Aterian, Inc.

You should carefully consider the factors discussed in Part I, Item 1A. “Risk Factors” in our Annual Report and this Quarterly Report on Form 10-Q, which could materially affect our business, financial condition, cash flows or future results. The risks described in our Annual Report and this Quarterly Report on Form 10-Q are not the only risks facing our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results. Except as presented below, there have been no material changes from the risk factors associated with our business previously disclosed in our Annual Report.

Risks Relating to Our Business

The completion of the Preferred Stock Sale resulted in a change in control, and a single controlling stockholder now exercises overwhelming control over corporate strategy and stockholder decisions.

On July 17, 2026, we completed the second closing under the Securities Purchase Agreement with David E. Lazar, resulting in the issuance of Series AAA Preferred Stock and a fundamental change in control of the Company. Upon full conversion of the Series AA and Series AAA Preferred Stock, Mr. Lazar controls approximately 95% of our fully diluted share capitalization. As a result, existing common stockholders have experienced immediate, severe dilution of their equity interests and voting power.

This extreme concentration of ownership gives Mr. Lazar majority voting control and effective decision-making authority over our corporate strategy, business affairs, and all matters requiring stockholder approval. This includes the power to elect directors, approve major strategic transactions, amend our certificate of incorporation and bylaws, and authorize future equity or debt issuances. The interests of Mr. Lazar may differ substantially from the interests of our other stockholders. Additionally, his ability to control the Company may have the effect of delaying, deterring, or preventing a future change in control, takeover attempt, or merger that other stockholders might consider favorable or in their best financial interest.

We have completed the sale of substantially all of our historical revenue-generating assets, and our future viability is subject to the successful execution of an unproven strategic pivot.* *

On July 17, 2026, we completed the sale of substantially all of our historical assets and operating operations—including our marquee consumer brands (Mueller Living, PurSteam, hOmeLabs, Squatty Potty, Healing Solutions, and Photo Paper Direct)—to Trademark Global, LLC. Following the consummation of the Asset Sale, our remaining business operations consist primarily of our smaller legacy brands, Vremi and Xtava, and residual corporate activities.

As a result, our ongoing operating model has been fundamentally altered, and our future viability depends heavily on our ability to successfully execute a strategic "Pivot" or evaluate potential strategic transactions to create long-term growth opportunities. We may be unable to successfully scale our remaining operations or identify and complete a suitable strategic transaction before our capital resources are depleted, and even if we do, there is no assurance that any such initiative will achieve its intended financial or operational benefits.

Our ability to retain key personnel and manage operational continuity may be adversely affected following executive leadership transitions and the completion of the Asset Sale.

On July 17, 2026, following the completion of the Asset Sale and the Preferred Stock Sale, David E. Lazar was appointed as Chief Executive Officer and Chairman of the Board, succeeding Arturo Rodriguez. In connection with this transition, Mr. Rodriguez entered into a Transition and Separation Agreement to assist with operational handoff through September 30, 2026, and Chief Financial Officer Joshua Feldman entered into a similar transition agreement through September 4, 2026.

The transition to new executive management, combined with the substantial reduction in our operating footprint following the sale of our marquee brands, represents a fundamental shift in our corporate leadership and organizational structure. These ongoing changes may create uncertainty regarding our future operational strategy, which could lead to increased employee attrition or hinder our ability to attract, retain, and motivate well-qualified personnel.

The loss of key remaining operational, financial, or corporate staff during this transition period or an inability to identify suitable long-term successors following the expiration of current executive transition agreements could disrupt our business operations, impair our financial reporting capabilities, and adversely affect our ability to execute our strategic pivot.

***We have historically operated at a loss and we may never achieve or sustain continuous profitability or positive cash flows.***Management has determined that there is substantial doubt about the Company's ability to continue as a going concern.

We experienced significant after-tax losses for the three and six months ended June 30, 2026 and 2025. In addition, our operating costs have increased historically and may fluctuate in future periods as we adjust our organizational structure, which could negatively affect our operating results and our ability to achieve long-term continuous profitability. Following the completion of the Asset Sale on July 17, 2026, our historical core revenue-generating marquee brands are no longer part of our ongoing operations, and our business model relies on our smaller retained legacy brands, Vremi and Xtava, alongside the execution of an unproven strategic pivot.

We have historically relied on a combination of cash flows from operations, debt facilities, and private placements of equity to fund our business. While we completed the Asset Sale and Preferred Stock Sale on July 17, 2026—generating $25.0 million in aggregate gross proceeds prior to transaction expenses, adjustments, and debt settlements—there can be no assurance that our capital resources will be sufficient to sustain long-term operations or that our revised business strategy will generate positive cash flows.

