Aterian Inc

Previous wording

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 six months ending June 30, 2024, the Company shifted its technology platform away from a fully internally developed model to an integrated third party model. Therefore, beginning with the three months ending March 31, 2024, technology and employee related costs have been presented in general and administrative costs on the Condensed Consolidated Statement of Operations.

Current wording

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 nine months ended September 30, 2024, the Company shifted its technology platform away from a fully internally developed model to an integrated third party model. Therefore, beginning with the three months ending March 31, 2024, technology and employee related costs have been presented in general and administrative costs on the Condensed Consolidated Statement of Operations.

Previous wording

Net revenue decreased $7.3 million, or 20.6%, during the three months ended June 30, 2024 to $28.0 million, compared to $35.3 million for the three months ended June 30, 2023. The decrease in net revenue was primarily attributable to a decrease in direct net revenue of $6.6 million, or 19.3%, which was primarily relating to a reduction in our product offering due to our SKU rationalization.

Current wording

Net revenue decreased $13.4 million, or 33.9%, during the three months ended September 30, 2024 to $26.2 million, compared to $39.7 million for the three months ended September 30, 2023. The decrease in net revenue was primarily attributable to a decrease in direct net revenue of $13.8 million, or 35%, which was primarily relating to a reduction in our product offering due to our SKU rationalization.

Previous wording

Our Heating cooling and air quality business increased to $10.4 million during the three months ending June 30, 2024 compared to $8.4 million during the three months ending June 30, 2023 due to an enhanced marketing program for our air quality products during the quarter ending June 30, 2024, resulting in an increase in units sold. Every other 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, 2023 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 kitchen appliance businesses. These factors resulted in a reduction of units sold and a reduction in certain retail sales prices.

Current wording

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, 2023 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 compared to the prior year period.

Previous wording

Cost of goods sold decreased by $18.0 million, from $36.2 million for the six months ended June 30, 2023 to $18.1 million for the six months ended June 30, 2024 primarily from reduced sales volumes. The decrease in cost of goods sold was primarily attributable to a decrease of $13.2 million in cost of goods sold from our direct businesses and a decrease of $4.8 million in cost of goods sold from our wholesale businesses.

Current wording

Cost of goods sold decreased by $9.7 million, from $20.1 million for the three months ended September 30, 2023 to $10.4 million for the three months ended September 30, 2024 primarily from reduced sales volumes. The decrease in cost of goods sold was primarily attributable to a decrease of $9.9 million in cost of goods sold from our direct businesses, partially offset by and increase of $0.3 million in cost of goods sold from our wholesale businesses.

Previous wording

Gross profit increased from 42.2% for the three months ended June 30, 2023 to 60.4% for the three months ended June 30, 2024. The increase in gross profit was due primarily to a change of product mix and a reduction in liquidation of high priced excess inventory at reduced prices compared to the prior year.

Current wording

Gross profit increased from 49.4% for the three months ended September 30, 2023 to 60.3% for the three months ended September 30, 2024. The increase in gross profit was due primarily to a change of product mix and a reduction in liquidation of high priced excess inventory at reduced prices compared to the prior year.

Previous wording

Sales and distribution expenses, which included e-commerce platform commissions, online advertising and logistics expenses (i.e., variable sales and distribution expense), decreased to $15.2 million for the three months ended June 30, 2024, from $20.6 million for the three months ended June 30, 2023. This decrease is primarily attributable to the decrease in the volume of products sold in the three months ended June 30, 2024, as our e-commerce platform commissions, online advertising, selling and logistics expenses decreased to $12.0 million in the three months ended June 30, 2024 as compared to $16.2 million in the prior year period.

Current wording

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 three months ended September 30, 2024, from $20.9 million for the three months ended September 30, 2023. This decrease is primarily attributable to the decrease in the volume of products sold in the three months ended September 30, 2024, as our e-commerce platform commissions, online advertising, selling and logistics expenses decreased to $11.4 million in the three months ended September 30, 2024 as compared to $18.4 million in the prior year period.

Previous wording

Our sales and distribution fixed costs (e.g., salary and office expenses) including stock-based compensation decreased to $3.1 million for the three months ended June 30, 2024, from $4.4 million for the three months ended June 30, 2023. This decrease is primarily attributable to a decrease in headcount expense of $0.8 million, a decrease in restructuring costs of $0.7 million and a decrease in stock compensation expense of $0.1 million, partially offset by an increase in other miscellaneous costs of $0.3 million.

