Aterian, Inc.
For the period ended Mar 31, 2026. Filed May 15, 2026.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2026 · Filed May 15, 2026
ATER$0.85+0.8%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-09-30; filed 2025-11-13.
0001437749-25-034871
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-03-31; filed 2026-05-15.
0001437749-26-017437
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 127 previous paragraphs and 93 current paragraphs.
34 unchanged; 25 reworded; 31 added; 60 removed; 8 previous and 3 current paragraphs rearranged.
Tables are not compared: 26 previous and 17 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (31)
Current report
Discontinued Operations
Current report
On April 27, 2026, the Company entered into a series of definitive agreements (collectively, the “Aterian Transactions”) to fundamentally restructure its operations and capital position. The Company entered into a definitive Asset Purchase Agreement (the “Asset Purchase Agreement”) with Trademark Global, LLC (“Trademark Global”), marking a significant strategic shift in our business model. Pursuant to this agreement, Trademark Global will acquire substantially all assets and certain liabilities associated with our marquee brands—Mueller Living, PurSteam, hOmeLabs, Squatty Potty, Healing Solutions, and Photo Paper Direct—for $18 million in cash, subject to customary adjustments (the “Asset Sale”).
Current report
As these marquee brands represent a major portion of the Company’s historical operations and strategic direction, the results of these brands have been classified as discontinued operations in the consolidated financial statements for all periods presented. Following the closing of the Asset Sale, the Company expects to continue operating its remaining legacy brands, including Vremi and Xtava.
Current report
In conjunction with the Asset Sale, the Company also entered into a Securities Purchase Agreement with David E. Lazar for the issuance of Series AA and Series AAA Preferred Stock for aggregate gross proceeds of $7.0 million. This capital infusion, combined with the proceeds from the Asset Sale, is intended to restructure the Company’s balance sheet.
Current report
To provide a meaningful comparison of our ongoing business performance, the following discussion separately analyzes the results of our continuing operations and the impact of the discontinued operations for the periods presented.
Current report
Results of Continuing Operations
Current report
Net revenue decreased $45 thousand, or 72%, during the three months ended March 31, 2026 to $18 thousand, compared to $63 thousand for the three months ended March 31, 2025. The decrease in net revenue was primarily attributable to reduction in consumer demand due to the macroeconomic environment.
Current report
Cost of goods sold decreased $5 thousand, or 40.2%, during the three months ended March 31, 2026 to $8 thousand, compared to $13 thousand for the three months ended March 31, 2025, primarily from reduced sales volumes.
Current report
Sales and distribution expenses increased to $0.3 million for the three months ended March 31, 2026, from $37 thousand for the three months ended March 31, 2025. This increase is primarily attributable to severance relating to our January 2026 workforce reduction of $0.3 million.
Current report
Results of Discontinued Operations
Current report
The following table sets forth the components of our results of discontinued operations:
Current report
Cost of goods sold decreased $1.5 million, or 25.1%, during the three months ended March 31, 2026 to $4.4 million, compared to $5.9 million for the three months ended March 31, 2025, primarily from reduced sales volumes.
Current report
Gross profit increased to 64.3% for the three months ended March 31, 2026 from 60.9% for the three months ended March 31, 2025. The increase in gross profit was due primarily to product mix and higher average sales prices on certain products.
Current report
Impairment loss on intangibles
Current report
On April 27, 2026, the Company entered into a definitive Asset Purchase Agreement with Trademark Global, LLC, to sell certain marquee brands for $18 million in cash. Based on the definitive deal terms, specifically the $18.0 million base purchase price and the estimated purchase price adjustments, the Company evaluated the carrying value of its brand intangible assets. The Company determined that the estimated allocated proceeds from the Asset Purchase Agreement were lower than the carrying values for certain definite-lived brand assets. Accordingly, the Company recorded a non-cash impairment charge of $3.4 million during the first quarter of 2026. This charge, recorded within Loss from Discontinued Operations on the Condensed Consolidated Statement of Operations, adjusts the carrying amount of the disposal group to its fair value less costs to sell, based on the $18.0 million cash consideration and estimated purchase price adjustments.
