Aterian, Inc.

Previous wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Condensed Consolidated Financial Statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and with our audited financial statements and related notes thereto for the year ended December 31, 2024 included in our Annual Report on Form 10-K for the year ended December 31, 2024 as filed with the Securities and Exchange Commission (the“SEC”) on March 25, 2025. As discussed in the section titled“Special Note Regarding Forward-Looking Statements”, the following discussion and analysis contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those identified in the section titled“Special Note Regarding Forward Looking Statements”* and those discussed in the section titled*“Risk Factors”* under Part II, Item 1A in this Quarterly Report on Form 10-Q.*

Current wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Condensed Consolidated Financial Statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and with our audited consolidated financial statements and related notes thereto for the year ended December 31, 2024 included in our Annual Report on Form 10-K for the year ended December 31, 2024 as filed with the Securities and Exchange Commission (the“SEC”) on March 25, 2025. As discussed in the section titled“Special Note Regarding Forward-Looking Statements”, the following discussion and analysis contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those identified in the section titled“Special Note Regarding Forward Looking Statements”* and those discussed in the section titled*“Risk Factors”* under Part II, Item 1A in this Quarterly Report on Form 10-Q.*

Previous 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.

Current wording

During 2025, the U.S. government announced a series of new tariff policies affecting imports from several countries, including China. While these actions impact a range of global trade flows, the new tariffs targeting imports from China are the most significant for our business. As a result of these tariffs, we experienced an increase in our cost of goods sold during the nine months ended September 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.

Previous wording

Stock-based compensation expense for the three months ended June 30, 2025 decreased compared to the prior year period. The decrease was primarily due to adjustments to previously accrued bonus-related stock compensation. These accruals, originally recorded during the year-ended December 31, 2024 based on expected equity settlement, were reversed in the current period due to changes in settlement approach and timing of vesting. In addition, the current period included a reversal of expense related to forfeitures for employees terminated as part of the May 2025 restructuring. As a result, the current quarter reflects a net reduction in expense due to these reversals, with a portion of the related expense being deferred to future periods.

Current wording

Stock-based compensation expense for the three months ended September 30, 2025 decreased compared to the prior year period. The decrease was primarily due to forfeitures for employees terminated as part of the May 2025 restructuring. As a result, the current quarter reflects a net reduction in expense due to these forfeitures, with a portion of the related expense being deferred to future periods.

Previous wording

The following tables sets forth our net revenue disaggregated by product categories:

Current wording

The following tables set forth our net revenue disaggregated by product categories:

Previous wording

Net revenue decreased $8.5 million, or 30.5%, during the three months ended June 30, 2025 to $19.5 million, compared to $28.0 million for the three months ended June 30, 2024. The decrease in net revenue was primarily attributable to a decrease in direct net revenue of $10.0 million, or 35.9%, as 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

Current wording

Net revenue decreased $7.2 million, or 27.5%, during the three months ended September 30, 2025 to $19.0 million, compared to $26.2 million for the three months ended September 30, 2024. The decrease in net revenue was primarily attributable to a decrease in direct net revenue of $7.3 million, or 28.4%, as 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

With the exception of Kitchen appliances, every category of business had a reduction in sales compared to the prior year primarily relating to softness in consumer demand due to the macroeconomic environment and higher sales prices implemented in response to tariffs, which led to a slowdown in unit volume. The increase in Kitchen Appliances is primarily driven by more prominent Amazon listing placements and the initial product load-in related to our expanded presence in Walmart stores.

Current wording

With the exception of Health and beauty products, every category of business had a reduction in sales compared to the prior year primarily relating to softness in consumer demand due to the macroeconomic environment and higher sales prices implemented in response to tariffs, which led to a slowdown in unit volume. The increase in Health and beauty products is driven in part by the timing of customer purchases and inventory replenishment, which accelerated certain orders into the current quarter.

Previous 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.

Current wording

Cost of goods sold decreased $2.1 million, or 19.8%, during the three months ended September 30, 2025 to $8.3 million, compared 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 $2.2 million in cost of goods sold from our direct businesses, partially offset by an increase of $0.1 million in cost of goods sold from our wholesale businesses.

