0000950170-22-023937 | 10-Q | XBRL Viewer

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Credit Facility, Term Loans and Warrants - Schedule of Interest Expense, Net (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Debt Disclosure [Abstract]
Interest expense	$ 904	$ 2,919	$ 2,043	$ 12,470
Interest income		(133)		(593)
Total Interest expense, net	$ 904	$ 2,786	$ 2,043	$ 11,877

Stock-Based Compensation - Summary of Stock Option Activity (Details) - USD ($) $ / shares in Units, $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2022	Dec. 31, 2021
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Options Outstanding, Number of Options, Shares, Beginning Balance	522,905
Options Outstanding, Number of Options, Cancelled, Shares	(154,309)
Options Outstanding, Number of Options, Shares, Ending Balance	368,596	522,905
Options Outstanding, Number of Options Exercisable, Shares, as of September 30, 2022	368,596
Options Outstanding, Number of Options, Vested and expected to vest, Shares as of September 30, 2022	368,596
Options Outstanding, Weighted Average Exercise Price, Beginning Balance	$ 9.25
Options Outstanding, Weighted Average Exercise Price, Cancelled	9.24
Options Outstanding, Weighted Average Exercise Price, Ending Balance	9.26	$ 9.25
Options Outstanding, Weighted Average Exercise Price, Exercisable as of September 30, 2022	9.26
Options Outstanding, Weighted Average Exercise Price, Vested and expected to vest as of September 30, 2022	$ 9.26
Options Outstanding, Weighted Average Remaining Contractual Life (Years)	6 years 1 month 20 days	6 years 9 months 7 days
Options Outstanding, Weighted Average Remaining Contractual Life (Years), Exercisable as of September 30, 2022	6 years 1 month 20 days
Options Outstanding, Weighted Average Remaining Contractual Life (Years), Vested and expected to vest as of September 30, 2022	6 years 1 month 20 days
Options Outstanding, Aggregate Intrinsic Value, Beginning Balance	$ 25,971
Options Outstanding, Aggregate Intrinsic Value, Ending Balance		$ 25,971

Commitments and Contingencies - Additional Information (Details)					1 Months Ended		3 Months Ended			9 Months Ended		12 Months Ended
	May 06, 2022 USD ($)	Mar. 22, 2022 shares	Jun. 10, 2021 USD ($) shares	May 02, 2021 USD ($) Installment	Apr. 30, 2022 USD ($)	May 31, 2021 USD ($)	Sep. 30, 2022 USD ($)	Mar. 31, 2022 USD ($)	Sep. 30, 2021 USD ($)	Sep. 30, 2022 USD ($)	Sep. 30, 2021 USD ($)	Dec. 31, 2021 USD ($)	Jun. 30, 2022 USD ($)	May 04, 2022 USD ($)	Nov. 30, 2021 USD ($)
Commitment And Contingencies [Line Items]
Sales tax payable current							$ 1,251,000			$ 1,251,000		$ 678,000
General and administrative							10,369,000		$ 10,843,000	29,481,000	$ 31,807,000
Issuance of common stock for settlement of outstanding seller note \| shares		292,887
Gain on extinguishment of seller note								$ 2,000,000.0	(106,991,000)		(136,763,000)	(138,900,000)
Settlement Agreement
Commitment And Contingencies [Line Items]
Agreement date				May 2, 2021
Payment to suppliers				$ 3,000,000.0
Number of installments \| Installment				3
Settlement Agreement \| Prepaid Expenses and Other Current Assets
Commitment And Contingencies [Line Items]
Prepaid asset				$ 4,100,000
Settlement Agreement \| First Payment
Commitment And Contingencies [Line Items]
Payment to suppliers						$ 1,000,000.0
Settlement received						$ 1,000,000.0
Settlement Agreement \| Second Payment
Commitment And Contingencies [Line Items]
Payment to suppliers									$ 1,000,000.0		$ 1,000,000.0
Settlement Agreement \| Third Payment
Commitment And Contingencies [Line Items]
Payment to suppliers															$ 1,000,000.0
Settlement Agreement
Commitment And Contingencies [Line Items]
Litigation settlement												$ 1,300,000
Litigation settlement expense	$ 1,300,000
Litigation settlement amount payable													$ 1,300,000	$ 1,300,000
Securities Purchase Agreement \| Settlement Agreement
Commitment And Contingencies [Line Items]
Payment to suppliers							1,600,000			1,600,000
General and administrative							1,600,000
Number of common shares issued \| shares			400,000
Sale of stock, value of shares issued in transaction			$ 6,000,000.0
Securities Purchase Agreement \| Settlement Agreement
Commitment And Contingencies [Line Items]
Litigation settlement								$ 800,000
Litigation settlement in cash					$ 500,000
Litigation settlement coupons awarded					$ 300,000
Shareholder Derivative Actions Related to Securities Class Action \| Maximum
Commitment And Contingencies [Line Items]
Litigation settlement amount payable							$ 300,000			$ 300,000

Credit Facility, Term Loans and Warrants - Schedule of Credit Facility and Term Loans (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Debt Instrument [Line Items]
Total MidCap Credit Facility – December 2021	$ 23,919	$ 32,845
MidCap Credit Facility
Debt Instrument [Line Items]
MidCap Credit Facility – December 2021	24,873	34,119
Less: deferred debt issuance costs	(518)	(691)
Less: discount associated with issuance of warrants	(436)	(583)
Total MidCap Credit Facility – December 2021	$ 23,919	$ 32,845

- Definition

The carrying value as of the balance sheet date of the current portion of long-term obligations drawn from a line of credit, which is a bank's commitment to make loans up to a specific amount. Examples of items that might be included in the application of this element may consist of letters of credit, standby letters of credit, and revolving credit arrangements, under which borrowings can be made up to a maximum amount as of any point in time conditional on satisfaction of specified terms before, as of and after the date of drawdowns on the line. Includes short-term obligations that would normally be classified as current liabilities but for which (a) postbalance sheet date issuance of a long term obligation to refinance the short term obligation on a long term basis, or (b) the enterprise has entered into a financing agreement that clearly permits the enterprise to refinance the short-term obligation on a long term basis and the following conditions are met (1) the agreement does not expire within 1 year and is not cancelable by the lender except for violation of an objectively determinable provision, (2) no violation exists at the BS date, and (3) the lender has entered into the financing agreement is expected to be financially capable of honoring the agreement.

+ References + Details

Stock-Based Compensation - Summary of Total Stock-based Compensation Expense by Function (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock-based compensation expense	$ 2,943	$ 9,570	$ 11,854	$ 21,330
Sales and Distribution Expenses
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock-based compensation expense	999	2,444	4,228	4,968
Research and Development Expense
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock-based compensation expense	511	1,776	1,418	3,880
General and Administrative Expense
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock-based compensation expense	$ 1,433	$ 5,350	$ 6,208	$ 12,482

Goodwill and Intangibles (Tables)

9 Months Ended

Sep. 30, 2022

Goodwill And Intangible Assets Disclosure [Abstract]

Summary of Changes in Goodwill and Intangible Assets

The following tables summarize the changes in the Company’s intangible assets as of December 31, 2021 and September 30, 2022 (in thousands):


	December 31, 2020		For the year ended December 31, 2021					December 31, 2021
	Gross Carrying Amount		Additions		Impairments			Net Book Value
Goodwill	$	47,318	$	72,623	$	—		$	119,941
-

	December 31, 2021		Nine Months Ended September 30, 2022					September 30, 2022
	Gross Carrying Amount		Additions		Impairments (1)			Net Book Value
Goodwill	$	119,941	$	—	$	(119,941	)	$	—

(1)

The Company evaluated current economic conditions during the third quarter of 2022, including the impact of the Federal Reserve further increasing the risk-free interest rate, as well as the inflationary pressure on product and labor costs and operational impacts attributable to continued global supply chain disruptions. The Company believes that these conditions were factors in our market capitalization falling below the book value of net assets as of September 30, 2022. Accordingly, the Company concluded a triggering event had occurred and performed interim goodwill impairment analyses determining that our goodwill was fully impaired as of September 30, 2022. As a result, the Company recorded a goodwill impairment charge of approximately $90.9 million in the three months ended September 30, 2022. The Company also had a triggering event during the three months ended March 31, 2022 and recorded an impairment charge of $29.0 million. For the nine months ended September 30, 2022, total goodwill impairment was approximately $119.9 million.

The following tables summarize the changes in the Company’s intangible assets as of December 31, 2021 and September 30, 2022 (in thousands):


	December 31, 2020		For the year ended December 31, 2021								December 31, 2021
	Gross Carrying Amount		Additions		Impairments			Accumulated Amortization			Net Book Value
Trademarks	$	31,810	$	34,100	$	—		$	(6,332	)	$	59,578
Non-competition agreement		111		—		—			(54	)		57
Transition services agreement		23		—		—			(23	)		—
Customer relations		—		5,700		—			(380	)		5,320
Other		—		700		—			(700	)		—
Total intangibles	$	31,944	$	40,500	$	—		$	(7,489	)	$	64,955

	December 31, 2021		Nine Months Ended September 30, 2022								September 30, 2022
	Gross Carrying Amount		Additions		Impairments (1)			Accumulated Amortization			Net Book Value
Trademarks	$	65,910	$	—	$	(3,087	)	$	(11,450	)	$	51,373
Non-competition agreement		111		—		(31	)		(80	)		—
Transition services agreement		23		—		—			(23	)		—
Customer relations		5,700		—		—			(808	)		4,892
Other		700		—		—			(700	)		—
Total intangibles	$	72,444	$	—	$	(3,118	)	$	(13,061	)	$	56,265

(1) Certain asset groups experienced a significant decrease in sales and contribution margin through September 30, 2022. This was considered an interim triggering event for the three months ended September 30, 2022. Based on the analysis of comparing the undiscounted cash flow to the carrying value of the asset group, one group tested indicated that the assets may not be recoverable. For this asset group, the Company compared the fair value to the carrying amount of the asset group and recorded an intangible impairment charge of $3.1 million in the three months ended September 30, 2022.