Current report
For the three months ended March 31, 2025, no cash was used in investing activities.
Current report
On April 27, 2026, the Company entered into a series of definitive agreements (collectively, the “Aterian Transactions”) to fundamentally restructure its operations and capital position. Under the terms of an Asset Purchase Agreement with Trademark Global, LLC, the Company agreed to sell its marquee brands, including Mueller Living, PurSteam, hOmeLabs, Squatty Potty, Healing Solutions, and Photo Paper Direct, for $18 million in cash less transaction related costs. Simultaneously, the Company entered into a Securities Purchase Agreement with David E. Lazar for the issuance of Series AA and Series AAA Preferred Stock for aggregate gross proceeds of $7.0 million.
Current report
Upon the closing of these transactions, Mr. Lazar will hold approximately 95.13% of the Company’s fully diluted share capitalization. Management intends to utilize the proceeds from these transactions to satisfy existing debt obligations and provide working capital for our core ongoing business segments, which include the Vremi and Xtava brands. Following the change in control, the Company intends to leverage its retained assets and operational infrastructure to pursue a streamlined growth strategy.
Current report
In accordance with ASC 205-40, Going Concern, management evaluated whether there are conditions and events that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date these Condensed Consolidated Financial Statements are issued.
Current report
Management’s plan to alleviate substantial doubt is centered on the consummation of the Aterian Transactions. If the Company is unable to obtain stockholder approval, or if the transactions otherwise fail to close, management may be required to implement alternative strategies. These may include seeking other strategic buyers, attempting to secure alternative high-cost financing, or a further drastic reduction in our operating footprint.
Current report
Furthermore, if the transactions are terminated under certain circumstances, the Company may be required to pay a termination fee of $1.1 million and reimburse expenses up to $0.6 million, which would further adversely impact our liquidity.
Current report
**Nasdaq Listing—**On December 9, 2025, the Company received a letter from the Listing Qualifications Staff of The Nasdaq Stock Market LLC (“Nasdaq”) indicating that, based upon the closing bid price of the Company’s common stock, par value $0.0001 per share (“Common Stock”), for the last 30 consecutive business days, the Company is not currently in compliance with the requirement to maintain a minimum bid price of $1.00 per share for continued listing on The Nasdaq Capital Market, as set forth in Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Notice”).
Current report
The Bid Price Notice has no immediate effect on the continued listing status of the Common Stock on The Nasdaq Capital Market, and, therefore, the Company's listing remains fully effective.
Current report
The Company is provided a compliance period of 180 calendar days from the date of the Bid Price Notice, or until June 8, 2026, to regain compliance with the minimum closing bid requirement, pursuant to Nasdaq Listing Rule 5810(c)(3)(A). If at any time before June 8, 2026, the closing bid price of the Common Stock closes at or above $1.00 per share for a minimum of 10 consecutive business days, subject to Nasdaq’s discretion to extend this period pursuant to Nasdaq Listing Rule 5810(c)(3)(H) to 20 consecutive business days, Nasdaq will provide written notification that the Company has achieved compliance with the minimum bid price requirement, and the matter would be resolved. If the Company does not regain compliance during the compliance period ending June 8, 2026, then Nasdaq may grant the Company a second 180 calendar day period to regain compliance, provided the Company meets the continued listing requirement for market value of publicly-held shares and all other initial listing standards for The Nasdaq Capital Market, other than the minimum closing bid price requirement, and notifies Nasdaq of its intent to cure the deficiency during the second compliance period.
Current report
The Company will continue to monitor the closing bid price of its Common Stock and seek to regain compliance with all applicable Nasdaq requirements within the allotted compliance periods. If the Company does not regain compliance within the allotted compliance periods, including any extensions that may be granted by Nasdaq, Nasdaq will provide notice that the Common Stock will be subject to delisting. The Company would then be entitled to appeal that determination to a Nasdaq hearings panel. There can be no assurance that the Company will regain compliance with the minimum bid price requirement during the 180-day compliance period, secure a second period of 180 days to regain compliance or maintain compliance with the other Nasdaq listing requirements.