Current wording

Our sales and distribution fixed costs (e.g., salary and office expenses) including stock-based compensation was relatively flat at $2.5 million for the three months ended September 30, 2024 and 2023. This is primarily attributable to a decrease in headcount expense of $0.4 million, partially offset by an increase in expenses related to a new Amazon Seller Program of $0.2 million, an increase in professional fees of $0.1 million and an increase in stock compensation expenses of $0.1 million.

Previous wording

As a percentage of net revenue, sales and distribution expenses decreased to 54.2% for the three months ended June 30, 2024, from 58.3% for the three months ended June 30, 2023. E-commerce platform commissions, online advertising, selling and logistics expenses included within sales and distribution expenses, as a percentage of net revenue, were 43.0% for the three months ended June 30, 2024 as compared to 45.8% for the three months ended June 30, 2023. This decrease in sales and distribution expenses as a percentage of revenue is primarily due to product mix, with a higher proportion of heating, cooling and air quality sales during the three months ending June 30, 2024, compared to the previous quarter. These products incur lower last-mile costs as a percentage of revenue.

Current wording

As a percentage of net revenue, sales and distribution expenses increased to 53.0% for the three months ended September 30, 2024, from 52.7% for the three months ended September 30, 2023. E-commerce platform commissions, online advertising, selling and logistics expenses included within sales and distribution expenses, as a percentage of net revenue, were 43.3% for the three months ended September 30, 2024 as compared to 46.3% for the three months ended September 30, 2023. This decrease in sales and distribution expenses as a percentage of revenue is primarily due to product mix and a decrease in last mile costs.

Previous wording

The decrease in general and administrative expenses was primarily the result of a decrease of $0.9 million in depreciation and amortization, a decrease of $0.4 in headcount expenses, and a decrease of $0.4 in other miscellaneous expenses, partially offset by an increase in stock-compensation expense of $0.3 million and an increase in restructuring costs of $0.1 million.

Current wording

The decrease in general and administrative expenses was primarily the result of a decrease of $0.6 million in professional fees, a decrease of $0.4 million in restructuring costs, a decrease of $0.2 million in other miscellaneous expenses, and a decrease of $0.1 million in insurance expenses, partially offset by an increase in stock-compensation expense of $0.7 million.

Previous wording

The decrease in interest expense, net of $0.1 million is primarily relating to a decrease in interest expense of $0.2 million and an increase in interest income of $0.1 million compared to the prior period due to lower average borrowings.

Current wording

The decrease in interest expense, net of $0.2 million is primarily relating to a decrease in interest expense of $0.2 million compared to the prior period due to lower average borrowings.

Previous wording

Change in fair market value of warrant liability

Current wording

Change in fair market value of warrant liabilities

Previous wording

Net revenue decreased $21.9 million, or 31.3%, during the six months ended June 30, 2024 to $48.2 million, compared to $70.1 million for the six months ended June 30, 2023. The decrease in net revenue was primarily attributable to a decrease in direct net revenue of $19.9 million, or 29.4%, which was primarily relating to a reduction in our product offering due to our SKU rationalization, competitive pricing pressure and other competitive dynamics on marketplaces.

Current wording

Net revenue decreased $35.4 million, or 32.2%, during the nine months ended September 30, 2024 to $74.4 million, compared to $109.8 million for the nine months ended September 30, 2023. The decrease in net revenue was primarily attributable to a decrease in direct net revenue of $33.8 million, or 31.4%, which was primarily relating to a reduction in our product offering due to our SKU rationalization, competitive pricing pressure and other competitive dynamics on marketplaces.

Previous wording

Cost of goods sold decreased by $9.3 million, from $20.4 million for the three months ended June 30, 2023 to $11.1 million for the three months ended June 30, 2024 primarily from reduced sales volumes. The decrease in cost of goods sold was primarily attributable to a decrease of $6.9 million in cost of goods sold from our direct businesses and a decrease of $2.4 million in cost of goods sold from our wholesale businesses.

Current wording

Cost of goods sold decreased by $27.7 million, from $56.2 million for the nine months ended September 30, 2023 to $28.6 million for the nine months ended September 30, 2024 primarily from reduced sales volumes. The decrease in cost of goods sold was primarily attributable to a decrease of $23.1 million in cost of goods sold from our direct businesses and a decrease of $4.5 million in cost of goods sold from our wholesale businesses.

Previous wording

Gross profit increased from 48.5% for the six months ended June 30, 2023 to 62.4% for the six months ended June 30, 2024. The increase in gross profit was due primarily to a change of product mix and a reduction in liquidation of high priced excess inventory at reduced prices compared to the prior year.