Our ongoing operating losses and negative cash flows raise substantial doubt about our ability to continue as a going concern. Our independent registered public accounting firm included an explanatory paragraph in its report on our consolidated financial statements for the fiscal year ended December 31, 2025, expressing substantial doubt regarding our ability to continue as a going concern. On July 17, 2026, in connection with the closing of the Aterian Transactions, all outstanding indebtedness under our MidCap credit facility was repaid in full and the facility was terminated. However, if our remaining capital resources are depleted faster than anticipated or if we fail to establish a profitable ongoing business model, we may be forced to make significant alterations to our operating plans, delay growth expenditures, further reduce operating infrastructure, or liquidate remaining assets. In the event of a liquidation or dissolution, the values realized for our remaining assets could be significantly lower than the carrying values reflected in our Condensed Consolidated Financial Statements.

Increased costs of raw materials, energy, labor, transportation and platform fees charged by marketplaces may adversely affect our business, operating results, financial condition, and cash flows.

Significant increases in the cost and/or reductions in the availability of raw materials, energy, labor, transportation, and increases in tariffs and platform fees charged by marketplaces have negatively impacted our business, operating results, financial condition, and cash flows and may continue to negatively impact such items in the future. Our contract manufacturers purchase significant amounts of metals, plastics and other materials to manufacture our products. In addition, they also purchase significant amounts of electricity to supply the energy required in their production processes. Global political instabilities, including the Iran conflict, are expected to result in higher metal, plastic, electric, transportation and product costs, and may increase our cost of goods sold in the near term or impair our ability to obtain products at marketable rates or at all. We are heavily dependent on inbound sea, rail and truck freight. Disruptions in the global supply chain and freight networks, has, and may continue to limit inbound and outbound shipment capacity and increase our cost of goods sold and certain operating expenses. Further, the marketplaces on which we sell our products charge fees for selling, storage, advertising and fulfillment, all of which have historically increased, and we expect will continue to increase. Specifically, recent increases in oil prices have contributed to higher marketplace fees. The cost of raw materials, energy, labor, and transportation represents a significant portion of our cost of goods sold, while platform fees charged by marketplaces represent a significant portion of our operating expenses; these costs are not within our control and we have had limited success passing these on to customers. Our business, operating results, financial condition, and cash flows could be adversely affected by future increases in any of these costs. Additionally, the loss or disruption of essential manufacturing and supply elements such as raw materials or other finished product components, restricted transportation or increased freight costs, reduced workforce, or other manufacturing and distribution disruption could adversely impact our ability to meet our customers’ needs. Furthermore, it is not practical for us to mitigate our exposure to, nor are we able to accurately project the possible effect of foreign currency exchange rate fluctuations on our operating results due to our constantly changing exposure to various foreign currencies and the difficulty in predicting fluctuations in foreign currency exchange rates relative to the U.S. Dollar.

Recent escalations in geopolitical tensions in Iran, including significant combat operations and retaliatory strikes involving the United States and regional powers, have created substantial volatility in global energy and shipping markets. This conflict has led to disruptions in critical maritime routes and increased the risk of spiked freight insurance premiums and fuel surcharges for inbound shipments from our Asian suppliers. These macroeconomic pressures pose a direct threat to our operating results and could specifically impair our ability to achieve the contribution margin targets required as a condition to the closing of the Asset Purchase Agreement with Trademark Global. Furthermore, any sustained increase in shipping costs or delays in product availability would exacerbate the liquidity constraints that have historically affected our business and could interfere with our ability to maintain compliance with our existing credit facility prior to the anticipated influx of capital from the Aterian Transactions. If we are unable to successfully navigate these disruptions, they would have a material adverse effect on our financial condition and our ability to continue as a going concern.

We depend on third-party suppliers for all of our products, most of which are located in Asia, and any inability or delay in obtaining products from such suppliers could have a material adverse effect on our business, operating results, financial condition, and cash flow.