Current report
As of the date of this filing, the Company has not yet received formal written confirmation from Nasdaq that it has regained compliance, as the closing bid price of the Company’s common stock has been at or above $1.00 per share for 10 consecutive business days, ending on May 14, 2026.
Current report
On March 13, 2026 (the "Fifth Amendment Effective Date"), the Company and its subsidiaries entered into Amendment No. 5 to its Credit and Security Agreement with MidCap Funding IV Trust. Under the terms of the amendment, the Company’s minimum liquidity covenant was reduced from $5.0 million to $3.5 million during the Minimum Liquidity Covenant Reduction Period. This reduction period commenced on the Fifth Amendment Effective Date and is subject to extension at the Company's option on a weekly basis through May 9, 2026, provided it remains in compliance with certain fee payment obligations.
Current report
On April 27, 2026, the Company entered into an Asset Purchase Agreement with Trademark Global, LLC, to sell the assets and liabilities associated with our marquee brands, including Mueller Living, PurSteam, hOmeLabs, Squatty Potty, Healing Solutions, and Photo Paper Direct. As these brands represented the substantial majority of our historical consolidated operations, their results are now classified as discontinued operations for all periods presented.
Current report
Consequently, management believes that historical Non-GAAP financial measures previously disclosed, including Adjusted EBITDA and Contribution Margin, no longer provide a meaningful basis for evaluating the Company’s ongoing performance or future prospects. Our remaining continuing operations consist primarily of smaller legacy brands, such as Vremi and Xtava, and residual corporate activities. Given this fundamental shift in our business profile and the ongoing transition of our leadership and capital structure, we have elected to omit the presentation of these Non-GAAP measures for the current period.
Current report
We intend to re-evaluate our performance metrics as our remaining operations evolve and will provide updated disclosures if management determines that such measures provide useful information to investors.
Current report
On April 27, 2026, the Company entered into a definitive Asset Purchase Agreement with Trademark Global, LLC, to sell certain marquee brands for $18 million in cash. Based on the definitive deal terms, specifically the $18.0 million base purchase price and the estimated purchase price adjustments, the Company evaluated the carrying value of its brand intangible assets. The Company determined that the estimated allocated proceeds from the Asset Purchase Agreement were lower than the carrying values for certain definite-lived brand assets. Accordingly, the Company recorded a non-cash impairment charge of $3.4 million during the first quarter of 2026. This charge, recorded within Loss from Discontinued Operations on the Condensed Consolidated Statement of Operations, adjusts the carrying amount of the disposal group to its fair value less costs to sell, based on the $18.0 million cash consideration and estimated purchase price adjustments.
Removed paragraphs (60)
Previous report
Our primary brands include Squatty Potty, HomeLabs, Mueller Living, PurSteam, Healing Solutions, and Photo Paper Direct ("PPD").
Previous report
Results of Operations
Previous report
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 report
The following table sets forth the components of our results of operations as a percentage of net revenue:
Previous report
Revenue by Product Categories:
Previous report
The following tables set forth our net revenue disaggregated by product categories:
Previous report
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 report
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 report
costs. During the three 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
Previous report
Consolidated Statement of Operations.
Previous report
Comparison of the Nine Months Ended September 30, 2025 and 2024
Previous report
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 report
The following table sets forth the components of our results of operations as a percentage of net revenue:
Previous report
Revenue by Product Categories:
Previous report
The following tables set forth our net revenue disaggregated by product categories:
Previous report
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.
Previous report
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 report
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 report
costs. During the three 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
Previous report
Consolidated Statement of Operations.
