Aterian, Inc.
For the period ended Mar 31, 2025. Filed May 15, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed May 15, 2025
ATER$0.85+0.8%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-12.
0001437749-24-034539
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-15.
0001437749-25-017173
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 128 previous paragraphs and 98 current paragraphs.
55 unchanged; 32 reworded; 10 added; 32 removed; 9 previous and 1 current paragraphs rearranged.
Tables are not compared: 29 previous and 15 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (10)
Current report
In the first quarter of 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. While the ultimate implications of the tariffs remain unclear, they could materially increase our import costs and potentially lead to higher prices that reduce consumer demand. We are monitoring the situation closely and are proactively evaluating strategies to mitigate the impact on our supply chain and margins. These efforts include exploring alternative sourcing outside of China, working with our suppliers to manage cost increases, and implementing price increases. These actions that we take may not fully offset the impact of tariffs and, as a result, our revenues, gross margins and overall financial performance may be materially impacted.
Current report
The following table sets forth the components of our results of operations as a percentage of net revenue:
Current report
The following table sets forth the components of our results of operations as a percentage of net revenue:
Current report
For the three months ended March 31, 2025, no cash was used in investing activities.
Current report
In addition, our future results could be materially 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 will materially raise our cost of goods sold and will place pressure on our margins. While we are actively pursuing mitigation strategies—including supplier negotiations, selective price adjustments, potential 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.
Current report
On May 14, 2025, the Company announced a fixed cost reduction plan, which includes a workforce reduction affecting approximately 20 employees. The Company expects to substantially complete this reduction by the end of the third quarter of 2025. In connection with this plan, the Company anticipates recognizing restructuring charges of approximately $2.3 million, primarily related to severance, during the second quarter of 2025. Severance payments are expected to be made through the second quarter of 2026. Combined with other vendor-related cost reductions, the plan is expected to generate annualized savings of approximately $5 to $6 million.
Current report
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 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.
Current report
**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 have 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. During the three months ended March 31, 2025 and through May 1, 2025, the Company did not repurchase any shares under its authorized share repurchase program. On May 2, 2025, the Company temporarily suspended its share repurchase program.
Current report
**Trade Policy—**In the first quarter of 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. While the ultimate implications of the tariffs remain unclear, they could materially increase our import costs and potentially lead to higher prices that reduce consumer demand. We are monitoring the situation closely and are proactively evaluating strategies to mitigate the impact on our supply chain and margins. These efforts include exploring alternative sourcing outside of China, working with our suppliers to manage cost increases, and implementing price increases. These actions that we take may not fully offset the impact of tariffs and, as a result, our revenues, gross margins and overall financial performance may be materially impacted.
Current report
During the three months ended March 31, 2025, the implementation of new tariffs raised concerns about potential negative effects on the Company’s revenue and profitability. As a result, the Company identified a triggering event and performed a recoverability test for the relevant asset groups. Based on this assessment, the Company concluded that the undiscounted future cash flows expected to be generated from these asset groups exceeded their carrying amounts. Accordingly, no impairment was recognized as of March 31, 2025.
Removed paragraphs (32)
Previous report
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.
Previous report
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 report
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 report
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 report
Research and Development Expenses
Previous report
During the three months ending 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 September 30, 2024, technology and employee related costs have been presented in general and administrative costs on the Condensed Consolidated Statements of Operations.
Previous report
Comparison of the Nine Months Ended September 30, 2023 and 2024
Previous report
Net Revenue
Previous report
Revenue by Product Categories:
Previous report
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 report
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 report
Sales and Distribution Expenses
Previous report
Research and Development Expenses
Previous report
During the nine months ending 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 nine months ending September 30, 2024, technology and employee related costs have been presented in general and administrative costs on the Condensed Consolidated Statements of Operations.
Previous report
General and Administrative Expenses
Previous report
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 report
Impairment loss on intangibles
Previous report
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 report
Interest expense, net
Previous report
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 report
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 report
**Nasdaq Listing -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 is 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”).
Previous report
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.
Previous report
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.
Previous report
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 report
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 report
**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, respectively.
Previous report
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 report
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 report
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 report
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 continues to see reduced net revenues across its portfolio due to the current macroeconomic environment reducing demand for consumer 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 has 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 condensed consolidated statement of operations.
