ATER 10-Q
Aterian, Inc. (ATER)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
| | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number:
Aterian, Inc.
(Exact name of registrant as specified in its charter)
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| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer | |
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| | | The |
Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |
| | ☒ | Smaller reporting company | | |
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of August 12, 2026, the registrant had
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Notes to Unaudited Condensed Consolidated Financial Statements |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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| PART II. |
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| Item 1A. |
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act"). Many of these statements can be identified by the use of terminology such as “believes,” “expects,” “intends,” “anticipates,” “plans,” “may,” “will,” “could,” "would,” “projects,” “continues,” “estimates,” “potential,” “opportunity” or the negative versions of these terms and other similar expressions. Our actual results or experience could differ significantly from the forward-looking statements. Factors that could cause or contribute to these differences include those discussed in “Risk Factors,” in Part II, Item 1A of this Quarterly Report on Form 10-Q as well as information provided elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2025, which was filed with the Securities and Exchange Commission (the SEC) on March 20, 2026. You should carefully consider that information before you make an investment decision.
You should not place undue reliance on these types of forward-looking statements, which speak only as of the date that they were made. These forward-looking statements are based on the beliefs and assumptions of the Company’s management based on information currently available to management and should be considered in connection with any written or oral forward-looking statements that the Company may issue in the future as well as other cautionary statements the Company has made and may make. Except as required by law, the Company does not undertake any obligation to release publicly any revisions to these forward-looking statements after completion of the filing of this Quarterly Report on Form 10-Q to reflect later events or circumstances or the occurrence of unanticipated events.
The discussion of the Company’s financial condition and results of operations should be read in conjunction with the Company’s Condensed Consolidated Financial Statements and the related Notes thereto included in this Quarterly Report on Form 10-Q.
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands, except share and per share data)
| June 30, 2026 | December 31, 2025 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable | ||||||||
| Inventory, net | ||||||||
| Prepaid and other current assets | ||||||||
| Assets held for sale (Note 3) | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Other non-current assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Credit facility | $ | $ | ||||||
| Accounts payable | ||||||||
| Seller notes | ||||||||
| Accrued and other current liabilities | ||||||||
| Liabilities held for sale (Note 3) | ||||||||
| Total current liabilities | ||||||||
| Other liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 12) | ||||||||
| Stockholders' equity: | ||||||||
| Preferred stock, $ par value, shares authorized, and shares issued and outstanding at June 30, 2026 and December 31, 2025, respectively | ||||||||
| Common stock, $ par value, shares authorized and and shares outstanding at June 30, 2026 and December 31, 2025, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders' equity | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.
Condensed Consolidated Statements of Operations
(Unaudited)
(in thousands, except share and per share data)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Net revenue | $ | $ | $ | $ | ||||||||||||
| Cost of goods sold | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| Sales and distribution | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest expense, net | ||||||||||||||||
| Change in fair value of warrant liabilities | ( | ) | ( | ) | ||||||||||||
| Gain on extinguishment of debt | ( | ) | ( | ) | ||||||||||||
| Other expense (income), net | ( | ) | ||||||||||||||
| Loss from continuing operations before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income taxes | ||||||||||||||||
| Loss from continuing operations, net of income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income (loss) from discontinued operations, net of income taxes | ( | ) | ( | ) | ||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss from continuing operations per share, basic and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net income (loss) from discontinued operations per share, basic and diluted | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Net loss per share, basic and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted-average number of shares outstanding, basic and diluted | ||||||||||||||||
The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.
Condensed Consolidated Statements of Comprehensive Loss
(Unaudited)
(in thousands)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Net loss(1) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Other comprehensive income (loss): | ||||||||||||||||
| Foreign currency translation adjustments(1) | ( | ) | ||||||||||||||
| Other comprehensive income (loss) | ( | ) | ||||||||||||||
| Comprehensive loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| (1) |
Includes amounts from discontinued operations, please see Note 3, Held for Sale Classification and Discontinued Operations Presentation for additional details. |
The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
(in thousands, except share and per share data)
| Three Months Ended June 30, 2026 | ||||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Additional Paid-in | Accumulated | Accumulated Other Comprehensive | Total Stockholders’ | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Loss | Equity | |||||||||||||||||||||||||
| BALANCE—April 1, 2026 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||
| Net loss(1) | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Issuance of series AA preferred stock | ||||||||||||||||||||||||||||||||
| Issuance of shares of restricted common stock | ||||||||||||||||||||||||||||||||
| Forfeiture of shares of restricted common stock | — | ( | ) | — | — | — | — | — | ||||||||||||||||||||||||
| Stock-based compensation expense(1) | — | — | ||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | ||||||||||||||||||||||||||||||
| BALANCE—June 30, 2026 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||
| (1) |
Includes amounts from discontinued operations, please see Note 3, Held for Sale Classification and Discontinued Operations Presentation for additional details. |
| Three Months Ended June 30, 2025 | ||||||||||||||||||||||||
| Common Stock | Additional Paid-in | Accumulated | Accumulated Other Comprehensive | Total Stockholders’ | ||||||||||||||||||||
| Shares | Amount | Capital | Deficit | Loss | Equity | |||||||||||||||||||
| BALANCE—April 1, 2025 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| Net loss(1) | — | ( | ) | ( | ) | |||||||||||||||||||
| Issuance of shares of restricted common stock | ||||||||||||||||||||||||
| Forfeiture of shares of restricted common stock | ( | ) | — | — | — | — | — | |||||||||||||||||
| Stock-based compensation expense(1) | — | |||||||||||||||||||||||
| Other comprehensive income | — | |||||||||||||||||||||||
| BALANCE—June 30, 2025 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| (1) |
Includes amounts from discontinued operations, please see Note 3, Held for Sale Classification and Discontinued Operations Presentation for additional details. |
ATERIAN, INC.
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
(in thousands, except share and per share data)
| Six Months Ended June 30, 2026 | ||||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Additional Paid-in | Accumulated | Accumulated Other Comprehensive | Total Stockholders’ | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Loss | Equity | |||||||||||||||||||||||||
| BALANCE—January 1, 2026 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||
| Net loss(1) | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Issuance of series AA preferred stock | ||||||||||||||||||||||||||||||||
| Issuance of shares of restricted common stock | ||||||||||||||||||||||||||||||||
| Forfeiture of shares of restricted common stock | — | ( | ) | — | — | — | — | — | ||||||||||||||||||||||||
| Stock-based compensation expense(1) | — | — | ||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||
| BALANCE—June 30, 2026 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||
| (1) |
Includes amounts from discontinued operations, please see Note 3, Held for Sale Classification and Discontinued Operations Presentation for additional details. |
| Six Months Ended June 30, 2025 | ||||||||||||||||||||||||
| Common Stock | Additional Paid-in | Accumulated | Accumulated Other Comprehensive | Total Stockholders’ | ||||||||||||||||||||
| Shares | Amount | Capital | Deficit | Loss | Equity | |||||||||||||||||||
| BALANCE—January 1, 2025 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| Net loss(1) | — | ( | ) | ( | ) | |||||||||||||||||||
| Issuance of shares of restricted common stock | ||||||||||||||||||||||||
| Forfeiture of shares of restricted common stock | ( | ) | — | — | — | — | — | |||||||||||||||||
| Stock-based compensation expense(1) | — | |||||||||||||||||||||||
| Other comprehensive income | — | |||||||||||||||||||||||
| BALANCE—June 30, 2025 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| (1) |
Includes amounts from discontinued operations, please see Note 3, Held for Sale Classification and Discontinued Operations Presentation for additional details. |
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
| Six Months Ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Income (loss) from discontinued operations | ( | ) | ||||||
| Loss from continuing operations | ( | ) | ( | ) | ||||
| Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Amortization of deferred financing cost and debt discounts | ||||||||
| Stock-based compensation | ||||||||
| Change in fair value of warrant liabilities | ( | ) | ||||||
| Gain on extinguishment of debt | ( | ) | ||||||
| Impairment of equity investment | ||||||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable | ||||||||
| Inventory | ( | ) | ( | ) | ||||
| Prepaid and other current assets | ( | ) | ||||||
| Accounts payable, accrued and other liabilities | ( | ) | ||||||
| Cash used in operating activities in continuing operations | ( | ) | ( | ) | ||||
| Cash provided by (used in) operating activities in discontinued operations | ( | ) | ||||||
| Cash provided by (used in) operating activities | ( | ) | ||||||
| INVESTING ACTIVITIES: | ||||||||
| Purchase of fixed assets | ( | ) | ( | ) | ||||
| Cash used in investing activities in continuing operations | ( | ) | ( | ) | ||||
| Cash used in investing activities in discontinued operations | ||||||||
| Cash used in investing activities | ( | ) | ( | ) | ||||
| FINANCING ACTIVITIES: | ||||||||
| Issuance of preferred stock | ||||||||
| Repayment on seller notes | ( | ) | ||||||
| Borrowings from MidCap credit facilities | ||||||||
| Repayments for MidCap credit facilities | ( | ) | ( | ) | ||||
| Insurance obligation payments | ( | ) | ( | ) | ||||
| Insurance financing proceeds | ||||||||
| Cash (used in) provided by financing activities in continuing operations | ( | ) | ||||||
| Cash used in financing activities in discontinued operations | ||||||||
| Cash (used in) provided by financing activities | ( | ) | ||||||
| Foreign currency effect on cash and restricted cash | ( | ) | ||||||
| Net change in cash and restricted cash for the period | ( | ) | ( | ) | ||||
| Cash and restricted cash at beginning of year | ||||||||
| Cash and restricted cash at end of period | $ | $ | ||||||
| RECONCILIATION OF CASH AND RESTRICTED CASH: | ||||||||
| Cash | ||||||||
| Restricted cash—Prepaid and other current assets | ||||||||
| Restricted cash—Other non-current assets | ||||||||
| TOTAL CASH AND RESTRICTED CASH | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for taxes | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.
Notes to Condensed Consolidated Financial Statements
For the Three and Six Months Ended June 30, 2026 and 2025 (Unaudited)
| 1. | COMPANY OVERVIEW |
Aterian, Inc. (the "Company") is a consumer products company that predominantly operates through online retail channels such as Amazon, Walmart, and Target and its own direct to consumer websites. The Company operates its owned brands, which were either incubated or purchased, selling products in multiple categories, including home and kitchen appliances, kitchenware, air quality appliances, health and beauty products and essential oils.
On July 17, 2026, the Company completed a strategic sale of substantially all of its marquee consumer brands pursuant to the Asset Purchase Agreement described below (the “Asset Sale”). As of June 30, 2026, the assets and liabilities associated with the Asset Sale met the criteria for held-for-sale treatment and are presented as Assets Held for Sale and Liabilities Associated with Assets Held for Sale on the Condensed Consolidated Balance Sheets. Furthermore, the historical operating results and cash flows of these divested assets are classified as Discontinued Operations in the Condensed Consolidated Statements of Operations and cash flows for all periods presented. Following the Asset Sale, the Company's ongoing continuing operations consist primarily of its remaining legacy brands, including Vremi and Xtava.
Headquartered in New Jersey, the Company also maintains offices in China, the Philippines, and the United Kingdom.