Summary of Estimated Aggregate Amortization Expense of Intangible Assets

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


Remainder of 2022	$	1,701
2023		6,802
2024		6,781
2025		6,740
2026		6,740
Thereafter		27,501
Total	$	56,265

Accrued and Other Current Liabilities - Schedule of Components of Accrued Expenses and Other Current Liabilities (Parenthetical) (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Jan. 01, 2022
Accrued And Other Current Liabilities [Line Items]
Right-of-use assets	$ 700
Lease liabilities	700
Current right-of-use liabilities	252
Current lease liabilities	$ 200
Operating Lease, Liability, Current, Statement of Financial Position [Extensible Enumeration]	Accrued Expenses And Other Liabilities Current
Accrued and Other Current Liabilities
Accrued And Other Current Liabilities [Line Items]
Current right-of-use liabilities	$ 200
ASU 842
Accrued And Other Current Liabilities [Line Items]
Right-of-use assets		$ 700
Lease liabilities		$ 700

Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares	Sep. 30, 2022	Dec. 31, 2021
Statement Of Financial Position [Abstract]
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, shares authorized	500,000,000	500,000,000
Common stock, shares outstanding	69,540,749	55,090,237

Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2022

Accounting Policies [Abstract]

Net Revenue Disaggregated by Sales Channel and Geographic Region

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


	Three Months Ended September 30, 2021
	(in thousands)
	Direct		Wholesale/Other		Total
North America	$	64,920	$	2,046	$	66,966
Other		1,155		—		1,155
Total net revenue	$	66,075	$	2,046	$	68,121

	Three Months Ended September 30, 2022
	(in thousands)
	Direct		Wholesale/Other		Total
North America	$	62,818	$	2,530	$	65,348
Other		978		—		978
Total net revenue	$	63,796	$	2,530	$	66,326


	Nine Months Ended September 30, 2021
	(in thousands)
	Direct		Wholesale/Other		Total
North America	$	178,218	$	4,138	$	182,356
Other		2,090		—		2,090
Total net revenue	$	180,308	$	4,138	$	184,446

	Nine Months Ended September 30, 2022
	(in thousands)
	Direct		Wholesale/Other		Total
North America	$	158,399	$	4,415	$	162,814
Other		3,454		—		3,454
Total net revenue	$	161,853	$	4,415	$	166,268

Net Revenue Disaggregated by Product Categories

Net Revenue by Product Categories. The following table sets forth the Company’s net revenue disaggregated by product categories:


	Three Months Ended September 30,
	2021		2022
	(in thousands)
Heating, cooling and air quality	$	29,988	$	27,179
Kitchen appliances		8,084		10,504
Health and beauty		1,273		3,661
Personal protective equipment		1,298		516
Cookware, kitchen tools and gadgets		5,221		5,128
Home office		4,190		3,045
Housewares		10,418		8,787
Essential oils and related accessories		5,722		6,262
Other		1,927		1,244
Total net revenue	$	68,121	$	66,326


	Nine Months Ended September 30,
	2021		2022
	(in thousands)
Heating, cooling and air quality	$	62,968	$	56,835
Kitchen appliances		29,208		27,438
Health and beauty		6,736		12,452
Personal protective equipment		2,957		1,565
Cookware, kitchen tools and gadgets		16,867		14,229
Home office		7,710		10,077
Housewares		26,709		23,478
Essential oils and related accessories		23,017		17,102
Other		8,274		3,092
Total net revenue	$	184,446	$	166,268

Summary of Financial Assets Measured at Fair Value

The following table summarizes the fair value of the Company’s financial assets that are measured at fair value as of December 31, 2021 and September 30, 2022 (in thousands):


	December 31, 2021
	Fair Value Measurement Category
	Level 1		Level 2		Level 3

Assets:
Cash and cash equivalents	$	30,317	$	—	$	—
Restricted cash		7,998		—		—
Liabilities:
Estimated fair value of contingent earn-out considerations		—		—		9,223


	September 30, 2022
	Fair Value Measurement Category
	Level 1		Level 2		Level 3

Assets:
Cash and cash equivalents	$	25,997	$	—	$	—
Restricted cash		3,043		—		—
Liabilities:
Fair value of contingent earn-out considerations		—		—		—
Fair value of warrant liability		—		—		6,308

Summary of Activity of the Level 3 Liabilities Carried at Fair Value on a Recurring Basis

A summary of the activity of the Level 3 liabilities carried at fair value on a recurring basis for the nine months ended September 30, 2022 is as follows (in thousands):


Balance at December 31, 2021	$	9,223
Change in fair value of contingent earn-out liability		(5,240	)
Payment of contingent earn-out liability		(3,983	)
Balance at September 30, 2022	$	—

Balance at December 31, 2021	$	—
Issuance of warrants in connection with offering		18,982
Change in fair value of warrant liability		2,365
Exercise of prefunded warrants		(15,039	)
Balance at September 30, 2022	$	6,308

- Definition

Tabular disclosure of financial instruments measured at fair value, including those classified in shareholders' equity measured on a recurring or nonrecurring basis. Disclosures include, but are not limited to, fair value measurements recorded and the reasons for the measurements, level within the fair value hierarchy in which the fair value measurements are categorized and transfers between levels 1 and 2. Nonrecurring fair value measurements are those that are required or permitted in the statement of financial position in particular circumstances.

+ References + Details

Prepaid Expenses and Other Current Assets - Summary of Prepaids and Other Current Assets (Parenthetical) (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Jan. 01, 2022
Prepaid Expense And Other Assets Current [Line Items]
Right-of-use assets	$ 700
Lease liabilities	700
Current right-of-use assets	241
Current lease liabilities	$ 200
Operating Lease, Liability, Current, Statement of Financial Position [Extensible Enumeration]	Accrued Expenses And Other Liabilities Current
ASU 842
Prepaid Expense And Other Assets Current [Line Items]
Right-of-use assets		$ 700
Lease liabilities		$ 700
Prepaid Expenses and Other Current Assets
Prepaid Expense And Other Assets Current [Line Items]
Current right-of-use assets	$ 200

Summary of Significant Accounting Policies - Net Revenue Disaggregated by Product Categories (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Disaggregation Of Revenue [Line Items]
Total net revenue	$ 66,326	$ 68,121	$ 166,268	$ 184,446
Product Revenue \| Heating, Cooling and Air Quality
Disaggregation Of Revenue [Line Items]
Total net revenue	27,179	29,988	56,835	62,968
Product Revenue \| Kitchen Appliances
Disaggregation Of Revenue [Line Items]
Total net revenue	10,504	8,084	27,438	29,208
Product Revenue \| Health and Beauty
Disaggregation Of Revenue [Line Items]
Total net revenue	3,661	1,273	12,452	6,736
Product Revenue \| Personal Protective Equipment
Disaggregation Of Revenue [Line Items]
Total net revenue	516	1,298	1,565	2,957
Product Revenue \| Cookware, Kitchen Tools and Gadgets
Disaggregation Of Revenue [Line Items]
Total net revenue	5,128	5,221	14,229	16,867
Product Revenue \| Home Office
Disaggregation Of Revenue [Line Items]
Total net revenue	3,045	4,190	10,077	7,710
Product Revenue \| Housewares
Disaggregation Of Revenue [Line Items]
Total net revenue	8,787	10,418	23,478	26,709
Product Revenue \| Essential Oils and Related Accessories
Disaggregation Of Revenue [Line Items]
Total net revenue	6,262	5,722	17,102	23,017
Product Revenue \| Other
Disaggregation Of Revenue [Line Items]
Total net revenue	$ 1,244	$ 1,927	$ 3,092	$ 8,274

Acquisition - Pro Forma Information (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Business Acquisition [Line Items]
NET REVENUE	$ 66,326	$ 68,121	$ 166,268	$ 184,446
Net revenue pro forma		68,121		201,877
Operating loss as reported	$ (108,941)	(7,527)	$ (155,364)	(30,812)
Operating loss pro forma		(7,527)		(26,544)
Healing Solutions LLC
Business Acquisition [Line Items]
NET REVENUE		6,800		27,100
Net revenue				4,600
Operating loss as reported		1,100		6,300
Operating income				382
Squatty Potty, LLC
Business Acquisition [Line Items]
NET REVENUE		3,200		5,400
Net revenue				6,024
Operating loss as reported		2,000		2,800
Operating income				1,772
Photo Paper Direct Ltd.
Business Acquisition [Line Items]
NET REVENUE		4,200		7,200
Net revenue				6,807
Operating loss as reported		$ 1,500		2,100
Operating income				$ 2,114

Commitments and Contingencies

9 Months Ended

Sep. 30, 2022

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

COMMITMENTS AND CONTINGENCIES

Sales or Other Similar Taxes—Based on the location of the Company’s current operations, the majority of sales tax is collected and remitted either by the Company or on its behalf by e-commerce marketplaces in most states within the U.S. To date, the Company has 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 December 31, 2021 and September 30, 2022, the Company estimates that the potential liability, including current sales tax payable is approximately $0.7 million and $1.3 million. The Company believes this is the best estimate of an amount due to taxing agencies, given that such a potential loss is an unasserted liability that would be contested and subject to negotiation between the Company and the state, or decided by a court.