Previous report
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.
Reworded paragraphs (32)
Previous wording
We are a technology-enabled consumer products company that predominantly operates through online retail channels such as Amazon and Walmart. 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.
Current wording
We are a 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.
Previous wording
Our primary brands include Squatty Potty, HomeLabs, Mueller Living, PurSteam, Healing Solutions, and Photo Paper Direct ("PPD"). We generate revenue primarily through the online sales of our various consumer products with substantially all of our sales being made through the Amazon U.S. marketplace.
Current wording
Our primary brands include Squatty Potty, HomeLabs, Mueller Living, PurSteam, Healing Solutions, and Photo Paper Direct ("PPD"). We generate revenue primarily through the online sales of our various consumer products with the large majority of our sales being made through the Amazon U.S. marketplace.
Previous wording
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, and our own websites, with substantially all of our sales 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.
Current wording
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 the large 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.
Previous wording
Sales and Distribution Expenses—Sales and distribution expenses consist of online advertising costs, marketing and promotional costs, sales and ecommerce platform commissions, fulfillment, including shipping and handling, and warehouse costs (i.e., sales and distribution variable expenses). Sales and distribution expenses also include employee compensation and benefits and other related fixed costs. Shipping and handling expenses are included in our consolidated statements of operations in sales and distribution expenses. This includes inbound, pick and pack costs and outbound transportation costs to ship goods to customers performed by e-commerce platforms or incurred directly by us, through our own direct fulfillment platform, which leverages our technology platform and third-party logistics partners. Our sales and distribution expenses, specifically our logistics expenses and online advertising, will vary quarter to quarter as they are dependent on our sales volume, our product mix and whether we fulfill products ourselves, i.e., fulfillment by merchant (“FBM”), or through e-commerce platform service providers, i.e., fulfillment by Amazon (“FBA”) or fulfilled by Walmart (“WFS”). Products with less expensive fulfillment costs as a percentage of net revenue may allow for a lower gross margin, while still maintaining their targeted profitability level. Conversely, products with higher fulfillment costs will need to achieve a higher gross margin to maintain their targeted level of profitability. We are FBM One Day and Two Day Prime certified, allowing us to deliver our sales through Amazon to most customers within one or two days. We periodically review the locations and capacity of our third-party warehouses to ensure we have the appropriate geographic reach, which helps to reduce the average last mile shipping zones to the end customer and as such our speed of delivery improves while our shipping costs to customers decrease, prior to the impacts on shipping providers’ rates.
Current wording
Sales and Distribution Expenses—Sales and distribution expenses consist of online advertising costs, marketing and promotional costs, sales and ecommerce platform commissions, fulfillment, including shipping and handling, and warehouse costs (i.e., sales and distribution variable expenses). Sales and distribution expenses also include employee cash and stock compensation and benefits and other related fixed costs. Shipping and handling expenses are included in our consolidated statements of operations in sales and distribution expenses. This includes inbound, pick and pack costs and outbound transportation costs to ship goods to customers performed by e-commerce platforms or incurred directly by us, through our own direct fulfillment platform, which leverages our technology platform and third-party logistics partners. Our sales and distribution expenses, specifically our logistics expenses and online advertising, will vary quarter to quarter as they are dependent on our sales volume, our product mix and whether we fulfill products ourselves, i.e., fulfillment by merchant (“FBM”), or through e-commerce platform service providers, i.e., fulfillment by Amazon (“FBA”) or fulfilled by Walmart (“WFS”). Products with less expensive fulfillment costs as a percentage of net revenue may allow for a lower gross margin, while still maintaining their targeted profitability level. Conversely, products with higher fulfillment costs will need to achieve a higher gross margin to maintain their targeted level of profitability. We are FBM One Day and Two Day Prime certified, allowing us to deliver our sales through Amazon to most customers within one or two days. We periodically review the locations and capacity of our third-party warehouses to ensure we have the appropriate geographic reach, which helps to reduce the average last mile shipping zones to the end customer and as such our speed of delivery improves while our shipping costs to customers decrease, prior to the impacts on shipping providers’ rates.