Previous report
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 report
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 report
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 report
Interest expense, net
Previous report
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 report
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 report
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 report
In order to execute our growth strategy, we have historically relied on outside capital through the issuance of equity, debt, and borrowings under financing arrangements (collectively “outside capital”) to fund our cost structure, and we expect to continue to rely on outside capital for the foreseeable future, specifically if we pursue material M&A opportunities. While we believe we will eventually reach a level of profitability to sustain our operations, there can be no assurance we will be able to achieve such profitability or do so in a manner that does not require our continued reliance on outside capital. Moreover, while we have historically been successful in raising outside capital, there can be no assurance we will be able to continue to obtain outside capital in the future or do so on terms that are acceptable to us.
Previous report
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 205-40, Going Concern:
Previous report
• 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 report
• 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 report
• As of the issuance date, we have no firm commitments to secure additional outside capital from lenders or investors. While we expect to continue to explore raising additional outside capital, specifically if we pursue material M&A opportunities, there can be no assurance we will be able to obtain capital or do so on terms that are acceptable to us. Accordingly, absent our ability to generate cash inflows from our operations and/or secure additional outside capital in the near term, we may be unable to meet our obligations as they become due over the next twelve months beyond the issuance date.
Previous report
• 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 report
• The Company's plan is to continue to closely monitor our operating forecast, to pursue additional sources of outside capital on terms that are acceptable to us, and to secure a waiver or forbearance from MidCap if we are unable to remain in compliance with one or more of the covenants required by the MidCap Credit Facility. If some or all of our plans prove unsuccessful, we may need to implement short-term changes to our operating plan, including but not limited to delaying expenditures, reducing investments in new products, or reducing our sale and distribution infrastructure. We may also need to seek long-term strategic alternatives, such as a significant curtailment of our operations, a sale of certain of our assets, a divestiture of certain product lines, a sale of the entire enterprise to strategic or financial investors, and/or allow our enterprise to become insolvent.
Previous report
**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 report
We believe that our Condensed Consolidated Financial Statements and the other financial data included in this Quarterly Report have been prepared in a manner that complies, in all material respects, with generally accepted accounting principles in the U.S. (“GAAP”). However, for the reasons discussed below, we have presented certain non-GAAP measures herein.
Previous report
We have presented the following non-GAAP measures to assist investors in understanding our core net operating results on an on-going basis: (i) Contribution margin; (ii) Contribution margin as a percentage of net revenue; (iii) EBITDA (iv) Adjusted EBITDA; and (v) Adjusted EBITDA as a percentage of net revenue. These non-GAAP financial measures may also assist investors in making comparisons of our core operating results with those of other companies.
Previous report
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 report
We present Contribution margin and Contribution margin as a percentage of net revenue, as we believe each of these measures provides an additional metric to evaluate our operations and, when considered with both our GAAP results and the reconciliation to gross profit, provides useful supplemental information for investors. Specifically, Contribution margin and Contribution margin as a Non-GAAP Financial Measure percentage of net revenue are two of our key metrics in running our business. All product decisions made by us, from the approval of launching a new product and to the liquidation of a product at the end of its life cycle, are measured primarily from Contribution margin and/or Contribution margin as a percentage of net revenue. Further, we believe these measures provide improved transparency to our stockholders to determine the performance of our products prior to fixed costs as opposed to referencing gross profit alone.
Previous report
In the reconciliation to calculate Contribution margin, we add e-commerce platform commissions, online advertising, selling and logistics expenses (“sales and distribution variable expense”) to gross profit to inform users of our financial statements of what our product profitability is at each period prior to fixed costs (such as sales and distribution expenses such as salaries as well as general and administrative expenses). By excluding these fixed costs, we believe this allows users of our financial statements to understand our products performance and allows them to measure our products performance over time.
Showing the first 40 of 60 passages. Open the source sections for the rest.
Reworded paragraphs (25)
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 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.*
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, 2025 included in our Annual Report on Form 10-K for the year ended December 31, 2025 as filed with the Securities and Exchange Commission (the“SEC”) on March 20, 2026. As discussed in the section titled“Cautionary 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“Cautionary 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
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.
