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2021-09-30 0001757715 us-gaap:CustomerRelationshipsMember 2021-09-30

 

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2021

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission File Number: 001-38937

 

Aterian, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware

 

83-1739858

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer
Identification Number)

 

37 East 18th Street, 7th Floor

New York, NY

 

10003

(Address of principal executive offices)

 

(Zip Code)

 

(347) 676-1681

(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

Common Stock, $0.0001 par value per share

 

ATER

 

The Nasdaq Stock Market LLC

 

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.     Yes      No  

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).    Yes      No  

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

Non-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      No  

As of November 4, 2021, the registrant had 53,528,757 shares of common stock, $0.0001 par value per share, outstanding.

 

 

 

 

 


 

 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

 

Item 1.

Financial Statements (Unaudited)

3

 

Condensed Consolidated Balance Sheets

3

 

Condensed Consolidated Statements of Operations

4

 

Condensed Consolidated Statements of Comprehensive Loss

5

 

Condensed Consolidated Statements of Stockholder’s Equity

6

 

Condensed Consolidated Statements of Cash Flows

9

 

Notes to Unaudited Condensed Consolidated Financial Statements

11

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

35

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

54

Item 4.

Controls and Procedures

54

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

55

Item 1A.

Risk Factors

55

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

68

Item 3.

Defaults Upon Senior Securities

68

Item 4.

Mine Safety Disclosures

68

Item 5.

Other Information

68

Item 6.

Exhibits

69

Signatures

72

 

1


 

 

Special 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 of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance.  In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans, or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

 

 

the potential impact of the COVID-19 global pandemic on our business, revenue and financial condition, including our supply chain and our operations;

 

our expectation that consumer spending will continue to shift online, and that such shift will continue even after the COVID-19 global pandemic ends;

 

our future financial performance, including our revenue, costs of goods sold and operating expenses;

 

our ability to achieve, sustain and grow profitability;

 

the sufficiency of our cash to meet our liquidity and operational needs and to execute our growth strategies, including potential acquisitions;

 

our ability to continue as a going concern;

 

our ability to maintain the security and availability of our technology platform, including our AIMEE (Artificial Intelligence Marketplace e-Commerce Engine) software platform;

 

our ability to successfully launch new products, including our ability to successfully manage supply chain risks;

 

our ability to identify, complete and integrate merger and acquisition transactions;

 

our ability to successfully execute and grow net revenue and profitability from sales of personal protective equipment (“PPE”);

 

our predictions about industry and market trends;

 

our ability to successfully expand internationally;

 

our ability to effectively manage our growth and future expenses;

 

our estimated total addressable market, including for potential acquisitions;

 

our ability to maintain, protect and enhance our intellectual property, including our AIMEE software platform;

 

our ability to comply with laws and regulations applying to our business, including new or modified laws and regulations;

 

our ability to attract and retain key personnel;

 

our ability to successfully defend litigation brought against us or to pursue litigation; and

 

the increased expenses and obligations associated with being a public company.

We caution you that the foregoing list may not contain all the forward-looking statements made in this Quarterly Report on Form 10-Q.

We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section of this Quarterly Report on Form 10-Q entitled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a highly competitive and challenging environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. We cannot assure you that the results, events and circumstances reflected, or that the plans, intentions or expectations disclosed, in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those expressed or implied by the forward-looking statements.

The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q, new information or the occurrence of unanticipated events, except as required by law. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, other strategic transactions or investments we may make or enter into.

2


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

ATERIAN, INC.

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands, except share and per share data)

 

 

 

December 31, 2020

 

 

September 30, 2021

 

ASSETS

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

Cash

 

$

26,718

 

 

$

37,470

 

Accounts receivable—net

 

 

5,747

 

 

 

9,292

 

Inventory

 

 

31,582

 

 

 

71,273

 

Prepaid and other current assets

 

 

11,111

 

 

 

12,831

 

Total current assets

 

 

75,158

 

 

 

130,866

 

PROPERTY AND EQUIPMENT—net

 

 

169

 

 

 

1,299

 

GOODWILL—net

 

 

47,318

 

 

 

118,619

 

OTHER INTANGIBLES—net

 

 

31,460

 

 

 

67,355

 

OTHER NON-CURRENT ASSETS

 

 

3,349

 

 

 

3,546

 

TOTAL ASSETS

 

$

157,454

 

 

$

321,685

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

Credit facility

 

$

12,190

 

 

$

 

Accounts payable

 

 

14,856

 

 

 

24,640

 

Term loan

 