Previous wording
General and Administrative Expenses—General and administrative expenses include compensation and employee benefits for executive management, finance administration, legal, and human resources, facility costs, insurance, travel, professional service fees and other general overhead costs, including the costs of being a public company. Beginning with the three months ending March 31, 2024, technology and employee related costs have been presented in general and administrative costs.
Current wording
General and Administrative Expenses—General and administrative expenses include cash and stock compensation and employee benefits for executive management, finance administration, legal, and human resources, facility costs, insurance, travel, professional service fees, and other general overhead costs, including the costs of being a public company.
Previous wording
Interest Expense, Net—Interest expense, net includes the interest cost from our credit facility and term loans, and includes amortization of deferred finance costs and debt discounts from our credit facility (the “Credit Facility”) with MidCap Funding IV Trust (“MidCap”).
Current wording
Interest Expense, Net—Interest expense, net includes the interest cost from our credit facility, and includes amortization of deferred finance costs and debt discounts from our credit facility (the “Credit Facility”) with MidCap Funding IV Trust (“MidCap”).
Previous 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.
Current wording
Net revenue decreased $4.9 million, or 24.0%, during the three months ended March 31, 2025 to $15.4 million, compared to $20.2 million for the three months ended March 31, 2024. The decrease in net revenue was primarily attributable to a decrease in direct net revenue of $5.1 million, or 25.5%, which was primarily relating to a reduction in our product offering due to our SKU rationalization and changes to Amazon's marketing affiliate program, which reduced traffic and conversions on certain products.
Previous 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 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 was initiated during the year ended December 31, 2023 and softness in consumer demand due to the macroeconomic environment.The reduction in sales from our Heating, cooling and air quality products was primarily due to changes in Amazon’s marketing affiliate program.
Previous 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.
Current wording
Cost of goods sold decreased by $1.1 million, from $7.0 million for the three months ended March 31, 2024 to $5.9 million for the three months ended March 31, 2025 primarily from reduced sales volumes. The decrease in cost of goods sold was primarily attributable to a decrease of $1.3 million in cost of goods sold from our direct businesses, partially offset by an increase of $0.2 million in cost of goods sold from our wholesale businesses.
Previous 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.
Current wording
Gross profit decreased from 65.1% for the three months ended March 31, 2024 to 61.4% for the three months ended March 31, 2025. The decrease in gross profit was due primarily to product mix.
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 $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.
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 $9.7 million for the three months ended March 31, 2025, from $13.2 million for the three months ended March 31, 2024. This decrease is primarily attributable to the decrease in the volume of products sold in the three months ended March 31, 2025, as our e-commerce platform commissions, online advertising, selling and logistics expenses decreased to $7.4 million in the three months ended March 31, 2025 as compared to $10.3 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 $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.
Current wording
Our sales and distribution fixed costs (e.g., salary and office expenses) including stock-based compensation decreased to $2.3 million for the three months ended March 31, 2025, from $2.9 million for the three months ended March 31, 2024. This decrease is primarily attributable to lower restructuring costs of $0.3 million, lower headcount expense of $0.2 million and lower stock-compensation expense of $0.1 million.
Previous 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.
Current wording
As a percentage of net revenue, sales and distribution expenses decreased to 62.9% for the three months ended March 31, 2025, from 65.4% for the three months ended March 31, 2024. E-commerce platform commissions, online advertising, selling and logistics expenses included within sales and distribution expenses, as a percentage of net revenue, were 48.0% for the three months ended March 31, 2025 as compared to 51.1% for the three months ended March 31, 2024. 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 $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.
Current wording
The decrease in general and administrative expenses was primarily the result of a decrease of $0.8 million in stock-compensation expense, a decrease of $0.4 million in headcount expense, a decrease of $0.2 million in restructuring costs, and a decrease of $0.4 million in other miscellaneous costs.
Previous 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.
Current wording
The decrease in interest expense, net of $0.1 million is primarily relating to a decrease in interest expense of $0.2 million due to lower average borrowings and a decrease in interest income of $0.1 million compared to the prior period.
Previous wording
Cash Flows for the Nine Months Ended September 30, 2023 and 2024
Current wording
Cash Flows for the Three Months Ended March 31, 2024 and 2025
Previous wording
The following table provides information regarding our cash flows for the nine months ended September 30, 2023 and 2024:
Current wording
The following table provides information regarding our cash flows for the three months ended March 31, 2024 and 2025:
Previous wording
Net Cash (Used in) Provided by Operating Activities
Current wording
Net Cash Used in Operating Activities
Previous 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.