We are dependent on third-party suppliers such as contract manufacturers and third-party logistics providers and carriers for the manufacturing and distribution of our products and any disruption to our supply chain, even for a relatively short period of time, could cause a loss of revenue, which could adversely affect our business, operating results, financial condition, and cash flows. Our ability to select reliable suppliers that provide timely deliveries of quality products will impact our success in meeting customer demand. Further, for a number of our significant products, we only have a single-source of supply (such as for certain dehumidifiers) and in general we do not have contracts with our contract manufacturers covering costs and production that we believe we can enforce without undue effort or cost. Any supplier’s inability or unwillingness to timely deliver products that meet desired specifications or any unanticipated changes in suppliers could be disruptive and costly and it is unlikely that we will be able to effect alternative arrangements on a timely basis, or in the case of manufacturing certain of our significant products, at all. Any significant failure by us to obtain quality products, in sufficient quantities, on a timely basis, and at an affordable cost or any significant delays or interruptions of supply would have a material adverse effect on our business, operating results, financial condition, and cash flows.

As most of our product suppliers are based in China, our business is subject to additional risks including, among others: currency fluctuations; labor unrest; potential political, economic and social instability; restrictions on transfers of funds; import duties and quotas; changes in domestic and international customs and tariffs, including embargoes and customs restrictions; uncertainties involving the costs to transport and warehouse products due to the dynamic nature of the global supply chain; unexpected changes in regulatory environments; regulatory issues involved in dealing with foreign suppliers and in exporting and importing products. The foregoing factors could have a material adverse effect on our business, operating results, financial condition, and cash flows.

If our products experience any recalls, product liability claims, or government, customer or consumer concerns about product safety, our reputation and operating results could be harmed.

Our products are subject to regulation by the U.S. Consumer Product Safety Commission (the “CPSC”) and similar state and international regulatory authorities, and these products sold on our platform could be subject to involuntary recalls and other actions by these authorities. Concerns about product safety including concerns about the safety of products manufactured in developing countries, could lead us to recall selected products. Recalls and government, customer or consumer concerns about product safety could harm our reputation and reduce sales, either of which could have a material adverse effect on our business, results of operations, financial condition and prospects.

In February 2026, we announced a voluntary recall in coordination with the CPSC for approximately 195,000 units of our PurSteam Mighty Lil Steamers and Elite Travel Steamers due to reports of hot water expelling from the nozzle. We have incurred, and expect to continue to incur, costs related to this recall, including refund payments and legal expenses. As a result of this recall, a putative class action complaint, Sarah Brannon v. Aterian, Inc., was filed against us on March 6, 2026, in the U.S. District Court for the District of New Jersey. The complaint alleges various violations, including breach of implied warranty, unjust enrichment, and violations of the New Jersey Products Liability Act. While the Company ceased selling these steamers in 2024, the defense of this existing litigation, and the potential for additional product liability or class action lawsuits, could result in significant legal expenses, settlements, or judgments. Furthermore, these developments could damage the reputation of the PurSteam brand, leading to a loss of consumer trust and a permanent decline in revenue for this product line.

On May 13, 2026, the company entered into a settlement agreement and general release to resolve this litigation. Under the terms of the agreement, the company agreed to pay a total settlement sum of $100,000 in exchange for a full release of all claims related to the purchase and use of the products. The agreement stipulates a voluntary dismissal of the claims with prejudice and includes customary provisions regarding confidentiality, non-disparagement, and a denial of any wrongdoing or liability by the company.

We may be subject to product liability claims if people or property are harmed by the products we sell. Some of the products we sell may expose us to product liability claims and litigation (including class actions) or regulatory action relating to safety, personal injury, and death or environmental or property damage.

Although we maintain liability insurance, we cannot be certain that our coverage will be adequate for liabilities actually incurred or that insurance will continue to be available to us on economically reasonable terms, or at all. In general, our agreements with members of our supply chain do not indemnify us from product liability for a particular product, and some members of our supply chain may not have sufficient resources or insurance to satisfy their indemnity and defense obligations.

Any failure by us or our vendors to comply with product safety, consumer protection or other laws, or our standard vendor terms and conditions, or to provide safe factory conditions for our or their workers may damage our reputation and brand and harm our business.

The products we sell to our clients are subject to regulation by the CPSC, the Federal Trade Commission (“FTC”) and similar state and international regulatory authorities. As a result, such products could be in the future subject to recalls and other remedial actions, including the manner in which we market our products. Product safety or labeling concerns may require us to voluntarily remove selected merchandise from our inventory. Such recalls or voluntary removal of merchandise can result in, among other things, suspension of our seller accounts on Amazon and other online marketplaces, lost sales, diverted resources, potential harm to our reputation and increased client service costs and legal expenses, which could have a material adverse effect on our operating results.