Asset Purchase Agreement
On July 17, 2026, the Company completed the sale of substantially all of its assets to Trademark Global, LLC ("Trademark Global"), pursuant to the Asset Purchase Agreement, dated as of April 27, 2026 (the "Asset Purchase Agreement"). Pursuant to the Asset Purchase Agreement, Trademark Global acquired certain specified assets and liabilities of the Company, including, among other things, assets associated with the Company’s marquee consumer brands: Mueller Living, PurSteam, hOmeLabs, Squatty Potty, Healing Solutions, and Photo Paper Direct for $
Securities Purchase Agreement
On July 17, 2026, the Company completed its previously announced sale of preferred stock to David E. Lazar (“Lazar”), pursuant to that certain Securities Purchase Agreement, dated as of April 27, 2026 (the “Securities Purchase Agreement”). Pursuant to the Securities Purchase Agreement, Lazar purchased from the Company (a)
Liquidity and Going Concern
In accordance with Accounting Standards Codification 205-40, Presentation of Financial Statements - 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.
Since inception, the Company has incurred significant losses and used cash flows from operations to fund its enterprise. To preserve liquidity, management implemented fixed cost reduction plans in May 2025 and January 2026. However, these actions were insufficient to fully offset macroeconomic pressures, such as tariffs, geopolitical instabilities, rising costs for raw materials and shipping, higher marketplace fees, and reduced consumer spending, which continued to negatively impact operating results and cash flows.
On April 27, 2026, the Company entered into a series of definitive agreements (the "Aterian Transactions"), to restructure its operations and capital position. These agreements included the Asset Purchase Agreement with Trademark Global to sell marquee brands, including Mueller Living, PurSteam, hOmeLabs, Squatty Potty, Healing Solutions, and Photo Paper Direct, for $
On June 25, 2026, in connection with the Asset Sale to Trademark Global, LLC and the Securities Purchase Agreement with David E. Lazar, the Board of Directors of the Company conditionally declared a dividend in the form of contingent value rights. The contingent value rights were declared to record holders as of the close of business on July 8, 2026, comprising holders of the Company’s common stock, par value $
On July 17, 2026, following the receipt of stockholder approval at a special meeting of stockholders, the Company completed both the Asset Sale to Trademark Global, LLC and the Stock Sale to Lazar. Upon the closing of the Stock Sale, Lazar became the beneficial owner of approximately
On July 17, 2026, following approval by the Company's stockholders at a special meeting, the Company completed the Asset Sale to Trademark Global for $
The Board established August 17, 2026 as the distribution date of the contingent value rights to record holders. Upon the closing of the transactions on July 17, 2026, the condition precedent was satisfied. Consequently, the contingent value right obligation will be measured at fair value as of the effective date in the third quarter of 2026 and recognized as a distribution from equity, within retained earnings or additional paid-in capital, with a corresponding contingent value right liability or equity instrument as evaluated under ASC 480 and ASC 815. The contingent value rights represent contractual payment rights only, do not carry voting or dividend rights, accrue no interest, and do not represent equity ownership in the Company.
Following the consummation of the Aterian Transactions, the Company will continue to operate its remaining legacy brands, primarily Vremi and Xtava. Management intends to utilize remaining net proceeds to support working capital for these ongoing business segments.
While the completion of the Aterian Transactions eliminated senior debt obligations and provided immediate capital, the Company's retained legacy business operations remain limited in scale. The ongoing macroeconomic challenges, potential operational cash burn associated with scaling the remaining brands, and execution risks regarding the streamlined growth strategy continue to create uncertainty regarding future cash flows.
Based on these factors, management concluded that these conditions continue to 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. Management’s ongoing plans include driving operational efficiencies across the retained business, optimizing supply chain expenditures, and evaluating additional strategic alternatives. The accompanying Condensed Consolidated Financial Statements do not include any adjustments that might result from the outcome of this uncertainty.
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, 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”).
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.
| 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Basis of Presentation—The Condensed Consolidated Financial Statements and accompanying notes have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”).
Unaudited Interim Financial Information—The accompanying interim Condensed Consolidated Financial Statements are unaudited and have been prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, reflect all adjustments necessary for the fair presentation of the Company's financial position as of June 30, 2026 and the results of its operations and its cash flows for the periods ended June 30, 2026 and 2025. The financial data and other information disclosed in these notes related to the three and six months ended June 30, 2026 and 2025 are also unaudited. The results for the three and six months ended June 30, 2026 are not necessarily indicative of results to be expected for the year ending December 31, 2026, any other interim periods, or any future year or period.
The Condensed Consolidated Balance Sheet as of December 31, 2025, presented herein, has been derived from the Company’s audited Consolidated Financial Statements for the fiscal year then ended. These unaudited Interim Condensed Consolidated Financial Statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2025 as filed with the SEC on March 20, 2026 (“Annual Report”) and have been prepared on a consistent basis with the accounting policies described in Note 2 of the Notes to Consolidated Financial Statements included in our Annual Report. Our accounting policies did not change during the three and six months ended June 30, 2026, other than with respect to the new accounting pronouncements adopted as described in Note 2, Recent Accounting Pronouncements.
The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with U.S. GAAP for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required by U.S. GAAP for complete financial statements. In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair presentation of the Condensed Consolidated financial statements of the Company as of June 30, 2026 and for the three and six months then ended.
Held for sale classification—We report and classify a business or a component of an entity as held-for-sale (Held-For-Sale Business) when management has approved the sale or received approval to sell the business and is committed to a formal plan, the business is available for immediate sale, the business is being actively marketed, the sale is anticipated to occur during the next 12 months and certain other specified criteria are met. A Held-For-Sale Business is recorded at the lower of its carrying amount or estimated fair value less cost to sell. If the carrying amount of the business exceeds its estimated fair value, a loss is recognized. As of June 30, 2026, assets and liabilities related to a Held-For-Sale Business are reported in Assets held for sale and Liabilities held for sale, respectively, in our Condensed Consolidated Balance Sheets. Refer to Note 3, Held for Sale Classification and Discontinued Operations Presentation for additional details.
Discontinued operations presentation—We present a business, or a component of an entity, as discontinued operations if a) it meets the held-for-sale criteria, or is disposed of by sale, or is disposed of other than by sale, and b) the disposal of the business, or component of an entity, represents a strategic shift that has (or will have) a major effect on the Company's financial results. As of June 30, 2026, we have retrospectively adjusted our Condensed Consolidated Statement of Operations to reflect the classification of continuing and discontinued operations. Refer to Note 3, Held for Sale Classification and Discontinued Operations Presentation for additional details.
Use of Estimates—Preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period covered by the Condensed Consolidated Financial Statements and accompanying notes. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, and makes adjustments when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ from those estimates.
Principles of Consolidation—The Condensed Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Restricted Cash—As of June 30, 2026 and December 31, 2025, the Company has classified the following as restricted cash: $
Inventory and Cost of Goods Sold—The Company’s inventory consists almost entirely of finished goods. The Company currently records inventory on its balance sheet on a first-in first-out basis, or net realizable value, if it is below the Company’s recorded cost. The Company’s costs include the amounts it pays manufacturers for product, tariffs and duties associated with transporting product across national borders, and freight costs associated with transporting the product from its manufacturers to its warehouses, as applicable. The valuation of our inventory requires us to make judgments, based on available information such as historical data, about the likely method of disposition, such as through sales to individual customers or liquidations, and expected recoverable values of each disposition category. Changes to the relevant assumptions and projections would impact our consolidated financial results in periods subsequent to recording these estimates. If we anticipate a change in assumptions such as future demand or market conditions to be less favorable than our previous estimates, additional inventory write-downs may be required. Conversely, if we are able to sell inventories that had been written down to a level below the ultimate realized selling price in a previous period, sales would be recorded with a lower or no offsetting charge to cost of goods sold.
During the three months ended June 30, 2026, the Company received $
The “Cost of goods sold” line item in the Condensed Consolidated Statements of Operations consists of the book value of inventory sold to customers during the reporting period. When circumstances dictate that the Company use net realizable value as the basis for recording inventory, it bases its estimates on expected future selling prices less expected disposal costs.
Accounts Receivable—Accounts receivable are stated at historical cost less allowance for credit losses. On a periodic basis, management evaluates its accounts receivable and determines whether to provide an allowance or if any accounts should be written off based on a past history of write-offs, collections and current credit conditions. A receivable is considered past due if the Company has not received payments based on agreed-upon terms. The Company generally does not require any security or collateral to support its receivables. The Company performs ongoing evaluations of its customers and maintains an allowance for credit losses. As of June 30, 2026 and December 31, 2025, the Company did not have an allowance for credit losses.
Revenue Recognition—The Company accounts for revenue in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC Topic 606”). The Company derives its revenue from the sale of consumer products. The Company sells its products directly to consumers through online retail channels and through wholesale channels.
For direct-to-consumer sales, the Company considers customer order confirmations to be a contract with the customer. Customer confirmations are executed at the time an order is placed through third-party online channels. For wholesale sales, the Company considers the customer purchase order to be the contract.
For all of the Company’s sales and distribution channels, revenue is recognized when control of the product is transferred to the customer (i.e., when the Company’s performance obligation is satisfied), which typically occurs at shipment date. As a result, the Company has a present and unconditional right to payment and record the amount due from the customer in accounts receivable.
Revenue from consumer product sales is recorded at the net sales price (transaction price), which includes an estimate of future returns based on historical return rates. There is judgment in utilizing historical trends for estimating future returns. The Company’s refund liability for sales returns was $
The Company evaluated principal versus agent considerations to determine whether it is appropriate to record platform fees paid to Amazon as an expense or as a reduction of revenue. Platform fees are recorded as sales and distribution expenses and are not recorded as a reduction of revenue because the Company owns and controls all the goods before they are transferred to the customer. The Company can, at any time, direct Amazon, or similarly, direct other third-party logistics providers (“Logistics Providers”), to return the Company’s inventory to any location specified by the Company. It is the Company’s responsibility to make customers whole following any returns made by customers directly to Logistic Providers and the Company retains the back-end inventory risk. Further, the Company is subject to credit risk (i.e., credit card charge backs), establishes prices of its products, can determine who fulfills the goods to the customer (Amazon or the Company) and can limit quantities or stop selling the goods at any time. Based on these considerations, the Company is the principal in this arrangement.
Intangibles—We review long-lived assets for impairment when performance expectations, events, or changes in circumstances indicate that the asset's carrying value may not be recoverable. The evaluation is performed at the lowest level of identifiable cash flows by comparing the carrying value of the asset group to the undiscounted cash flows. If the evaluation indicates that the carrying amount of the assets may not be recoverable, any potential impairment is measured based upon the fair value of the related asset or asset group as determined by an appropriate market appraisal or other valuation technique.
On July 17, 2026, the Company completed the sale of substantially all of its assets to Trademark Global, pursuant to the Asset Purchase Agreement, dated as of April 27, 2026. Pursuant to the Asset Purchase Agreement, Trademark Global acquired certain specified assets and liabilities of the Company, including, among other things, assets associated with the Company’s marquee consumer brands: Mueller Living, PurSteam, hOmeLabs, Squatty Potty, Healing Solutions, and Photo Paper Direct for $
Based on the definitive deal terms, specifically the $
Fair Value of Financial Instruments—The Company’s financial instruments, including net accounts receivable, accounts payable, and accrued and other current liabilities are carried at historical cost. As of June 30, 2026 and December 31, 2025, the carrying amounts of these instruments approximated their fair values because of their short-term nature. The Company’s credit facility is carried at amortized cost at June 30, 2026 and December 31, 2025, and the carrying amount approximates fair value as the stated interest rate approximates market rates currently available to the Company.