 

21,600

 

 

 

 

Seller notes

 

 

16,231

 

 

 

8,827

 

Contingent earn-out liability

 

 

1,515

 

 

 

14,886

 

Accrued and other current liabilities

 

 

8,340

 

 

 

18,177

 

Total current liabilities

 

 

74,732

 

 

 

66,530

 

OTHER LIABILITIES

 

 

1,841

 

 

 

379

 

CONTINGENT EARN-OUT LIABILITY

 

 

21,016

 

 

 

16,667

 

TERM LOANS

 

 

36,483

 

 

 

25,454

 

Total liabilities

 

 

134,072

 

 

 

109,030

 

COMMITMENTS AND CONTINGENCIES (Note 9)

 

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY:

 

 

 

 

 

 

 

 

Common stock, par value $0.0001 per share—500,000,000 shares authorized and

   27,074,791 shares outstanding at December 31, 2020; 500,000,000 shares

   authorized and 50,049,660 shares outstanding at September 30, 2021

 

 

3

 

 

 

5

 

Additional paid-in capital

 

 

216,305

 

 

 

635,296

 

Accumulated deficit

 

 

(192,935

)

 

 

(422,350

)

Accumulated other comprehensive income (loss)

 

 

9

 

 

 

(296

)

Total stockholders’ equity

 

 

23,382

 

 

 

212,655

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

$

157,454

 

 

$

321,685

 

 

See notes to condensed consolidated financial statements.

3


 

ATERIAN, INC.

Condensed Consolidated Statements of Operations

(Unaudited)

(in thousands, except share and per share data)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2020

 

 

2021

 

 

2020

 

 

2021

 

NET REVENUE

 

$

58,783

 

 

$

68,121

 

 

$

144,212

 

 

$

184,446

 

COST OF GOODS SOLD

 

 

30,688

 

 

 

33,946

 

 

 

78,218

 

 

 

91,464

 

GROSS PROFIT

 

 

28,095

 

 

 

34,175

 

 

 

65,994

 

 

 

92,982

 

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and distribution

 

 

18,944

 

 

 

32,337

 

 

 

51,472

 

 

 

96,716

 

Research and development

 

 

1,846

 

 

 

2,767

 

 

 

6,578

 

 

 

7,220

 

General and administrative

 

 

7,199

 

 

 

10,843

 

 

 

23,554

 

 

 

31,807

 

Change in fair value of contingent earn-out liabilities

 

 

 

 

 

(4,245

)

 

 

 

 

 

(11,949

)

TOTAL OPERATING EXPENSES:

 

 

27,989

 

 

 

41,702

 

 

 

81,604

 

 

 

123,794

 

OPERATING INCOME (LOSS)

 

 

106

 

 

 

(7,527

)

 

 

(15,610

)

 

 

(30,812

)

INTEREST EXPENSE—net

 

 

934

 

 

 

2,786

 

 

 

3,120

 

 

 

11,877

 

CHANGE IN FAIR VALUE OF DERIVATIVE LIABILITY

 

 

 

 

 

1,360

 

 

 

 

 

 

3,254

 

LOSS ON EXTINGUISHMENT OF DEBT

 

 

 

 

 

106,991

 

 

 

 

 

 

136,763

 

CHANGE IN FAIR VALUE OF WARRANT LIABILITY

 

 

 

 

 

(8,134

)

 

 

 

 

 

26,455

 

LOSS ON INITIAL ISSUANCE OF WARRANT

 

 

 

 

 

 

 

 

 

 

 

20,147

 

OTHER EXPENSE (INCOME)

 

 

(23

)

 

 

5

 

 

 

(4

)

 

 

43

 

LOSS BEFORE INCOME TAXES

 

 

(805

)

 

 

(110,535

)

 

 

(18,726

)

 

 

(229,351

)

PROVISION FOR INCOME TAXES

 

 

 

 

 

21

 

 

 

46

 

 

 

64

 

NET LOSS

 

$

(805

)

 

$

(110,556

)

 

$

(18,772

)

 

$

(229,415

)

Net loss per share, basic and diluted

 

$

(0.05

)

 

$

(3.13

)

 

$

(1.18

)

 

$

(7.55

)

Weighted-average number of shares outstanding, basic and diluted

 

 

17,090,050

 

 

 

35,359,999

 

 

 

15,903,517

 

 

 

30,383,375

 

 

See notes to condensed consolidated financial statements.

4


 

ATERIAN, INC.

