Aterian, Inc.

Aterian, Inc.

Notes to Condensed Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2025 and 2024 (Unaudited)

Aterian, Inc. (the "Company") is 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.

Our primary brands include Squatty Potty, HomeLabs, Mueller Living, PurSteam, Healing Solutions, and Photo Paper Direct ("PPD").

Headquartered in New Jersey, the Company also maintains offices in China, the Philippines, and the United Kingdom.

Liquidity and Going Concern

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, 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 are focusing 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.

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.

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 beno assurance we will be able to achieve such profitability or do so in a manner that doesnot require our continued reliance on outside capital. Moreover, while we have historically been successful in raising outside capital, there can beno assurance we will be able to continue to obtain outside capital in the future or do so on terms that are acceptable to us.

As of the date the accompanying Condensed Consolidated Financial Statements were issued (the “issuance date”), we evaluated the significance of the following adverse financial conditions in accordance with Accounting Standard Codification ("ASC")205-40, Going Concern:

• Since our inception, we have incurred significant losses and used cash flows from operations to fund our enterprise. In this regard, during thenine 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.

• We are required to remain in compliance with certain financial covenants required by the MidCap Credit facility (See Note7, 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 provideno* assurances that we will remain in compliance with our financial covenants. On* August 29, 2025,the Company entered into AmendmentNo.* 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.

• As of the issuance date, we haveno 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 beno 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* maybe unable to meet our obligations as they become due over the nexttwelve* months beyond the issuance date.

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• 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 thenine* months ended* September 30, 2025.Severance payments are expected to be made through thesecond* quarter of2026. Combined with other vendor-related cost reductions, the plan is expected to generate annualized savings of approximately $5 to $6 million.

• 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 withone or more of the covenants required by the MidCap Credit Facility. If some or all of our plans prove unsuccessful, we* mayneed to implement short-term changes to our operating plan, including butnot* 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.

Although significant strides have been made in reducing our operating losses and strengthening our balance sheet, uncertainties persist in our business operations and the forecasting of our business. These uncertainties raise substantial doubt about our ability to continue as a going concern. The accompanying Condensed Consolidated Financial Statements have been prepared on the basis that we will continue to operate as a going concern, which contemplates that we will be able to realize assets and settle liabilities and commitments in the normal course of business for the foreseeable future. Accordingly, the accompanying Condensed Consolidated Financial Statements donot include any adjustments that* may*result from the outcome of these uncertainties.

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Basis of Presentation—The Condensed Consolidated Financial Statements and accompanying notes have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”).

Unaudited Interim Financial Information—The accompanying interim Condensed Consolidated Financial Statements are unaudited and have been prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, reflect all adjustments necessary for the fair presentation of the Company's financial position as of* September 30, 2025* and the results of its operations and its cash flows for the periods ended* September 30, 2025and2024.* The financial data and other information disclosed in these notes related to thethree andnine months ended* September 30, 2025and2024* are also unaudited. The results for thethree andnine months ended* September**30,* 2025 arenot necessarily indicative of results to be expected for the year ending* December 31,*2025, any other interim periods or any future year or period.

The Condensed Consolidated Balance Sheet as of* December 31, 2024*, presented herein, has been derived from the Company’s audited Consolidated Financial Statements for the fiscal year then ended. These unaudited Interim Condensed Consolidated Financial Statements should be read in conjunction with our Annual Report on Form10-K for the year ended* December 31, 2024* as filed with the SEC on* March 25, 2025 (“Annual Report”) and have been prepared on a consistent basis with the accounting policies described in Note2* of the Notes to Consolidated Financial Statements included in our Annual Report. Our accounting policies didnot change during thenine months ended* September 30, 2025*, other than with respect to the new accounting pronouncements adopted as described in Note2, Recent Accounting Pronouncements.

The accompanying unaudited Interim Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form10-Q and Article8 of Regulation S-X. Accordingly, they donot include all of the information and disclosures required by U.S. GAAP for complete financial statements. In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair presentation of the Condensed Consolidated financial statements of the Company as of* September 30, 2025and for thethree* andnine months then ended.