Previous 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.

Current wording

Gross profit decreased to 56.1% for the three months ended September 30, 2025 from 60.3% for the three months ended September 30, 2024. The decrease in gross profit was due primarily to product mix, as well as higher cost of goods sold resulting from the impact of newly implemented tariffs, partially offset by the benefit of price increases taken to mitigate these

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 $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.

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 $9.8 million for the three months ended September 30, 2025, from $13.9 million for the three months ended September 30, 2024. This decrease is primarily attributable to the decrease in the volume of products sold in the three months ended September 30, 2025, as our e-commerce platform commissions, online advertising, selling and logistics expenses decreased to $8.1 million in the three months ended September 30, 2025 as compared to $11.4 million in the prior year period.

Previous wording

Our sales and distribution fixed costs (e.g., salary and office expenses) including stock-based compensation increased to $3.3 million for the three months ended June 30, 2025, from $3.1 million for the three months ended June 30, 2024. This increase is primarily attributable to higher restructuring costs of $1.1 million, partially offset by lower stock-compensation expense of $0.8 million and lower miscellaneous office 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 $1.7 million for the three months ended September 30, 2025, from $2.5 million for the three months ended September 30, 2024. This decrease is primarily attributable to lower stock-compensation expense of $0.4 million, lower headcount expense of $0.2 million, and lower miscellaneous office expense of $0.2 million.

Previous wording

As a percentage of net revenue, sales and distribution expenses increased to 63.1% for the six months ended June 30, 2025, from 58.9% for the six 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 47.2% for the six months ended June 30, 2025 as compared to 46.4% for the six 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.

Current wording

As a percentage of net revenue, sales and distribution expenses decreased to 51.7% for the three months ended September 30, 2025, from 53.0% for the three months ended September 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 42.8% for the three months ended September 30, 2025 as compared to 43.3% for the three months ended September 30, 2024. This decrease in sales and distribution expenses as a percentage of revenue is primarily due to product mix and a decrease in logistics costs.

Previous 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.

Current wording

The decrease in general and administrative expenses was primarily the result of a decrease of $0.7 million in stock-compensation expense, and a decrease of $0.3 million in headcount expense, partially offset by an increase of $0.2 million in professional fees.

Previous wording

Stock-based compensation expense for the six months ended June 30, 2025 decreased compared to the prior year period. The decrease was primarily due to adjustments during the three months ended June 30, 2025 to previously accrued bonus-related stock compensation. These accruals, originally recorded during the year-ended December 31, 2024 based on expected equity settlement, were reversed in the current period due to changes in settlement approach and timing of vesting. In addition, the current period included a reversal of expense related to forfeitures for employees terminated as part of the May 2025 restructuring. As a result, the current period reflects a net reduction in expense due to these reversals, with a portion of the related expense being deferred to future periods.

Current wording

Stock-based compensation expense for the nine months ended September 30, 2025 decreased compared to the prior year period. The decrease was primarily due to adjustments during the three months ended June 30, 2025 to previously accrued bonus-related stock compensation. These accruals, originally recorded during the year-ended December 31, 2024 based on expected equity settlement, were reversed in the current period due to changes in settlement approach and timing of vesting. In addition, the current period included a reversal of expense related to forfeitures for employees terminated as part of the May 2025 restructuring. As a result, the current period reflects a net reduction in expense due to these reversals, with a portion of the related expense being deferred to future periods.

Previous wording

The following tables sets forth our net revenue disaggregated by product categories:

Current wording

The following tables set forth our net revenue disaggregated by product categories:

Previous 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.

Current wording

Net revenue decreased $20.6 million, or 27.7%, during the nine months ended September 30, 2025 to $53.8 million, compared to $74.4 million for the nine months ended September 30, 2024. The decrease in net revenue was primarily attributable to a decrease in direct net revenue of $22.4 million, or 30.4%, related to the newly implemented tariffs which increased our cost of goods sold, prompting us to raise prices to mitigate the impact. These pricing actions, combined with the broader challenging macroeconomic environment, led to a reduction in unit volume as consumer demand softened at elevated price levels. In addition, changes to Amazon's marketing affiliate program reduced traffic and conversions on certain products.