The fair value of the stock purchase warrants issued in connection with the Company’s common stock offering on March 1, 2022 were measured using the Black-Scholes model. Inputs used to determine the estimated fair value of the warrant liabilities include the fair value of the underlying stock at the valuation date, the term of the warrants, and the expected volatility of the underlying stock. The significant unobservable input used in the fair value measurement of the warrant liabilities is the estimated term of the warrants. Upon the issuance of the stock purchase warrants, the Company evaluated the terms of each warrant to determine the appropriate accounting and classification pursuant to FASB ASC Topic 480, Distinguishing Liabilities from Equity (“ASC 480”), and FASB Accounting Standards Codification Topic 815, Derivatives and Hedging (“ASC 815”). Based on the Company’s evaluation and due to certain terms in the warrant agreements, it concluded the stock purchase warrants should be classified as a liability with subsequent remeasurement as long as such warrants continue to be classified as liabilities.
Assets and liabilities recorded at fair value on a recurring basis in the Condensed Consolidated Balance Sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair values. Fair value is defined as the exchange price that would be received for an asset or an exit price that would be paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The authoritative guidance on fair value measurements establishes a three-tier fair value hierarchy for disclosure of fair value measurements as follows:
Level 1—Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;
Level 2—Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and
Level 3—Unobservable inputs that are supported by little or no market data for the related assets or liabilities.
A summary of the activity of the Level 3 liabilities carried at fair value on a recurring basis for the six months ended June 30, 2026 and June 30, 2025 is as follows (in thousands):
| June 30, 2026 | ||||
| Warrants liabilities as of January 1, 2026 | $ | |||
| Change in fair value of warrants | ||||
| Warrants liabilities as of June 30, 2026 | $ | |||
| June 30, 2025 | ||||
| Warrants liabilities as of January 1, 2025 | $ | |||
| Change in fair value of warrants | ( | ) | ||
| Warrants liabilities as of June 30, 2025 | $ |
| ||
Equity Investment
During the three months ended June 30, 2026, the Company recognized an impairment loss of $
Recent Accounting Pronouncements
Since the issuance of the Company's Annual Report on Form 10-K for the year ended December 31, 2025, there have been no material updates to the recent accounting pronouncement previously disclosed.
| 3. | HELD FOR SALE CLASSIFICATION AND DISCONTINUED OPERATIONS PRESENTATION |
Held for sale classification—We report and classify a business or a component of an entity as held-for-sale (Held-For-Sale Business) when management has approved the sale or received approval to sell the business and is committed to a formal plan, the business is available for immediate sale, the business is being actively marketed, the sale is anticipated to occur during the next 12 months and certain other specified criteria are met. A Held-For-Sale Business is recorded at the lower of its carrying amount or estimated fair value less cost to sell. If the carrying amount of the business exceeds its estimated fair value, a loss is recognized. As of June 30, 2026, assets and liabilities related to a Held-For-Sale Business are reported in Assets held for sale and Liabilities held for sale, respectively, in our Condensed Consolidated Balance Sheets.
The following table summarizes the components of assets and liabilities held-for-sale on the Condensed Consolidated Balance Sheets at June 30, 2026 (in thousands):
| June 30, 2026 | December 31, 2025 | |||||||
| ASSETS | ||||||||
| Accounts receivable | ||||||||
| Inventory, net | ||||||||
| Prepaid and other current assets | ||||||||
| Property and equipment, net (1) | ||||||||
| Intangibles, net | ||||||||
| Total assets held for sale | $ | $ | ||||||
| LIABILITIES | ||||||||
| Accounts payable | ||||||||
| Accrued and other current liabilities | ||||||||
| Total liabilities held for sale | $ | $ | ||||||
| (1) | As of June 30, 2026, Assets Held for Sale includes the net carrying value of the Company's UK warehouse facility, consisting of land, building, and related accumulated depreciation of $ As of June 30, 2026, Liabilities Held for Sale includes the mortgage secured by the UK warehouse facility with an outstanding balance of $ |
Discontinued operations presentation—We present a business, or a component of an entity, as discontinued operations if a) it meets the held-for-sale criteria, or is disposed of by sale, or is disposed of other than by sale, and b) the disposal of the business, or component of an entity, represents a strategic shift that has (or will have) a major effect on the Company's financial results. As of June 30, 2026, we have retrospectively adjusted our Condensed Consolidated Statement of Operations to reflect the classification of continuing and discontinued operations.
The following table presents the amounts related to the operations of the Company that have been reflected in Income (loss) from discontinued operations (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Net revenue | $ | $ | $ | $ | ||||||||||||
| Cost of goods sold | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| Sales and distribution | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Impairment loss on intangibles(1) | ||||||||||||||||
| Total operating expenses from discontinued operations | ||||||||||||||||
| Operating income (loss) from discontinued operations | ( | ) | ( | ) | ||||||||||||
| Other expense, net | ||||||||||||||||
| Income (loss) from discontinued operations before income taxes | ( | ) | ( | ) | ||||||||||||
| Provision for income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income (loss) from discontinued operations | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| (1) | On July 17, 2026, the Company completed the sale of substantially all of its assets to Trademark Global, pursuant to the Asset Purchase Agreement, dated as of April 27, 2026. Pursuant to the Asset Purchase Agreement, Trademark Global acquired certain specified assets and liabilities of the Company, including, among other things, assets associated with the Company’s marquee consumer brands: Mueller Living, PurSteam, hOmeLabs, Squatty Potty, Healing Solutions, and Photo Paper Direct for $
Based on the definitive deal terms, specifically the $ |
| 4. | ACCOUNTS RECEIVABLE |
Accounts receivable consisted of the following as of June 30, 2026 and December 31, 2025 (in thousands):
| June 30, 2026 | December 31, 2025 | |||||||
| Trade accounts receivable | $ | $ | ||||||
| Allowance for credit losses | ||||||||
| Accounts receivable | $ | $ | ||||||
| 5. | INVENTORY, NET |
Inventory consisted of the following as of June 30, 2026 and December 31, 2025 (in thousands):
| June 30, 2026 | December 31, 2025 | |||||||
| Inventory on-hand | $ | $ | ||||||
| Inventory, net | $ | $ | ||||||
| 6. | PREPAID EXPENSES AND OTHER CURRENT ASSETS |
Prepaid and other current assets consisted of the following as of June 30, 2026 and December 31, 2025 (in thousands):
| June 30, 2026 | December 31, 2025 | |||||||
| Restricted cash | ||||||||
| Prepaid insurance | ||||||||
| Prepaid software | ||||||||
| Other | ||||||||
| Prepaid and current assets | $ | $ | ||||||
| 7. | ACCRUED AND OTHER CURRENT LIABILITIES |
Accrued and other current liabilities consisted of the following as of June 30, 2026 and December 31, 2025 (in thousands):
| June 30, 2026 | December 31, 2025 | |||||||
| Accrued compensation costs | $ | $ | ||||||
| Accrued restructuring costs | ||||||||
| Accrued accounting and consulting fees | ||||||||
| Sales tax payable | ||||||||
| Accrued insurance premium financing | ||||||||
| Federal payroll taxes payable | ||||||||
| Accrued interest payable | ||||||||
| Accrued legal fees | ||||||||
| All other accruals | ||||||||
| Accrued and current liabilities | $ | $ | ||||||
The Company sponsors, through its professional employer organization provider, a 401(k) defined contribution plan covering all eligible US employees. Contributions to the 401(k) plan are discretionary. Currently, the Company does not match or make any contributions to the 401(k) plan.
| 8. | CREDIT FACILITY AND WARRANTS |
MidCap Credit Facility
On December 22, 2021, the Company entered into a Credit and Security Agreement (the “Credit Agreement” or the "Existing Credit Agreement") together with certain of its subsidiaries party thereto as borrowers, the entities party thereto as lenders, and Midcap Funding IV Trust, as administrative agent, pursuant to which, among other things, (i) the Lenders agreed to provide a year revolving credit facility in a principal amount of up to $
The obligations under the Credit Agreement are a senior secured obligation of the Company and rank senior to all indebtedness of the Company. Borrowings under the Credit Agreement bear interest at a rate of Term Secured Overnight Financing Rate ("Term SOFR"), which is defined as SOFR plus
The Credit Agreement minimum liquidity covenant, which includes the Company’s unrestricted U.S. cash plus the revolving loan availability, requires that Midcap shall not permit the credit party liquidity at any time to be less than (a) during the period commencing on February 1st through and including May 31st of each calendar year, $
The Midcap Warrant has an exercise price of $
On February 23, 2024, the Company amended its asset backed credit facility with MidCap Financial Trust. The Credit Agreement term was extended to December 2026 and gives the Company access to $
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 $
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 (as defined in the Credit Agreement) covenant to $
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 $
The Company is in compliance with the financial covenants contained within the Credit Agreement as of June 30, 2026.
As of June 30, 2026, there was
On July 17, 2026, in connection with the closing of the Asset Sale and the Stock Sale, all outstanding indebtedness under the Existing Credit Agreement was repaid in full and all commitments thereunder were terminated. Additionally, all guarantees and liens securing the indebtedness under the Existing Credit Agreement were fully discharged and released.
The Company’s credit facility consisted of the following as of June 30, 2026 and December 31, 2025 (in thousands):
| June 30, 2026 | December 31, 2025 | |||||||
| MidCap Credit Facility | $ | $ | ||||||
| Less: deferred debt issuance costs | ( | ) | ||||||
| Less: discount associated with issuance of warrants | ( | ) | ||||||
| Total MidCap Credit Facility | $ | $ | ||||||
Interest Expense, Net
Interest expense, net consisted of the following for the three and six months ended June 30, 2026 and 2025 (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Interest expense | $ | $ | $ | $ | ||||||||||||
| Interest income(1) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total interest expense, net | $ | $ | $ | $ | ||||||||||||
| (1) | Interest income for the three and six months ended June 30, 2026 includes $ |
Seller Notes
As of June 30, 2026, the Company entered into a binding settlement agreement to fully discharge its outstanding Seller Notes with an aggregate carrying value of $
Securities Purchase Agreement and Warrants
In March 2022, the Company raised approximately $
| 9. | STOCKHOLDERS' EQUITY |
On July 17, 2026, the Company completed its sale of preferred stock to David E. Lazar, pursuant to that certain Securities Purchase Agreement, dated as of April 27, 2026. Pursuant to the Securities Purchase Agreement, Lazar purchased from the Company (a)
On June 25, 2026, in connection with the Asset Sale to Trademark Global, LLC and the Securities Purchase Agreement with David E. Lazar, the Board of Directors of the Company conditionally declared a dividend in the form of contingent value rights. The contingent value rights were declared to record holders as of the close of business on July 8, 2026, comprising holders of the Company’s common stock, par value $
On April 27, 2026, the Company received gross proceeds of $
| 10. | STOCK-BASED COMPENSATION |
The Company has three equity plans:
2014 Amended and Restated Equity Incentive Plan
The board of directors of Aterian Group, Inc., (the “Board”) a subsidiary of the Company (“AGI”), adopted, and AGI’s stockholders approved, the Aterian Group, Inc. 2014 Equity Incentive Plan on June 11, 2014. On March 1, 2017, AGI’s board of directors adopted, and AGI’s stockholders approved, an amendment and restatement of the 2014 Equity Incentive Plan (as amended, the “Aterian 2014 Plan”). As of June 30, 2026, there were shares reserved for future issuance under the Aterian 2014 Plan.