Use of Estimates—Preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period covered by the Condensed Consolidated Financial Statements and accompanying notes. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, and makes adjustments when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ from those estimates.

Principles of Consolidation—The Condensed Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Restricted Cash—As of* September**30,* 2025, the Company has classified the following as restricted cash: $0.1 million related to its Chinese subsidiary within “Other Noncurrent Assets” on the Condensed Consolidated Balance Sheets and $1.0 million related to a letter of credit within "Prepaid and Other Current Assets" on the Condensed Consolidated Balance Sheets.

As of* December 31, 2024*, the Company has classified the following as restricted cash: $0.1 million related to its Chinese subsidiary within “Other Non-current Assets” on the Condensed Consolidated Balance Sheets and $1.0 million related to a letter of credit within "Prepaid and Other Current Assets" on the Condensed Consolidated Balance Sheets.

Inventory and Cost of Goods Sold—The Company’s inventory consists almost entirely of finished goods. The Company currently records inventory on its balance sheet on afirst-infirst-out basis, or net realizable value, if it is below the Company’s recorded cost. The Company’s costs include the amounts it pays manufacturers for product, tariffs and duties associated with transporting product across national borders, and freight costs associated with transporting the product from its manufacturers to its warehouses, as applicable. The valuation of our inventory requires us to make judgments, based on available information such as historical data, about the likely method of disposition, such as through sales to individual customers or liquidations, and expected recoverable values of each disposition category. Changes to the relevant assumptions and projections would impact our consolidated financial results in periods subsequent to recording these estimates. If we anticipate a change in assumptions such as future demand or market conditions to be less favorable than our previous estimates, additional inventory write-downs* maybe required. Conversely, if we are able to sell inventories that had been written down to a level below the ultimate realized selling price in a previous period, sales would be recorded with a lower orno* offsetting charge to cost of goods sold.

The “Cost of goods sold” line item in the Condensed Consolidated Statements of Operations consists of the book value of inventory sold to customers during the reporting period. When circumstances dictate that the Company use net realizable value as the basis for recording inventory, it bases its estimates on expected future selling prices less expected disposal costs.

Accounts Receivable—Accounts receivable are stated at historical cost less allowance for credit losses. On a periodic basis, management evaluates its accounts receivable and determines whether to provide an allowance or if any accounts should be written off based on a past history of write-offs, collections and current credit conditions. A receivable is considered past due if the Company hasnot received payments based on agreed-upon terms. The Company generally doesnot require any security or collateral to support its receivables. The Company performs ongoing evaluations of its customers and maintains an allowance for credit losses. As of* September 30, 2025,the Company didnot have an allowance for credit losses. As of December 31, 2024*, the Company had an allowance for credit losses of $0.1 million.

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Revenue Recognition—The Company accounts for revenue in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic606, Revenue from Contracts with Customers (“ASC Topic606”). The Company derives its revenue from the sale of consumer products. The Company sells its products directly to consumers through online retail channels and through wholesale channels.

For direct-to-consumer sales, the Company considers customer order confirmations to be a contract with the customer. Customer confirmations are executed at the time an order is placed throughthird-party online channels. For wholesale sales, the Company considers the customer purchase order to be the contract.

For all of the Company’s sales and distribution channels, revenue is recognized when control of the product is transferred to the customer (i.e., when the Company’s performance obligation is satisfied), which typically occurs at shipment date. As a result, the Company has a present and unconditional right to payment and record the amount due from the customer in accounts receivable.

Revenue from consumer product sales is recorded at the net sales price (transaction price), which includes an estimate of future returns based on historical return rates. There is judgment in utilizing historical trends for estimating future returns. The Company’s refund liability for sales returns was $0.2 million at* September 30, 2025and $0.3 million at December 31, 2024,*which is included in accrued and other current liabilities on the Condensed Consolidated Balance Sheets and represents the expected value of the refund that will be due to its customers.