Some of the products we sell may expose us to product liability claims and litigation or regulatory action relating to personal injury or environmental or property damage. Although we maintain liability insurance and have implemented a quality assurance program that includes obtaining necessary certifications, we cannot be certain that our coverage will be adequate for liabilities actually incurred or that insurance will continue to be available to us on economically reasonable terms or at all. In addition, our agreements with our vendors in general do not indemnify us from product liability for a particular vendor’s products or our vendors may not have sufficient resources or insurance to satisfy their indemnity and defense obligations.

Our business is sensitive to the strength of the United States consumer market to a meaningful extent, and changes in consumer spending and economic conditions could adversely affect our business.

The strength of the U.S. economy has a significant impact on our performance. We are dependent on discretionary spending, which is affected by, among other things, unemployment rates, economic and political conditions worldwide, consumer confidence, energy and gasoline prices, interest and mortgage rates, the level of consumer debt and taxation, and financial markets, all of which are outside of our control. In particular, the ongoing conflict in Iran has contributed to increased gasoline and energy prices and heightened geopolitical uncertainty, which has negatively impacted discretionary spending at least in the short term, though these effects could be prolonged if the conflict continues or escalates. A continuing softening of demand, whether caused by changes in customer preferences, a weakening of the U.S. or global economies, or regional instability, may result in decreased revenue. We believe we have sustained a decline in the sales of our products in part due to the factors mentioned above, and any continued economic downturn or uncertainties in the U.S. or in other parts of the world could materially and adversely affect our business, operating results, financial condition, and cash flows.

Risks Relating to the Litigation and Government Regulation

Claims, litigation, government investigations, product liability and recalls, and other proceedings may adversely affect our business, operating results, financial condition, and cash flows.

We are, from time to time, involved in various claims, litigation matters and regulatory proceedings that could have a material adverse effect on us. These matters may include personal injury and other tort claims, deceptive trade practice disputes, intellectual property disputes, product recalls, contract disputes, employment and tax matters and other proceedings and litigation, including class actions lawsuits. It is not possible to predict the outcome of pending or future litigation and any such claims, with or without merit, could be time consuming and expensive, and may require the Company to incur substantial costs and divert the resources of management.

We face exposure to product liability and other claims in the event that one of our products is alleged to have resulted in property damage, bodily injury or other adverse effects. In addition, if we are required to, or voluntarily, repair, replace or refund one or more of our products, it could have a material impact on our business, operating results, financial condition and reputation.

Determining legal reserves or possible losses from claims against us involves judgment and may not reflect the full range of uncertainties and unpredictable outcomes. Until the final resolution of such matters, we may be exposed to losses in excess of the amount recorded, and such excess amounts could have a material effect on our business, results of operations, financial condition, and cash flows. In addition, it is possible that a resolution of any claim, including as a result of a settlement, could require us to make substantial future payments, prevent us from offering certain products or services, or require us to change our business practices each of which could have a material adverse effect on our business, operating results, financial condition, and cash flows.

U.S. government trade actions, including the expiration of Section 122 tariffs and the transition to alternative tariff authorities, create ongoing uncertainty that could adversely affect our remaining operations.

Over the past several years, the U.S. trade environment has undergone unprecedented volatility. Following the Supreme Court’s February 2026 ruling in Learning Resources Inc. v. Trump, which invalidated the administration's broad IEEPA tariffs, the government transitioned to a 10% baseline tariff under Section 122 of the Trade Act of 1974. By statute, these Section 122 tariffs were limited to 150 days and expired on July 24, 2026, as Congress did not pass legislation to extend them.

While the U.S. Court of International Trade (CIT) ruled on May 7, 2026, in Burlap and Barrel, Inc. v. Trump that these Section 122 tariffs were unlawful, the U.S. Court of Appeals for the Federal Circuit subsequently stayed that decision pending appeal on June 11, 2026. As a result, U.S. Customs and Border Protection continued to collect the 10% surcharge on our imports through the July 24, 2026 expiration date.

During the three months ended June 30, 2026, the Company received tariff refunds of approximately $2.8 million related to previously paid IEEPA tariffs. The Company recognized this amount as a reduction to cost of goods sold within its Condensed Consolidated Statement of Operations for the three and six months ended June 30, 2026.

Furthermore, the expiration of the Section 122 surcharge does not eliminate our tariff exposure. The administration has advanced replacement measures under alternative statutory authorities, such as Section 301 and Section 232, which carry no statutory rate ceiling or fixed expiration. Any implementation of these replacement tariffs, or the imposition of additional trade barriers and retaliatory measures, could materially increase the cost of goods sold for our retained legacy brands, disrupt our supply chain, and adversely affect our financial condition and results of operations.