Settlement Agreement—On May 2, 2021, the Company entered into a settlement agreement with one of the Company’s suppliers who agreed to pay the amount of $3.0 million to the Company in three installments of $1.0 million each, with the first payment to be paid on or before May 31, 2021, the second payment to be paid on or before September 30, 2021, and the third payment to be paid on or before November 30, 2021. Further, the supplier agreed to deliver certain goods as part of this settlement by September 30, 2021. Through the date of the accompanying condensed consolidated financial statements, the supplier has not paid in full its required first payment of $1.0 million nor has it delivered the required quantity of goods. As such, the Company has fully reserved $4.1 million within prepaid and other current assets on its consolidated financial statements during the year-ended December 31, 2021. The Company has commenced legal action against the supplier and certain other parties to the matter. One of the parties to the matter has filed for bankruptcy and such legal action is being stayed until the resolution of such bankruptcy. The Company continues to reserve its legal options and rights on this matter as of September 30, 2022.

Legal Proceedings—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.

Securities Class Action—Following a mediation, an initial settlement-in-principle, and further negotiations, on April 22, 2022, the Company, in conjunction with its codefendants Yaniv Sarig, Fabrice Hamaide, and Arturo Rodriguez, entered into a formal settlement agreement to resolve the purported class action lawsuits filed in the U.S. District Court for the Southern District of New York (the “Court”) by Andrew Tate on May 13, 2021, and by Jeff Coon, on June 10, 2021, consolidated under the caption Tate v. Aterian, Inc., et. al., 21-cv-04323-VM (the “Action”).

In the Action, plaintiffs claimed that defendants made false and materially misleading statements and failed to disclose material adverse facts regarding the Company’s business, operations, and prospects, and that this was revealed on May 4, 2021, in a report issued by Culper Research. The Company and its codefendants denied, and continue to deny, that these allegations have any merit. The settlement agreement contains no admission of wrongdoing and expressly states that the Company and its codefendants have entered into a settlement solely to avoid the uncertainties, burden, and expense of further litigation.

The settlement class consists of purchasers of the Company’s securities during the period from August 24, 2020, through May 3, 2021, inclusive (the “Class Period”). Under the terms of the proposed settlement, members of the settlement class release the Company and its codefendants from, among other things, all claims and causes of action of every nature and description, whether known or unknown, that were asserted in the Action; could have been asserted in the Action; relate in any way to transactions in the Company’s securities during the Class Period and any facts, transactions, or occurrences referred to in any of the pleadings or other documents filed in the Action. Under the agreement, the Company was to pay $1.3 million, within 10 business days of the Court’s preliminary approval of the settlement, which would, after final court approval, be distributed to claimants in the settlement class pursuant to the plan of allocation filed with the Court on May 4, 2022. To the extent permitted by the Court, this payment will also fund the legal fees of plaintiffs’ counsel and the costs of administering the settlement.

The proposed settlement was preliminarily approved by the Court on May 6, 2022, and the Company thereafter paid $1.3 million into the designated escrow. On September 12, 2022, the Court entered a final judgment approving the class action settlement. The claims administrator is in the process of distributing funds to claimants. The Company does not anticipate any further action in this matter.In connection with the settlement, the Company accrued approximately $1.3 million during the year ended December 31, 2021 and paid approximately $1.3 million in the second quarter of 2022.

Shareholder Derivative Actions Related to the Securities Class Action—On October 21, October 25 and November 10, 2021, three shareholder derivative actions were filed on behalf of the Company by Shaoxuan Zhang, Michael Sheller and Tyler Magnus in the U.S. District Court for the Southern District of New York. These actions, collectively, name Yaniv Sarig, Fabrice Hamaide, Arturo Rodriguez, Greg B. Petersen, Bari A. Harlam, Amy von Walter, William Kurtz, Roi Zion Zahut, Joseph A. Risico, Tomer Pascal and Mihal Chaouat-Fix as individual defendants, and the Company as a nominal defendant. These actions are predicated on substantively the same factual allegations contained in the above-described securities class action, and assert that the individual defendants (i) breached their fiduciary duties, (ii) misused their authority, (iii) were unjustly enriched and (iv) wasted corporate assets. The action filed by Michael Sheller also alleges that individual defendants Sarig and Hamaide are liable for contribution pursuant to Sections 10(b) and 21D of the Exchange Act in the event the Company is held liable in the Securities Class Action. The action filed by Shaoxuan Zhang alleges analogous liability on the part of Sarig, Hamaide and Rodriguez. Finally, the action filed by Shaoxuan Zhang also alleges that individual defendants Sarig, Harlam, Kurtz, Petersen and von Walter are liable for violations of Section 14(a) of the Exchange Act. The Company believes the allegations are without merit and intends to vigorously defend against these actions. The Company and the parties to this action have tentatively agreed to settle the matter pursuant to which the Company shall make certain governance reforms and pay up to $0.3 million to plaintiff’s counsel. This settlement is subject to negotiation and execution of final settlement documents and court approval. If this process does not succeed, the Company is prepared to continue the full defense of this action. The Company and its codefendants denied, and continue to deny, that these allegations have any merit.

Investor Contract Action—On September 20, 2021, Sabby Volatility Warrant Master Fund Ltd. (the “Investor”) sued the Company in the Supreme Court of the State of New York, New York County, alleging that the Company breached the Securities Purchase Agreement, dated June 10, 2021 (the “Purchase Agreement”), pursuant to which the Investor purchased 400,000 shares of the Company’s common stock, for an aggregate price of approximately $6.0 million. The Investor contended that certain of the representations and warranties made by the Company in the Purchase Agreement concerning its financial condition and the accuracy of its prior disclosures were untrue and that the Company breached the Purchase Agreement’s anti-dilution and use-of-proceeds covenants on both August 9, 2021 and September 23, 2021, when the Company resolved certain defaults with High Trail. The parties reached a settlement agreement for $1.6 million. In this action, the Company denied, and it continues to deny, the Investor’s allegations, and the settlement agreement contains no admission of wrongdoing; the Company nevertheless determined that a resolution was warranted to minimize the costs and risks of ongoing litigation. The Company recorded a $1.6 million expense in general and administrative expenses on the condensed consolidated statement of operations for the three months ended September 30, 2022.

Mueller Action—In October 2021, the Company received a class action notification and pre-lawsuit demand letter demanding corrective action with respect to the marketing, advertising and labeling of certain products under the Mueller Austria brand (the “Mueller Action”). In April 2022, the parties reached an agreement in principle to resolve this potential action for $0.5 million in cash and $0.3 million worth of coupons, which the Company accrued $0.8 million in the three months ended March 31, 2022, subject to negotiation and the execution of final settlement documents and court approval. If that process does not succeed, the Company is prepared to continue the full defense of this action.

Sentia Wellness Action—On June 7, 2022, Sentia Wellness Inc. (“Sentia”) filed an action in Multnomah County, Oregon against Boris Jordan; Measure 8 Ventures, LP; Gron Ventures Fund I, LP; Zola Global Investors Ltd.; Anson Advisors Inc.; AC Anson Investments Ltd.; Anson Investments Master Fund LP; Anson Opportunities Master Fund LP; Serendipity SPC -Trimble Fund SP; Lapid Us Investments LLC; Hadron Healthcare and Consumer Special Opportunities Master Fund; Alliance Global Partners LLC; Sunny Puri; Juan Martinez; Peter Clateman; Wilder Ramsey; Gregory Crowe; Igor Gimelshtein; Tarik Ouass; Andrea Oriani; Marco D’attanseo; Afzal Hasan; and the Company. Sentia asserts claims for breach of fiduciary duty, breach of duty of good faith and fair dealing, intentional interference with prospective economic relations, intentional interference with contractual relationship, negligent misrepresentation, and unjust enrichment against various of these defendants, based on the allegation that Sentia’s debt holders conspired to take control of Sentia and direct its resources and acquisition efforts to the debt holders’ individual financial interests. Sentia alleges that Aterian—then known as Mohawk—contemplated a partial acquisition of Sentia that played some role in these events. The Company believes this to be a nuisance lawsuit and that it has been improperly named in such action. The Company filed a motion to dismiss the pleadings with the Court on September 12, 2022 and the Company filed a brief in support of this motion October 25, 2022. Regardless, the Company intends to vigorously defend against this action. Nevertheless, the outcome of this legal proceeding remains uncertain. Based on information available to the Company at present, the Company cannot reasonably estimate a range of loss for this action.

Earn-out Payment Dispute—On February 24, 2022, the Company received a notice disputing the Company’s calculation of the earn-out payment to be paid to Josef Eitan and Ran Nir pursuant to the Stock Purchase Agreement (the “PPD Stock Purchase Agreement”), dated as of May 5, 2021, by and among the Company, Truweo, LLC, Photo Paper Direct Ltd, Josef Eitan and Ran Nir. The Company is in discussions with representatives of Mr. Eitan and Mr. Nir, who believe they are entitled to the full earnout under the terms of the PPD Stock Purchase Agreement, whereas the Company believes they are not. Mr. Eitan and Mr. Nir filed a motion to compel

arbitration in the Southern District of New York on September 14, 2022. The Company filed its motion to oppose such motion on October 28, 2022, believes its calculations are accurate and intends to vigorously defend itself.