2018 Equity Incentive Plan
The Board adopted the Aterian, Inc. 2018 Equity Incentive Plan (the “2018 Plan”) on October 11, 2018. The 2018 Plan was approved by its stockholders on May 24, 2019. As of June 30, 2026,
Options granted to date under the Aterian 2014 Plan and the 2018 Plan generally vest either: (i) over a -year period with
Inducement Equity Incentive Plan
On May 27, 2022, the Compensation Committee of the Board (the “Compensation Committee”) adopted the Aterian, Inc. 2022 Inducement Equity Incentive Plan (the “Inducement Plan”). The Inducement Plan will serve to advance the interests of the Company by providing a material inducement for the best available individuals to join the Company as employees by affording such individuals an opportunity to acquire a proprietary interest in the Company.
The Inducement Plan provides for the grant of equity-based awards in the form of stock options, stock appreciation rights, restricted stock, restricted stock units, performance units and performance shares solely to prospective employees of the Company or an affiliate of the Company provided that certain criteria are met. Awards under the Inducement Plan may only be granted to an individual, as a material inducement to such individual to enter into employment with the Company or an affiliate of the Company, who (i) has not previously been an employee or director of the Company or (ii) is rehired following a bona fide period of non-employment with the Company. The maximum number of shares available for grant under the Inducement Plan is
The Inducement Plan has not been and will not be approved by the Company’s stockholders. Awards under the Inducement Plan will be made pursuant to the exemption from Nasdaq stockholder approval requirements for equity compensation provided by Nasdaq Listing Rule 5635(c)(4), which permits Nasdaq listed companies to make inducement equity awards to new employees without first obtaining stockholder approval of the award.
The following is a summary of stock option activity during the six months ended June 30, 2026:
| Options Outstanding | ||||||||||||
| Number of | Weighted- | Weighted- | ||||||||||
| Balance—January 1, 2026 | $ | |||||||||||
| Options granted | $ | — | ||||||||||
| Options exercised | $ | — | ||||||||||
| Options canceled | ( | ) | $ | 1.65 | ||||||||
| Balance—June 30, 2026 | $ | |||||||||||
| Exercisable as of June 30, 2026 | $ | |||||||||||
| Vested and expected to vest as of June 30, 2026 | $ | |||||||||||
As of June 30, 2026, all options have been fully expensed.
A summary of restricted stock award activity within the Company’s equity plans and changes for the six months ended June 30, 2026 is as follows:
| Restricted Stock Awards | Shares | Weighted Average Grant- Date Fair Value | ||||||
| Nonvested at January 1, 2026 | $ | |||||||
| Granted | $ | |||||||
| Vested | ( | ) | $ | |||||
| Forfeited | ( | ) | $ | |||||
| Nonvested at June 30, 2026 | $ | |||||||
As of June 30, 2026, the total unrecognized compensation expense related to unvested shares of restricted common stock was $
Stock-based compensation expense is allocated based on the cost center to which the award holder belongs. During the three months ended June 30, 2026 and 2025, $
| 11. | NET LOSS PER SHARE |
Basic net loss per share is determined by dividing net loss by the weighted-average shares of common stock outstanding during the period. Diluted net loss per share is determined by dividing net loss by diluted weighted-average shares outstanding. Diluted weighted-average shares reflect the dilutive effect, if any, of potentially dilutive shares of common stock, such as options to purchase common stock calculated using the treasury stock method and convertible notes using the “if-converted” method. In periods with reported net operating losses, all options to purchase common stock are deemed anti-dilutive such that basic net loss per share and diluted net loss per share are equal.
The Company’s shares of restricted common stock are entitled to receive dividends and hold voting rights applicable to the Company’s common stock, irrespective of any vesting requirement. Accordingly, although the vesting commences upon the elimination of the contingency, the shares of restricted common stock are considered a participating security and the Company is required to apply the two-class method to consider the impact of the shares of restricted common stock on the calculation of basic and diluted earnings per share. The Company is currently in a net loss position and is therefore not required to present the two-class method; however, in the event the Company is in a net income position, the two-class method must be applied by allocating all earnings during the period to shares of common stock and shares of restricted common stock.
The following table sets forth the computation of basic and diluted net loss per share (in thousands, except share and per share data):
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Net loss from continuing operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net income (loss) from discontinued operations | ( | ) | ( | ) | ||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted-average number of shares used in computing net loss per share, basic and diluted | ||||||||||||||||
| Net loss from continuing operations per share, basic and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net income (loss) from discontinued operations per share, basic and diluted | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Net loss per share, basic and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Anti-dilutive shares excluded from computation of net loss per share (in shares) | ||||||||||||||||
| 12. | COMMITMENTS AND CONTINGENCIES |
Based on the location of the Company’s current operations, the majority of sales tax is collected and remitted either by the Company or on its behalf by e-commerce marketplaces in most states within the U.S. To date, the Company has had no actual or threatened sales and use tax claims from any state where it does not already claim nexus or any state where it sold products prior to claiming nexus. However, the Company believes that the likelihood of incurring a liability as a result of sales tax nexus being asserted by certain states where it sold products prior to claiming nexus is probable. As of June 30, 2026 and December 31, 2025, the Company estimates that the potential liability, including current sales tax payable is approximately $
From time to time, the Company is party to various actions and claims arising in the normal course of business. The Company does not believe that the final outcome of these matters will have a material adverse effect on the Company’s financial position or results of operations. In addition, the Company maintains what it believes is adequate insurance coverage to further mitigate risk. However, no assurance can be given that the final outcome of such proceedings will not materially impact the Company’s financial condition or results of operations. Further, no assurance can be given that the amount or scope of existing insurance coverage will be sufficient to cover losses arising from such matters.
During June and July 2026, in connection with the proxy statement filed in relation to the Asset Sale and Stock Sale, the Company received demand letters from purported stockholders alleging certain omitted information or disclosure deficiencies in the proxy materials. The Company evaluated the demands, determined that the proxy disclosures complied with all applicable reporting requirements, and proceeded with the special meeting where the required stockholder approvals were obtained. The Company believes the claims asserted in these demand letters are without merit and that the likelihood of any material loss arising from these matters is remote. Consequently, no liability has been accrued in the Condensed Consolidated Balance Sheets as of June 30, 2026.
In February 2026, we announced a voluntary recall in coordination with the U.S. Consumer Product Safety Commission (the "CPSC") for approximately
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 $
Total accrued liabilities related to estimated product recall costs were $
| 13. | RESTRUCTURING |
On May 14, 2025, the Company announced a fixed cost reduction plan, which included a workforce reduction affecting approximately
In January 2026, the Company implemented a fixed cost reduction plan that included a workforce reduction affecting approximately
The accounting for the restructuring costs follows the provisions of ASC 420, "Accounting for Costs Associated with Exit or Disposal Activities," which requires the recognition of a liability once the restructuring plan is communicated to affected employees and meets the criteria of being probable and reasonably estimable. The Company recognizes a liability for employee severance, other benefits, and involuntary terminations on the communication date.
The following table provides a summary of the restructuring costs incurred (in thousands):
| Three Months Ended | Three Months Ended | |||||||
| June 30, 2026 | June 30, 2025 | |||||||
| (in thousands) | (in thousands) | |||||||
| Employee severance | $ | $ | ||||||
| Total restructuring costs | $ | $ | ||||||
| Six Months Ended | Six Months Ended | |||||||
| June 30, 2026 | June 30, 2025 | |||||||
| (in thousands) | (in thousands) | |||||||
| Employee severance | $ | $ | ||||||
| Total restructuring costs | $ | $ | ||||||
The following table provides a summary of the Company's total restructuring reserve (in thousands):
| Employee Severance | ||||
| Balance – December 31, 2025 | $ | |||
|
| ||||
| Usage-cash | ( | ) | ||
| Balance – June 30, 2026 | $ | |||
As of June 30, 2026, the Company did have a liability for restructuring costs.
As of December 31, 2025, the Company had a liability of $
The Company will continue to assess the restructuring plan's progress and provide updates as required in future financial statements if there are material changes to the initial estimates or additional significant restructuring activities.
| 14. | SEGMENT INFORMATION |
Aterian, Inc. is a consumer products company that predominantly operates through online retail channels such as Amazon, Walmart, and Target and its own direct to consumer websites. The Company operates its owned brands, which were either incubated or purchased, selling products in multiple categories, including home and kitchen appliances, kitchenware, air quality appliances, health and beauty products and essential oils. The Company has determined that it has
| Three Months Ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| Net revenue | $ | $ | ||||||
| Less: | ||||||||
| Cost of Sales | ||||||||
| Other vendor and payroll expenses | ||||||||
| Depreciation and amortization | ||||||||
| Stock-based compensation expense | ( | ) | ||||||
| Other segment items(1) | ||||||||
| Net loss from continuing operations | $ | ( | ) | $ | ( | ) | ||
| Six Months Ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| Net revenue | $ | $ | ||||||
| Less: | ||||||||
| Cost of Sales | ||||||||
| Other vendor and payroll expenses | ||||||||
| Depreciation and amortization | ||||||||
| Stock-based compensation expense | ||||||||
| Other segment items(1) | ||||||||
| Net loss from continuing operations | $ | ( | ) | $ | ( | ) | ||
(1) Other segment items primarily include income taxes, interest expense, other income, gain on extinguishment of debt, and the change in fair value of warrant liabilities.
The CODM does not use total assets as a financial metric when making key operating decisions.
| 15. | SUBSEQUENT EVENTS |
On July 17, 2026, the Company completed its sale of assets to Trademark Global pursuant to the Asset Purchase Agreement. Pursuant to the Asset Purchase Agreement, Trademark Global acquired certain specified assets and liabilities of the Company, including, among other things, assets associated with the Company’s marquee consumer brands: Mueller Living, PurSteam, hOmeLabs, Squatty Potty, Healing Solutions, and Photo Paper Direct for $
On July 17, 2026, the Company completed its sale of preferred stock to Lazar, pursuant to the Securities Purchase Agreement. Pursuant to the Securities Purchase Agreement, Lazar purchased from the Company (a)
In connection with the closing of these transactions, the Company entered into a Contingent Value Rights Agreement with Broadridge Corporate Issuer Solutions, LLC, as Rights Agent, on July 17, 2026. Each contingent value right represents a non-transferable contractual right to receive pro rata cash distributions derived from specified future proceeds, including net proceeds from the Asset Sale after satisfaction of certain indebtedness and transaction costs, setting aside $
The Board established August 17, 2026, as the distribution date of the contingent value rights to record holders. Upon the closing of the transactions on July 17, 2026, the condition precedent was satisfied. Consequently, the contingent value right obligation will be measured at fair value as of the effective date in the third quarter of 2026 and recognized as a distribution from equity, within retained earnings or additional paid-in capital, with a corresponding contingent value right liability or equity instrument as evaluated under ASC 480 and ASC 815. The contingent value rights represent contractual payment rights only, do not carry voting or dividend rights, accrue no interest, and do not represent equity ownership in the Company.
On July 17, 2026, in connection with the closing of the asset and preferred stock sales, all remaining commitments under the Existing Credit Agreement with MidCap Funding IV Trust were terminated, and all associated financial obligations thereunder were settled in full. Concurrently, all guarantees, mortgages, security interests, and liens securing the indebtedness under the Existing Credit Agreement were fully discharged and released.
The Company is currently evaluating the accounting for the transaction, and an estimate of the financial effect, including the final gain or loss on the sale, cannot be made at this time.