Condensed Consolidated Statements of Comprehensive Loss

(Unaudited)

(in thousands)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2020

 

 

2021

 

 

2020

 

 

2021

 

NET LOSS

 

$

(805

)

 

$

(110,556

)

 

$

(18,772

)

 

$

(229,415

)

OTHER COMPREHENSIVE LOSS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(19

)

 

 

(259

)

 

 

(28

)

 

 

(305

)

Other comprehensive loss

 

 

(19

)

 

 

(259

)

 

 

(28

)

 

 

(305

)

COMPREHENSIVE LOSS

 

$

(824

)

 

$

(110,815

)

 

$

(18,800

)

 

$

(229,720

)

 

See notes to condensed consolidated financial statements.

 

5


 

 

ATERIAN, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

(in thousands, except share data)

 

 

 

For the Three Months Ended September 30, 2020

 

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Accumulated

 

 

Accumulated

Other

Comprehensive

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Income/(Loss)

 

 

Equity

 

BALANCE—July 1, 2020

 

 

17,763,164

 

 

 

2

 

 

 

152,948

 

 

 

(147,776

)

 

 

48

 

 

 

5,222

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(805

)

 

 

 

 

 

(805

)

Issuance of 3,860,710 shares of common

   stock in connection with follow-on

   public offering, including underwriter's

   over-allotment, net of offering costs

   and underwriter's discount

 

 

3,860,710

 

 

 

 

 

 

23,416

 

 

 

 

 

 

 

 

 

23,416

 

Stock-based compensation

 

 

 

 

 

 

 

 

4,582

 

 

 

 

 

 

 

 

 

4,582

 

Issuance of 10,000 shares of restricted

   common stock on July 13, 2020

 

 

10,000

 

 

 

 

 

 

49

 

 

 

 

 

 

 

 

 

49

 

Issuance of 95,500 shares of restricted

   common stock on July 20, 2020

 

 

95,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of 22,700 shares of restricted

   common stock on September 30, 2020

 

 

22,700

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of 25,000 warrants on

   August 18, 2020

 

 

 

 

 

 

 

 

204

 

 

 

 

 

 

 

 

 

204

 

Issuance of 90,000 shares of restricted

   common stock on August 10, 2020

 

 

90,000

 

 

 

 

 

 

760

 

 

 

 

 

 

 

 

 

760

 

Exercise of stock options

 

 

2,870

 

 

 

 

 

 

12

 

 

 

 

 

 

 

 

 

 

 

12

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(19

)

 

 

(19

)

BALANCE—September 30, 2020

 

 

21,844,944

 

 

$

2

 

 

$

181,971

 

 

$

(148,581

)

 

$

29

 

 

$

33,421

 

 

 

 

Three Months Ended September 30, 2021

 

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Accumulated

 

 

Accumulated

Other

Comprehensive

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Income (Loss)

 

 

Equity

 

BALANCE—July 1, 2021

 

 

35,734,767

 

 

$

3

 

 

$

487,605

 

 

$

(311,794

)

 

$

(37

)

 

$

175,777

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(110,556

)

 

 

 

 

 

(110,556

)

Issuance of common stock to High Trail

 

 

12,154,161

 

 

 

2

 

 

 

125,562

 

 

 

 

 

 

 

 

 

125,564

 

Reclassification of warrants to equity

 

 

 

 

 

 

 

 

17,065

 

 

 

 

 

 

 

 

 

17,065

 

Reclassification of warrants to liability

 

 

 

 

 

 

 

 

(21,260

)

 

 

 

 

 

 

 

 

(21,260

)

Issuance of shares of restricted common stock

 

 

125,055

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock related to exercise of warrants

 

 

1,879,368

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Forfeiture of shares of restricted common stock

 

 

(22,026

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value of warrant modification on extinguishment

 

 

 

 

 

 

 

 

17,399

 

 

 

 

 

 

 

 

 

17,399

 

Exercise of stock options

 

 

32,927

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of RSU issued to consultant

 

 

145,408

 

 

 

 

 

 

1,043

 

 

 

 

 

 

 

 

 

1,043

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

7,882

 

 

 

 

 

 

 

 

 

7,882

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(259

)

 

 

(259

)

BALANCE—September 30, 2021

 

 

50,049,660

 

 

$

5

 

 

$

635,296

 

 

$

(422,350

)

 

$

(296

)

 

$

212,655

 

 

6


 

 

ATERIAN, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

(in thousands, except share data)

 

 

 

For the Nine Months Ended September 30, 2020

 

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Accumulated

 

 

Accumulated

Other

Comprehensive

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit