraise substantial doubt about our ability to continue as a going concern. Our independent registered public accounting firm included an explanatory paragraph in its report on our consolidated financial statementsas of andfor the fiscal year ended December 31, 2025,that raisedexpressing substantial doubtaboutregarding our ability to continue as a going concern.IfOnweJuly 17, 2026, in connection with the closing of the Aterian Transactions, all outstanding indebtedness under our MidCap credit facility was repaid in full and the facility was terminated. However, if our remaining capital resources areunabledepletedtofastercontinuethanas a going concernanticipated ormaintain our financial covenants with our lenders, we may have to make significant changes to our operating plan, such as delay expenditures, reduce investments in new products, reduce our sales and distribution infrastructure, or significantly reduce our business. Further,if weare unablefail tocontinue asestablish agoingprofitableconcern,ongoing business model, we may be forced toliquidatemake significant alterations to ourassetsoperatingandplans, delay growth expenditures, further reduce operating infrastructure, or liquidate remaining assets. In the event of a liquidation or dissolution, the valueswe receiverealized for our remaining assetsin liquidation or dissolutioncould be significantly lower than the carrying values reflected in ourfinancialCondensedstatements.Consolidated Financial Statements.
“Throughout 2025, the U.S. trade environment underwent a period of unprecedented volatility characterized by the implementation of a broad “reciprocal” tariff regime. Utilizing the International Emergency Economic Powers Act (IEEPA), the administration imposed steep duties on nearly all imported goods, including a baseline 10% global tariff and targeted rates on major trading partners like China that reached historic highs before a late-year temporary truce. …”see in full comparison
Full comparison: every changed paragraph (58)
The completion of the Preferred Stock Sale resulted in a change in control, and a single controlling stockholder now exercises overwhelming control over corporate strategy and stockholder decisions.
On July 17, 2026, we completed the second closing under the Securities Purchase Agreement with David E. Lazar, resulting in the issuance of Series AAA Preferred Stock and a fundamental change in control of the Company. Upon full conversion of the Series AA and Series AAA Preferred Stock, Mr. Lazar controls approximately 95% of our fully diluted share capitalization. As a result, existing common stockholders have experienced immediate, severe dilution of their equity interests and voting power.
The Aterian Transactions are subject to significant conditions, including stockholder approval; failure to complete these transactions could materially harm our business and our ability to continue as a going concern.
On April 27, 2026, we entered into an Asset Purchase Agreement with Trademark Global, LLC and a Securities Purchase Agreement with David E. Lazar (collectively, the "Aterian Transactions"); however, there can be no assurance that we will obtain the necessary stockholder approvals or that other closing conditions will be satisfied. These transactions are subject to significant conditions, including the receipt of stockholder approval for the Asset Sale and the issuance of Common Stock upon conversion of the Preferred Stock, as well as our ability to achieve specific contribution margin targets. If the Aterian Transactions are not consummated, we will have incurred substantial legal, accounting, and advisory fees without the benefit of the $25 million in total anticipated gross proceeds, and we may be required to pay a termination fee of $1.1 million and reimburse up to $0.6 million of expenses under certain circumstances. Furthermore, our current liquidity position and our ability to remain in compliance with the covenants of our MidCap Credit Facility are significantly dependent on the closing of these transactions. A failure to close would likely impair our ability to continue as a going concern, and during the pendency of these transactions, we face ongoing operational risks including potential disruptions to business relationships with customers such as Amazon, Walmart, and Target, as well as broader macroeconomic hurdles.
The strategic investment made by David E. Lazar will result in a change in control and significant dilution of existing stockholders, giving a single investor outsized influence over our corporate strategy.
Existing stockholders will experience immediate and substantial dilution and a change in control as a result of the Aterian Transactions. Upon the Second SPA Closing and the subsequent conversion of the Series AA and Series AAA Preferred Stock, Mr. Lazar is expected to hold approximately 95.13% of our fully diluted share capitalization. This extreme concentration of ownership will givegives Mr. Lazar significantlymajority outsizedvoting influencecontrol and effective decision-making authority over our corporate strategystrategy, business affairs, and all matters requiring stockholder approval,approval. includingThis includes the electionpower to elect directors, approve major strategic transactions, amend our certificate of directorsincorporation and thebylaws, approvaland ofauthorize significantfuture corporateequity transactions.or debt issuances. The interests of Mr. Lazar may differ substantially from the interests of our other stockholders,stockholders. andAdditionally, his ability to control the Company may have the effect of delayingdelaying, deterring, or preventing a future change in controlcontrol, takeover attempt, or other mergersmerger that other stockholders might consider favorable.favorable or in their best financial interest.
TheWe Companyhave willcompleted disposethe sale of substantially all of itsour historical revenue-generating assets upon the closing of the Asset Sale,assets, and our future viability is subject to the successful execution of an unproven strategic pivot.
On July 17, 2026, we completed the sale of substantially all of our historical assets and operating operations—including our marquee consumer brands (Mueller Living, PurSteam, hOmeLabs, Squatty Potty, Healing Solutions, and Photo Paper Direct)—to Trademark Global, LLC. Following the consummation of the Asset Sale, our remaining business operations consist primarily of our smaller legacy brands, Vremi and Xtava, and residual corporate activities.
As a result, our ongoing operating model has been fundamentally altered, and our future viability depends heavily on our ability to successfully execute a strategic "Pivot" or evaluate potential strategic transactions to create long-term growth opportunities. We may be unable to successfully scale our remaining operations or identify and complete a suitable strategic transaction before our capital resources are depleted, and even if we do, there is no assurance that any such initiative will achieve its intended financial or operational benefits.
The Company will not have any material business assets following the consummation of the Asset Sale, as the sale to Trademark Global constitutes a sale of substantially all of our assets and revenue-generating operations, including our marquee brands. Consequently, our future viability will depend entirely on our ability to identify and consummate a "Post-Investment Transaction" or strategic "Pivot," which involves combining with a target company to create future growth opportunities. We may not be able to identify a suitable target company before our capital resources are depleted, and even if we do, there is no assurance that such a transaction will be successful or achieve anticipated benefits. Additionally, the final amount of net proceeds we receive from the Asset Sale remains subject to substantial uncertainty due to potential adjustments for net working capital, the satisfaction of unforeseen liabilities, and ongoing operational costs. There is also no guarantee that the Contingent Value Rights (CVRs) issued in connection with potential tariff refunds will result in any future cash payments to stockholders.
