Aterian, Inc.

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 the large majority 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").

Previous wording

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 wording

In the first and second 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. As a result of these tariffs, we experienced an increase in our cost of goods sold during the three and six months ended June 30, 2025. In response, we implemented targeted price increases across affected product categories to partially offset the higher input costs. These pricing actions, however, contributed to a decline in unit volumes as consumer demand responded to the higher retail prices. We 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.

Previous 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.

Current wording

Cost of goods sold decreased $2.2 million, or 19.8%, during the three months ended June 30, 2025 to $8.9 million, compared 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 $3.8 million in cost of goods sold from our direct businesses, partially offset by an increase of $1.6 million in cost of goods sold from our wholesale businesses.

Previous 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.

Current wording

Gross profit decreased to 54.3% for the three months ended June 30, 2025 from 60.4% for the three months ended June 30, 2024. The decrease in gross profit was due primarily to product mix, as well as higher cost of sales resulting from the impact of newly implemented tariffs, partially offset by the benefit of price increases taken to mitigate these costs.

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 $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.

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 $12.4 million for the three months ended June 30, 2025, from $15.2 million for the three months ended June 30, 2024. This decrease is primarily attributable to the decrease in the volume of products sold in the three months ended June 30, 2025, as our e-commerce platform commissions, online advertising, selling and logistics expenses decreased to $9.1 million in the three months ended June 30, 2025 as compared to $12.0 million in the prior year period.

Previous 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.

Current wording

As a percentage of net revenue, sales and distribution expenses increased to 63.3% for the three months ended June 30, 2025, from 54.2% for the three months ended June 30, 2024. E-commerce platform commissions, online advertising, selling and logistics expenses included within sales and distribution expenses, as a percentage of net revenue, were 46.5% for the three months ended June 30, 2025 as compared to 43.0% for the three months ended June 30, 2024. This increase in sales and distribution expenses as a percentage of revenue is primarily due to product mix and an increase in marketing costs.

Previous 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.

Current wording

Net revenue decreased $13.4 million, or 27.8%, during the six months ended June 30, 2025 to $34.9 million, compared to $48.2 million for the six months ended June 30, 2024. The decrease in net revenue was primarily attributable to a decrease in direct net revenue of $15.1 million, or 31.5%, related to changes to Amazon's marketing affiliate program, which reduced traffic and conversions on certain products. In addition, the newly implemented tariffs increased our cost of goods sold, prompting us to raise prices to mitigate the impact. These pricing actions, combined with the broader challenging macroeconomic environment, led to a reduction in unit volume as consumer demand softened at elevated price levels.

Previous 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.

Current wording

Our sales and distribution fixed costs (e.g., salary and office expenses) including stock-based compensation decreased to $5.6 million for the six months ended June 30, 2025, from $6.0 million for the six months ended June 30, 2024. This decrease is primarily attributable to lower stock-compensation expense of $0.9 million, lower headcount expense of $0.2 million, and lower miscellaneous office expense of $0.1 million, partially offset by higher restructuring costs of $0.8 million.

Previous 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.

Current wording

The decrease in general and administrative expenses was primarily the result of a decrease of $2.8 million in stock-compensation expense, a decrease of $0.8 million in headcount expense, and a decrease of $0.8 million in other miscellaneous costs, partially offset by an increase of $0.4 million in restructuring costs.

Previous wording

Cash Flows for the Three Months Ended March 31, 2024 and 2025

Current wording

Cash Flows for the Six Months Ended June 30, 2025 and 2024

Previous wording

The following table provides information regarding our cash flows for the three months ended March 31, 2024 and 2025:

Current wording

The following table provides information regarding our cash flows for the six months ended June 30, 2025 and 2024:

Previous wording

Net Cash Used in Operating Activities

Current wording

Net Cash (Used in) Provided by Operating Activities

Previous 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.

Current wording

Net cash used in operating activities was $8.3 million for the six months ended June 30, 2025, resulting primarily from our net cash losses from operations of $6.7 million, outflow from working capital of $1.6 million from changes in accounts receivable, purchases of inventory and payments of accounts payable. The working capital outflow primarily relates to purchases of our air quality products for the summer season and intentional build up of certain products to avoid higher tariffs.

Previous 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.

Current 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.

Previous 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.

Current 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.

Previous 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.

Current wording

For the six months ended June 30, 2025, cash provided by financing activities of $0.4 million was primarily from the net borrowings for our MidCap credit facility of $0.2, and net proceeds from insurance financing of $0.3 million, partially offset by repayment of note payable to Smash of $0.1 million.

Previous 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.

Current wording

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

Previous 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.

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 profitability, our investment in incremental growth through mergers & acquisitions (“M&A strategy”), our recruitment of management and technical staff, and raising capital to fund the development of our enterprise. As a result of these efforts, we have incurred significant losses and negative cash flows from operations since our inception and expect to continue to incur such losses, at a reduced level, and negative cash flows in the near term. However, we anticipate improvements over time as we work toward achieving a sustainable scale of profitability. We have also experienced declining revenues due to macroeconomic factors, including increased interest rates and reduced consumer discretionary spending, and other factors, and we intend to focus our efforts on a more limited number of products. In addition, our recent financial performance has been adversely impacted by inflationary pressures and reduced consumer spending.

Previous wording

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 wording

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 have materially raised our cost of goods sold and have placed 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.

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 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.

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 six months ended June 30, 2025, we incurred a net loss of $8.8 million and used net cash flows from operations of $8.3 million. In addition, as of June 30, 2025, we had unrestricted cash of $10.5 million available to fund our operations and an accumulated deficit of $720.4 million.

Previous wording

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 wording

• 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 recognized restructuring charges of approximately $1.8 million, of which $1.0 million is recorded in Sales and Distribution expenses and $0.8 million is recorded in General and Administrative expenses, primarily related to severance, during the three and six months ended June 30, 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.

Previous 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.

Current wording

The outstanding balance on the MidCap credit facility as of June 30, 2025 and December 31, 2024 was $7.2 million and $6.9 million, respectively. The Company had $0.2 million available on the Midcap credit facility as of June 30, 2025. We are in compliance with the financial covenants contained within the Credit Agreement as of June 30, 2025.

Previous wording

In the reconciliation to calculate contribution margin, we add e-commerce platform commissions, online advertising, selling and logistics expenses (“sales and distribution variable expense”) to gross profit to inform users of our financial statements of what our product profitability is at each period prior to fixed costs (such as sales and distribution expenses such as salaries as well as research and development expenses and general administrative expenses). By excluding these fixed costs, we believe this allows users of our financial statements to understand our products performance and allows them to measure our products performance over time.

Current wording

In the reconciliation to calculate contribution margin, we add e-commerce platform commissions, online advertising, selling and logistics expenses (“sales and distribution variable expense”) to gross profit to inform users of our financial statements of what our product profitability is at each period prior to fixed costs (such as sales and distribution expenses such as salaries as well as general and administrative expenses). By excluding these fixed costs, we believe this allows users of our financial statements to understand our products performance and allows them to measure our products performance over time.

Previous wording

• general and administrative expense necessary to operate our business; research and development expenses necessary for the development, operation and support of our software platform;

Current wording

• general and administrative expense necessary to operate our business;

Previous wording

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.

Current wording

During the three and six months ended June 30, 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 June 30, 2025.

Previous wording

There were no triggering events to test intangibles for impairment loss during the three months ended March 31, 2024.

Current wording

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