Current wording
Net cash used in operating activities was $6 thousand for the three months ended March 31, 2024, resulting primarily from our net cash losses from operations of $4.4 million, inflow from working capital of $4.4 million from changes in accounts receivable, purchases of inventory and payments of accounts payable. The reduction of gross inventory of $3.0 million from December 31, 2023 to March 31, 2024 primarily relates to the liquidation of high priced excess inventory and a reduction of purchases for the period.
Previous 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.
Current wording
Net cash used in operating activities was $3.9 million for the three months ended March 31, 2025, resulting primarily from our net cash losses from operations of $2.9 million, outflow from working capital of $1.0 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.
Previous 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.
Current wording
For the three months ended March 31, 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 three months ending March 31, 2024.
Previous 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.
Current wording
For the three months ended March 31, 2024, cash used by financing activities of $2.2 million was primarily from the net repayments for our MidCap credit facility of $1.8 million, repayment of note payable to Smash of $0.2 million and payment of insurance obligations of $0.2 million.
Previous 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.
Current wording
For the three months ended March 31, 2025, cash provided by financing activities of $0.4 million was primarily from the net borrowings for our MidCap credit facility of $0.5 million and payment of insurance obligations of $0.1 million.
Previous 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.
Current wording
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, 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 and reduced consumer spending.
Previous wording
In order to execute our growth strategy, we have historically relied on outside capital through the issuance of equity, debt, and borrowings under financing arrangements (collectively “outside capital”) to fund our cost structure, and we expect to continue to rely on outside capital for the foreseeable future, specifically for our M&A strategy. While we believe we will eventually reach a level of profitability to sustain our operations, there can be no assurance we will be able to achieve such profitability or do so in a manner that does not require our continued reliance on outside capital. Moreover, while we have historically been successful in raising outside capital, there can be no assurance we will be able to continue to obtain outside capital in the future or do so on terms that are acceptable to us.
Current wording
In order to execute our growth strategy, we have historically relied on outside capital through the issuance of equity, debt, and borrowings under financing arrangements (collectively “outside capital”) to fund our cost structure, and we expect to continue to rely on outside capital for the foreseeable future, specifically if we pursue material M&A opportunities. While we believe we will eventually reach a level of profitability to sustain our operations, there can be no assurance we will be able to achieve such profitability or do so in a manner that does not require our continued reliance on outside capital. Moreover, while we have historically been successful in raising outside capital, there can be no assurance we will be able to continue to obtain outside capital in the future or do so on terms that are acceptable to us.
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 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.
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 three months ended March 31, 2025, we incurred a net loss of $3.9 million and used net cash flows from operations of $3.9 million. In addition, as of March 31, 2025, we had unrestricted cash of $14.3 million available to fund our operations and an accumulated deficit of $715.6 million.
Previous wording
• We are required to remain in compliance with certain financial covenants required by the MidCap Credit facility (See Note 7, Credit Facility, Term Loans and Warrants). We were in compliance with these financial covenants as of September 30, 2024, and expect to remain in compliance through at least September 30, 2025. During February 2024, the Company amended its terms with Midcap Credit Facility extending the term until December 2026 and amending certain financial covenants with favorable terms. We can provide no assurances that we will remain in compliance with our financial covenants. Further, absent of our ability to generate cash inflows from our operations or secure additional outside capital, we will be unable to remain in compliance with these financial covenants. In the event we are unable to remain in compliance with these financial covenants (or other non-financial covenants required by the MidCap Credit Facility), and we are unable to secure a waiver or forbearance, MidCap may, at its discretion, exercise any and all of its existing rights and remedies, which may include, among others, accelerating repayment of the outstanding borrowings and/or asserting its rights in the assets securing the loan.