Our ability to retain key personnel and manage operational continuity may be adversely affected byfollowing executive leadership transitions and the pendingcompletion of the Asset Sale and our transition to new executive leadership.Sale.
On July 17, 2026, following the completion of the Asset Sale and the Preferred Stock Sale, David E. Lazar was appointed as Chief Executive Officer and Chairman of the Board, succeeding Arturo Rodriguez. In connection with this transition, Mr. Rodriguez entered into a Transition and Separation Agreement to assist with operational handoff through September 30, 2026, and Chief Financial Officer Joshua Feldman entered into a similar transition agreement through September 4, 2026.
The transition to new executive management, combined with the substantial reduction in our operating footprint following the sale of our marquee brands, represents a fundamental shift in our corporate leadership and organizational structure. These ongoing changes may create uncertainty regarding our future operational strategy, which could lead to increased employee attrition or hinder our ability to attract, retain, and motivate well-qualified personnel.
The loss of key remaining operational, financial, or corporate staff during this transition period or an inability to identify suitable long-term successors following the expiration of current executive transition agreements could disrupt our business operations, impair our financial reporting capabilities, and adversely affect our ability to execute our strategic pivot.
The consummation of the Asset Sale and the strategic investment is subject to several conditions that may not be satisfied, including the receipt of stockholder approval. The uncertainty regarding the successful completion of these transactions, as well as the transition of leadership following the Second SPA Closing, may create significant anxiety regarding our future direction and ownership. This uncertainty could lead to increased employee attrition and further hinder our ability to attract and motivate key personnel. Additionally, the Asset Purchase Agreement requires the Company to maintain certain contribution margins, and any failure to meet these financial thresholds could jeopardize the closing of the sale, potentially impacting our ability to retain well-qualified employees.
Following the Second SPA Closing, David Lazar is expected to be appointed as the sole Chief Executive Officer, succeeding Arturo Rodriguez, which represents a significant shift in our senior management team. The loss of one or more of our key personnel during this transition period, or our inability to promptly identify suitable successors, could have an adverse effect on our business. Each of our executive officers and other employees could terminate their employment relationship with us at any time.
We experienced significant after-tax losses for the three and six months ended June 30, 2026 and 2025. In addition, our operating costs have increased historically and may fluctuate in future periods as we adjust our organizational structure, which could negatively affect our operating results and our ability to achieve long-term continuous profitability. Following the completion of the Asset Sale on July 17, 2026, our historical core revenue-generating marquee brands are no longer part of our ongoing operations, and our business model relies on our smaller retained legacy brands, Vremi and Xtava, alongside the execution of an unproven strategic pivot.
We have historically relied on a combination of cash flows from operations, debt facilities, and private placements of equity to fund our business. While we completed the Asset Sale and Preferred Stock Sale on July 17, 2026—generating $25.0 million in aggregate gross proceeds prior to transaction expenses, adjustments, and debt settlements—there can be no assurance that our capital resources will be sufficient to sustain long-term operations or that our revised business strategy will generate positive cash flows.
We have experienced significant after-tax losses for the three months ended March 31, 2026 and 2025. In addition, our costs have increased historically and may increase further in future periods, which could negatively affect our future operating results and ability to achieve and sustain long-term ongoing profitability. For example, we may need to continue to expend substantial financial and other resources on the ideation, sourcing and development of products, our technology infrastructure, sales and marketing, international expansion and general administration, including expenses related to being a public company. We have had to rely on a combination of cash flow from operations and new capital to sustain our business. Even though we have raised significant capital, there can be no assurance that we will ever achieve long-term continuous profitability. Even if we do, there can be no assurance that we will be able to maintain or increase profitability on a quarterly or annual basis. Failure to achieve or sustain profitability could have a material adverse effect on our business.
Our growth strategy has resulted inongoing operating losses and negative cash flows from operations that raise substantial doubt about our ability to continue as a going concern. Our independent registered public accounting firm included an explanatory paragraph in its report on our consolidated financial statements as of and for the fiscal year ended December 31, 2025, that raisedexpressing substantial doubt aboutregarding our ability to continue as a going concern. IfOn weJuly 17, 2026, in connection with the closing of the Aterian Transactions, all outstanding indebtedness under our MidCap credit facility was repaid in full and the facility was terminated. However, if our remaining capital resources are unabledepleted tofaster continuethan as a going concernanticipated or maintain our financial covenants with our lenders, we may have to make significant changes to our operating plan, such as delay expenditures, reduce investments in new products, reduce our sales and distribution infrastructure, or significantly reduce our business. Further, if we are unablefail to continue asestablish a goingprofitable concern,ongoing business model, we may be forced to liquidatemake significant alterations to our assetsoperating andplans, delay growth expenditures, further reduce operating infrastructure, or liquidate remaining assets. In the event of a liquidation or dissolution, the values we receiverealized for our remaining assets in liquidation or dissolution could be significantly lower than the carrying values reflected in our financialCondensed statements.Consolidated Financial Statements.
Recent escalations in geopolitical tensions in Iran, including significant combat operations and retaliatory strikes involving the United States and regional powers, have created substantial volatility in global energy and shipping markets. This conflict has led to disruptions in critical maritime routes and increased the risk of spiked freight insurance premiums and fuel surcharges for inbound shipments from our Asian suppliers. These macroeconomic pressures pose a direct threat to our operating results and could specifically impair our ability to achieve the contribution margin targets required as a condition to the closing of the Asset Purchase Agreement with Trademark Global. Furthermore, any sustained increase in shipping costs or delays in product availability would exacerbate the liquidity constraints that have historically affected our business and could interfere with our ability to maintain compliance with our existing credit facility prior to the anticipated influx of capital from the Aterian Transactions. If we are unable to successfully navigate these disruptions, the failure to close the pending Asset Sale and Stock Salethey would have a material adverse effect on our financial condition and our ability to continue as a going concern.