Effective July 17, 2026, David E. Lazar was appointed as the Chief Executive Officer of the Company, succeeding Arturo Rodriguez, who ceased serving as Chief Executive Officer while remaining on the Company's Board of Directors. In connection with this transition, the Company entered into a Transition and Separation Agreement with Mr. Rodriguez to provide operational transition services through September 30, 2026.
On August 4, 2026,
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
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.
Unless the context otherwise requires, the terms “Aterian,” the “Company,” “we,” “us” and “our” in this Quarterly Report on Form 10-Q refer to Aterian, Inc. and our consolidated subsidiaries, including Aterian Group, Inc.
Overview
We are a consumer products company that predominantly operates through online retail channels such as Amazon, Walmart, and Target and its own direct to consumer websites. The Company operates its owned brands, which were either incubated or purchased, selling products in multiple categories, including home and kitchen appliances, kitchenware, air quality appliances, health and beauty products and essential oils.
Seasonality of Business and Product Mix
Our individual product categories are typically affected by seasonal sales trends primarily resulting from the timing of the summer season for certain of our environmental appliance products and the fall and holiday season for our small kitchen appliances and accessories. With our current mix of environmental appliances, the sales of those products tend to be significantly higher in the summer season. Further, our essential oils, small kitchen appliances and accessories tend to have higher sales during the fourth quarter, which includes Thanksgiving and the December holiday season. As a result, our operational results, cash flows, cash and inventory positions may fluctuate materially in any quarterly period depending on, among other things, adverse weather conditions, shifts in the timing of certain holidays and changes in our product mix.
Product mix can affect our gross profit and the variable portion of our sales and distribution expenses. We rely heavily on a global supply chain in which the cost, lead times, and delays, as well as global and geopolitical events can ultimately have a direct impact to our margins. Further, impacts on our supply chain may force us to hold more inventory, which not only affects working capital but also requires us to increase our storage capacity, through our warehouse network, which of itself has a capital impact.
Financial Operations Overview
Net Revenue—We derive our revenue from the sale of consumer products, primarily in the U.S. We sell products directly to consumers through online retail channels and through wholesale channels. Direct-to-consumer sales (i.e., direct net revenue), which is currently the majority of our revenue, is done through various online retail channels. We sell on Amazon.com, Walmart.com, Target.com and our own websites, with the large majority of our sales being made through Amazon.com. For all of our sales and distribution channels, revenue is recognized when control of the product is transferred to the customer (i.e., when our performance obligation is satisfied), which typically occurs at the shipment date.
Cost of Goods Sold—Cost of goods sold consists of the book value of inventory sold to customers during the reporting period. Book value of inventory includes the amounts we pay manufacturers for product, tariffs and duties associated with transporting product across national borders, and freight costs associated with transporting the product from our manufacturers to our warehouses, as applicable. Shrinkage costs are also recognized within the cost of goods sold. When circumstances dictate that we use net realizable value as the basis for recording inventory, we base our estimates on expected future selling prices, less expected disposal costs.
During 2025 and early 2026, the U.S. government announced and implemented a series of expanded tariff policies affecting imports from several countries, including China. While these actions impact a range of global trade flows, tariffs targeting imports from China have had the most material impact on our supply chain and operating costs. As a result, we experienced an increase in our cost of goods sold during the year ended December 31, 2025, and the three months ended March 31, 2026. In response, we implemented targeted price increases across affected product categories to partially offset higher input costs. These pricing actions, however, contributed to a decline in unit volumes as consumer demand responded to higher retail prices.
During the three months ended June 30, 2026, the Company received $2.7 million from the U.S. Customs and Border Protection related to previously paid import duties, consisting of $2.6 million in duty refunds and $0.1 million in associated interest income. Of the duty refunds, $2.3 million was recorded as a reduction to cost of goods sold within Income (loss) from discontinued operations for inventory that had previously been sold, and $0.3 million was recorded as a reduction to the carrying value of inventory included within assets held for sale on the Condensed Consolidated Balance Sheet for unsold goods remaining on hand at June 30, 2026. The $0.1 million of interest was recorded within interest income on the Condensed Consolidated Statements of Operations.
Expenses:
Sales and Distribution Expenses—Sales and distribution expenses consist of online advertising costs, marketing and promotional costs, sales and ecommerce platform commissions, fulfillment, including shipping and handling, and warehouse costs (i.e., sales and distribution variable expenses). Sales and distribution expenses also include employee cash and stock compensation and benefits and other related fixed costs. Shipping and handling expenses are included in our consolidated statements of operations in sales and distribution expenses. This includes inbound, pick and pack costs and outbound transportation costs to ship goods to customers performed by e-commerce platforms or incurred directly by us, through our own direct fulfillment platform, which leverages our technology platform and third-party logistics partners. Our sales and distribution expenses, specifically our logistics expenses and online advertising, will vary quarter to quarter as they are dependent on our sales volume, our product mix and whether we fulfill products ourselves, i.e., fulfillment by merchant (“FBM”), or through e-commerce platform service providers, i.e., fulfillment by Amazon (“FBA”) or fulfilled by Walmart (“WFS”). Products with less expensive fulfillment costs as a percentage of net revenue may allow for a lower gross margin, while still maintaining their targeted profitability level. Conversely, products with higher fulfillment costs will need to achieve a higher gross margin to maintain their targeted level of profitability. We are FBM One Day and Two Day Prime certified, allowing us to deliver our sales through Amazon to most customers within one or two days. We periodically review the locations and capacity of our third-party warehouses to ensure we have the appropriate geographic reach, which helps to reduce the average last mile shipping zones to the end customer and as such our speed of delivery improves while our shipping costs to customers decrease, prior to the impacts on shipping providers’ rates.
General and Administrative Expenses—General and administrative expenses include cash and stock compensation and employee benefits for executive management, finance administration, legal, and human resources, facility costs, insurance, travel, professional service fees, and other general overhead costs, including the costs of being a public company.
Interest Expense, Net—Interest expense, net includes the interest cost from our credit facility, and includes amortization of deferred finance costs and debt discounts from our credit facility (the “Credit Facility”) with MidCap Funding IV Trust (“MidCap”).
Discontinued Operations
On April 27, 2026, the Company entered into a series of definitive agreements to fundamentally restructure its operations and capital position. On July 17, 2026, following stockholder approval, the Company completed the sale of specified assets and liabilities associated with its marquee consumer brands—including Mueller Living, PurSteam, hOmeLabs, Squatty Potty, Healing Solutions, and Photo Paper Direct to Trademark Global, LLC ("Trademark Global") for $18.0 million in cash, subject to customary post-closing adjustments (the "Asset Sale").
Because these marquee brands represented a strategic shift and comprised a major portion of the Company’s historical operations, the financial results of these brands have been classified as discontinued operations in the Condensed Consolidated Financial Statements for all periods presented. Following the closing of the Asset Sale, the Company expects to continue operating its remaining retained legacy brands, including Vremi and Xtava.
Concurrently with the Asset Sale, on July 17, 2026, the Company completed the final closing under a Securities Purchase Agreement, dated April 27, 2026 (the “Securities Purchase Agreement”), with David E. Lazar for the issuance and sale of Series AA Convertible Non-Redeemable Preferred Stock, par value $0.0001 per share, of the Company (the “Series AA Preferred Stock” and such purchased shares, the “Series AA Preferred Shares”) and Series AAA Convertible Non-Redeemable Preferred Stock, par value $0.0001 per share, of the Company (the “Series AAA Preferred Stock” and together with the Series AA Preferred Stock, the “Preferred Stock” and such purchased shares, the “Series AAA Preferred Shares” and together with the Series AA Preferred Shares, the “Purchased Shares”)for aggregate gross proceeds of $7.0 million (the “Preferred Stock Sale”). This capital infusion, combined with the net proceeds realized from the Asset Sale, was utilized to satisfy outstanding debt obligations, pay transaction fees, and restructure the Company’s balance sheet.
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 discontinued operations for the three and six months ended June 30, 2026 and 2025.
Results of Continuing Operations
Comparison of the Three Months Ended June 30, 2026 and 2025
The following table sets forth the components of our results of continuing operations:
| Three Months Ended June 30, |
Change |
|||||||||||||||
| 2026 |
2025 |
Amount |
% |
|||||||||||||
| (in thousands, except percentages) |
||||||||||||||||
| Net revenue |
$ | 7 | $ | 88 | $ | (81 | ) | (91.9 | )% | |||||||
| Cost of good sold |
6 | 47 | (41 | ) | (87.7 | )% | ||||||||||
| Gross profit |
1 | 41 | (40 | ) | (96.6 | )% | ||||||||||
| Operating expenses: |
||||||||||||||||
| Sales and distribution |
188 | 1,035 | (847 | ) | (81.8 | )% | ||||||||||
| General and administrative(1) |
3,772 | 2,584 | 1,189 | 46.0 | % | |||||||||||
| Total operating expenses |
3,960 | 3,619 | 341 | 9.4 | % | |||||||||||
| Operating loss |
(3,959 | ) | (3,578 | ) | (381 | ) | (10.6 | )% | ||||||||
| Interest expense, net |
173 | 222 | (49 | ) | (22.1 | )% | ||||||||||
| Change in fair value of warrant liabilities |
— | (35 | ) | 35 | 100.0 | % | ||||||||||
| Gain on extinguishment of debt |
(295 | ) | — | (295 | ) | (100.0 | )% | |||||||||
| Other expense, net |
125 | — | 125 | 100.0 | % | |||||||||||
| Loss from continuing operations |
(3,962 | ) | (3,765 | ) | (197 | ) | (5.2 | )% | ||||||||
| Income taxes |
— | — | — | — | % | |||||||||||
| Loss from continuing operations, net of income taxes |
$ | (3,962 | ) | $ | (3,765 | ) | $ | (197 | ) | (5.2 | )% | |||||
| (1) |
During the three months ended June 30, 2026 and 2025, $0.3 million and a reversal of $3 thousand of stock-based compensation were included in general and administrative expenses on the Condensed Consolidated Statement of Operations. |
Net Revenue
Net revenue decreased $0.1 million, or 91.9%, during the three months ended June 30, 2026 to $7 thousand, compared to $88 thousand for the three months ended June 30, 2025. The decrease in net revenue was primarily attributable to reduction in consumer demand due to the macroeconomic environment.
Cost of Goods Sold and Gross Profit
| Three Months Ended June 30, |
Change |
|||||||||||||||
| 2026 |
2025 |
Amount |
% |
|||||||||||||
| (in thousands, except percentages) |
||||||||||||||||
| Cost of goods sold |
$ | 6 | $ | 47 | $ | (41 | ) | (87.7 | )% | |||||||
| Gross profit |
$ | 1 | $ | 41 | $ | (40 | ) | (96.6 | )% | |||||||
Cost of goods sold decreased $41 thousand, or 87.7%, during the three months ended June 30, 2026 to $6 thousand, compared to $47 thousand for the three months ended June 30, 2025, primarily from reduced sales volumes.
Gross profit decreased to 14.0% for the three months ended June 30, 2026 from 46.7% for the three months ended June 30, 2025. The decrease in gross profit was due primarily to product mix.
Sales and Distribution Expenses
| Three Months Ended June 30, |
Change |
|||||||||||||||
| 2026 |
2025 |
Amount |
% | |||||||||||||
| (in thousands, except percentages) |
||||||||||||||||
| Sales and distribution expenses |
$ | 188 | $ | 1,035 | $ | (847 | ) | (81.8 | )% | |||||||
Sales and distribution expenses decreased to $0.2 million for the three months ended June 30, 2026, from $1.0 million for the three months ended June 30, 2025. This decrease is primarily attributable to lower restructuring costs of $0.8 million.