Previous wording

Cost of goods sold decreased $3.3 million, or 18.2%, during the six months ended June 30, 2025 to $14.8 million, compared 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 $5.2 million in cost of goods sold from our direct businesses, partially offset by an increase of $1.9 million in cost of goods sold from our wholesale businesses.

Current wording

Cost of goods sold decreased $5.4 million, or 18.8%, during the nine months ended September 30, 2025 to $23.2 million, compared 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 $7.4 million in cost of goods sold from our direct businesses, partially offset by an increase of $2.0 million in cost of goods sold from our wholesale businesses.

Previous wording

Gross profit decreased to 57.4% for the six months ended June 30, 2025 from 62.4% for the six 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.

Current wording

Gross profit decreased to 56.9% for the nine months ended September 30, 2025 from 61.6% for the nine months ended September 30, 2024. The decrease in gross profit was due primarily to product mix, as well as higher cost of goods sold resulting from the impact of newly implemented tariffs, partially offset by the benefit of price increases taken to mitigate these

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 $22.0 million for the six months ended June 30, 2025, from $28.4 million for the six months ended June 30, 2024. This decrease is primarily attributable to the decrease in the volume of products sold in the six months ended June 30, 2025, as our e-commerce platform commissions, online advertising, selling and logistics expenses decreased to $16.4 million in the six months ended June 30, 2025 as compared to $22.3 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 $31.9 million for the nine months ended September 30, 2025, from $42.3 million for the nine months ended September 30, 2024. This decrease is primarily attributable to the decrease in the volume of products sold in the nine months ended September 30, 2025, as our e-commerce platform commissions, online advertising, selling and logistics expenses decreased to $24.6 million in the nine months ended September 30, 2025 as compared to $33.7 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 $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.

Current wording

Our sales and distribution fixed costs (e.g., salary and office expenses) including stock-based compensation decreased to $7.3 million for the nine months ended September 30, 2025, from $8.6 million for the nine months ended September 30, 2024. This decrease is primarily attributable to lower stock-compensation expense of $1.3 million, lower headcount expense of $0.5 million, and lower miscellaneous expenses of $0.3 million, partially offset by higher restructuring costs of $0.8 million.

Previous 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.

Current wording

As a percentage of net revenue, sales and distribution expenses increased to 59.2% for the nine months ended September 30, 2025, from 56.8% for the nine months ended September 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 45.6% for the nine months ended September 30, 2025 as compared to 45.3% for the nine months ended September 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

The decrease in general and administrative expenses was primarily the result of a decrease of $2.0 million in stock-compensation expense, a decrease of $0.4 million in headcount expense, a decrease of $0.5 million in other miscellaneous costs, partially offset by an increase of $0.7 million in restructuring costs.

Current wording

The decrease in general and administrative expenses was primarily the result of a decrease of $3.4 million in stock-compensation expense, a decrease of $1.1 million in headcount expense, and a decrease of $0.7 million in other miscellaneous costs, partially offset by an increase of $0.5 million in restructuring costs.

Previous wording

The 2025 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, 2025 primarily relates to the reduced share price compared to the prior period.

Current wording

The 2025 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, 2025 primarily relates to the reduced share price compared to the prior period.

Previous wording

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

Current wording

Cash Flows for the Nine Months Ended September 30, 2025 and 2024

Previous wording

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

Current wording

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

Previous 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.

Current wording

Net cash used in operating activities was $9.9 million for the nine months ended September 30, 2025, primarily driven by net cash losses from operations of $7.9 million and a $2.0 million outflow from changes in working capital, mainly related to changes in accounts receivable, purchases of inventory, and payments of accounts payable. The $4.0 million outflow related to inventory purchases was primarily due to lower-than-expected sell-through of our air quality products during the summer season and an intentional build-up of certain products to mitigate the impact of higher tariffs.

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, 2025, net cash used in investing activities was $6 thousand, primarily related to the purchase of laptops during the six months ended June 30, 2025.

Current wording

For the nine months ended September 30, 2025, net cash used in investing activities was $46 thousand, primarily related to the purchase of fixed assets during the nine months ended September 30, 2025.

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, 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.

Current wording

For the nine months ended September 30, 2025, net cash used in financing activities of $0.9 million was primarily from the net repayments for our MidCap credit facility of $0.9 million and repayment of notes payable of $0.1 million, partially offset by net proceeds from insurance financing of $0.1 million.

Previous 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.

Current wording

For the nine months ended September 30, 2024, net 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 notes payable of $0.6 million and payment of insurance obligations of $0.5 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 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.

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, reduced consumer spending, and tariffs.

Previous 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.

Current wording

Our results have been impacted by recent changes to U.S. trade policy, including the imposition and expansion of tariffs on imports, specifically from China. A substantial portion of our products are sourced from China, and as such, the increased tariff rates have materially raised our cost of goods sold and have placed pressure on our margins. While we 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 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.

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, 2025, we incurred a net loss of $11.0 million and used net cash flows from operations of $9.9 million. In addition, as of September 30, 2025, we had unrestricted cash of $7.6 million available to fund our operations and an accumulated deficit of $722.7 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 and Warrants). We were in compliance with these financial covenants as of June 30, 2025, and expect to remain in compliance through at least September 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.

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 September 30, 2025, and expect to remain in compliance through at least December 31, 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. On August 29, 2025, the Company entered into Amendment No. 4 to its existing Credit and Security Agreement with MidCap. The amendment (i) reduces the Minimum Credit Party Liquidity covenant to $5.0 million during a temporary “Minimum Liquidity Covenant Reduction Period,” (ii) provides that the covenant will increase to $6.8 million upon delivery of a Liquidity Certificate evidencing liquidity at or above that level, and (iii) establishes an Availability Reserve of $2.8 million during the reduction period and $1.0 million thereafter. 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

• 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.

Current wording

• On May 14, 2025, the Company announced a fixed cost reduction plan, which included a workforce reduction affecting approximately 20 employees. The Company has substantially completed this reduction as of the quarter ended September 30, 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 nine months ended September 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 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.

Current wording

The outstanding balance on the MidCap credit facility as of September 30, 2025 and December 31, 2024 was $6.2 million and $6.9 million, respectively. The Company had no availability on the Midcap credit facility as of September 30, 2025. We are in compliance with the financial covenants contained within the Credit Agreement as of September 30, 2025.

Previous wording

**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 June 30, 2025 and through August 12, 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 wording

**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. As of May 2, 2025, the Company has temporarily suspended its share repurchase program.

Previous wording

**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 wording

**Trade Policy—**During 2025, the U.S. government announced a series of new tariff policies affecting imports from several countries, including China. While these actions impact a range of global trade flows, the new tariffs targeting imports from China are the most significant for our business. 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.

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, 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, product remediation costs, 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

As discussed in our Form 10-K for the fiscal year ended December 31, 2024, the discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”). The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the amounts of assets, liabilities, revenues and expenses reported in those consolidated financial statements. These judgments can be subjective and complex, and consequently, actual results could differ from those estimates. Our most critical accounting policies and estimates relate to revenue recognition; leases; impairment of intangible assets; impairment of long-lived assets; and income taxes (including uncertain tax positions). There have been no significant changes to the Company’s accounting policies subsequent to December 31, 2024.

Current wording

As discussed in our Form 10-K for the fiscal year ended December 31, 2024, the discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in conformity with generally accepted accounting principles in the United States of America (“US GAAP”). The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the amounts of assets, liabilities, revenues and expenses reported in those consolidated financial statements. These judgments can be subjective and complex, and consequently, actual results could differ from those estimates. Our most critical accounting policies and estimates relate to revenue recognition; leases; impairment of intangible assets; impairment of long-lived assets; and income taxes (including uncertain tax positions). There have been no significant changes to the Company’s accounting policies subsequent to December 31, 2024.