Our Credit Facility contains various restrictions and covenants that could limit our operating flexibility, and we may be unable to refinance or repay our Credit Facility. We also rely on credit export insurance for our vendors in China, the unavailability of which could have a material adverse impact on our business, operating results, financial condition, and cash flows.
On December 22, 2021, we obtained a revolving credit facility from Midcap Funding IV Trust (the “Credit Facility”). Our Credit Facility contains covenants and other restrictions that, among other things, requires us to satisfy certain liquidity and borrowing availability tests, restricts our ability to execute M&A transactions and to incur additional indebtedness. These restrictions and covenants, and those in other future financing arrangements, may limit our ability to respond to market conditions, to provide for capital investment needs or to take advantage of business opportunities.
On February 23, 2024, the Company amended the Credit Facility to extend the term to December 2026 and provide us with access to $17 million in current commitments which can be increased, subject to certain conditions, to $30.0 million. On March 25, 2025, the Company amended the Credit Facility to add repurchases of the Company’s common stock of up to $1.5 million per year, consisting of up to $1.5 million in repurchases allowed during the period from March 25, 2025 through December 22, 2025, and up to an additional $1.5 million allowed during the period from December 23, 2025 through the maturity date, subject to certain liquidity and compliance conditions.
On August 29, 2025, the Company amended the Credit Facility to include a reduction to the Minimum Credit Party Liquidity covenant to $5.0 million. Upon the Company’s delivery of a Liquidity Certificate evidencing liquidity of at least $6.8 million, the Minimum Liquidity Covenant Reduction Period will terminate and the covenant will increase to $6.8 million thereafter, and an Availability Reserve of $2.8 million during the Minimum Liquidity Covenant Reduction Period and $1.0 million thereafter.
On March 13, 2026, the Company and its subsidiaries entered into Amendment No. 5 to its Credit and Security Agreement with MidCap Funding IV Trust. Under the terms of the amendment, the Company’s minimum liquidity covenant was reduced from $5.0 million to $3.5 million during the Minimum Liquidity Covenant Reduction Period. This reduction period commenced on the Fifth Amendment Effective Date and is subject to extension at the Company's option on a weekly basis through May 9, 2026, provided it remains in compliance with certain fee payment obligations.
There is no guarantee that we will be available to repay or refinance our Credit Facility. Further, at any time, if we violate the terms of the Credit Facility, we may not be able to obtain a waiver from our lender under satisfactory terms, or at all, which would limit our operating flexibility and/or liquidity and which could have a material adverse effect on our business, operating results, financial condition, and cash flows.
We also rely on the availability of export credit insurance from the China Export & Credit Insurance Corporation (“Sinosure”), a Chinese state-owned enterprise, that provides export credit insurance to our contract manufacturers. From time to time, our contract manufacturers have experienced reductions in the availability of such credit from Sinosure as a result of our failure to timely pay them. While we currently believe our contract manufacturers have insurance at levels that we believe are sufficient to fund our operations, there can be no assurance that such insurance will be available at levels we require for our business, or at all, whether or not we make timely payments to our vendors, which would have a material adverse effect on our business, operating results, financial condition, and cash flows.
In addition, the Company has cash deposits at financial institutions in excess of the insured amount of $0.3 million by the Federal Deposit Insurance Corporation.
U.S. government trade actions, including the expiration of Section 122 tariffs and the transition to alternative tariff authorities, create ongoing uncertainty that could adversely affect our remaining operations.
Over the past several years, the U.S. trade environment has undergone unprecedented volatility. Following the Supreme Court’s February 2026 ruling in Learning Resources Inc. v. Trump, which invalidated the administration's broad IEEPA tariffs, the government transitioned to a 10% baseline tariff under Section 122 of the Trade Act of 1974. By statute, these Section 122 tariffs were limited to 150 days and expired on July 24, 2026, as Congress did not pass legislation to extend them.
While the U.S. Court of International Trade (CIT) ruled on May 7, 2026, in Burlap and Barrel, Inc. v. Trump that these Section 122 tariffs were unlawful, the U.S. Court of Appeals for the Federal Circuit subsequently stayed that decision pending appeal on June 11, 2026. As a result, U.S. Customs and Border Protection continued to collect the 10% surcharge on our imports through the July 24, 2026 expiration date.
During the three months ended June 30, 2026, the Company received tariff refunds of approximately $2.8 million related to previously paid IEEPA tariffs. The Company recognized this amount as a reduction to cost of goods sold within its Condensed Consolidated Statement of Operations for the three and six months ended June 30, 2026.
Furthermore, the expiration of the Section 122 surcharge does not eliminate our tariff exposure. The administration has advanced replacement measures under alternative statutory authorities, such as Section 301 and Section 232, which carry no statutory rate ceiling or fixed expiration. Any implementation of these replacement tariffs, or the imposition of additional trade barriers and retaliatory measures, could materially increase the cost of goods sold for our retained legacy brands, disrupt our supply chain, and adversely affect our financial condition and results of operations.
U.S. government trade actions could have a material adverse effect on our business, financial position, and results of operation.
Over the past several years, the U.S. government has taken a number of trade actions that impact or could impact our operations, including imposing tariffs on certain goods imported into the United States.
Throughout 2025, the U.S. trade environment underwent a period of unprecedented volatility characterized by the implementation of a broad “reciprocal” tariff regime. Utilizing the International Emergency Economic Powers Act (IEEPA), the administration imposed steep duties on nearly all imported goods, including a baseline 10% global tariff and targeted rates on major trading partners like China that reached historic highs before a late-year temporary truce. These actions were compounded by expanded Section 232 duties on industrial metals and the elimination of “de minimis” exemptions for low-value imports, significantly increasing our landed costs and requiring frequent adjustments to our pricing and sourcing strategies. While these measures were the primary drivers of trade policy for much of the year, their legal foundation remained a point of intense litigation until early 2026.
On February 20, 2026, the U.S. Supreme Court ruled in Learning Resources Inc. v. Trump that the International Emergency Economic Powers Act does not authorize the President to impose sweeping revenue-raising tariffs, invalidating previous broad reciprocal duties. In response, the administration immediately transitioned to a 10% baseline tariff under Section 122 of the Trade Act of 1974, effective February 24, 2026. These tariffs are subject to a 150-day statutory limit (expiring July 24, 2026) unless extended by Congress.