General and Administrative Expenses
| Three Months Ended June 30, |
Change |
|||||||||||||||
| 2026 |
2025 |
Amount |
% |
|||||||||||||
| (in thousands, except percentages) |
||||||||||||||||
| General and administrative expenses |
$ | 3,772 | $ | 2,584 | $ | 1,189 | 46.0 | % | ||||||||
The increase in general and administrative expenses was primarily the result of an increase of $2.0 million in professional fees, an increase of $0.3 million in stock-compensation expense, and an increase of $0.1 million in headcount expense, partially offset by a decrease in restructuring costs of $0.8 million, and a decrease of $0.4 million in miscellaneous expenses.
Interest expense, net
| Three Months Ended June 30, |
Change |
|||||||||||||||
| 2026 |
2025 |
Amount |
% |
|||||||||||||
| (in thousands, except percentages) |
||||||||||||||||
| Interest expense, net |
$ | 173 | $ | 222 | $ | (49 | ) | (22.1 | )% |
|||||||
The decrease in interest expense, net of $49 thousand is primarily relating to an increase in interest income of $110 thousand relating to tariff refunds received during the three months ending June 30, 2026, partially offset by an increase in interest expense of $61 thousand.
Change in fair market value of warrant liabilities
| Three Months Ended June 30, |
Change |
|||||||||||||||
| 2026 |
2025 |
Amount |
% |
|||||||||||||
| (in thousands, except percentages) |
||||||||||||||||
| Change in fair market value of warrant liabilities |
$ | — | $ | (35 | ) | $ | 35 | 100.0 | % | |||||||
The 2026 and 2025 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 three months ending June 30, 2026 primarily relates to the reduced share price compared to the prior period.
Gain on extinguishment of debt
| Three Months Ended June 30, |
Change |
|||||||||||||||
| 2025 |
2026 |
Amount |
% |
|||||||||||||
| (in thousands, except percentages) |
||||||||||||||||
| Gain on extinguishment of debt |
$ | (295 | ) | $ | — | $ | 295 |
|
100 | % |
||||||
During the three months ended June 30, 2026, the Company settled its seller note payable and recognized a gain on extinguishment of debt of approximately $0.3 million.
Comparison of the Six Months Ended June 30, 2026 and 2025
The following table sets forth the components of our results of continuing operations:
| Six Months Ended June 30, |
Change |
|||||||||||||||
| 2026 |
2025 |
Amount |
% |
|||||||||||||
| (in thousands, except percentages) |
||||||||||||||||
| Net revenue |
$ | 25 | $ | 151 | $ | (126 | ) | (83.4 | )% |
|||||||
| Cost of good sold |
14 | 60 | (46 | ) | (76.7 | )% |
||||||||||
| Gross profit |
11 | 91 | (80 | ) | (87.9 | )% |
||||||||||
| Operating expenses: |
||||||||||||||||
| Sales and distribution |
488 | 1,072 | (584 | ) | (54.5 | )% |
||||||||||
| General and administrative(1) |
6,691 | 5,938 | 753 | 12.7 | % | |||||||||||
| Total operating expenses |
7,179 | 7,010 | 169 | 2.4 | % | |||||||||||
| Operating loss |
(7,168 | ) | (6,919 | ) | (249 | ) | (3.6 | )% |
||||||||
| Interest expense, net |
399 | 397 | 2 | (0.5 | )% |
|||||||||||
| Change in fair value of warrant liabilities |
— | (90 | ) | 90 | 100.0 | % | ||||||||||
| Gain on extinguishment of debt |
(295 | ) | — | (295 | ) | (100.0 | )% |
|||||||||
| Other expense (income), net |
125 | (42 | ) | 167 | 397.6 | % | ||||||||||
| Loss before income taxes |
(7,397 | ) | (7,184 | ) | (213 | ) | (3.0 | )% |
||||||||
| Provision for income taxes |
— | — | — | — | % | |||||||||||
| Loss from continuing operations, net of income taxes |
$ | (7,397 | ) | $ | (7,184 | ) | $ | (213 | ) | (3.0 | )% |
|||||
| (1) |
During the six months ended June 30, 2026 and 2025, $0.7 million and $0.6 million of stock-based compensation were included in general and administrative expenses on the Condensed Consolidated Statement of Operations. |
Net Revenue
Net revenue decreased $0.1 million, or 83.4%, during the six months ended June 30, 2026 to $25 thousand, compared to $0.2 million for the six months ended June 30, 2025. The decrease in net revenue was primarily attributable to reduction in consumer demand due to the macroeconomic environment.
Cost of Goods Sold and Gross Profit
| Six Months Ended June 30, |
Change |
|||||||||||||||
| 2026 |
2025 |
Amount |
% |
|||||||||||||
| (in thousands, except percentages) |
||||||||||||||||
| Cost of goods sold |
$ | 14 | $ | 60 | $ | (46 | ) | (76.7 | )% | |||||||
| Gross profit |
$ | 11 | $ | 91 | $ | (80 | ) | (87.9 | )% | |||||||
Cost of goods sold decreased $46 thousand, or 76.7%, during the six months ended June 30, 2026 to $14 thousand, compared to $60 thousand for the six months ended June 30, 2025, primarily from reduced sales volumes.
Gross profit decreased to 44.0% for the six months ended June 30, 2026 from 60.3% for the six months ended June 30, 2025. The decrease in gross profit was due primarily to product mix.
Sales and Distribution Expenses
| Six Months Ended June 30, |
Change |
|||||||||||||||
| 2026 |
2025 |
Amount |
% |
|||||||||||||
| (in thousands, except percentages) |
||||||||||||||||
| Sales and distribution expenses |
$ | 488 | $ | 1,072 | $ | (584 | ) | (54.5 | )% | |||||||
Sales and distribution expenses decreased to $0.5 million for the six months ended June 30, 2026, from $1.1 million for the six months ended June 30, 2025. This decrease is primarily attributable to lower restructuring costs of $0.6 million.
General and Administrative Expenses
| Six Months Ended June 30, |
Change |
|||||||||||||||
| 2026 | 2025 |
Amount |
% |
|||||||||||||
| (in thousands, except percentages) |
||||||||||||||||
| General and administrative expenses |
$ | 6,691 | $ | 5,938 | $ | 753 | 12.7 | % | ||||||||
The increase in general and administrative expenses was primarily the result of an increase of $2.4 million in professional fees, and an increase of $0.1 million in stock-compensation expense, partially offset by a decrease in restructuring costs of $0.8 million, a decrease of $0.8 million in miscellaneous expenses, and a decrease of $0.1 million in headcount expense.
Interest expense, net
| Six Months Ended June 30, |
Change |
|||||||||||||||
| 2026 |
2025 |
Amount |
% |
|||||||||||||
| (in thousands, except percentages) |
||||||||||||||||
| Interest expense, net |
$ | 399 | $ | 397 | $ | 2 | 0.5 | % | ||||||||
Interest expense, net was relatively flat for the six months ended June 30, 2026 and June 30, 2025.
Change in fair market value of warrant liabilities
| Six Months Ended June 30, |
Change |
|||||||||||||||
| 2026 |
2025 |
Amount |
% |
|||||||||||||
| (in thousands, except percentages) |
||||||||||||||||
| Change in fair market value of warrant liabilities |
$ | — | $ | (90 | ) | $ | 90 | 100.0 | % | |||||||
The 2026 and 2025 activity is related to the change in fair market value of the warrant liabilities from the common stock warrants from our March 2022 equity raise of capital. The change in fair value of warrant liabilities during the six months ending June 30, 2026 primarily relates to the reduced share price compared to the prior period.
Gain on extinguishment of debt
| Six Months Ended June 30, |
Change |
|||||||||||||||
| 2026 |
2025 |
Amount |
% |
|||||||||||||
| (in thousands, except percentages) |
||||||||||||||||
| Gain on extinguishment of debt |
$ | (295 | ) | $ | — | $ | 295 |
|
100 | % |
||||||
During the three months ended June 30, 2026, the Company settled its seller note payable and recognized a gain on extinguishment of debt of approximately $0.3 million.
Results of Discontinued Operations
Comparison of the Three Months Ended June 30, 2026 and 2025
The following table sets forth the components of our results of discontinued operations:
| Three Months Ended June 30, |
Change |
|||||||||||||||
| 2026 |
2025 |
Amount |
% |
|||||||||||||
| (in thousands, except percentages) |
||||||||||||||||
| Net revenue |
$ | 13,297 | $ | 19,374 | $ | (6,077 | ) | (31.4 | )% | |||||||
| Cost of good sold |
3,016 | 8,849 | (5,833 | ) | (65.9 | )% | ||||||||||
| Gross profit |
10,281 | 10,525 | (244 | ) | (2.3 | )% | ||||||||||
| Operating expenses: |
||||||||||||||||
| Sales and distribution(1) |
6,706 | 11,322 | (4,616 | ) | (40.8 | )% | ||||||||||
| General and administrative |
73 | 130 | (56 | ) | (43.1 | )% | ||||||||||
| Total operating expenses |
6,779 | 11,452 | (4,673 | ) | (40.8 | )% | ||||||||||
| Operating income (loss) |
3,502 | (927 | ) | 4,429 | 477.8 | % | ||||||||||
| Other expense, net |
24 | 157 | (133 | ) | (84.7 | )% | ||||||||||
| Income (loss) from discontinued operations before income taxes |
3,478 | (1,084 | ) | 4,562 | 420.8 | % | ||||||||||
| Provision for income taxes |
(7 | ) | (11 | ) | 4 | (36.4 | )% | |||||||||
| Income (loss) from discontinued operations, net of income taxes |
$ | 3,471 | $ | (1,095 | ) | $ | 4,566 | 417.0 | % | |||||||
| (1) |
During the three months ended June 30, 2026 and 2025, $0.1 million and $0.1 million of stock-based compensation were included within Income (loss) from discontinued operations on the Condensed Consolidated Statement of Operations. |
Net Revenue
Net revenue decreased $6.1 million, or 31.4%, during the three months ended June 30, 2026 to $13.3 million, compared to $19.4 million for the three months ended June 30, 2025. The decrease in net revenue was primarily attributable to the macroeconomic environment resulting in reduced consumer demand.
Cost of Goods Sold and Gross Profit
| Three Months Ended June 30, |
Change |
|||||||||||||||
| 2026 |
2025 |
Amount |
% |
|||||||||||||
| (in thousands, except percentages) |
||||||||||||||||
| Cost of goods sold |
$ | 3,016 | $ | 8,849 | $ | (5,833 | ) | (65.9 | )% | |||||||
| Gross profit |
$ | 10,281 | $ | 10,525 | $ | (244 | ) | (2.3 | )% | |||||||
Cost of goods sold decreased $5.8 million, or 65.9%, during the three months ended June 30, 2026 to $3.0 million, compared to $8.8 million for the three months ended June 30, 2025, primarily from reduced sales volumes and tariff refunds of $2.3 million that were received during the three months ended June 30, 2026.
Gross profit increased to 77.3% for the three months ended June 30, 2026 from 54.3% for the three months ended June 30, 2025. The increase in gross profit was due primarily to product mix and tariff refunds of $2.3 million that were received during the three months ended June 30, 2026.