Leases—There were no new significant leases or embedded leases identified with the adoption of the lease accounting standard described in Note 2. The Company’s minimum lease liabilities has not changed significantly during the nine months ended September 30, 2022.

Seller Note—On March 22, 2022, the Company entered into a settlement agreement with Truweo, pursuant to which the Company satisfied the outstanding seller note for 292,887 shares and recorded $2.0 million gain on extinguishment of debt on the condensed consolidated statement of operations for the three months ended March 31, 2022.

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended			9 Months Ended		12 Months Ended
	Sep. 30, 2022	Mar. 31, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021	Dec. 31, 2021
OPERATING ACTIVITIES:
Net loss				$ (175,987)	$ (229,415)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization				5,763	4,757
Provision for sales returns				134	398
Amortization of deferred financing costs and debt discounts				321	7,730
Issuance of common stock				43
Stock-based compensation				11,854	21,330
Gain from increase of contingent earn-out liability fair value	$ (774)		$ (4,245)	(5,240)	(11,949)
Loss in connection with the change in warrant fair value	(5,528)		(8,134)	2,365	26,455
Loss from extinguishment		$ (2,000)	106,991		136,763	$ 138,900
Loss from embedded derivative related to term loan					3,254
Loss on initial issuance of warrant					20,147
Gain in connection with settlement of note payable				(2,012)
Loss on initial issuance of equity	12,834			18,669
Impairment loss on goodwill	90,921	29,000		119,941
Impairment loss on intangibles	3,118			3,118
Allowance for doubtful accounts and other				219	4,597
Changes in assets and liabilities:
Accounts receivable				5,326	(3,765)
Inventory				2,588	(27,531)
Prepaid and other current assets				3,351	(7,219)
Accounts payable, accrued and other liabilities				(9,994)	13,999
Cash used in operating activities				(19,541)	(40,449)
INVESTING ACTIVITIES:
Purchase of fixed assets				(29)	(14)
Cash used in investing activities				(29)	(44,887)
FINANCING ACTIVITIES:
Proceeds from warrant exercise					9,051
Proceeds from cancellation of warrant					16,957
Proceeds from equity offering, net of issuance costs					36,735
Proceeds from equity offering				27,007	8,749
Repayments on note payable to Smash				(2,868)	(9,254)
Borrowings from MidCap credit facility				107,678	14,630
Repayments for MidCap credit facility				(116,924)	(28,274)
Deferred financing costs from MidCap credit facility					(151)
Repayments for High Trail December 2020 Note and February 2021 Note					(59,500)
Payment for squatty earn-out				(3,983)	(3,988)
Insurance obligation payments				(1,778)	(2,329)
Insurance financing proceeds				2,099	2,424
Cash provided by financing activities				11,231	95,272
EFFECT OF EXCHANGE RATE ON CASH				(936)	(434)
NET CHANGE IN CASH AND RESTRICTED CASH FOR PERIOD				(9,275)	9,502
CASH AND RESTRICTED CASH AT BEGINNING OF PERIOD		$ 38,315		38,315	30,097	30,097
CASH AND RESTRICTED CASH AT END OF PERIOD	29,040		39,599	29,040	39,599	38,315
RECONCILIATION OF CASH AND RESTRICTED CASH
CASH	25,997		37,470	25,997	37,470
RESTRICTED CASH—Prepaid and other assets	2,914		2,000	2,914	2,000
RESTRICTED CASH—Other non-current assets	129		129	129	129
CASH AND RESTRICTED CASH AT END OF PERIOD	$ 29,040		$ 39,599	29,040	39,599	$ 38,315
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest				1,409	4,989
Cash paid for taxes				58	41
Non-cash consideration paid to contractors				1,137	4,032
Modification of warrants between equity and liability					75,826
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Original issue discount					2,475
Fair value of contingent consideration					20,971
Discount of debt relating to warrants issuance					50,695
Notes payable related to acquisitions					16,550
Issuance of common stock - debt repayment					125,562
Issuance of common stock related to exercise of warrants				767
Fair value of warrants issued in connection with equity offering				18,982
Issuance of Common Stock				43
Exercise of prefunded warrants				$ 15,039
High Trail December2020 Note And February2021 Term Loan
Adjustments to reconcile net loss to net cash used in operating activities:
Loss from extinguishment					28,240
High Trail February 2021 Note and Warrants
FINANCING ACTIVITIES:
Borrowings					14,025
High Trail February 2021 Note
FINANCING ACTIVITIES:
Debt issuance costs					(1,462)
High Trail April 2021 Note
FINANCING ACTIVITIES:
Borrowings					10,139
Debt issuance costs					(2,202)
High Trail April 2021 Note and Warrants
FINANCING ACTIVITIES:
Borrowings					110,000
High Trail April 2021 Term Loan
Adjustments to reconcile net loss to net cash used in operating activities:
Loss from extinguishment					106,991
Revolving Credit Facility
Adjustments to reconcile net loss to net cash used in operating activities:
Loss from extinguishment					1,532
Healing Solutions LLC
INVESTING ACTIVITIES:
Purchase of assets					(15,250)
Photo Paper Direct Ltd.
INVESTING ACTIVITIES:
Purchase of Photo Paper Direct, net of cash acquired					(10,583)
Squatty Potty, LLC
INVESTING ACTIVITIES:
Purchase of assets					(19,040)
Healing Solutions and Photo Paper Direct
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Issuance of common stock in connection with Healing Solutions and Photo Paper Direct acquisitions					$ 50,529

Net Loss Per Share

9 Months Ended

Sep. 30, 2022

Earnings Per Share [Abstract]

Net Loss Per Share

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 September 30,						Nine Months Ended September 30,
	2021			2022			2021			2022
Net loss	$	(110,556	)	$	(116,902	)	$	(229,415	)	$	(175,987	)
Weighted-average number of shares outstanding used in computing net loss per share, basic and diluted		35,359,999			64,648,650			30,383,375			63,397,196
Net loss per share, basic and diluted	$	(3.13	)	$	(1.81	)	$	(7.55	)	$	(2.78	)

Anti-dilutive shares excluded from computation of net loss per share (in shares)		4,822,387			13,054,457			5,168,431			9,238,156

Net Loss Per Share (Tables)

9 Months Ended

Sep. 30, 2022

Earnings Per Share [Abstract]

Schedule of Basic and Diluted Net Loss per Share

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 September 30,						Nine Months Ended September 30,
	2021			2022			2021			2022
Net loss	$	(110,556	)	$	(116,902	)	$	(229,415	)	$	(175,987	)
Weighted-average number of shares outstanding used in computing net loss per share, basic and diluted		35,359,999			64,648,650			30,383,375			63,397,196
Net loss per share, basic and diluted	$	(3.13	)	$	(1.81	)	$	(7.55	)	$	(2.78	)

Anti-dilutive shares excluded from computation of net loss per share (in shares)		4,822,387			13,054,457			5,168,431			9,238,156

Summary of Significant Accounting Policies - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Mar. 31, 2022	Sep. 30, 2022	Dec. 31, 2021
Significant Accounting Policies [Line Items]
Impairment loss on goodwill	$ 90,921	$ 29,000	$ 119,941
Right-of-use assets	$ 700		$ 700
Operating Lease, Right-of-Use Asset, Statement of Financial Position [Extensible Enumeration]	Prepaid and other current assets		Prepaid and other current assets
Lease liabilities	$ 700		$ 700
Operating Lease, Liability, Current, Statement of Financial Position [Extensible Enumeration]	Accrued Expenses And Other Liabilities Current		Accrued Expenses And Other Liabilities Current
Current right-of-use assets	$ 241		$ 241
Current lease liabilities	200		200
Non-current right-of-use assets	100		100
Non-current lease liabilities	100		100
Intangible Impairments	3,118		3,118
Other Noncurrent Assets
Significant Accounting Policies [Line Items]
Restricted cash deposit associated with credit facility	100		100	$ 100
Prepaid Expenses and Other Current Assets
Significant Accounting Policies [Line Items]
Current right-of-use assets	200		200
Prepaid Expenses and Other Current Assets \| MidCap Credit Facility
Significant Accounting Policies [Line Items]
Restricted cash deposit associated with credit facility	900		900	5,900
Prepaid Expenses and Other Current Assets \| Letter of Credit
Significant Accounting Policies [Line Items]
Restricted cash deposit associated with credit facility	$ 2,000		$ 2,000	$ 2,000

Net Loss Per Share - Schedule of Basic and Diluted Net Loss per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Earnings Per Share [Abstract]
Net loss	$ (116,902)	$ (110,556)	$ (175,987)	$ (229,415)
Weighted-average number of shares outstanding used in computing net loss per share, basic	64,648,650	35,359,999	63,397,196	30,383,375
Weighted-average number of shares outstanding used in computing net loss per share, diluted	64,648,650	35,359,999	63,397,196	30,383,375
Net loss per share, basic	$ (1.81)	$ (3.13)	$ (2.78)	$ (7.55)
Net loss per share, diluted	$ (1.81)	$ (3.13)	$ (2.78)	$ (7.55)
Anti-dilutive shares excluded from computation of net loss per share (in shares)	13,054,457	4,822,387	9,238,156	5,168,431

- Definition

The amount of net income (loss) for the period per each share of common stock or unit outstanding during the reporting period.