Current wording

Gross profit increased from 48.8% for the nine months ended September 30, 2023 to 61.6% for the nine months ended September 30, 2024. The increase in gross profit was due primarily to a change of product mix and a reduction in liquidation of high priced excess inventory at reduced prices compared to the prior year.

Previous wording

Sales and distribution expenses, which included e-commerce platform commissions, online advertising and logistics expenses (i.e., variable sales and distribution expense), decreased to $28.4 million for the six months ended June 30, 2024, from $40.8 million for the six months ended June 30, 2023. This decrease is primarily attributable to the decrease in the volume of products sold in the six months ended June 30, 2024, as our e-commerce platform commissions, online advertising, selling and logistics expenses decreased to $22.3 million in the six months ended June 30, 2024 as compared to $33.2 million in the prior year period.

Current wording

Sales and distribution expenses, which included e-commerce platform commissions, online advertising and logistics expenses (i.e., variable sales and distribution expense), decreased to $42.3 million for the nine months ended September 30, 2024, from $61.7 million for the nine months ended September 30, 2023. This decrease is primarily attributable to the decrease in the volume of products sold in the nine months ended September 30, 2024, as our e-commerce platform commissions, online advertising, selling and logistics expenses decreased to $33.7 million in the nine months ended September 30, 2024 as compared to $51.6 million in the prior year period.

Previous wording

Our sales and distribution fixed costs (e.g., salary and office expenses) including stock-based compensation decreased to $6.0 million for the six months ended June 30, 2024, from $7.6 million for the six months ended June 30, 2023. This decrease is primarily attributable to a decrease in headcount expense of $1.3 million, a decrease in stock-compensation expense of $0.5 million and a decrease in restructuring costs of $0.4 million, partially offset by an increase in other miscellaneous costs costs of $0.6 million.

Current wording

Our sales and distribution fixed costs (e.g., salary and office expenses) including stock-based compensation decreased to $8.6 million for the nine months ended September 30, 2024, from $10.1 million for the nine months ended September 30, 2023. This decrease is primarily attributable to a decrease in headcount expense of $1.7 million and a decrease in restructuring costs of $0.4 million, partially offset by an increase in expenses related to a new Amazon Seller Program of $0.6 million.

Previous wording

As a percentage of net revenue, sales and distribution expenses increased to 58.9% for the six months ended June 30, 2024, from 58.1% for the six months ended June 30, 2023. E-commerce platform commissions, online advertising, selling and logistics expenses included within sales and distribution expenses, as a percentage of net revenue, were 46.4% for the six months ended June 30, 2024 as compared to 47.3% for the six months ended June 30, 2023.

Current wording

As a percentage of net revenue, sales and distribution expenses increased to 56.8% for the nine months ended September 30, 2024, from 56.2% for the nine months ended September 30, 2023. E-commerce platform commissions, online advertising, selling and logistics expenses included within sales and distribution expenses, as a percentage of net revenue, were 45.3% for the nine months ended September 30, 2024 as compared to 47.0% for the nine months ended September 30, 2023. This decrease in sales and distribution expenses as a percentage of revenue is primarily due to product mix and a decrease in warehousing costs.

Previous wording

The decrease in general and administrative expenses was primarily the result of a decrease of $2.2 million in depreciation and amortization, a decrease of $0.3 million in headcount expense, and a decrease of $0.3 in other miscellaneous costs, partially offset by an increase in stock-compensation expense of $0.4 million and an increase in restructuring costs of $0.3 million.

Current wording

The decrease in general and administrative expenses was primarily the result of a decrease of $2.2 million in depreciation and amortization, a decrease of $0.9 million in insurance expenses, and a decrease of $0.6 million in professional fees, partially offset by an increase in stock-compensation expense of $1.1 million.

Previous wording

Certain asset groups experienced a significant decrease in sales and contribution margin through June 30, 2023. This was considered an interim triggering event for the six months ended June 30, 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 six months ended June 30, 2024.

Current wording

Certain asset groups experienced a significant decrease in sales and contribution margin through September 30, 2023. This was considered an interim triggering event for the nine months ended September 30, 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 nine months ended September 30, 2024.

Previous wording

The decrease in interest expense, net of $0.2 million is primarily relating to a decrease in interest expense of $0.5 million and an increase in interest income of $0.3 million compared to the prior period.