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 year ended December 31, 2025 and the quarter ended March 31, 2026. 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 have implemented a range of mitigation strategies to address the impact of these tariffs on our supply chain and margins. These efforts include diversifying sourcing outside of China, renegotiating supplier terms, redesigning certain products to reduce tariff exposure, and implementing selective price increases where appropriate. We continue to evaluate additional structural and operational measures to further reduce tariff-related exposure.
Previous wording
The following table sets forth the components of our results of operations:
Current wording
The following table sets forth the components of our results of continuing operations:
Previous 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
Current wording
Gross profit decreased to 56.7% for the three months ended March 31, 2026 from 79.9% for the three months ended March 31, 2025. The decrease in gross profit was due primarily to product mix.
Previous 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.
Current wording
The decrease in general and administrative expenses was primarily the result of a decrease of $0.3 million in headcount expense, a decrease of $0.3 million in miscellaneous expenses, and a decrease of $0.2 million in stock-compensation expense, partially offset by an increase of $0.4 million in professional fees.
Previous wording
The increase in interest expense, net of $0.1 million is primarily relating to a decrease in interest income of $67 thousand compared to the prior period.
Current wording
The increase in interest expense, net of $0.1 million is primarily relating to** **amortized fees of $69 thousand associated with the March 2026 amendment to lower the liquidity covenant and a decrease in interest income of $38 thousand partially offset by lower borrowings in the current period.
Previous 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.
Current wording
Net revenue decreased $2.9 million, or 18.8%, during the three months ended March 31, 2026 to $12.4 million, compared to $15.3 million for the three months ended March 31, 2025. The decrease in net revenue was primarily attributable 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.
Previous wording
Sales and distribution expenses, which included e-commerce platform commissions, online advertising and logistics expenses (i.e., variable sales and distribution expense), decreased to $9.8 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.
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 $7.2 million for the three months ended March 31, 2026, from $9.7 million for the three months ended March 31, 2025. This decrease is primarily attributable to the decrease in the volume of products sold in the three months ended March 31, 2026, as our e-commerce platform commissions, online advertising, selling and logistics expenses decreased to $6.0 million in the three months ended March 31, 2026 as compared to $7.3 million in the prior year period.
Previous wording
Our sales and distribution fixed costs (e.g., salary and office expenses) including stock-based compensation decreased to $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.
Current wording
Our sales and distribution fixed costs (e.g., salary and office expenses) including stock-based compensation decreased to $1.2 million for the three months ended March 31, 2026, from $2.3 million for the three months ended March 31, 2025. This decrease is primarily attributable to lower headcount expense of $0.6 million, lower miscellaneous expenses of $0.4 million, and lower stock-compensation expense of $0.1 million.
Previous 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.
Current wording
As a percentage of net revenue, sales and distribution expenses decreased to 58% for the three months ended March 31, 2026, from 63% for the three months ended March 31, 2025. E-commerce platform commissions, online advertising, selling and logistics expenses included within sales and distribution expenses, as a percentage of net revenue, stayed consistent at 48% for the three months ended March 31, 2026 and March 31, 2025.
Previous wording
Cash Flows for the Nine Months Ended September 30, 2025 and 2024
Current wording
Cash Flows for the Three Months Ended March 31, 2026 and 2025
Previous wording
The following table provides information regarding our cash flows for the nine months ended September 30, 2025 and 2024:
Current wording
The following table provides information regarding our cash flows for the three months ended March 31, 2026 and 2025:
Previous 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.
Current wording
Net cash used in operating activities was $0.4 million for the three months ended March 31, 2026, primarily driven by net cash losses from operations of $2.0 million and a $1.6 million inflow from changes in working capital, mainly related to changes in accounts receivable, purchases of inventory, and payments of accounts payable.
Previous wording
Net cash provided by operating activities was $2.2 million for the nine months ended September 30, 2024, resulting primarily from our net cash losses from operations of $5.0 million, inflow from working capital of $7.2 million from changes in accounts receivable, purchases of inventory and payments of accounts payable. The working capital benefit primarily relates to a decrease in inventory due to a reduction in purchases for the period.