On May 7, 2026, the U.S. Court of International Trade (CIT) ruled in Burlap and Barrel, Inc. v. Trump that these Section 122 tariffs are unlawful, finding the administration exceeded its statutory authority. However, because the CIT limited its permanent injunction only to the specific plaintiffs in that case, the federal government continues to collect the 10% duty from all other importers, including the Company. We expect the administration to appeal this decision, and there is significant uncertainty regarding whether the tariffs will be stayed, if Congress will provide a legislative extension, or if the administration will pivot to alternative authorities, such as Section 301 investigations, to maintain or increase duty levels. Any prolonged collection of these duties, or the imposition of higher replacement tariffs, could materially increase our cost of goods sold and adversely affect our operating results.
These tariff actions, along with the potential for retaliatory measures, create uncertainty and may increase our product costs, disrupt our supply chain, and adversely affect our competitive position. In particular, continued or escalated trade and political tensions with China or other key trading partners could result in retaliatory restrictions that impair our ability to source products and components from contract manufacturers or service providers operating in those countries. Any sustained increase in tariffs, or the imposition of additional trade barriers, could materially and adversely affect our business, financial condition, and results of operations.
In addition to the tariff measures described above, changes in U.S. or foreign trade policy may create ongoing uncertainty in international trade relations. Future actions by the United States or other governments — including the imposition, increase, or extension of tariffs, quotas, or other trade restrictions, or changes to existing trade agreements or policies — could occur at any time and without notice. Any such actions, whether unilateral or in response to geopolitical or economic developments, could reduce demand for our products, increase our costs, disrupt our supply chain, reduce our profitability, or otherwise have a material adverse effect on our business, financial condition, and results of operations.
We are continually evaluating the impact of the current and any possible new tariffs on our supply chain, costs and sales and are considering strategies to mitigate such impact, including reviewing sourcing options and working with our suppliers. We can provide no assurance that any strategies we implement to mitigate the impact of such tariffs or other trade actions will be successful or that any newly sourced products will be of the same quality of those previously sourced elsewhere. Given the uncertainty regarding the scope and duration of these trade actions by the U.S. government or other countries, as well as the potential for additional trade actions, the impact on our operations and results remains uncertain.
On December 9, 2025, the Company received a notice from Nasdaq indicating that, based upon the closing bid price of the Company’s common stock, par value $0.0001 per share,stock for the last 30 consecutive business days, the Company is not currently in compliance with the requirement to maintain a minimum bid price of $1.00 per share for continued listing on The Nasdaq Capital Market, as set forth in Nasdaq Listing Rule 5550(a)(2).
On May 19, 2026, Nasdaq notified the Company in the Compliance Notice that from May 1, 2026 to May 18, 2026 the closing bid price of the Company’s common stock had been $1.00 per share or greater and, accordingly, the Company had regained compliance with Nasdaq Listing Rule 5550(a)(2) and that the matter was now closed.
The Bid Price Notice has no immediate effect on the continued listing status of the Common Stock on The Nasdaq Capital Market, and, therefore, the Company's listing remains fully effective.
The Company is provided a compliance period of 180 calendar days from the date of the Bid Price Notice, or until June 8, 2026, to regain compliance with the minimum closing bid requirement, pursuant to Nasdaq Listing Rule 5810(c)(3)(A). If at any time before June 8, 2026, the closing bid price of the Common Stock closes at or above $1.00 per share for a minimum of 10 consecutive business days, subject to Nasdaq’s discretion to extend this period pursuant to Nasdaq Listing Rule 5810(c)(3)(H) to 20 consecutive business days, Nasdaq will provide written notification that the Company has achieved compliance with the minimum bid price requirement, and the matter would be resolved. If the Company does not regain compliance during the compliance period ending June 8, 2026, then Nasdaq may grant the Company a second 180 calendar day period to regain compliance, provided the Company meets the continued listing requirement for market value of publicly-held shares and all other initial listing standards for The Nasdaq Capital Market, other than the minimum closing bid price requirement, and notifies Nasdaq of its intent to cure the deficiency during the second compliance period.
The Company will continue to monitor the closing bid price of its Common Stock and seek to regain compliance with all applicable Nasdaq requirements within the allotted compliance periods. If the Company does not regain compliance within the allotted compliance periods, including any extensions that may be granted by Nasdaq, Nasdaq will provide notice that the Common Stock will be subject to delisting. The Company would then be entitled to appeal that determination to a Nasdaq hearings panel. There can be no assurance that the Company will regain compliance with the minimum bid price requirement during the 180-day compliance period, secure a second period of 180 days to regain compliance or maintain compliance with the other Nasdaq listing requirements.
As of the date of this filing, the Company has not yet received formal written confirmation from Nasdaq that it has regained compliance, as the closing bid price of the Company’s common stock has been at or above $1.00 per share for 10 consecutive business days, ending on May 14, 2026.
The proposedSEC’s Nasdaqapproval of Nasdaq’s $5 million minimum market value continued listing rule has been automatically stayed pending Commission review; however, if the stay is lifted and the rule is ultimately implemented, it could result in the immediate suspension and delisting of our common stock without a cure period.
On July 22, 2026, the Securities and Exchange Commission (“SEC”) approved a proposed rule change filed by The Nasdaq Stock Market LLC (File No. SR-NASDAQ-2026-004, as modified by Amendment No. 1) establishing a new continued listing requirement under Nasdaq Listing Rules 5450(a)(3) and 5550(a)(6). Under the rule as approved, companies listed on the Nasdaq Global and Capital Markets are required to maintain a minimum Market Value of Listed Securities (“MVLS”) of at least $5.0 million. If a company’s MVLS remains below $5.0 million for 30 consecutive business days, Nasdaq will issue an immediate Staff Delisting Determination and suspend trading in the company’s common stock. Unlike other Nasdaq continued listing deficiencies (such as the $1.00 minimum bid price requirement, which typically provides a 180-day grace period), the rule provides no compliance or cure period prior to suspension. Furthermore, requesting an appeal before the Nasdaq Hearings Panel would not automatically stay the suspension of trading, meaning an affected company’s common stock would be suspended from Nasdaq and forced to trade on the over-the-counter (“OTC”) market during any appeal process.