*There is no guarantee of a continuing public market for you to resell our common stock. *

There is no guarantee that we will continue to meet all requirements for continued listing on the Nasdaq Capital Market. We must continue to satisfy Nasdaq’s continued listing requirements, including, among other things, a minimum closing bid price requirement of $1.00 per share.

On April 24, 2023,the Company received a notice from 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 was 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”). In response to the potential risk of delisting, the Company’s stockholders approved granting the Board discretionary authority to implement a reverse stock split, and on March 20, 2024, the Company effected a 1-for-12 reverse stock split of its common stock. The Company subsequently regained compliance with Nasdaq’s minimum bid price requirement in April 2024, and the matter was closed.

On December 9, 2025, the Company received a notice from Nasdaq indicating that, based upon the closing bid price of the Company’s 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).

On May 19, 2026, Nasdaq notified the Company in the Compliance Notice that from May 1, 2026 to May 18, 2026 the closing bid price of the Company’s common stock had been $1.00 per share or greater and, accordingly, the Company had regained compliance with Nasdaq Listing Rule 5550(a)(2) and that the matter was now closed.

In the future, if our common stock falls below the continued listing standard of $1.00 per share or otherwise fails to satisfy any of the Nasdaq continued listing requirements, and if we are unable to cure such deficiency during any subsequent cure period, our common stock could be delisted from the Nasdaq. If our common stock ultimately were to be delisted for any reason, we could face significant material adverse consequences, including:

The SEC’s approval of Nasdaq’s $5 million minimum market value continued listing rule has been automatically stayed pending Commission review; however, if the stay is lifted and the rule is ultimately implemented, it could result in the immediate suspension and delisting of our common stock without a cure period.

On July 22, 2026, the Securities and Exchange Commission (“SEC”) approved a proposed rule change filed by The Nasdaq Stock Market LLC (File No. SR-NASDAQ-2026-004, as modified by Amendment No. 1) establishing a new continued listing requirement under Nasdaq Listing Rules 5450(a)(3) and 5550(a)(6). Under the rule as approved, companies listed on the Nasdaq Global and Capital Markets are required to maintain a minimum Market Value of Listed Securities (“MVLS”) of at least $5.0 million. If a company’s MVLS remains below $5.0 million for 30 consecutive business days, Nasdaq will issue an immediate Staff Delisting Determination and suspend trading in the company’s common stock. Unlike other Nasdaq continued listing deficiencies (such as the $1.00 minimum bid price requirement, which typically provides a 180-day grace period), the rule provides no compliance or cure period prior to suspension. Furthermore, requesting an appeal before the Nasdaq Hearings Panel would not automatically stay the suspension of trading, meaning an affected company’s common stock would be suspended from Nasdaq and forced to trade on the over-the-counter (“OTC”) market during any appeal process.

However, on July 29, 2026, the implementation of this new continued listing requirement was automatically stayed pursuant to Rule 431(e) of the SEC’s Rules of Practice. The stay was triggered after the Small Public Company Coalition (“SPCC”) and Cemtrex, Inc. each filed notices of their intent to petition the full Commission to review the approval order previously issued by the SEC’s Division of Trading and Markets under delegated authority. On July 29, 2026, the SEC issued a letter confirming that the approval order had been automatically stayed pending further action by the Commission.

As a result of the stay, Nasdaq’s $5.0 million MVLS requirement is currently not effective. Under SEC procedures, the petitioners have five days from their notice to file formal petitions for review setting forth the legal and factual bases for challenging the approval. The Commission may decide whether to grant or decline review and, if granted, may affirm, modify, reverse, set aside, or remand the Division’s approval order. There is no prescribed statutory timeline for the Commission to reach a final decision, and the stay remains in effect during this administrative review process. Furthermore, because seeking Commission review is generally a prerequisite to judicial review, the matter may ultimately be appealed to a federal court of appeals, which could extend the stay and delay potential implementation of the rule for a significant period.

Notwithstanding the current stay, significant uncertainty remains regarding the ultimate outcome of the regulatory and potential judicial review processes. If the Commission affirms the rule, if the stay is lifted, or if the rule is otherwise upheld and becomes effective, and if our MVLS remains below $5.0 million for 30 consecutive business days:

If the rule is ultimately reinstated and our market capitalization fluctuates below the required $5.0 million threshold for 30 consecutive business days, there can be no assurance that we will avoid immediate delisting or that a Hearings Panel would grant an exception, any of which would have a material adverse effect on our business, financial condition, results of operations, and the trading value of your investment.