Current wording
Net cash used in operating activities was $3.9 million for the three months ended March 31, 2025, resulting primarily from our net cash losses from operations of $2.9 million, outflow from working capital of $1.0 million from changes in accounts receivable, purchases of inventory and payments of accounts payable. The working capital outflow primarily relates to purchases of our air quality products for the summer season.
Previous wording
For the nine months ended September 30, 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.
Current wording
For the three months ended March 31, 2026, net cash used in investing activities was $4 thousand, primarily related to the purchase of fixed assets during the three months ended March 31, 2026.
Previous wording
Net Cash (Used in) Provided by Operating Activities
Current wording
Net Cash (Used in) Provided by Financing Activities
Previous 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
Current wording
For the three months ended March 31, 2026, cash used in financing activities of $2.1 million primarily from the net repayments for our MidCap credit facility of $1.8 million and payment of insurance obligations of $0.3 million.
Previous 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.
Current wording
For the three months ended March 31, 2025, cash provided by financing activities of $0.4 million was primarily from the net borrowings for our MidCap credit facility of $0.5 million and payment of insurance obligations of $0.1 million.
Previous wording
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 do not include any adjustments that may result from the outcome of these uncertainties.
Current wording
As the closing of the Aterian Transactions is subject to factors outside of the Company’s direct control, such as stockholder approval, management has concluded that these uncertainties raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying Condensed Consolidated Financial Statements do not include any adjustments that might result from the outcome of this uncertainty.
Previous wording
On February 23, 2024, the Company amended its asset backed credit facility with MidCap Financial Trust. The Credit Facility term has been extended to December 2026 and gives Aterian access to $17 million in current commitments which can be increased, subject to certain conditions, to $30.0 million. The Credit Facility extension reduces the minimum liquidity financial covenant from a peak of $15.0 million to $6.8 million of cash on hand and/or availability in the Credit Facility. The extension fee was less than $0.1 million. At our election, we may elect to comply with an alternative financial covenant that would require us to maintain a minimum borrowing availability under the credit facility of $5.0 million at all times. We currently do not anticipate electing the alternative financial covenant over the next twelve months and are in compliance with the minimum liquidity covenant as of the date these Condensed Consolidated Financial Statements were issued.
Current wording
On February 23, 2024, the Company amended its asset backed credit facility with MidCap Financial Trust. The Credit Facility term has been extended to December 2026 and gives Aterian access to $17 million in current commitments which can be increased, subject to certain conditions, to $30.0 million. The Credit Facility extension reduces the minimum liquidity financial covenant from a peak of $15.0 million to $6.8 million of cash on hand and/or availability in the Credit Facility. The extension fee was less than $0.1 million. At our election, we may elect to comply with an alternative financial covenant that would require us to maintain a minimum borrowing availability under the credit facility of $5.0 million at all times. We currently do not anticipate electing the alternative financial covenant over the next twelve months and are in compliance with the minimum liquidity covenant as of the date these Consolidated Financial Statements were issued.
Previous wording
On August 29, 2025 (the “Fourth Amendment Effective Date”) the Company entered into Amendment No. 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 and not otherwise defined shall have the meanings assigned in the Credit Agreement. Material changes contained in Amendment No. 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.
Current wording
On March 25, 2025 (the “Third Amendment Effective Date”) the Company entered into Amendment No. 3 (the “3rd Amendment”) to the Credit Agreement. Material changes contained in the 3rd Amendment include, among other things, adding repurchase of the Company’s common stock of up to $1.5 million per year, consisting of up to $1.5 million in repurchases allowed during the period from March 25, 2025 through December 22, 2025, and up to an additional $1.5 million allowed during the period from December 23, 2025 through the maturity date, subject to certain liquidity and compliance conditions. On August 29, 2025 (the “Fourth Amendment Effective Date”) the Company entered into Amendment No. 4 to the Credit Agreement. Material changes contained in Amendment No. 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.
Previous 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.