However, on July 29, 2026, the implementation of this new continued listing requirement was automatically stayed pursuant to Rule 431(e) of the SEC’s Rules of Practice. The stay was triggered after the Small Public Company Coalition (“SPCC”) and Cemtrex, Inc. each filed notices of their intent to petition the full Commission to review the approval order previously issued by the SEC’s Division of Trading and Markets under delegated authority. On July 29, 2026, the SEC issued a letter confirming that the approval order had been automatically stayed pending further action by the Commission.
As a result of the stay, Nasdaq’s $5.0 million MVLS requirement is currently not effective. Under SEC procedures, the petitioners have five days from their notice to file formal petitions for review setting forth the legal and factual bases for challenging the approval. The Commission may decide whether to grant or decline review and, if granted, may affirm, modify, reverse, set aside, or remand the Division’s approval order. There is no prescribed statutory timeline for the Commission to reach a final decision, and the stay remains in effect during this administrative review process. Furthermore, because seeking Commission review is generally a prerequisite to judicial review, the matter may ultimately be appealed to a federal court of appeals, which could extend the stay and delay potential implementation of the rule for a significant period.
Notwithstanding the current stay, significant uncertainty remains regarding the ultimate outcome of the regulatory and potential judicial review processes. If the Commission affirms the rule, if the stay is lifted, or if the rule is otherwise upheld and becomes effective, and if our MVLS remains below $5.0 million for 30 consecutive business days:
If the rule is ultimately reinstated and our market capitalization fluctuates below the required $5.0 million threshold for 30 consecutive business days, there can be no assurance that we will avoid immediate delisting or that a Hearings Panel would grant an exception, any of which would have a material adverse effect on our business, financial condition, results of operations, and the trading value of your investment.
On January 13, 2026, Nasdaq filed a proposed rule change with the SEC (File No. SR-NASDAQ-2026-004) that would establish a new continued listing requirement. Under the proposal, companies listed on the Nasdaq Global and Capital Markets would be required to maintain a minimum Market Value of Listed Securities (“MVLS”) of at least $5 million.
If this rule is approved and we fail to maintain a $5 million MVLS for a period of 30 consecutive business days, our common stock would be subject to immediate suspension and delisting. Unlike other Nasdaq listing deficiencies, such as the $1.00 minimum bid price requirement, which typically allows for a 180-day compliance period, the proposed rule does not provide for a cure or compliance period. Furthermore, the proposal specifies that any appeal of a delisting determination under this rule would not stay the suspension of trading.
If our common stock is delisted from Nasdaq, it would likely trade on the over-the-counter (“OTC”) market. Such a move could:
There can be no assurance that the SEC will not approve this rule or that we will be able to maintain a market capitalization sufficient to comply with these new requirements. Any such delisting would have a material adverse effect on our financial condition and the value of your investment.
Management's Discussion & Analysis (MD&A)
New heading “Comparison of the Six Months Ended June 30, 2026 and 2025”
New heading “Comparison of the Three Months Ended June 30, 2026 and 2025”
New heading “Comparison of the Six Months Ended June 30, 2026 and 2025”
Removed heading “Cost of Goods Sold and Gross Profit”
Removed heading “Sales and Distribution Expenses”
Removed heading “General and Administrative Expenses”
Removed heading “Change in fair market value of warrant liabilities”
Removed heading “Cost of Goods Sold and Gross Profit”
Removed heading “Sales and Distribution Expenses”
Removed heading “General and Administrative Expenses”
Largest changes
Thesee in full comparisonincreasedecrease in interest expense, net of$0.1$49millionthousand is primarily relating toamortizedanfees of $69 thousand associated with the March 2026 amendment to lower the liquidity covenant and a decreaseincrease in interest income of$38$110 thousand relating to tariff refunds received during the three months ending June 30, 2026, partially offset byloweranborrowingsincrease intheinterestcurrentexpenseperiod.of $61 thousand.
Duringsee in full comparison2025,2025 and early 2026, the U.S. government announced and implemented a series ofnewexpanded tariff policies affecting imports from several countries, including China. While these actions impact a range of global trade flows,the newtariffs targeting imports from Chinaarehave had the mostsignificantmaterialforimpact on ourbusiness.supply chain and operating costs. As aresult of these tariffs,result, we experienced an increase in our cost of goods sold during the year ended December 31,20252025, and thequarterthree months ended March 31, 2026. In response, we implemented targeted price increases across affected product categories to partially offsetthehigher input costs. These pricing actions, however, contributed to a decline in unit volumes as consumer demand responded tothehigher retail prices.We have implemented a range of mitigation strategies to address the impact of these tariffs on our supply chain and margins. These efforts include diversifying sourcing outside of China, renegotiating supplier terms, redesigning certain products to reduce tariff exposure, and implementing selective price increases where appropriate. We continue to evaluate additional structural and operational measures to further reduce tariff-related exposure.
“Since inception, the Company has incurred significant losses and used cash flows from operations to fund its enterprise. To preserve liquidity, management implemented fixed cost reduction plans in May 2025 and January 2026. However, these actions were insufficient to fully offset macroeconomic pressures, such as tariffs, geopolitical instabilities, rising costs for raw materials and shipping, higher marketplace fees, and reduced consumer spending, which continued to negatively impact operating results and cash flows.”see in full comparison
“The Company will continue to monitor the closing bid price of its Common Stock and seek to regain compliance with all applicable Nasdaq requirements within the allotted compliance periods. If the Company does not regain compliance within the allotted compliance periods, including any extensions that may be granted by Nasdaq, Nasdaq will provide notice that the Common Stock will be subject to delisting. The Company would then be entitled to appeal that determination to a Nasdaq hearings panel. …”see in full comparison
Sales and distribution expensessee in full comparisonincreaseddecreased to$0.3$0.2 million for the three months endedMarchJune31,30, 2026, from$37$1.0thousandmillion for the three months endedMarchJune31,30, 2025. Thisincreasedecrease is primarily attributable toseverancelowerrelatingrestructuringto our January 2026 workforce reductioncosts of$0.3$0.8 million.