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-Paragraph 1
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+ Details

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

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+ Details

Acquisition - Allocation of Purchase Price to Assets Acquired and Liabilities Assumed Based on Estimated Fair Values at Acquisition Date (Details) - USD ($) $ in Thousands	May 05, 2021	Feb. 02, 2021
Healing Solutions LLC
Business Acquisition [Line Items]
Cash purchase price		$ 15,280
Shares of common stock issued		39,454
Inventory		5,285
Estimated earnout liability		11,273
Total consideration to be paid		$ 71,292
Squatty Potty, LLC
Business Acquisition [Line Items]
Cash purchase price	$ 19,040
Inventory	1,100
Transition services payments	8,231
Estimated earnout liability	3,502
Total consideration to be paid	30,773
Photo Paper Direct Ltd.
Business Acquisition [Line Items]
Cash purchase price	8,293
Shares of common stock issued	11,075
Working capital adjustment	5,338
Estimated earnout liability	911
Total consideration to be paid	$ 25,617

Acquisition - Preliminary Allocation of Purchase Price to Assets Acquired and Liabilities Assumed Based on Estimated Fair Values at Acquisition Date (Parenthetical) (Details)	Feb. 02, 2021 shares
Healing Solutions LLC
Business Acquisition [Line Items]
Business acquisition shares issued	1,387,759

Acquisition - Summary of Changes in Carrying Value of Estimated Contingent Earn-Out Liabilities (Parenthetical) (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2022 USD ($)
Business Combinations [Abstract]
Business acquisition, earnout payments	$ (3,983)

Inventory - Schedule of Inventory (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Inventory Disclosure [Abstract]
Inventory on-hand	$ 54,267	$ 48,079
Inventory in-transit	6,190	14,966
Inventory	$ 60,457	$ 63,045

Goodwill and Intangibles - Summary of Changes in Goodwill and Intangible Assets (Parenthetical) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Mar. 31, 2022	Sep. 30, 2022
Goodwill And Intangible Assets Disclosure [Abstract]
Impairment loss on goodwill	$ 90,921	$ 29,000	$ 119,941
Intangible impairment charge	$ 3,118		$ 3,118

Stock-Based Compensation - Additional Information (Details) $ in Millions	9 Months Ended
	Sep. 30, 2022 USD ($) shares
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Options exercisable period	10 years
Restricted Stock
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Total unrecognized compensation expense related to unvested options, expects to recognize over estimated weighted average period	2 years 4 months 17 days
Total unrecognized compensation expense related to unvested shares of restricted common stock \| $	$ 22.1
Share-based Compensation Award, Tranche One
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Options vesting period	4 years
Share-based Compensation Award, Tranche One \| Vesting on First Anniversary
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Options vesting percentage	25.00%
Share-based Compensation Award, Tranche One \| Vesting Over Succeeding 36 Months
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Options vesting period	36 months
Options vesting percentage	75.00%
Share-based Compensation Award, Tranche Two
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Options vesting period	3 years
Share-based Compensation Award, Tranche Two \| Vesting on First Anniversary
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Options vesting percentage	33.33%
Share-based Compensation Award, Tranche Two \| Vesting Over Succeeding 24 Months
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Options vesting period	24 months
Options vesting percentage	66.66%
Aterian 2014 Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Shares reserved for future issuance	81,935
2018 Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Shares reserved for future issuance	672,979
2019 Equity Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Shares reserved for future issuance	0
2019 Equity Plan \| Restricted Stock
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Award vesting date	Mar. 14, 2022
Percentage of restricted shares issued and outstanding	70.00%
2022 Inducement Equity Incentive Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Shares reserved for future issuance	1,990,000
Options exercisable period	10 years
Number of shares available for grant	2,700,000
Shares granted in period	710,000

Credit Facility, Term Loans and Warrants - Additional Information (Details)											3 Months Ended		9 Months Ended		12 Months Ended
	Oct. 04, 2022 USD ($) shares	Sep. 29, 2022 USD ($) $ / shares shares	Mar. 22, 2022 USD ($) $ / shares shares	Dec. 31, 2021 USD ($) $ / shares	Dec. 22, 2021 USD ($) $ / shares shares	Sep. 22, 2021 USD ($) TradingDay $ / shares shares	Aug. 09, 2021 USD ($) $ / shares shares	Apr. 08, 2021 USD ($) shares	Feb. 02, 2021 USD ($)	Dec. 01, 2020 USD ($) Installment	Mar. 31, 2022 USD ($)	Sep. 30, 2021 USD ($)	Sep. 30, 2022 USD ($) $ / shares	Sep. 30, 2021 USD ($)	Dec. 31, 2021 USD ($) $ / shares	Sep. 23, 2021 shares	Aug. 11, 2021 USD ($)
Debt Instrument [Line Items]
Warrants to purchase shares \| shares		10,643,034
Loss from extinguishment											$ (2,000,000.0)	$ 106,991,000		$ 136,763,000	$ 138,900,000
Common stock shares issued \| shares							2,666,667
Accounts receivable, net							$ 65,000,000.0
Cash And Cash Equivalents At Carrying Value												$ 37,470,000	$ 25,997,000	37,470,000
Warrants exercise period after resale							60 days
Repaying of term loan														59,500,000
Common stock, par value \| $ / shares				$ 0.0001									$ 0.0001		$ 0.0001
Proceeds from warrant exercise														9,051,000
Gross proceeds from the Registered Direct Offering		$ 20,200,000												$ 36,735,000
Minimum
Debt Instrument [Line Items]
Increase minimum cash threshold covenant							$ 15,000,000.0
Cash And Cash Equivalents At Carrying Value							30,000,000
Maximum
Debt Instrument [Line Items]
Increase minimum cash threshold covenant							30,000,000.0
Restricted Stock Awards
Debt Instrument [Line Items]
Loss from extinguishment								$ 4,100,000
February Warrant, Penny Warrant and Additional Warrant
Debt Instrument [Line Items]
Reclassification from a liability to component of equity													$ 80,000,000.0
Reclassification from a component of equity to liability													$ 21,300,000
MidCap Credit Facility
Debt Instrument [Line Items]
Gross proceeds received					$ 27,600,000
Aggregate principal amount					$ 110,000,000.0
Warrants to purchase shares \| shares					200,000
Credit facility maximum borrowing amount					$ 50,000,000.0			25,000,000.0
Warrants to purchase shares, exercise price \| $ / shares													$ 4.70
Available balance of credit facility				$ 0.0									$ 4,000,000.0		$ 0.0
Debt offset against and expense over the term					3 years
Common stock, par value \| $ / shares					$ 0.0001
Credit facility, interest rate per annum					5.50%
Credit facility, unused capacity, commitment fee percentage					0.50%
Line of credit facility, maximum liquidity requirements during the period					$ 12,500,000
Line of credit facility, maximum liquidity requirements at all other times, cash on hand					$ 15,000,000.0
Line of credit facility, covenant terms													The Credit Agreement minimum liquidity covenant 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, $12.5 million and (b) at all other times, $15.0 million of cash on hand.
Warrants term													10 years
Warrant
Debt Instrument [Line Items]
Initial liability on issuance													$ 19,000,000.0
Warrant liability													6,300,000
Private Placement
Debt Instrument [Line Items]
Gross proceeds received								$ 14,800,000
Securities Purchase Agreement \| Common Stock
Debt Instrument [Line Items]
Warrants to purchase shares \| shares		10,643,034	4,827,242
Number of common shares issued \| shares		10,643,034	6,436,322
Securities Purchase Agreement \| Common Stock \| Subsequent Event
Debt Instrument [Line Items]
Number of common shares issued \| shares	10,643,034
Gross proceeds from the Registered Direct Offering	$ 20.2
Securities Purchase Agreement \| Common Stock Warrant
Debt Instrument [Line Items]
Warrants to purchase shares \| shares			2,260,388
Accrued, Unpaid interest \| $ / shares			$ 2.91
Proceeds from warrant exercise			$ 27,500,000
Expense derived from anticipated fair-value of issuances of equity													$ 12,800,000
Securities Purchase Agreement \| Prefunded Warrants \| Common Stock Warrant
Debt Instrument [Line Items]
Warrants to purchase shares \| shares			3,013,850
Accrued, Unpaid interest \| $ / shares			$ 2.9099
Securities Purchase Agreement \| Accredited Purchasers \| Common Stock
Debt Instrument [Line Items]
Warrants to purchase shares \| shares		10,526,368
Accrued, Unpaid interest \| $ / shares		$ 1.90
Number of common shares issued \| shares		10,526,368
Securities Purchase Agreement \| Insiders [Member]
Debt Instrument [Line Items]
Number of common shares issued \| shares		116,666
Securities Purchase Agreement \| Insiders [Member] \| Common Stock
Debt Instrument [Line Items]
Warrants to purchase shares \| shares		116,666
Accrued, Unpaid interest \| $ / shares		$ 2.10
April Letter Agreement
Debt Instrument [Line Items]
Common stock shares issued \| shares								130,000
SPA Amendment
Debt Instrument [Line Items]
Warrant amendment description													The Warrant Amendments amended the February Warrant, the Penny Warrant and the Additional Warrant to amend the definition of “Black Scholes Value” in each warrant to provide that the expected volatility used in the Black Scholes Value shall equal 100% instead of the greater of 100% and the 100-day volatility obtained from the HVT function on Bloomberg (determined utilizing a 365-day annualization factor) as of the trading day immediately following the public announcement of a Change of Control (as defined in each of the warrants), or, if the Change of Control is not publicly announced, the date the Change of Control is consummated.
High Trail Loan December 2020 Note
Debt Instrument [Line Items]
Short-term Debt, Refinanced, Amount										$ 15,000,000.0
Gross proceeds received										38,000,000.0
Aggregate principal amount										$ 43,000,000.0
Number of repayment installments \| Installment										24
Line of credit facility, frequency of payments										monthly
Cash payments										$ 1,800,000
High Trail February 2021 Note \| 0% Coupon Senior Secured Promissory Note \| Investor \| Securities Purchase Agreement
Debt Instrument [Line Items]
Aggregate principal amount									$ 16,500,000
Debt Instrument Interest Rate Stated Percentage									0.00%
Maturity date									Feb. 01, 2023
High Trail Loans \| Securities Purchase Agreement
Debt Instrument [Line Items]
Cash payments								$ 57,700,000
High Trail Loans \| Securities Purchase Agreement \| Common Stock
Debt Instrument [Line Items]
Warrants to purchase shares \| shares								2,259,166
High Trail Loans \| Senior Secured Promissory Notes \| Securities Purchase Agreement \| Private Placement
Debt Instrument [Line Items]
Debt Instrument Interest Rate Stated Percentage								8.00%
Maturity date								Apr. 08, 2024
Aggregate principal amount								$ 110,000,000.0
High Trail April 2021 Note
Debt Instrument [Line Items]
Loss from extinguishment								$ 28,200,000
Event of default description													On August 9, 2021, pursuant to those certain Letter Agreements entered into between the Company and High Trail with respect to each of the April 2021 Notes (collectively, the “August Letter Agreements”), High Trail notified the Company that High Trail declared an event of default under the April 2021 Notes as a result of the Company’s Adjusted EBITDA (as defined in the April 2021 Notes) not being equal to at least $12 million for the 12 month period ended June 30, 2021 and further notified the Company that High Trail immediately accelerated a total of $18.7 million of the principal amount of the April 2021 Notes, requiring the Company to immediately pay $21.5 million (such amount equal to 115% of the principal amount that was accelerated, as required under the terms of the April 2021 Notes, plus $0.3 million of accrued but unpaid interest on the principal amount that was accelerated) (the “Current Event of Default Acceleration Amount”).
Accelerated principal amount							18,700,000
Debt instrument redemption amount							$ 21,500,000
Debt instrument redemption price percentage							115.00%
Accrued, Unpaid interest							$ 300,000
Base percentage used to calculate current event of default acceleration							80
Description of current event of default acceleration payment													Pursuant to the August Letter Agreements, the Company agreed, among other things, to pay the Current Event of Default Acceleration Amount in cash by August 9, 2021 and that any portion not paid in cash would be paid in shares of the Company’s common stock under the terms of the April 2021 Notes, with the number of shares issuable equal to the unpaid Current Event of Default Acceleration Amount divided by 80% of the lesser of (i) the Daily VWAP (as defined in the April 2021 Notes) on August 9, 2021 and (ii) the average of the lowest two (2) Daily VWAPs during the ten (10) day VWAP trading period ending on August 9, 2021.
High Trail April 2021 Note \| Minimum
Debt Instrument [Line Items]
Debt instrument default amount							$ 12,000,000
High Trail April 2021 Note \| Letter Agreements
Debt Instrument [Line Items]
Base percentage used to calculate current event of default acceleration							0.80
Payment in cash of current event of default acceleration amount							$ 10,100,000
Payment in shares of current event of default acceleration amount							$ 11,700,000										$ 11,700,000
Payment in shares of current event of default acceleration shares \| shares							2,841,251
Accrued, Unpaid interest \| $ / shares							$ 4.1007
High Trail
Debt Instrument [Line Items]
Maturity date						Apr. 01, 2023
Loss from extinguishment				2,500,000											2,500,000
Accelerated principal amount						$ 66,300,000
Debt instrument redemption amount						$ 76,900,000
Debt instrument redemption price percentage						115.00%
Accrued, Unpaid interest						$ 300,000
Base percentage used to calculate current event of default acceleration						0.80
Warrant exercisable to common stock percentage						200.00%
Warrants consecutive trading days \| TradingDay						20
Warrants to purchase shares, exercise price \| $ / shares						$ 0.01
Common stock issued subject to satisfy obligation to repay acceleration amount \| shares						3,474,814										5,838,096
Notes extinguished in exchange for debt repayment						$ 25,000,000.0
Repaying of term loan				25,000,000.0
High Trail \| High Trail Debt Repayment
Debt Instrument [Line Items]
Loss from extinguishment															107,000,000.0
High Trail \| High Trail April 2021 Notes Repayment
Debt Instrument [Line Items]
Loss from extinguishment															28,200,000
High Trail \| High Trail Term Loan
Debt Instrument [Line Items]
Available balance of credit facility				$ 25,000,000.0											25,000,000.0
High Trail \| Line of Credit
Debt Instrument [Line Items]
Loss from extinguishment															$ 1,500,000
High Trail \| Minimum
Debt Instrument [Line Items]
Increase minimum cash threshold covenant						$ 15,000,000.0
Beneficial ownership limit, percentage						9.99%
High Trail \| Maximum
Debt Instrument [Line Items]
Increase minimum cash threshold covenant						$ 30,000,000.0