Sales and Distribution Expenses
| Three Months Ended June 30, |
Change |
|||||||||||||||
| 2026 |
2025 |
Amount |
% |
|||||||||||||
| (in thousands, except percentages) |
||||||||||||||||
| Sales and distribution expenses |
$ | 6,706 | $ | 11,322 | $ | (4,616 | ) | (40.8 | )% | |||||||
Sales and distribution expenses, which included e-commerce platform commissions, online advertising and logistics expenses (i.e., variable sales and distribution expense), decreased to $6.7 million for the three months ended June 30, 2026, from $11.3 million for the three months ended June 30, 2025. This decrease is primarily attributable to the decrease in the volume of products sold in the three months ended June 30, 2026, as our e-commerce platform commissions, online advertising, selling and logistics expenses decreased to $5.5 million in the three months ended June 30, 2026 as compared to $9.0 million in the prior year period.
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 June 30, 2026, from $2.3 million for the three months ended June 30, 2025. This decrease is primarily attributable to lower miscellaneous expenses of $0.6 million, lower headcount expense of $0.5 million, and lower stock-compensation expense of $0.1 million.
As a percentage of net revenue, sales and distribution expenses decreased to 50.4% for the three months ended June 30, 2026, from 58.4% for the three months ended June 30, 2025. E-commerce platform commissions, online advertising, selling and logistics expenses included within sales and distribution expenses, as a percentage of net revenue, decreased to 41.7% for the three months ended June 30, 2026, from 46.7% for the three months ended June 30, 2025.
General and Administrative Expenses
| Three Months Ended June 30, |
Change |
|||||||||||||||
| 2026 |
2025 |
Amount |
% |
|||||||||||||
| (in thousands, except percentages) |
||||||||||||||||
| General and administrative expenses |
$ | 73 | $ | 130 | $ | (57 | ) | (43.8 | )% | |||||||
The decrease in general and administrative expenses was primarily the result of a decrease of $57 thousand in logistics software expenses.
Comparison of the Six Months Ended June 30, 2026 and 2025
The following table sets forth the components of our results of discontinued operations:
| Six Months Ended June 30, |
Change |
|||||||||||||||
| 2026 |
2025 |
Amount |
% |
|||||||||||||
| (in thousands, except percentages) |
||||||||||||||||
| Net revenue |
$ | 25,711 | $ | 34,671 | $ | (8,960 | ) | (25.8 | )% | |||||||
| Cost of good sold |
7,450 | 14,772 | (7,322 | ) | (49.6 | )% | ||||||||||
| Gross profit |
18,261 | 19,899 | (1,638 | ) | (8.2 | )% | ||||||||||
| Operating expenses: |
||||||||||||||||
| Sales and distribution(1) |
13,892 | 20,946 | (7,054 | ) | (33.7 | )% | ||||||||||
| General and administrative |
138 | 235 | (97 | ) | (41.3 | )% | ||||||||||
| Impairment loss on intangibles |
3,427 | — | 3,427 | 100.0 | % | |||||||||||
| Total operating expenses |
17,457 | 21,181 | (3,724 | ) | (17.6 | )% | ||||||||||
| Operating income (loss) |
804 | (1,282 | ) | 2,086 | 162.7 | % | ||||||||||
| Other expense, net |
10 | 259 | (249 | ) | (96.1 | )% | ||||||||||
| Income (loss) from discontinued operations before income taxes |
794 | (1,541 | ) | 2,335 | 151.5 | % | ||||||||||
| Provision for income taxes |
(20 | ) | (31 | ) | 11 | 35.5 | % | |||||||||
| Income (loss) from discontinued operations, net of income taxes |
$ | 774 | $ | (1,572 | ) | $ | 2,346 | 149.2 | % | |||||||
| (1) |
During the six months ended June 30, 2026 and 2025, $0.1 million and $0.3 million of stock-based compensation were included within Income (loss) from discontinued operations on the Condensed Consolidated Statement of Operations. |
Net Revenue
Net revenue decreased $9 million, or 25.8%, during the six months ended June 30, 2026 to $25.7 million, compared to $34.7 million for the six months ended June 30, 2025. The decrease in net revenue was primarily attributable to the macroeconomic environment resulting in reduced consumer demand.
Cost of Goods Sold and Gross Profit
| Six Months Ended June 30, |
Change |
|||||||||||||||
| 2026 |
2025 |
Amount |
% |
|||||||||||||
| (in thousands, except percentages) |
||||||||||||||||
| Cost of goods sold |
$ | 7,450 | $ | 14,772 | $ | (7,322 | ) | (49.6 | )% | |||||||
| Gross profit |
$ | 18,261 | $ | 19,899 | $ | (1,638 | ) | (8.2 | )% | |||||||
Cost of goods sold decreased $7.3 million, or 49.6%, during the six months ended June 30, 2026 to $7.5 million, compared to $14.8 million for the six months ended June 30, 2025, primarily from reduced sales volumes and tariff refunds of $2.3 million that were received during the six months ended June 30, 2026.
Gross profit increased to 71.0% for the six months ended June 30, 2026 from 57.4% for the six months ended June 30, 2025. The increase in gross profit was due primarily to product mix and tariff refunds of $2.3 million that were received during the six months ended June 30, 2026.
Sales and Distribution Expenses
| Six Months Ended June 30, |
Change |
|||||||||||||||
| 2026 |
2025 |
Amount |
% |
|||||||||||||
| (in thousands, except percentages) |
||||||||||||||||
| Sales and distribution expenses |
$ | 13,892 | $ | 20,946 | $ | (7,054 | ) | (33.7 | )% | |||||||
Sales and distribution expenses, which included e-commerce platform commissions, online advertising and logistics expenses (i.e., variable sales and distribution expense), decreased to $13.9 million for the six months ended June 30, 2026, from $20.9 million for the six months ended June 30, 2025. This decrease is primarily attributable to the decrease in the volume of products sold in the six months ended June 30, 2026, as our e-commerce platform commissions, online advertising, selling and logistics expenses decreased to $11.5 million in the six months ended June 30, 2026 as compared to $16.3 million in the prior year period.
Our sales and distribution fixed costs (e.g., salary and office expenses) including stock-based compensation decreased to $2.4 million for the six months ended June 30, 2026, from $4.6 million for the six months ended June 30, 2025. This decrease is primarily attributable to lower headcount expense of $1.1 million, lower miscellaneous expenses of $0.8 million, lower stock-compensation expense of $0.2 million, and lower expenses related to the Amazon Seller program of $0.2 million.
As a percentage of net revenue, sales and distribution expenses decreased to 54.0% for the six months ended June 30, 2026, from 60.4% for the six months ended June 30, 2025. E-commerce platform commissions, online advertising, selling and logistics expenses included within sales and distribution expenses, as a percentage of net revenue, increased to 44.7% for the six months ended June 30, 2026, from 47.0% for the six months ended June 30, 2025.
General and Administrative Expenses
| Six Months Ended June 30, |
Change |
|||||||||||||||
| 2026 |
2025 |
Amount |
% |
|||||||||||||
| (in thousands, except percentages) |
||||||||||||||||
| General and administrative expenses |
$ | 138 | $ | 235 | $ | (97 | ) | (41.3 | )% | |||||||
The decrease in general and administrative expenses was primarily the result of a decrease of $0.1 million in logistics software expenses.
Impairment loss on intangibles
| Six Months Ended June 30, |
Change |
|||||||||||||||
| 2026 |
2025 |
Amount |
% |
|||||||||||||
| (in thousands, except percentages) |
||||||||||||||||
| Impairment loss on intangibles |
$ | 3,427 | $ | — | $ | 3,427 | 100 | % |
||||||||
On July 17, 2026, the Company completed the sale of substantially all of its assets to Trademark Global, pursuant to the Asset Purchase Agreement, dated as of April 27, 2026 (the “Asset Purchase Agreement” and together with the Securities Purchase Agreement, the “Aterian Transactions”). Pursuant to the Asset Purchase Agreement, Trademark Global acquired certain specified assets and liabilities of the Company, including, among other things, assets associated with the Company’s marquee consumer brands: Mueller Living, PurSteam, hOmeLabs, Squatty Potty, Healing Solutions, and Photo Paper Direct for $18.0 million in cash, subject to certain purchase price adjustments.
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. As of June 30, 2026, management evaluated the carrying value of these brand intangible assets based on the finalized deal terms and expected net proceeds, and determined that no impairment was required for the three months ended June 30, 2026. Previously, 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, and accordingly recorded a non-cash impairment charge of $3.4 million during the first quarter of 2026. This charge was recorded within Income (loss) from discontinued operations on the Condensed Consolidated Statement of Operations.
Liquidity and Capital Resources
Cash Flows for the Six Months Ended June 30, 2026 and 2025
The following table provides information regarding our cash flows for the six months ended June 30, 2026 and 2025:
| Six Months Ended June 30, |
||||||||
| 2026(1) |
2025(1) |
|||||||
| (in thousands) |
||||||||
| Cash provided by (used in) operating activities |
$ | 75 | $ | (8,287 | ) | |||
| Cash used in investing activities |
(18 | ) | (6 | ) | ||||
| Cash (used in) provided by financing activities |
(2,325 | ) | 388 | |||||
| Effect of exchange rate on cash |
(52 | ) | 448 | |||||
| Net change in cash and restricted cash for the period |
$ | (2,320 | ) | $ | (7,457 | ) | ||
| (1) |
Includes amounts from discontinued operations, please see Note 3, Held for Sale Classification and Discontinued Operations Presentation for additional details. |
Net Cash Provided by (Used in) Operating Activities
Net cash provided by operating activities was $0.1 million for the six months ended June 30, 2026, primarily driven by net cash losses from operations of $2.1 million and a $2.2 million inflow from changes in working capital, mainly related to changes in accounts payable.
Net cash used in operating activities was $8.3 million for the six months ended June 30, 2025, resulting primarily from our net cash losses from operations of $6.7 million, outflow from working capital of $1.6 million from changes in accounts receivable, purchases of inventory and payments of accounts payable. The working capital outflow primarily relates to purchases of our air quality products for the summer season and intentional build up of certain products to avoid higher tariffs.
Net Cash Used in Investing Activities
For the six months ended June 30, 2026, net cash used in investing activities was $18 thousand, primarily related to the purchase of fixed assets during the six months ended June 30, 2026.
For the six months ended June 30, 2025, net cash used in investing activities was $6 thousand, primarily related to the purchase of laptops during the six months ended June 30, 2025.
Net Cash (Used in) Provided by Financing Activities
For the six months ended June 30, 2026, net cash used in financing activities of $2.3 million primarily from the net repayments for our MidCap credit facility of $5.0 million and payment of insurance obligations of $0.5 million, partially offset by $3.2 million in proceeds from the issuance of preferred stock.
For the six months ended June 30, 2025, net cash provided by financing activities of $0.4 million was primarily from the net borrowings for our MidCap credit facility of $0.2, and net proceeds from insurance financing of $0.3 million, partially offset by repayment of note payable to Smash of $0.1 million.
Liquidity and Going Concern
In accordance with Accounting Standards Codification 205-40, Presentation of Financial Statements - 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.
Since inception, the Company has incurred significant losses and used cash flows from operations to fund its enterprise. To preserve liquidity, management implemented fixed cost reduction plans in May 2025 and January 2026. However, these actions were insufficient to fully offset macroeconomic pressures, such as tariffs, geopolitical instabilities, rising costs for raw materials and shipping, higher marketplace fees, and reduced consumer spending, which continued to negatively impact operating results and cash flows.