“On July 17, 2026, following approval by the Company's stockholders at a special meeting, the Company completed the Asset Sale to Trademark Global for $18.0 million in cash, subject to purchase price adjustments, and completed the issuance and sale of 1,750,000 shares of Series AAA Convertible Non-Redeemable Preferred Stock to Lazar for aggregate proceeds of $3.5 million. In connection with the closing of these transactions, the Company entered into a Contingent Value Rights Agreement with Broadridge Corporate Issuer Solutions, LLC, as Rights Agent, on July 17, 2026. …”see in full comparison
Full comparison: every changed paragraph (93)
During 2025,2025 and early 2026, the U.S. government announced and implemented a series of newexpanded tariff policies affecting imports from several countries, including China. While these actions impact a range of global trade flows, the new tariffs targeting imports from China arehave had the most significantmaterial forimpact on our business.supply chain and operating costs. As a result of these tariffs,result, we experienced an increase in our cost of goods sold during the year ended December 31, 20252025, and the quarterthree months ended March 31, 2026. In response, we implemented targeted price increases across affected product categories to partially offset the higher input costs. These pricing actions, however, contributed to a decline in unit volumes as consumer demand responded to the higher retail prices. We have implemented a range of mitigation strategies to address the impact of these tariffs on our supply chain and margins. These efforts include diversifying sourcing outside of China, renegotiating supplier terms, redesigning certain products to reduce tariff exposure, and implementing selective price increases where appropriate. We continue to evaluate additional structural and operational measures to further reduce tariff-related exposure.
During the three months ended June 30, 2026, the Company received $2.7 million from the U.S. Customs and Border Protection related to previously paid import duties, consisting of $2.6 million in duty refunds and $0.1 million in associated interest income. Of the duty refunds, $2.3 million was recorded as a reduction to cost of goods sold within Income (loss) from discontinued operations for inventory that had previously been sold, and $0.3 million was recorded as a reduction to the carrying value of inventory included within assets held for sale on the Condensed Consolidated Balance Sheet for unsold goods remaining on hand at June 30, 2026. The $0.1 million of interest was recorded within interest income on the Condensed Consolidated Statements of Operations.
On April 27, 2026, the Company entered into a series of definitive agreements (collectively, the “Aterian Transactions”) to fundamentally restructure its operations and capital position. TheOn July 17, 2026, following stockholder approval, the Company enteredcompleted into a definitive Asset Purchase Agreement (the “Assetsale Purchaseof Agreement”) with Trademark Global, LLC (“Trademark Global”), marking a significant strategic shift in our business model. Pursuant to this agreement, Trademark Global will acquire substantially allspecified assets and certain liabilities associated with ourits marquee consumer brands—including Mueller Living, PurSteam, hOmeLabs, Squatty Potty, Healing Solutions, and Photo Paper Direct— to Trademark Global, LLC ("Trademark Global") for $18$18.0 million in cash, subject to customary post-closing adjustments (the “"Asset Sale”").
AsBecause these marquee brands representrepresented a strategic shift and comprised a major portion of the Company’s historical operations and strategic direction,operations, the financial results of these brands have been classified as discontinued operations in the consolidatedCondensed financialConsolidated statementsFinancial Statements for all periods presented. Following the closing of the Asset Sale, the Company expects to continue operating its remaining retained legacy brands, including Vremi and Xtava.
Concurrently with the Asset Sale, on July 17, 2026, the Company completed the final closing under a Securities Purchase Agreement, dated April 27, 2026 (the “Securities Purchase Agreement”), with David E. Lazar for the issuance and sale of Series AA Convertible Non-Redeemable Preferred Stock, par value $0.0001 per share, of the Company (the “Series AA Preferred Stock” and such purchased shares, the “Series AA Preferred Shares”) and Series AAA Convertible Non-Redeemable Preferred Stock, par value $0.0001 per share, of the Company (the “Series AAA Preferred Stock” and together with the Series AA Preferred Stock, the “Preferred Stock” and such purchased shares, the “Series AAA Preferred Shares” and together with the Series AA Preferred Shares, the “Purchased Shares”)for aggregate gross proceeds of $7.0 million (the “Preferred Stock Sale”). This capital infusion, combined with the net proceeds realized from the Asset Sale, was utilized to satisfy outstanding debt obligations, pay transaction fees, and restructure the Company’s balance sheet.
In conjunction with the Asset Sale, the Company also entered into a Securities Purchase Agreement with David E. Lazar for the issuance of Series AA and Series AAA Preferred Stock for aggregate gross proceeds of $7.0 million. This capital infusion, combined with the proceeds from the Asset Sale, is intended to restructure the Company’s balance sheet.
To provide a meaningful comparison of our ongoing business performance, the following discussion separately analyzes the results of our continuing operations and the impact of the discontinued operations for the periodsthree presented.and six months ended June 30, 2026 and 2025.
Comparison of the Three Months Ended MarchJune 31,30, 2026 and 2025
Net Revenue
Net revenue decreased $45$0.1 thousand,million, or 72%,91.9%, during the three months ended MarchJune 31,30, 2026 to $18$7 thousand, compared to $63$88 thousand for the three months ended MarchJune 31,30, 2025. The decrease in net revenue was primarily attributable to reduction in consumer demand due to the macroeconomic environment.
Cost of Goods Sold and Gross Profit
Cost of goods sold decreased $5$41 thousand, or 40.2%,87.7%, during the three months ended MarchJune 31,30, 2026 to $8$6 thousand, compared to $13$47 thousand for the three months ended MarchJune 31,30, 2025, primarily from reduced sales volumes.
Gross profit decreased to 56.7%14.0% for the three months ended MarchJune 31,30, 2026 from 79.9%46.7% for the three months ended MarchJune 31,30, 2025. The decrease in gross profit was due primarily to product mix.