Goodwill and Intangibles - Summary of Estimated Aggregate Amortization Expense of Intangible Assets (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Goodwill And Intangible Assets Disclosure [Abstract]
Remainder of 2022	$ 1,701
2023	6,802
2024	6,781
2025	6,740
2026	6,740
Thereafter	27,501
Total	$ 56,265	$ 64,955

Credit Facility, Term Loans and Warrants (Tables)

9 Months Ended

Sep. 30, 2022

Debt Disclosure [Abstract]

Schedule of Credit Facility

The Company’s credit facility consisted of the following as of December 31, 2021 and September 30, 2022:


	December 31, 2021			September 30, 2022
	(in thousands)
MidCap Credit Facility – December 2021	$	34,119		$	24,873
Less: deferred debt issuance costs		(691	)		(518	)
Less: discount associated with issuance of warrants		(583	)		(436	)
Total MidCap Credit Facility – December 2021	$	32,845		$	23,919

Schedule of Interest Expense, Net

Interest expense, net consisted of the following for the three and nine months ended September 30, 2021 and 2022:


	Three Months Ended					Nine Months Ended
	September 30, 2021			September 30, 2022		September 30, 2021			September 30, 2022
	(in thousands)					(in thousands)
Interest expense	$	2,919		$	904	$	12,470		$	2,043
Interest income		(133	)		—		(593	)		—
Total Interest expense, net	$	2,786		$	904	$	11,877		$	2,043

Organization and Description of Business - Additional Information (Details) - USD ($) $ in Thousands		1 Months Ended	9 Months Ended
	Sep. 29, 2022	Dec. 31, 2021	Sep. 30, 2022	Sep. 30, 2021
Organization And Description Of Business [Line Items]
Going concern, cash and cash equivalents			$ 26,000
Going concern, accumulated deficit			605,000
Going concern, net loss			176,000
Going concern, net cash used in operating activities			19,500
Issuance of common stock, shares	10,643,034
Warrants to purchase shares	10,643,034
Gross proceeds from the Registered Direct Offering	$ 20,200			$ 36,735
Capital raising before fees payable and other offering expenses			$ 20,200
Asset Backed Credit Agreement
Organization And Description Of Business [Line Items]
Additional increase in borrowing amount		$ 50,000
Line of credit facility, minimum liquidity requirements during the period		12,500
Line of credit facility, minimum liquidity requirements at all other times		15,000
Line of credit facility, covenant terms			The MidCap Credit Facility contains a financial covenant that requires the Company to maintain a minimum unrestricted cash balance or minimum borrowing availability 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 thereafter. At its election, the Company may elect to comply with an alternative financial covenant that would require the Company to maintain a minimum borrowing availability under the MidCap Credit Facility of $10.0 million at all times. The Company does not anticipate electing the alternative financial covenant over the next twelve months and was in compliance with the minimum liquidity covenant as of the date these condensed consolidated financial statements were issued.
Line of credit facility, minimum borrowing		$ 10,000

Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2022

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation—The accompanying unaudited condensed consolidated financial statements have been prepared by the Company in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial reporting and as required by Rule 10-01 of Regulation S-X. Certain information and note disclosures normally included in the annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. The condensed consolidated balance sheet as of December 31, 2021 included herein was derived from the Company’s audited consolidated financial statements as of that date. As such, the information included in this Quarterly Report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and the related notes thereto as of and for the year ended December 31, 2021, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 16, 2022 (the “Annual Report”).

In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of items of a normal and recurring nature) necessary to present fairly the financial position as of September 30, 2022, the results of operations for the three and nine months ended September 30, 2021 and 2022, the statements of stockholders’ equity for the three and the nine months ended September 30, 2021 and 2022, and cash flows for the nine months ended September 30, 2021 and 2022. The results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the full fiscal year.

Use of Estimates

Use of Estimates—Preparation of financial statements in conformity with 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 financial statements and the reported amounts of revenues and expenses during the reporting period covered by the 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

Principles of Consolidation— The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All inter-company balances and transactions have been eliminated in consolidation.

Restricted Cash

Restricted Cash— As of December 31, 2021, the Company has classified the following as restricted cash: $0.1 million related to its Chinese subsidiary within “other non-current assets” on the condensed consolidated balance sheets, $2.0 million related to a letter of credit and $5.9 million for cash sweep accounts related to the MidCap Credit Facility within “prepaid and other current assets” on the condensed consolidated balance sheets. As of September 30, 2022, the Company has classified the following as restricted cash: $0.1 million related to its Chinese subsidiary within “other non-current assets” on the condensed consolidated balance sheets, $2.0 million related to a letter of credit and $0.9 million for cash sweep accounts related to the MidCap Credit Facility within “prepaid and other current assets” on the condensed consolidated balance sheets.