The Company evaluated principal versus agent considerations to determine whether it is appropriate to record platform fees paid to Amazon as an expense or as a reduction of revenue. Platform fees are recorded as sales and distribution expenses and arenot recorded as a reduction of revenue because the Company owns and controls all the goods before they are transferred to the customer. The Company can, at any time, direct Amazon, or similarly direct otherthird-party logistics providers (“Logistics Providers”), to return the Company’s inventory to any location specified by the Company. It is the Company’s responsibility to make customers whole following any returns made by customers directly to Logistic Providers and the Company retains the back-end inventory risk. Further, the Company is subject to credit risk (i.e., credit card charge backs), establishes prices of its products, can determine who fulfills the goods to the customer (Amazon or the Company) and can limit quantities or stop selling the goods at any time. Based on these considerations, the Company is the principal in this arrangement.

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Net Revenue by Category. The following tables set forth the Company’s net revenue disaggregated by sales channel and geographic region based on the billing addresses of its customers:

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Net Revenue by Product Categories. The following tables set forth the Company’s net revenue disaggregated by product categories for thethree andnine months ended* September 30, 2025and2024*:

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Intangibles—We review long-lived assets for impairment when performance expectations, events, or changes in circumstances indicate that the asset's** carrying value maynot* be recoverable. The evaluation is performed at the lowest level of identifiable cash flows by comparing the carrying value of the asset group to the undiscounted cash flows. If the evaluation indicates that the carrying amount of the assets* may*not* be recoverable, any potential impairment is measured based upon the fair value of the related asset or asset group as determined by an appropriate market appraisal or other valuation technique.

These fair value measurements require significant judgements using Level3 inputs, such as discounted projected future cash flows, which arenot observable from the market, directly or indirectly. There is uncertainty in the projected future cash flows used in the Company’s impairment analysis, which requires the use of estimates and assumptions. If actual performance doesnot achieve the projections, or if the assumptions used in the analysis change in the future, the Company* maybe required to recognize additional impairment charges in future periods. Key assumptions in the impairment models included a discount and royalty rate. The Company believes our procedures for determining fair value are reasonable and consistent with current market conditions as of September 30, 2025*.

There wereno triggering events to test intangibles for impairment loss during thethree months ended* September 30, 2025.During thenine* months ended* September30,* 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* September30,* 2025.

There wereno triggering events to test intangibles for impairment loss during thethree andnine months ended* September**30,* 2024.

We will continue to closely monitor actual results versus expectations as well as whether and to what extent any significant changes in current events or conditions result in corresponding changes to our expectations about future estimated cash flows. If our adjusted expectations of the operating results donot materialize, we* maybe required to record intangible impairment charges, which may*be material.

Fair Value of Financial Instruments—The Company’s financial instruments, including net accounts receivable, accounts payable, and accrued and other current liabilities are carried at historical cost. At* September 30, 2025*, the carrying amounts of these instruments approximated their fair values because of their short-term nature. The Company’s credit facility is carried at amortized cost at* September 30, 2025and December 31, 2024*and the carrying amount approximates fair value as the stated interest rate approximates market rates currently available to the Company.

The fair value of the stock purchase warrants issued in connection with the Company’s common stock offering on* March 1, 2022were measured using the Black-Scholes-Merton model. Inputs used to determine the estimated fair value of the warrant liabilities include the fair value of the underlying stock at the valuation date, the term of the warrants, and the expected volatility of the underlying stock. The significant unobservable input used in the fair value measurement of the warrant liabilities is the estimated term of the warrants. Upon the issuance of the stock purchase warrants, the Company evaluated the terms of each warrant to determine the appropriate accounting and classification pursuant to FASB ASC Topic480,* Distinguishing Liabilities from Equity (“ASC480**”), and FASB Accounting Standards Codification Topic815, Derivatives and Hedging (“ASC815**”). Based on the Company’s evaluation and due to certain terms in the warrant agreements, it concluded the stock purchase warrants should be classified as liabilities with subsequent remeasurement as long as such warrants continue to be classified as liabilities.

Assets and liabilities recorded at fair value on a recurring basis in the Condensed Consolidated Balance Sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair values. Fair value is defined as the exchange price that would be received for an asset or an exit price that would be paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The authoritative guidance on fair value measurements establishes athree-tier fair value hierarchy for disclosure of fair value measurements as follows:

Level1**—Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;

Level2**—Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that arenot active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and

Level3**—Unobservable inputs that are supported by little orno market data for the related assets or liabilities.