Sales and Distribution Expenses
Sales and distribution expenses increaseddecreased to $0.3$0.2 million for the three months ended MarchJune 31,30, 2026, from $37$1.0 thousandmillion for the three months ended MarchJune 31,30, 2025. This increasedecrease is primarily attributable to severancelower relatingrestructuring to our January 2026 workforce reductioncosts of $0.3$0.8 million.
General and Administrative Expenses
The decreaseincrease in general and administrative expenses was primarily the result of aan decreaseincrease of $2.0 million in professional fees, an increase of $0.3 million in stock-compensation expense, and an increase of $0.1 million in headcount expense, partially offset by a decrease in restructuring costs of $0.3$0.8 million in miscellaneous expenses,million, and a decrease of $0.2 million in stock-compensation expense, partially offset by an increase of $0.4 million in professionalmiscellaneous fees.expenses.
The increasedecrease in interest expense, net of $0.1$49 millionthousand is primarily relating to amortizedan fees of $69 thousand associated with the March 2026 amendment to lower the liquidity covenant and a decreaseincrease in interest income of $38$110 thousand relating to tariff refunds received during the three months ending June 30, 2026, partially offset by loweran borrowingsincrease in theinterest currentexpense period.of $61 thousand.
Change in fair market value of warrant liabilities
The 2026 and 2025 activity is related to the change in fair market value of the warrant liabilities from the common stock warrants from our March 2022 equity raise of capital. The change in fair value of warrant liabilities during the three months ending MarchJune 31,30, 2026 primarily relates to the reduced share price compared to the prior period.
During the three months ended June 30, 2026, the Company settled its seller note payable and recognized a gain on extinguishment of debt of approximately $0.3 million.
Comparison of the Six Months Ended June 30, 2026 and 2025
The following table sets forth the components of our results of continuing operations:
Net revenue decreased $0.1 million, or 83.4%, during the six months ended June 30, 2026 to $25 thousand, compared to $0.2 million for the six months ended June 30, 2025. The decrease in net revenue was primarily attributable to reduction in consumer demand due to the macroeconomic environment.
Cost of goods sold decreased $46 thousand, or 76.7%, during the six months ended June 30, 2026 to $14 thousand, compared to $60 thousand for the six months ended June 30, 2025, primarily from reduced sales volumes.
Gross profit decreased to 44.0% for the six months ended June 30, 2026 from 60.3% for the six months ended June 30, 2025. The decrease in gross profit was due primarily to product mix.
Sales and distribution expenses decreased to $0.5 million for the six months ended June 30, 2026, from $1.1 million for the six months ended June 30, 2025. This decrease is primarily attributable to lower restructuring costs of $0.6 million.
The increase in general and administrative expenses was primarily the result of an increase of $2.4 million in professional fees, and an increase of $0.1 million in stock-compensation expense, partially offset by a decrease in restructuring costs of $0.8 million, a decrease of $0.8 million in miscellaneous expenses, and a decrease of $0.1 million in headcount expense.
Interest expense, net was relatively flat for the six months ended June 30, 2026 and June 30, 2025.
The 2026 and 2025 activity is related to the change in fair market value of the warrant liabilities from the common stock warrants from our March 2022 equity raise of capital. The change in fair value of warrant liabilities during the six months ending June 30, 2026 primarily relates to the reduced share price compared to the prior period.
During the three months ended June 30, 2026, the Company settled its seller note payable and recognized a gain on extinguishment of debt of approximately $0.3 million.
Comparison of the Three Months Ended June 30, 2026 and 2025
Net Revenue
Net revenue decreased $2.9 million, or 18.8%, during the three months ended March 31, 2026 to $12.4 million, compared to $15.3 million for the three months ended March 31, 2025. The decrease in net revenue was primarily attributable to the newly implemented tariffs which increased our cost of goods sold, prompting us to raise prices to mitigate the impact. These pricing actions, combined with the broader challenging macroeconomic environment, led to a reduction in unit volume as consumer demand softened at elevated price levels.
Cost of Goods Sold and Gross Profit
CostNet of goods soldrevenue decreased $1.5$6.1 million, or 25.1%,31.4%, during the three months ended MarchJune 31,30, 2026 to $4.4$13.3 million, compared to $5.9$19.4 million for the three months ended MarchJune 31,30, 2025,2025. The decrease in net revenue was primarily fromattributable to the macroeconomic environment resulting in reduced salesconsumer volumes.demand.
Cost of goods sold decreased $5.8 million, or 65.9%, during the three months ended June 30, 2026 to $3.0 million, compared to $8.8 million for the three months ended June 30, 2025, primarily from reduced sales volumes and tariff refunds of $2.3 million that were received during the three months ended June 30, 2026.
Gross profit increased to 64.3%77.3% for the three months ended MarchJune 31,30, 2026 from 60.9%54.3% for the three months ended MarchJune 31,30, 2025. The increase in gross profit was due primarily to product mix and highertariff averagerefunds salesof prices$2.3 onmillion certainthat products.were received during the three months ended June 30, 2026.
Sales and Distribution Expenses
Sales and distribution expenses, which included e-commerce platform commissions, online advertising and logistics expenses (i.e., variable sales and distribution expense), decreased to $7.2$6.7 million for the three months ended MarchJune 31,30, 2026, from $9.7$11.3 million for the three months ended MarchJune 31,30, 2025. This decrease is primarily attributable to the decrease in the volume of products sold in the three months ended MarchJune 31,30, 2026, as our e-commerce platform commissions, online advertising, selling and logistics expenses decreased to $6.0$5.5 million in the three months ended MarchJune 31,30, 2026 as compared to $7.3$9.0 million in the prior year period.
Our sales and distribution fixed costs (e.g., salary and office expenses) including stock-based compensation decreased to $1.2 million for the three months ended MarchJune 31,30, 2026, from $2.3 million for the three months ended MarchJune 31,30, 2025. This decrease is primarily attributable to lower headcountmiscellaneous expenseexpenses of $0.6 million, lower miscellaneousheadcount expensesexpense of $0.4$0.5 million, and lower stock-compensation expense of $0.1 million.