Current wording
• We are required to remain in compliance with certain financial covenants required by the MidCap Credit facility (See Note 7,Credit Facility and Warrants). We were in compliance with these financial covenants as of March 31, 2025, and expect to remain in compliance through at least June 30, 2026. However, if our mitigation strategies to address the impact of tariffs are unsuccessful, we can provide no assurances that we will remain in compliance with our financial covenants. During February 2024, the Company amended its terms with Midcap Credit Facility extending the term until December 2026 and amending certain financial covenants with favorable terms. Further, absent of our ability to generate cash inflows from our operations or secure additional outside capital, we will be unable to remain in compliance with these financial covenants. In the event we are unable to remain in compliance with these financial covenants (or other non-financial covenants required by the MidCap Credit Facility), and we are unable to secure a waiver or forbearance, MidCap may, at its discretion, exercise any and all of its existing rights and remedies, which may include, among others, accelerating repayment of the outstanding borrowings and/or asserting its rights in the assets securing the loan.
Previous wording
• As of the issuance date, we have no firm commitments to secure additional outside capital from lenders or investors. While we expect to continue to explore raising additional outside capital, specifically to fund our M&A strategy, there can be no assurance we will be able to obtain capital or do so on terms that are acceptable to us. Accordingly, absent our ability to generate cash inflows from our operations and/or secure additional outside capital in the near term, we may be unable to meet our obligations as they become due over the next twelve months beyond the issuance date.
Current wording
• As of the issuance date, we have no firm commitments to secure additional outside capital from lenders or investors. While we expect to continue to explore raising additional outside capital, specifically if we pursue material M&A opportunities, there can be no assurance we will be able to obtain capital or do so on terms that are acceptable to us. Accordingly, absent our ability to generate cash inflows from our operations and/or secure additional outside capital in the near term, we may be unable to meet our obligations as they become due over the next twelve months beyond the issuance date.
Previous wording
• The Company's plan is to continue to closely monitor our operating forecast, to pursue our M&A strategy, to pursue additional sources of outside capital on terms that are acceptable to us, and to secure a waiver or forbearance from MidCap if we are unable to remain in compliance with one or more of the covenants required by the MidCap Credit Facility. Further, the Company has enacted a strategy to reduce the number of SKUs it sells and will no longer be pursuing future sales of SKUs that are either not profitable or not core to the Company’s strategy. If some or all of our plans prove unsuccessful, we may need to implement short-term changes to our operating plan, including but not limited to delaying expenditures, reducing investments in new products, or reducing our sale and distribution infrastructure. We may also need to seek long-term strategic alternatives, such as a significant curtailment of our operations, a sale of certain of our assets, a divestiture of certain product lines, a sale of the entire enterprise to strategic or financial investors, and/or allow our enterprise to become insolvent.
Current wording
• The Company's plan is to continue to closely monitor our operating forecast, to pursue additional sources of outside capital on terms that are acceptable to us, and to secure a waiver or forbearance from MidCap if we are unable to remain in compliance with one or more of the covenants required by the MidCap Credit Facility. If some or all of our plans prove unsuccessful, we may need to implement short-term changes to our operating plan, including but not limited to delaying expenditures, reducing investments in new products, or reducing our sale and distribution infrastructure. We may also need to seek long-term strategic alternatives, such as a significant curtailment of our operations, a sale of certain of our assets, a divestiture of certain product lines, a sale of the entire enterprise to strategic or financial investors, and/or allow our enterprise to become insolvent.
Previous 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.
Current wording
The outstanding balance on the MidCap credit facility as of December 31, 2024 and March 31, 2025 was $6.9 million and $7.5 million, respectively. The Company had $0.7 million available on the Midcap credit facility as of March 31, 2025. We are in compliance with the financial covenants contained within the Credit Agreement as of March 31, 2025.
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 (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.
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, 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
There were no triggering events to test intangibles for impairment loss during the nine months ended September 30, 2024.
Current wording
There were no triggering events to test intangibles for impairment loss during the three months ended March 31, 2024.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
Net Cash Provided by (Used in) Financing Activities
Rearranged previous paragraphs (9)
Previous report — wording carried elsewhere
The following tables sets forth our net revenue disaggregated by product categories:
Previous report — wording carried elsewhere
Cost of Goods Sold and Gross Profit
Previous report — wording carried elsewhere
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 report — wording carried elsewhere
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 report — wording carried elsewhere
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 report — wording carried elsewhere
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 report — wording carried elsewhere
Change in fair market value of warrant liabilities
Previous report — wording carried elsewhere
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 report — wording carried elsewhere
Net Cash Used in Financing Activities