Current wording
The outstanding balance on the MidCap credit facility as of March 31, 2026 and December 31, 2025 was $2.5 million and $4.3 million, respectively. The Company had $1.1 million availability on the Midcap credit facility as of March 31, 2026. We are in compliance with the financial covenants contained within the Credit Agreement as of March 31, 2026.
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. As of May 2, 2025, the Company has 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 had temporarily suspended its share repurchase program.
Previous wording
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 do not materialize, we may be required to record intangible impairment charges, which may be material.
Current wording
We 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 do not materialize, we may be required to record intangible impairment charges, which may be material.
Previous wording
While we believe our conclusions regarding the estimates of recoverability of our asset groupings are appropriate, these estimates are subject to uncertainty and by nature include judgments and estimates regarding various factors. These factors include the rate and extent of growth in the markets that our asset groups serve, the realization of future sales price and volume increases, fluctuations in exchange rates, fluctuations in price and availability of key raw materials, fluctuations in discount rate, and future operating efficiencies.
Current wording
While we believe our conclusions regarding the estimates of recoverability of our asset groupings are appropriate, these estimates are subject to uncertainty and by nature include judgments and estimates regarding various factors. These factors include the rate and extent of growth in the markets that our asset groups serve, the realization of future sales price and volume increases, fluctuations in exchange rates, fluctuations in price and availability of key raw materials, fluctuations in discount rate, future operating efficiencies, and strategic alternative processes.
Rearranged current paragraphs (3)
Current report — wording carried from elsewhere
The decrease in general and administrative expenses was primarily the result of a decrease of $40 thousand in logistics software expenses.
Current report — wording carried from elsewhere
Net Cash Used in Operating Activities
Current report — wording carried from elsewhere
**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. As a result of these tariffs, we experienced an increase in our cost of goods sold during the quarter ended March 31, 2026. 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 have implemented a range of mitigation strategies to address the impact of these tariffs on our supply chain and margins. These efforts include diversifying sourcing outside of China, renegotiating supplier terms, redesigning certain products to reduce tariff exposure, and implementing selective price increases where appropriate. We have implemented a range of mitigation strategies to address the impact of these tariffs on our supply chain and margins. These efforts include diversifying sourcing outside of China, renegotiating supplier terms, redesigning certain products to reduce tariff exposure, and implementing selective price increases where appropriate. We continue to evaluate additional structural and operational measures to further reduce tariff-related exposure.
Rearranged previous paragraphs (8)
Previous report — wording carried elsewhere
The following table sets forth the components of our results of operations:
Previous report — wording carried elsewhere
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 report — wording carried elsewhere
Sales and distribution expenses, which included e-commerce platform commissions, online advertising and logistics expenses (i.e., variable sales and distribution expense), decreased to $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 report — wording carried elsewhere
The decrease in interest expense, net of $0.1 million is primarily relating to a decrease in interest expense of $0.2 million due to lower average borrowings and a decrease in interest income of $0.1 million compared to the prior period.
Previous report — wording carried elsewhere
Change in fair market value of warrant liabilities
Previous report — wording carried elsewhere
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 report — wording carried elsewhere
Net Cash Used in Financing Activities
Previous report — wording carried elsewhere
On March 25, 2025 (the “Third Amendment Effective Date”) the Company entered into Amendment No. 3 (the “Amendment”) to that certain Credit and Security Agreement, dated as of December 22, 2021 (as amended from time to time, the “Credit Agreement”) by and among the Company, certain of its subsidiaries thereto, the lenders thereto (the “Lenders”) and Midcap Funding IV Trust, as administrative agent. Capitalized terms used in this section and not otherwise defined shall have the meanings assigned in the Credit Agreement. Material changes contained in the Amendment include, among other things, adding repurchase of the Company’s common stock of up to $1.5 million per year, consisting of up to $1.5 million in repurchases allowed during the period from March 25, 2025 through December 22, 2025, and up to an additional $1.5 million allowed during the period from December 23, 2025 through the maturity date, subject to certain liquidity and compliance conditions.