Current wording

The decrease in interest expense, net of $0.3 million is primarily relating to a decrease in interest expense of $0.6 million and an increase in interest income of $0.3 million compared to the prior period.

Previous wording

The 2023 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 six months ending June 30, 2024 primarily relates to the reduced share price compared to the prior period.

Current wording

The 2023 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 nine months ending September 30, 2024 primarily relates to the reduced share price compared to the prior period.

Previous wording

The following table provides information regarding our cash flows for the six months ended June 30, 2023 and 2024:

Current wording

The following table provides information regarding our cash flows for the nine months ended September 30, 2023 and 2024:

Previous wording

Net cash used in operating activities was $8.9 million for the six months ended June 30, 2023, resulting primarily from our net cash losses from operations of $14.2 million, impacts from working capital of $5.3 million from changes in accounts receivable, purchases of inventory and payments of accounts payable. The reduction of gross inventory of $6.7 million from December 31, 2022 to June 30, 2023 primarily relates to the liquidation of high priced excess inventory and a reduction of purchases for the period.

Current wording

Net cash used in operating activities was $8.5 million for the nine months ended September 30, 2023, resulting primarily from our net cash losses from operations of $19.3 million, inflow from working capital of $10.8 million from changes in accounts receivable, purchases of inventory and payments of accounts payable. The reduction of gross inventory of $12.0 million from December 31, 2022 to September 30, 2023 primarily relates to the liquidation of high priced excess inventory and a reduction of purchases for the period.

Previous wording

Net cash generated by operating activities was $2.9 million for the six months ended June 30, 2024, resulting primarily from our net cash losses from operations of $5.0 million, inflow from working capital of $7.9 million from changes in accounts receivable, purchases of inventory and payments of accounts payable. The working capital benefit primarily relates to the timing of payments for our seasonal air quality products.

Current wording

Net cash provided by operating activities was $2.2 million for the nine months ended September 30, 2024, resulting primarily from our net cash losses from operations of $5.0 million, inflow from working capital of $7.2 million from changes in accounts receivable, purchases of inventory and payments of accounts payable. The working capital benefit primarily relates to a decrease in inventory due to a reduction in purchases for the period.

Previous wording

For the six months ended June 30, 2023, net cash used in investing activities was $0.2 million primarily related to the remaining payment for the purchase of Step and Go assets which was acquired during the three months ending December 31, 2022.

Current wording

For the nine months ended September 30, 2023, net cash used in investing activities was $0.2 million primarily related to the remaining payment for the purchase of Step and Go assets which was acquired during the three months ending December 31, 2022.

Previous wording

For the six months ended June 30, 2024, net cash used in investing activities was $0.2 million primarily related to the purchase of a minority equity investment in 4th and Heart during the six months ending June 30, 2024.

Current wording

For the nine months ended September 30, 2024, net cash used in investing activities was $0.2 million primarily related to the purchase of a minority equity investment in 4th and Heart during the nine months ended September 30, 2024.

Previous wording

For the six months ended June 30, 2024, cash used by financing activities of $2.3 million primarily from the net repayments for our MidCap credit facility of $1.6 million, repayment of note payable to Smash of $0.4 million and payment of insurance obligations of $0.3 million.

Current wording

For the nine months ended September 30, 2023, cash used in financing activities of $7.5 million primarily from the net repayments for our MidCap credit facility of $7.2 million, repayment of note payable to Smash of $0.5 million and net proceeds of insurance financing of $0.2 million.

Previous wording

For the six months ended June 30, 2023, cash used by financing activities of $6.5 million primarily from the net repayments for our MidCap credit facility of $5.5 million, repayment of note payable to Smash of $0.5 million and payment of insurance obligations of $0.5 million.

Current wording

For the nine months ended September 30, 2024, cash used in financing activities of $5.7 million primarily from the net repayments for our MidCap credit facility of $4.6 million, repayment of note payable to Smash of $0.6 million and payment of insurance obligations of $0.5 million.

Previous wording

As an emerging growth 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, 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 for the foreseeable future until such time that we reach a scale of profitability to sustain our operations. 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 and reduced consumer spending.

Current wording

As an emerging growth company, 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, 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 for the foreseeable future until such time that we reach a scale of profitability to sustain our operations. We have also experienced declining revenues due to macroeconomic factors, including increased interest rates and reduced consumer discretionary spending, and other factors, and we are focusing our efforts on a more limited number of products. In addition, our recent financial performance has been adversely impacted by inflationary pressures and reduced consumer spending.