Revenue Recognition

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.

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.

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


	Three Months Ended September 30, 2021
	(in thousands)
	Direct		Wholesale/Other		Total
North America	$	64,920	$	2,046	$	66,966
Other		1,155		—		1,155
Total net revenue	$	66,075	$	2,046	$	68,121

	Three Months Ended September 30, 2022
	(in thousands)
	Direct		Wholesale/Other		Total
North America	$	62,818	$	2,530	$	65,348
Other		978		—		978
Total net revenue	$	63,796	$	2,530	$	66,326


	Nine Months Ended September 30, 2021
	(in thousands)
	Direct		Wholesale/Other		Total
North America	$	178,218	$	4,138	$	182,356
Other		2,090		—		2,090
Total net revenue	$	180,308	$	4,138	$	184,446

	Nine Months Ended September 30, 2022
	(in thousands)
	Direct		Wholesale/Other		Total
North America	$	158,399	$	4,415	$	162,814
Other		3,454		—		3,454
Total net revenue	$	161,853	$	4,415	$	166,268

Net Revenue by Product Categories. The following table sets forth the Company’s net revenue disaggregated by product categories:


	Three Months Ended September 30,
	2021		2022
	(in thousands)
Heating, cooling and air quality	$	29,988	$	27,179
Kitchen appliances		8,084		10,504
Health and beauty		1,273		3,661
Personal protective equipment		1,298		516
Cookware, kitchen tools and gadgets		5,221		5,128
Home office		4,190		3,045
Housewares		10,418		8,787
Essential oils and related accessories		5,722		6,262
Other		1,927		1,244
Total net revenue	$	68,121	$	66,326


	Nine Months Ended September 30,
	2021		2022
	(in thousands)
Heating, cooling and air quality	$	62,968	$	56,835
Kitchen appliances		29,208		27,438
Health and beauty		6,736		12,452
Personal protective equipment		2,957		1,565
Cookware, kitchen tools and gadgets		16,867		14,229
Home office		7,710		10,077
Housewares		26,709		23,478
Essential oils and related accessories		23,017		17,102
Other		8,274		3,092
Total net revenue	$	184,446	$	166,268

Goodwill

Goodwill—The Company operates under one business component which is the same as its reporting unit based on the guidance in ASC Topic 350-20.

We assess goodwill for impairment at least annually during the fourth quarter and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. During 2022, we had events and conditions in the first quarter and third quarter that required an interim assessment of goodwill.

We evaluated current economic conditions during the third quarter of 2022, including the impact of the Federal Reserve further increasing the risk-free interest rate, as well as the inflationary pressure on product and labor costs and operational impacts attributable to continued global supply chain disruptions. We believe that these conditions were factors in our market capitalization falling below the book value of net assets as of September 30, 2022. Accordingly, we concluded a triggering event had occurred and performed interim goodwill impairment analyses.

The Company engaged a third-party valuation specialist to assist management in performing an interim goodwill impairment test in September 2022. For goodwill, impairment testing is based upon the best information available using a combination of the discounted cash flow method (a form of the income approach) and the guideline public company method, while also taking into consideration our market capitalization. Under the income approach, or discounted cash flow method, the significant assumptions used are projected net revenue, projected contribution margin (product operating margin before fixed costs), fixed costs and terminal growth rates. Projected net revenue, projected contribution margin and terminal growth rates were determined to be significant assumptions because they are the three primary drivers of the projected cash flows in the discounted cash flow fair value model. Under the guideline public company method, significant assumptions relate to the selection of appropriate guideline companies, the valuation multiples used in the market analysis and the Company’s market capitalization.

Due to the sustained decline in the Company’s stock price leading up to and subsequent to September 30, 2022, the Company used the market capitalization as of September 30, 2022 to determine the fair value of the reporting unit. As a result, the Company has determined that the goodwill was fully impaired as of September 30, 2022 and recorded a goodwill impairment charge of $90.9 million in the three months ended September 30, 2022. The Company also assessed its goodwill during the three months ended March 31, 2022 and previously recorded an impairment charge of $29.0 million during the three months ended March 31, 2022. For the nine months ended September 30, 2022, the total goodwill impairment was approximately $119.9 million.

Intangibles

Intangibles—The Company reviews long-lived intangible 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.

Certain asset groups experienced a significant decrease in sales and contribution margin through September 30, 2022. This was considered an interim triggering event for the three months ended September 30, 2022. The company assessed the recoverability of the related intangible assets by using level 3 inputs and comparing carrying value of an asset group to the net undiscounted cash flows expected to be generated to determine if carrying value is not recoverable. The recoverability test indicated that certain definite-lived trademark intangible assets were impaired which resulted in an impairment charge. The Company recorded an intangible impairment charge of $3.1 million in the three months ended September 30, 2022 within impairment loss on intangibles on the condensed consolidated statement of operations.

Fair Value of Financial Instruments

Fair Value of Financial Instruments—The Company’s financial instruments, including net accounts receivable, accounts payable, and accrued and other current liabilities are carried at historical cost. At September 30, 2022, 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 December 31, 2021 and September 30, 2022 and the carrying amount approximates fair value as the stated interest rate approximates market rates currently available to the Company. The Company considers the inputs utilized to determine the fair value of the borrowings to be Level 2 inputs.

The fair value of the prefunded warrants and stock purchase warrants issued in connection with he Company’s common stock offering on March 1, 2022 were measured using the Black-Scholes model. Due to the complexity of the warrants issued, the Company uses an outside expert to assist in providing the mark to market fair valuation of the liabilities over the reporting periods in which the original agreement was in effect. Inputs used to determine 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 prefunded warrants and 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 prefunded warrants and the stock purchase warrants should be classified as liability with subsequent remeasurement as long as such warrants continue to be classified as liabilities.

The fair value of the contingent consideration related to business combinations is estimated using a probability-adjusted discounted cash flow model. These fair value measurements are based on significant inputs not observable in the market. The key internally developed assumptions used in these models are discount rates and the probabilities assigned to the milestones to be achieved. The company remeasures the fair value of the contingent consideration at each reporting period, and any changes in fair value resulting from either the passage of time or events occurring after the acquisition date, such as changes in discount rates, or in the expectations of achieving the performance targets, are recorded within “change in fair value of contingent earn-out liabilities” on the statement of operations.

Assets and liabilities recorded at fair value on a recurring basis in the 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.

The following table summarizes the fair value of the Company’s financial assets that are measured at fair value as of December 31, 2021 and September 30, 2022 (in thousands):


	December 31, 2021
	Fair Value Measurement Category
	Level 1		Level 2		Level 3

Assets:
Cash and cash equivalents	$	30,317	$	—	$	—
Restricted cash		7,998		—		—
Liabilities:
Estimated fair value of contingent earn-out considerations		—		—		9,223


	September 30, 2022
	Fair Value Measurement Category
	Level 1		Level 2		Level 3

Assets:
Cash and cash equivalents	$	25,997	$	—	$	—
Restricted cash		3,043		—		—
Liabilities:
Fair value of contingent earn-out considerations		—		—		—
Fair value of warrant liability		—		—		6,308

A summary of the activity of the Level 3 liabilities carried at fair value on a recurring basis for the nine months ended September 30, 2022 is as follows (in thousands):


Balance at December 31, 2021	$	9,223
Change in fair value of contingent earn-out liability		(5,240	)
Payment of contingent earn-out liability		(3,983	)
Balance at September 30, 2022	$	—

Balance at December 31, 2021	$	—
Issuance of warrants in connection with offering		18,982
Change in fair value of warrant liability		2,365
Exercise of prefunded warrants		(15,039	)
Balance at September 30, 2022	$	6,308

Recent Accounting Pronouncements

Adopted Accounting Standards

In February 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842) (“ASC 842”), which was amended by subsequent ASUs, to enhance the comparability and usefulness of financial reporting around leasing activity. The new standard supersedes the existing authoritative literature for lease accounting under ASC 840, with a focus on applying a “right-of-use model.” The guidance for leases under ASC 842 results in a right-of-use asset (“ROU asset”) and lease liability being reported on the balance sheet for leases with an original lease term greater than twelve months. ASC 842 is effective for the Company for annual reporting periods beginning after December 15, 2021, including interim periods within that fiscal year. The Company elected the standard on January 1, 2022 using the alternative modified retrospective transition approach in accordance with ASU 2018-11, Leases (Topic 842): Targeted Improvements. The cumulative effect of the transition adjustments was recognized as of the date of adoption.

Under the alternative modified retrospective transition approach, the reported results for 2022 reflect the application of ASC 842 guidance, whereas comparative periods and the respective disclosures prior to the adoption of ASC 842 are presented using the legacy guidance of ASC 840. The Company recorded an aggregate of approximately $0.7 million of right-of-use assets and a corresponding $0.7 million of lease liabilities upon adoption of this standard. Current Right-of-use assets of $0.2 million and corresponding lease liabilities are included in the prepaid and other current assets and accrued and other current liabilities line item respectively on the condensed consolidated balance sheets. Non-current Right-of-Use Assets of $0.1 million and corresponding lease liabilities are included in the prepaid and other non-current assets and accrued and other non-current liabilities line item respectively on the condensed consolidated balance sheets. The adoption of the standard did not have a material impact on the condensed consolidated statements of operations, or condensed consolidated statements of cash flows.