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The following tables summarize the fair value of the Company’s financial assets that are measured at fair value as of* September 30, 2025and December 31, 2024 (*in thousands):

A summary of the activity of the Level3 liabilities carried at fair value on a recurring basis for thenine months ended* September 30, 2025and September 30, 2024*is as follows (in thousands):

Recent Accounting Pronouncements

In* August 2023,the FASB finalized ASU2023*-09, Income Taxes (Topic740). This ASU provides for certain updates to enhance the transparency about companies’ exposure to changes in tax legislation and the global tax risk they* mayface. Under the guidance, companies will be required to provide a breakout of amounts paid for taxes between federal, state, and foreign taxing jurisdictions, rather than a lump sum amount. Further, the rate reconciliation will require disaggregation intoeight* specific categories, with these categories further disaggregated by jurisdiction and for amounts exceeding5 percent of their domestic tax rate. The rate reconciliation will need to also disclose both dollar amounts and percentages. This standard is effective for fiscal years beginning after* December 15, 2024.The Company is currently evaluating the impact and will adopt ASU2023*-09 in its Annual Report on Form10-K for the year ending* December 31, 2025,*consistent with the effective date of the standard.

In* November 2024,the FASB issued ASU2024*-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic220-40): Disaggregation of Income Statement Expenses, requiring public entities to disclose additional information about specific expense categories in the notes to the financial statements on an interim and annual basis. ASU2024-03 is effective for fiscal years beginning after* December 15, 2026,and for interim periods beginning after December 15, 2027,with early adoption permitted. The Company is currently evaluating the impact of adopting ASU2024*-03.

We have reviewed all other recently issued accounting pronouncements and concluded that they were eithernot applicable ornot expected to have a significant impact to the Condensed Consolidated Financial Statements.

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Accounts receivable consisted of the following as of* September 30, 2025and December 31, 2024 (*in thousands):

Inventory consisted of the following as of* September 30, 2025and December 31, 2024 (*in thousands):

The Company’s inventory on-hand is held either with Amazon or the Company’s otherthird-party warehouses. The Company doesnot have any contractual right of returns with its contract manufacturers. The Company’s inventory on-hand held by Amazon was approximately $6.4 million and $3.5 million as of* September 30, 2025and December 31, 2024,*respectively.

Prepaid and other current assets consisted of the following as of* September 30, 2025and December 31, 2024 (*in thousands):

Accrued and other current liabilities consisted of the following as of* September 30, 2025and December 31, 2024 (*in thousands):

The Company sponsors, through its professional employer organization provider, a401(k) defined contribution plan covering all eligible US employees. Contributions to the401(k) plan are discretionary. Currently, the Company doesnot match or make any contributions to the401(k) plan.

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MidCap Credit Facility

On* December 22, 2021,*the Company entered into a Credit and Security Agreement (the “Credit Agreement”) together with certain of its subsidiaries party thereto as borrowers, the entities party thereto as lenders, and Midcap Funding IV Trust, as administrative agent, pursuant to which, among other things, (i) the Lenders agreed to provide athree year revolving credit facility in a principal amount of up to $40.0 million subject to a borrowing base consisting of, among other things, inventory and sales receivables (subject to certain reserves), and (ii) the Company agreed to issue to MidCap Funding XXVII Trust a warrant (the “Midcap Warrant”) to purchase up to an aggregate of 16,667 shares of common stock of the Company, par value $0.0001 per share, in exchange for the Lenders extending loans and other extensions of credit to the Company under the Credit Agreement.

The obligations under the Credit Agreement are a senior secured obligation of the Company and rank senior to all indebtedness of the Company. Borrowings under the Credit Agreement bear interest at a rate of Term Secured Overnight Financing Rate ("Term SOFR"), which is defined as SOFR plus 0.10%, plus 5.50%. The Company will also be required to pay a commitment fee of 0.50% in respect of the undrawn portion of the commitments, which is generally based on average daily usage of the facility during the immediately preceding fiscal quarter. The Credit Agreement doesnot require any amortization payments.

The Credit Agreement minimum liquidity covenant, which includes the Company’s unrestricted U.S. cash plus the revolving loan availability, requires that Midcap shallnot permit the credit party liquidity at any time to be less than (a) during the period commencing on* February1st* through and including* May31st* of each calendar year, $12.5 million and (b) at all other times, $15.0 million. The Credit Agreement includes events of default that are customary for these types of credit facilities, including the occurrence of a change of control.

The Midcap Warrant has an exercise price of $56.40 per share, subject to adjustment for stock splits, reverse stock splits, stock dividends and similar transactions, is immediately exercisable, has a term often years from the date of issuance and is exercisable on a cash or cashless basis.

On* February 23, 2024,the Company amended its asset backed credit facility with MidCap Financial Trust. The Credit Facility term was extended to December 2026*and gives the Company access to $17 million in current commitments which can be increased, subject to certain conditions, to $30.0 million. The Credit Facility extension reduced the minimum liquidity financial covenant from a peak of $15.0 million to $6.8 million of U.S. cash on hand and/or availability in the Credit Facility. The extension fee was less than $0.1 million.

On* March 25, 2025 (the “Third Amendment Effective Date”) the Company entered into AmendmentNo.* 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 andnot* 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, 2025through December 22, 2025,and up to an additional $1.5 million allowed during the period from December 23, 2025*through the maturity date, subject to certain liquidity and compliance conditions.

On* August 29, 2025 (the “Fourth Amendment Effective Date”) the Company entered into AmendmentNo.* 4 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 andnot* otherwise defined shall have the meanings assigned in the Credit Agreement. Material changes contained in AmendmentNo. 4 include a reduction to the Minimum Credit Party Liquidity covenant to $5.0 million, upon the Company’s delivery of a Liquidity Certificate evidencing liquidity of at least $6.8 million, the Minimum Liquidity Covenant Reduction Period will terminate and the covenant will increase to $6.8 million thereafter, and an Availability Reserve of $2.8 million during the Minimum Liquidity Covenant Reduction Period and $1.0 million thereafter.

The Company is in compliance with the financial covenants contained within the Credit Agreement as of* September 30, 2025.As of May 2, 2025,*the Company has temporarily suspended its share repurchase program.

The Company’s credit facility consisted of the following as of* September 30, 2025and December 31, 2024 (*in thousands):

Interest Expense, Net

Interest expense, net consisted of the following for thethree andnine months ended* September 30, 2025and2024* (in thousands):

Securities Purchase Agreement and Warrants

In* March 2022,the Company raised approximately $27.5 million through a private placement involving common stock and accompanying stock purchase warrants. The 590,637 common stock warrants issued in the transaction were classified as liabilities with subsequent remeasurement each quarter. As of September 30, 2025,*these warrants remain outstanding and are recorded as a $1 thousand liability on the Company’s Condensed Consolidated Balance Sheet.

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The Company hasthree equity plans:

2014 Amended and Restated Equity Incentive Plan

The board of directors of Aterian Group, Inc., (the “Board”) a subsidiary of the Company (“AGI”), adopted, and AGI’s stockholders approved, the Aterian Group, Inc.2014 Equity Incentive Plan on* June 11, 2014.On March 1, 2017,AGI’s board of directors adopted, and AGI’s stockholders approved, an amendment and restatement of the2014* Equity Incentive Plan (as amended, the “Aterian2014 Plan”). As of* September 30, 2025,there wereno shares reserved for future issuance under the Aterian2014* Plan.

2018 Equity Incentive Plan

The Board adopted the Aterian, Inc.2018 Equity Incentive Plan (the*“2018* Plan”) on* October 11, 2018.The2018* Plan was approved by its stockholders on* May 24, 2019.As of September**30,* 2025, 647,527 shares were reserved for awards available for future issuance under the2018 Plan.