On April 27, 2026, the Company entered into a series of definitive agreements (the "Aterian Transactions"), to restructure its operations and capital position. These agreements included the Asset Purchase Agreement with Trademark Global to sell marquee brands, including Mueller Living, PurSteam, hOmeLabs, Squatty Potty, Healing Solutions, and Photo Paper Direct, for $18.0 million in cash, subject to purchase price adjustments, and the Securities Purchase Agreement with Lazar for the issuance of Series AA Preferred Stock and Series AAA Preferred Stock for aggregate gross proceeds of $7.0 million. As of June 30, 2026, the Company received gross proceeds of $3.5 million from the issuance of the Series AA Preferred Stock, which were offset by approximately $0.3 million of transaction costs recorded as a reduction to additional paid-in capital, resulting in net proceeds of approximately $3.2 million.
On June 25, 2026, in connection with the Asset Sale to Trademark Global, LLC and the Securities Purchase Agreement with David E. Lazar, the Board of Directors of the Company conditionally declared a dividend in the form of contingent value rights. The contingent value rights were declared to record holders as of the close of business on July 8, 2026, comprising holders of the Company’s common stock, par value $0.0001 per share, and holders of certain unexercised participating warrants to purchase common stock. Each eligible holder is entitled to receive one contingent value right for each share of common stock held or issuable upon exercise of participating warrants as of the record date. Shares of Series AA and Series AAA Convertible Non-Redeemable Preferred Stock are expressly excluded from participating in the distribution. Because the payment of the dividend remained subject to unfulfilled conditions precedent, including stockholder approval and the closing of the transactions, and remained subject to revocation by the Board as of June 30, 2026, no liability or reduction of equity was recognized in the condensed consolidated financial statements for the period ended June 30, 2026.
On July 17, 2026, following the receipt of stockholder approval at a special meeting of stockholders, the Company completed both the Asset Sale to Trademark Global, LLC and the Stock Sale to Lazar. Upon the closing of the Stock Sale, Lazar became the beneficial owner of approximately 95.8% of the Company's issued and outstanding voting securities, constituting a change in control, and was appointed as Chief Executive Officer. Concurrently, all outstanding indebtedness under the Credit and Security Agreement with MidCap Funding IV Trust was repaid in full, all commitments thereunder were terminated, and all associated guarantees and liens were released.
On July 17, 2026, following approval by the Company's stockholders at a special meeting, the Company completed the Asset Sale to Trademark Global for $18.0 million in cash, subject to purchase price adjustments, and completed the issuance and sale of 1,750,000 shares of Series AAA Convertible Non-Redeemable Preferred Stock to Lazar for aggregate proceeds of $3.5 million. In connection with the closing of these transactions, the Company entered into a Contingent Value Rights Agreement with Broadridge Corporate Issuer Solutions, LLC, as Rights Agent, on July 17, 2026. Each contingent value right represents a non-transferable contractual right to receive pro rata cash distributions derived from specified future proceeds, including net proceeds from the Asset Sale after satisfaction of certain indebtedness and transaction costs, setting aside $1.0 million for ongoing operational expenses, and establishing up to $6.0 million in reserves for specified liabilities. Additional potential proceeds include any remaining amounts from the specified liability reserves upon full satisfaction of such liabilities, net proceeds from future sales of remaining legacy assets and inventory not acquired by Trademark Global, and net proceeds from tax or tariff refunds, drawbacks, customs claims, or released restricted cash and escrow amounts held prior to closing.
The Board established August 17, 2026 as the distribution date of the contingent value rights to record holders. Upon the closing of the transactions on July 17, 2026, the condition precedent was satisfied. Consequently, the contingent value right obligation will be measured at fair value as of the effective date in the third quarter of 2026 and recognized as a distribution from equity, within retained earnings or additional paid-in capital, with a corresponding contingent value right liability or equity instrument as evaluated under ASC 480 and ASC 815. The contingent value rights represent contractual payment rights only, do not carry voting or dividend rights, accrue no interest, and do not represent equity ownership in the Company.
Following the consummation of the Aterian Transactions, the Company will continue to operate its remaining legacy brands, primarily Vremi and Xtava. Management intends to utilize remaining net proceeds to support working capital for these ongoing business segments.
While the completion of the Aterian Transactions eliminated senior debt obligations and provided immediate capital, the Company's retained legacy business operations remain limited in scale. The ongoing macroeconomic challenges, potential operational cash burn associated with scaling the remaining brands, and execution risks regarding the streamlined growth strategy continue to create uncertainty regarding future cash flows.
Based on these factors, management concluded that these conditions continue to 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. Management’s ongoing plans include driving operational efficiencies across the retained business, optimizing supply chain expenditures, and evaluating additional strategic alternatives. The accompanying Condensed Consolidated Financial Statements do not include any adjustments that might result from the outcome of this uncertainty.
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, 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”).
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.
MidCap Credit Facility—On December 22, 2021, we entered into a Credit Facility with MidCap, pursuant to which, among other things, (i) the lenders party thereto as lenders (the “Lenders”) agreed to provide a revolving credit facility in a principal amount of up to $40.0 million subject to a borrowing base consisting of, among other things, inventory and sales receivables (subject to certain reserves), and (ii) we agreed to issue to MidCap Funding XXVII Trust a warrant to purchase up to an aggregate of 16,667 shares of our common stock, in exchange for the Lenders extending loans and other extensions of credit to us under the Credit Facility.
Prior to the February 2024 amendment, the Credit Facility contained a financial covenant that required us to maintain a minimum unrestricted cash balance of (a) $12.5 million during the period from February 1st through and including May 31st of each calendar year, and (b) $15.0 million at all other times.
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.
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.
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.
As of June 30, 2026, there was no outstanding principal balance under the Existing Credit Agreement. As of June 30, 2026, the Company had an overpayment balance of $0.4 million due from the lender, as well as unamortized deferred financing costs of $0.1 million, both of which are included within Prepaid Expenses and Other Current Assets on the Condensed Consolidated Balance Sheet.
On July 17, 2026, in connection with the closing of the Asset Sale and the Preferred Stock Sale, all outstanding indebtedness under the Existing Credit Agreement was repaid in full and all commitments thereunder were terminated. Additionally, all guarantees and liens securing the indebtedness under the Existing Credit Agreement were fully discharged and released.
Seller Notes—During the three months ended June 30, 2026, the Company fully settled its outstanding Seller Notes in exchange for a cash payment of $0.1 million, resulting in a gain on extinguishment of debt of $0.3 million in the Condensed Consolidated Statements of Operations.
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.
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.
Non-GAAP Financial Measures
On July 17, 2026, following stockholder approval, the Company completed the sale of specified assets and liabilities associated with its marquee consumer brands including Mueller Living, PurSteam, hOmeLabs, Squatty Potty, Healing Solutions, and Photo Paper Direct to Trademark Global, LLC ("Trademark Global") for $18.0 million in cash, subject to customary post-closing adjustments. As these brands represented the substantial majority of our historical consolidated operations, their results are now classified as discontinued operations for all periods presented.
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.
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.
Critical Accounting Policies and Use of Estimates
As discussed in our Form 10-K for the fiscal year ended December 31, 2025, the discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in conformity with generally accepted accounting principles in the United States of America (“US GAAP”). The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the amounts of assets, liabilities, revenues and expenses reported in those consolidated financial statements. These judgments can be subjective and complex, and consequently, actual results could differ from those estimates. Our most critical accounting policies and estimates relate to revenue recognition; leases; impairment of intangible assets; impairment of long-lived assets; and income taxes (including uncertain tax positions). There have been no significant changes to the Company’s accounting policies subsequent to December 31, 2025.
Intangible asset valuation—We review long-lived assets for impairment when performance expectations, events, or changes in circumstances indicate that the asset's carrying value may not be recoverable. The evaluation is performed at the lowest level of identifiable cash flows by comparing the carrying value of the asset group to the undiscounted cash flows. If the evaluation indicates that the carrying amount of the assets may not be recoverable, any potential impairment is measured based upon the fair value of the related asset or asset group as determined by an appropriate market appraisal or other valuation technique.
On July 17, 2026, the Company completed the sale of substantially all of its assets to Trademark Global, pursuant to the Asset Purchase Agreement, dated as of April 27, 2026. Pursuant to the Asset Purchase Agreement, Trademark Global acquired certain specified assets and liabilities of the Company, including, among other things, assets associated with the Company’s marquee consumer brands: Mueller Living, PurSteam, hOmeLabs, Squatty Potty, Healing Solutions, and Photo Paper Direct for $18.0 million in cash, subject to certain purchase price adjustments.
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. As of June 30, 2026, management evaluated the carrying value of these brand intangible assets based on the finalized deal terms and expected net proceeds, and determined that no impairment was required for the three months ended June 30, 2026. Previously, 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, and accordingly recorded a non-cash impairment charge of $3.4 million during the first quarter of 2026. This charge was recorded within Income (loss) from discontinued operations on the Condensed Consolidated Statement of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this Quarterly Report on Form 10-Q.
Based on the evaluation of our disclosure controls and procedures as of June 30, 2026, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of June 30, 2026.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the six months ended June 30, 2026, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating the disclosure controls and procedures and internal control over financial reporting, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures and internal control over financial reporting must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
From time to time, we may be involved in various claims and legal proceedings relating to claims arising out of our operations, primarily with respect to the sale of our consumer products. We believe that there are no pending lawsuits or claims that, individually or in the aggregate, may have a material effect on our business, financial condition or operating results.
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.
Item 1A. Risk Factors.
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.
Risks Relating to the Ownership of our Common Stock
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:
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limited availability of market quotations for our common stock; |
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| • | a limited amount of news and analyst coverage for us; | |
| • | a decreased ability for us to issue additional securities or obtain additional financing in the future; | |
| • | limited liquidity for our stockholders due to thin trading; and | |
| • | the potential loss of confidence by investors and employees. |
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:
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Nasdaq would issue an immediate Staff Delisting Determination and suspend trading in our common stock without a compliance or cure period; | |
| • | Our common stock would likely be forced to trade on the OTC market, including during any appeal before a Nasdaq Hearings Panel; | |
| • | Trading on the OTC market would significantly reduce the liquidity, trading volume, and market price of our common stock; | |
| • | Our ability to raise additional capital through equity offerings would be severely limited; | |
| • | We could experience a loss of confidence among institutional investors, vendors, and business partners; and | |
| • | Our common stock could become subject to SEC “penny stock” regulations, imposing heightened disclosure and sales practice burdens on broker-dealers that further restrict secondary market trading. |
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.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Recent Sales of Unregistered Securities
There were no unregistered sales of the Company’s equity securities during the three months ended June 30, 2026, other than those previously reported in a Current Report on Form 8-K.
Share Repurchase Program
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.
The Company has not repurchased any shares of its common stock under this program to date. As of May 2, 2025, the Company had temporarily suspended its share repurchase program.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Rule 10b5-1 Trading Plans. During the three and six months ended June 30, 2026, director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
* Filed herewith.
** Furnished herewith.
+ Non-material schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company hereby undertakes to furnish supplemental copies of any of the omitted schedules and exhibits upon request by the Securities and Exchange Commission.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Quarterly Report on Form 10-Q to be signed on its behalf by the undersigned thereunto duly authorized.
| ATERIAN, INC. |
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| Date: August 14, 2026 |
By: |
/s/ David E. Lazar |
| David E. Lazar | ||
| Chief Executive Officer |
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| (Principal Executive Officer) |
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| Date: August 14, 2026 | By: |
/s/ Joshua Feldman |
| Joshua Feldman | ||
| Chief Financial Officer (Principal Financial Officer) |
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