As a percentage of net revenue, sales and distribution expenses decreased to 58%50.4% for the three months ended MarchJune 31,30, 2026, from 63%58.4% for the three months ended MarchJune 31,30, 2025. E-commerce platform commissions, online advertising, selling and logistics expenses included within sales and distribution expenses, as a percentage of net revenue, stayeddecreased consistentto at 48%41.7% for the three months ended MarchJune 31,30, 20262026, andfrom March46.7% 31,for the three months ended June 30, 2025.
General and Administrative Expenses
Comparison of the Six Months Ended June 30, 2026 and 2025
The following table sets forth the components of our results of discontinued operations:
Net revenue decreased $9 million, or 25.8%, during the six months ended June 30, 2026 to $25.7 million, compared to $34.7 million for the six months ended June 30, 2025. The decrease in net revenue was primarily attributable to the macroeconomic environment resulting in reduced consumer demand.
Cost of goods sold decreased $7.3 million, or 49.6%, during the six months ended June 30, 2026 to $7.5 million, compared to $14.8 million for the six months ended June 30, 2025, primarily from reduced sales volumes and tariff refunds of $2.3 million that were received during the six months ended June 30, 2026.
Gross profit increased to 71.0% for the six months ended June 30, 2026 from 57.4% for the six months ended June 30, 2025. The increase in gross profit was due primarily to product mix and tariff refunds of $2.3 million that were received during the six months ended June 30, 2026.
Sales and distribution expenses, which included e-commerce platform commissions, online advertising and logistics expenses (i.e., variable sales and distribution expense), decreased to $13.9 million for the six months ended June 30, 2026, from $20.9 million for the six months ended June 30, 2025. This decrease is primarily attributable to the decrease in the volume of products sold in the six months ended June 30, 2026, as our e-commerce platform commissions, online advertising, selling and logistics expenses decreased to $11.5 million in the six months ended June 30, 2026 as compared to $16.3 million in the prior year period.
Our sales and distribution fixed costs (e.g., salary and office expenses) including stock-based compensation decreased to $2.4 million for the six months ended June 30, 2026, from $4.6 million for the six months ended June 30, 2025. This decrease is primarily attributable to lower headcount expense of $1.1 million, lower miscellaneous expenses of $0.8 million, lower stock-compensation expense of $0.2 million, and lower expenses related to the Amazon Seller program of $0.2 million.
As a percentage of net revenue, sales and distribution expenses decreased to 54.0% for the six months ended June 30, 2026, from 60.4% for the six months ended June 30, 2025. E-commerce platform commissions, online advertising, selling and logistics expenses included within sales and distribution expenses, as a percentage of net revenue, increased to 44.7% for the six months ended June 30, 2026, from 47.0% for the six months ended June 30, 2025.
The decrease in general and administrative expenses was primarily the result of a decrease of $0.1 million in logistics software expenses.
On July 17, 2026, the Company completed the sale of substantially all of its assets to Trademark Global, pursuant to the Asset Purchase Agreement, dated as of April 27, 2026 (the “Asset Purchase Agreement” and together with the Securities Purchase Agreement, the “Aterian Transactions”). Pursuant to the Asset Purchase Agreement, Trademark Global acquired certain specified assets and liabilities of the Company, including, among other things, assets associated with the Company’s marquee consumer brands: Mueller Living, PurSteam, hOmeLabs, Squatty Potty, Healing Solutions, and Photo Paper Direct for $18.0 million in cash, subject to certain purchase price adjustments.
On April 27, 2026, the Company entered into a definitive Asset Purchase Agreement with Trademark Global, LLC, to sell certain marquee brands for $18 million in cash. Based on the definitive deal terms, specifically the $18.0 million base purchase price and the estimated purchase price adjustments, the Company evaluated the carrying value of its brand intangible assets. TheAs of June 30, 2026, management evaluated the carrying value of these brand intangible assets based on the finalized deal terms and expected net proceeds, and determined that no impairment was required for the three months ended June 30, 2026. Previously, the Company determined that the estimated allocated proceeds from the Asset Purchase Agreement were lower than the carrying values for certain definite-lived brand assets.assets, Accordingly,and the Companyaccordingly recorded a non-cash impairment charge of $3.4 million during the first quarter of 2026. This charge,charge was recorded within LossIncome (loss) from Discontinueddiscontinued Operationsoperations on the Condensed Consolidated Statement of Operations, adjusts the carrying amount of the disposal group to its fair value less costs to sell, based on the $18.0 million cash consideration and estimated purchase price adjustments.Operations.
Cash Flows for the ThreeSix Months Ended MarchJune 31,30, 2026 and 2025
The following table provides information regarding our cash flows for the threesix months ended MarchJune 31,30, 2026 and 2025:
Net Cash Provided by (Used in) Operating Activities
Net cash usedprovided inby operating activities was $0.4$0.1 million for the threesix months ended MarchJune 31,30, 2026, primarily driven by net cash losses from operations of $2.0$2.1 million and a $1.6$2.2 million inflow from changes in working capital, mainly related to changes in accounts receivable, purchases of inventory, and payments of accounts payable.
Net cash used in operating activities was $3.9$8.3 million for the threesix months ended MarchJune 31,30, 2025, resulting primarily from our net cash losses from operations of $2.9$6.7 million, outflow from working capital of $1.0$1.6 million from changes in accounts receivable, purchases of inventory and payments of accounts payable. The working capital outflow primarily relates to purchases of our air quality products for the summer season.season and intentional build up of certain products to avoid higher tariffs.
For the threesix months ended MarchJune 31,30, 2026, net cash used in investing activities was $4$18 thousand, primarily related to the purchase of fixed assets during the threesix months ended MarchJune 31,30, 2026.
ATER insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 0 filings. Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-09-25 | Natan David |
Grant/award | 301,205 | — | — |
| 2026-09-25 | Kurtz William |
Grant/award | 150,602 | — | — |
| 2026-09-24 | Lazar David E. |
Conversion | 1,300,530 | — | — |
| 2026-08-04 | Lazar David E. |
Conversion | 875,000 | $2.00 | $1.8M |
| 2026-05-21 | Rodriguez Arturo |
Grant/award | 70,000 | — | — |
Well-known investors holding ATER (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| Renaissance Technologies | 2026-06-30 | 223,030 | $294.4K | 0.0% | Added 358% |