Options granted to date under the Aterian2014 Plan and the2018 Plan generally vest either: (i) over afour-year period with 25% of the shares underlying the options vesting on thefirst anniversary of the vesting commencement date with the remaining 75% of the shares vesting on a pro-rata basis over the succeedingthirty-six months, subject to continued service with the Company through each vesting date, or (ii) over athree-year period with 33 1/3% of the shares underlying the options vesting on thefirst anniversary of the vesting commencement date with the remaining 66 2/3% of the shares vesting on a pro-rata basis over the succeedingtwenty-four months, subject to continued service with the Company through each vesting date. Options granted are generally exercisable for up to 10 years subject to continued service with the Company.

Inducement Equity Incentive Plan

On* May 27, 2022,*the Compensation Committee of the Board (the “Compensation Committee”) adopted the Aterian, Inc.2022 Inducement Equity Incentive Plan (the “Inducement Plan”). The Inducement Plan will serve to advance the interests of the Company by providing a material inducement for the best available individuals to join the Company as employees by affording such individuals an opportunity to acquire a proprietary interest in the Company.

The Inducement Plan provides for the grant of equity-based awards in the form of stock options, stock appreciation rights, restricted stock, restricted stock units, performance units and performance shares solely to prospective employees of the Company or an affiliate of the Company provided that certain criteria are met. Awards under the Inducement Plan* mayonly be granted to an individual, as a material inducement to such individual to enter into employment with the Company or an affiliate of the Company, who (i) hasnot* previously been an employee or director of the Company or (ii) is rehired following a bona fide period of non-employment with the Company. The maximum number of shares available for grant under the Inducement Plan is 225,000 shares of the Company’s common stock (subject to adjustment for recapitalizations, stock splits, reorganizations and similar transactions). The Inducement Plan is administered by the Compensation Committee and expiresten years from the date of effectiveness. As of* September 30, 2025,*193,476 shares were reserved for future issuance under the Inducement Plan.

The Inducement Plan hasnot been and willnot be approved by the Company’s stockholders. Awards under the Inducement Plan will be made pursuant to the exemption from Nasdaq stockholder approval requirements for equity compensation provided by Nasdaq Listing Rule5635(c)(4), which permits Nasdaq listed companies to make inducement equity awards to new employees withoutfirst obtaining stockholder approval of the award.

The following is a summary of stock option activity during thenine months ended* September 30, 2025*:

As of* September 30, 2025*, all options have been fully expensed.

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A summary of restricted stock award activity within the Company’s equity plans and changes for thenine months ended* September 30, 2025* is as follows:

As of* September 30, 2025*, the total unrecognized compensation expense related to unvested shares of restricted common stock was $2.7 million, which the Company expects to recognize over an estimated weighted-average period of 1.56 years.

Stock-based compensation expense is allocated based on the cost center to which the award holder belongs. The following table summarizes the total stock-based compensation expense by function, including expense related to consultants, for thethree andnine months ended* September 30, 2025and2024* (in thousands):

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Basic net loss per share is determined by dividing net loss by the weighted-average shares of common stock outstanding during the period. Diluted net loss per share is determined by dividing net loss by diluted weighted-average shares outstanding. Diluted weighted-average shares reflect the dilutive effect, if any, of potentially dilutive shares of common stock, such as options to purchase common stock calculated using the treasury stock method and convertible notes using the “if-converted” method. In periods with reported net operating losses, all options to purchase common stock are deemed anti-dilutive such that basic net loss per share and diluted net loss per share are equal.

The Company’s shares of restricted common stock are entitled to receive dividends and hold voting rights applicable to the Company’s common stock, irrespective of any vesting requirement. Accordingly, although the vesting commences upon the elimination of the contingency, the shares of restricted common stock are considered a participating security and the Company is required to apply thetwo-class method to consider the impact of the shares of restricted common stock on the calculation of basic and diluted earnings per share. The Company is currently in a net loss position and is thereforenot required to present thetwo-class method; however, in the event the Company is in a net income position, thetwo-class method must be applied by allocating all earnings during the period to shares of common stock and shares of restricted common stock.