Previous wording

• Since our inception, we have incurred significant losses and used cash flows from operations to fund our enterprise. In this regard, during the six months ended June 30, 2024, we incurred a net loss of $8.8 million and generated net cash flows from operations of $2.9 million. In addition, as of June 30, 2024, we had unrestricted cash and cash equivalents of $20.3 million available to fund our operations and an accumulated deficit of $708.6 million.

Current wording

• Since our inception, we have incurred significant losses and used cash flows from operations to fund our enterprise. In this regard, during the nine months ended September 30, 2024, we incurred a net loss of $10.6 million and generated net cash flows from operations of $2.2 million. In addition, as of September 30, 2024, we had unrestricted cash and cash equivalents of $16.1 million available to fund our operations and an accumulated deficit of $710.4 million.

Previous wording

The Company has initiated two restructuring programs over the last 15 months to reduce operating costs and right size the workforce to align with the scale of our streamlined operations. In addition, we have reduced the SKU count to solely focus on profitable products that are core to the Company’s strategy. During the six months ending June 30, 2024, we extended the term with Midcap Credit Facility until December 2026 (See Note 7, 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.

Current wording

The Company has completed two restructuring programs over the last 18 months to reduce operating costs and right size the workforce to align with the scale of our streamlined operations. In addition, we have reduced the SKU count to solely focus on profitable products that are core to the Company’s strategy. During the nine months ended September 30, 2024, we extended the term with Midcap Credit Facility until December 2026 (See Note 7, 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.

Previous wording

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 affect 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. 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).

Current wording

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).

Previous wording

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 has been retroactively adjusted to reflect the Reverse Stock Split.

Current wording

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 Quarterly Report on Form 10-Q have been retroactively adjusted to reflect the Reverse Stock Split.

Previous wording

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 $17 thousand and $0.6 million for the three and six months ended June 30, 2024, respectively.

Current wording

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 (reversals) of $(10) thousand and $0.6 million for the three and nine months ended September 30, 2024, respectively.

Previous wording

As of June 30, 2024, the Company has a liability of $0.2 million for restructuring costs included in accrued expenses and other current liabilities on the consolidated balance sheet. As of June 30, 2023, the Company has a liability of $0.6 million for restructuring costs, of which $0.5 million is included in accrued expenses and other current liabilities and $0.1 million is included in other liabilities on the consolidated balance sheet.

Current wording

As of September 30, 2024, the Company has a liability of $3 thousand for restructuring costs included in accrued expenses and other current liabilities on the consolidated balance sheet.

Previous wording

The outstanding balance on the MidCap credit facility as of December 31, 2023 and June 30, 2024 was $11.1 million and $9.6 million, respectively. The Company had $1.1 million available on the Midcap credit facility as of June 30, 2024. We are in compliance with the financial covenants contained within the Credit Agreement as of June 30, 2024.

Current wording

The outstanding balance on the MidCap credit facility as of December 31, 2023 and September 30, 2024 was $11.1 million and $6.7 million, respectively. The Company had $1.3 million available on the Midcap credit facility as of September 30, 2024. We are in compliance with the financial covenants contained within the Credit Agreement as of September 30, 2024.

Previous wording

We believe that our financial statements and the other financial data included in this Quarterly Report have been prepared in a manner that complies, in all material respects, with generally accepted accounting principles in the U.S. (“GAAP”). However, for the reasons discussed below, we have presented certain non-GAAP measures herein.

Current wording

We believe that our condensed consolidated financial statements and the other financial data included in this Quarterly Report have been prepared in a manner that complies, in all material respects, with generally accepted accounting principles in the U.S. (“GAAP”). However, for the reasons discussed below, we have presented certain non-GAAP measures herein.

Previous wording

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 provision for income taxes. As used herein, Adjusted EBITDA represents EBITDA plus stock-based compensation expense, changes in fair-market value of warrant liability, impairment on intangibles, restructuring expenses, 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.

Current wording

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 provision (benefit) 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, restructuring expenses, 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.

Previous wording

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 will result in a reduced portfolio offering. This reduction in the portfolio will be 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 in the three months ending March 31, 2023 within impairment loss on intangibles on the condensed consolidated statement of operations.

Current wording

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 will be 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 in the three months ending March 31, 2023 within impairment loss on intangibles on the condensed consolidated statement of operations.

Previous wording

There were no triggering events to test intangibles for impairment loss during the six months ended June 30, 2024.

Current wording

There were no triggering events to test intangibles for impairment loss during the nine months ended September 30, 2024.