The following table sets forth the computation of basic and diluted net loss per share (in thousands, except share and per share data):

Sales or Other Similar Taxes—Based on the location of the Company’s current operations, the majority of sales tax is collected and remitted either by the Company or on its behalf by e-commerce marketplaces in most states within the U.S. To date, the Company has hadno actual or threatened sales and use tax claims from any state where it doesnot already claim nexus or any state where it sold products prior to claiming nexus. However, the Company believes that the likelihood of incurring a liability as a result of sales tax nexus being asserted by certain states where it sold products prior to claiming nexus is probable. As of* September 30, 2025and December 31, 2024,*the Company estimates that the potential liability, including current sales tax payable is approximately $0.8 million and $1.0 million, which has been recorded in accrued and other current liabilities on the Condensed Consolidated Balance Sheets. The Company believes this is the best estimate of an amount due to taxing agencies, given that such a potential loss is an unasserted liability that would be contested and subject to negotiation between the Company and the state, or decided by a court.

Legal Proceedings—From time to time, the Company is party to various actions and claims arising in the normal course of business. The Company doesnot believe that the final outcome of these matters will have a material adverse effect on the Company’s financial position or results of operations. In addition, the Company maintains what it believes is adequate insurance coverage to further mitigate risk. However,no assurance can be given that the final outcome of such proceedings willnot materially impact the Company’s financial condition or results of operations. Further,no assurance can be given that the amount or scope of existing insurance coverage will be sufficient to cover losses arising from such matters.

Product Remediation Costs—During thethree months ended* September 30, 2025,the Company accrued approximately $0.4 million for estimated costs associated with addressing a product performance matter involving certain houseware appliances that the Company ceased selling during the year ended December 31, 2024.*These costs are included in cost of goods sold on the Condensed Consolidated Statement of Operations.

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The following tables summarize the changes in the Company’s intangible assets as of* September 30, 2025and December 31, 2024 (*in thousands):

The following table sets forth the estimated aggregate amortization of the Company’s intangible assets for the nextfive years and thereafter (in thousands):

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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 thenine* months ended* September 30, 2025.Severance payments are expected to be made through thesecond* quarter of2026. Combined with other vendor-related cost reductions, the plan is expected to generate annualized savings of approximately $5 to $6 million.

On* February 8, 2024,the Company committed to a fixed cost-cutting plan, including a reduction in workforce which resulted in the termination of approximately17* employees and 26 contractors globally. The Company incurred $0.6 million of restructuring charges during the year ended* December 31, 2024.*

The accounting for the restructuring costs follows the provisions of ASC420, "Accounting for Costs Associated with Exit or Disposal Activities," which requires the recognition of a liability once the restructuring plan is communicated to affected employees and meets the criteria of being probable and reasonably estimable. The Company recognizes a liability for employee severance, other benefits, and involuntary terminations on the communication date.

The following tables provide a summary of the restructuring costs incurred:

(1) Includes reversal of costs associated with a contract settlement during thethree andnine months ended* September 30, 2024.*

The following table provides a summary of the Company's total restructuring reserve:

As of* September 30, 2025,*the Company had a liability of $0.8 million for restructuring costs, which was included in accrued and other current liabilities on the Condensed Consolidated Balance Sheet.

As of* December 31, 2024,*the Company didnot have a liability for restructuring costs.

The Company will continue to assess the restructuring plan's progress and provide updates as required in future financial statements if there are material changes to the initial estimates or additional significant restructuring activities.

Aterian, Inc. is 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. The Company has determined that it hasone operating segment. The Company's chief operating decision maker ("CODM") is its chief executive officer, who reviews financial information presented on a consolidated basis. The CODM uses consolidated operating margin and net income to assess financial performance and allocate resources. These financial metrics are used by the CODM to make key operating decisions, such as the determination of the rate at which the Company seeks to grow operating margin and the allocation of budget between cost of goods sold, variable sales costs, and other vendor and payroll expenses.

(1) Variable sales costs primarily include e-commerce platform commissions, online advertising, and selling and logistics expenses.

(2) Other segment items primarily include income taxes, interest expense, other (income) expense, and the change in fair value of warrant liabilities.

The CODM doesnot use total assets as a financial metric when making key operating decisions.

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