The Company has elected to apply the package of practical expedients requiring no reassessment of whether any expired or existing contracts are or contain leases, the lease classification of any expired or existing leases, or the capitalization of initial direct costs for any existing leases. Additionally, the Company elected the practical expedient that permit the exclusions of leases considered to be short-term.

In August 2018, the FASB issued ASU No. 2018-15, “Customer’s Accounting for Implementation Cost Incurred in a Cloud Computing Arrangement That Is a Service Contract”. Under the new guidance, customers apply the same criteria for capitalizing implementation costs as they would for an arrangement that has a software license. This will result in certain implementation costs being capitalized; the associated amortization charge will, however, be recorded as an operating expense. Under the previous guidance, costs incurred when implementing a cloud computing arrangement deemed to be a service contract were recorded as an operating expense when incurred. The new guidance is effective for public business entities in fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. For all other entities, the amendments in this update are effective for annual reporting periods beginning after December 15, 2020, and interim periods within annual periods beginning after December 15, 2021. The new guidance was adopted on December 15, 2021 with no material impact on the Company’s condensed consolidated financial statements.

In August 2020, the FASB issued ASU No. 2020-06, “Debt—Debt with Conversion and Other Options (Topic 470) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Topic 814): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”). ASU 2020-06 eliminates the number of accounting models used to account for convertible debt instruments and convertible preferred stock. The update also amends the disclosure requirements for convertible instruments and EPS in an effort to increase financial reporting transparency. ASU 2020-06 will be effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted. The new guidance was early adopted on January 1, 2022 with no material impact on the Company’s condensed consolidated financial statements.

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13: Financial Instruments – Credit Losses (Topic 326). This ASU requires the use of an expected loss model for certain types of financial instruments and requires consideration of a broader range of reasonable and supportable information to calculate credit loss estimates. For trade receivables, loans and held-to-maturity debt securities, an estimate of lifetime expected credit losses is required. For available-for-sale debt securities, an allowance for credit losses will be required rather than a reduction to the carrying value of the asset. In July 2019, the FASB delayed the effective date for this ASU for private companies (including emerging growth companies) and will be effective for annual reporting periods beginning after December 15, 2022, with early adoption permitted. While the Company has not completed its evaluation of the impact of adoption of this standard, the Company does not expect it to have a material impact on its condensed consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Income Taxes. This ASU provides for certain updates to reduce complexity in accounting for income taxes, including the utilization of the incremental approach for intra-period tax allocation, among others. This standard is effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. While the Company has not completed its evaluation of the impact of adoption of this standard, the Company does not expect it to have a material impact on its condensed consolidated financial statements and will adopt it as of January 2023.

In October 2020, the FASB issued ASU 2020-10, Codification Improvements. The amendments in this Update represent changes to clarify the Codification, correct unintended application of guidance, or make minor improvements to the Codification that are not expected to have a significant effect on current accounting practice or create a significant administrative cost to most entities. The amendments are effective for annual periods beginning after December 15, 2020, for public business entities. For all other entities, the amendments are effective for annual periods beginning after December 15, 2021, and interim periods within annual periods beginning after December 15, 2022. While the Company has not completed its evaluation of the impact of adoption of this standard, the Company does not expect it to have a material impact on its condensed consolidated financial statements and will adopt it as of January 2023.

In September 2022, the FASB issued ASU 2022-04, Disclosures for Supplier Finance Arrangements. The amendments in this Update enhances the transparency of supplier finance programs. This standard is effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022 except for amendment on rollforward information, which is effective for fiscal years beginning after December 15, 2023. Early adoption is permitted. While the Company has not completed its evaluation of the impact of adoption of this standard, the Company does not expect it to have a material impact on its condensed consolidated financial statements and will adopt it as of January 2023.

Accrued and Other Current Liabilities

9 Months Ended

Sep. 30, 2022

Accrued Liabilities And Other Liabilities [Abstract]

Accrued and Other Current Liabilities

ACCRUED AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consisted of the following as of December 31, 2021 and September 30, 2022:


	December 31, 2021		September 30, 2022
	(in thousands)
Accrued compensation costs	$	162	$	199
Accrued professional fees and consultants		331		305
Accrued logistics costs		578		1,058
Product related accruals		2,984		1,516
Sales tax payable		678		1,251
Sales return reserve		590		724
Accrued fulfillment expense		744		949
Accrued insurance		967		1,680
Federal payroll taxes payable		4,449		1,416
Accrued interest payable		338		183
Accrued legal		375		3,191
Right-of-Use-Liabilities (1)		—		252
All other accruals		5,425		1,809
Accrued and other current liabilities	$	17,621	$	14,533

(1)

On January 1, 2022, the Company recorded an aggregate of approximately $0.7 million of right-of-use assets and corresponding $0.7 million of lease liabilities upon adoption of ASC 842. Current Right-of-Use Liabilities of $0.2 million and corresponding lease liabilities are included in the accrued and other current liabilities line item respectively on the condensed consolidated balance sheets as of September 30, 2022. See the discussion for the adoption of the lease accounting standard described in Note 2.

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.

Summary of Significant Accounting Policies - Summary of Financial Assets Measured at Fair Value (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Level 1 \| Cash and Cash Equivalents
Assets:
Assets	$ 25,997	$ 30,317
Level 1 \| Restricted Cash
Assets:
Assets	3,043	7,998
Level 3 \| Estimated fair value of contingent earn-out considerations
Liabilities:
Liabilities		$ 9,223
Level 3 \| Fair Value of Warrant Liability
Liabilities:
Liabilities	$ 6,308

Accrued and Other Current Liabilities (Tables)

9 Months Ended

Sep. 30, 2022

Accrued Liabilities And Other Liabilities [Abstract]

Schedule of Components of Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following as of December 31, 2021 and September 30, 2022:


	December 31, 2021		September 30, 2022
	(in thousands)
Accrued compensation costs	$	162	$	199
Accrued professional fees and consultants		331		305
Accrued logistics costs		578		1,058
Product related accruals		2,984		1,516
Sales tax payable		678		1,251
Sales return reserve		590		724
Accrued fulfillment expense		744		949
Accrued insurance		967		1,680
Federal payroll taxes payable		4,449		1,416
Accrued interest payable		338		183
Accrued legal		375		3,191
Right-of-Use-Liabilities (1)		—		252
All other accruals		5,425		1,809
Accrued and other current liabilities	$	17,621	$	14,533

(1)

Stock-Based Compensation (Tables)

9 Months Ended

Sep. 30, 2022

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Summary of Stock Options Activity

The following is a summary of stock option activity during the nine months ended September 30, 2022:


	Options Outstanding
	Number of Options			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (years)		Aggregate Intrinsic Value
Balance—January 1, 2022		522,905		$	9.25		6.77	$	25,971
Options granted		—		$	—		—	$	—
Options exercised		—		$	—		—	$	—
Options cancelled		(154,309	)	$	9.24		—	$	—
Balance—September 30, 2022		368,596		$	9.26		6.14	$	—
Exercisable as of September 30, 2022		368,596		$	9.26		6.14	$	—
Vested and expected to vest as of September 30, 2022		368,596		$	9.26		6.14	$	—

Summary of Restricted Stock Award Activity

A summary of restricted stock award activity within the Company’s equity plans and changes for the nine months ended September 30, 2022 is as follows:


Restricted Stock Awards	Shares			Weighted Average Grant- Date Fair Value
Nonvested at January 1, 2022		2,106,180		$	14.94
Granted		4,350,642		$	3.17
Vested		(1,622,006	)	$	8.31
Forfeited		(233,561	)	$	14.79
Nonvested at September 30, 2022		4,601,255		$	5.25

Summary of Total Stock-based Compensation Expense by Function

The following table summarizes the total stock-based compensation expense by function, including expense related to consultants, for the three and nine months ended September 30, 2021 and 2022:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2022		2021		2022
	(in thousands)				(in thousands)
Sales and distribution expenses	$	2,444	$	999	$	4,968	$	4,228
Research and development expenses		1,776		511		3,880		1,418
General and administrative expenses		5,350		1,433		12,482		6,208
Total stock-based compensation expense	$	9,570	$	2,943	$	21,330	$	11,854

Acquisition - Allocation of Purchase Price to Assets Acquired and Liabilities Assumed Based on Estimated Fair Values at Acquisition Date (Parenthetical) (Details)	May 05, 2021 shares
Photo Paper Direct Ltd.
Business Acquisition [Line Items]
Business acquisition shares issued	704,548

Acquisition - Amounts Assigned to Goodwill and Major Intangibles Asset Classifications (Parenthetical) (Details) - USD ($) $ in Thousands	May 06, 2021	Feb. 02, 2021	May 05, 2021
Business Acquisition [Line Items]
Deferred tax liability	$ 1,500
Photo Paper Direct Ltd.
Business Acquisition [Line Items]
Deferred tax liability			$ 1,481
Trademarks \| Healing Solutions LLC
Business Acquisition [Line Items]
Useful life (in years)		10 years
Trademarks \| Squatty Potty, LLC
Business Acquisition [Line Items]
Useful life (in years)	10 years
Trademarks \| Photo Paper Direct Ltd.
Business Acquisition [Line Items]
Useful life (in years)	10 years

Prepaid Expenses and Other Current Assets (Tables)

9 Months Ended

Sep. 30, 2022

Prepaid Expense And Other Assets Current [Abstract]

Schedule of Prepaids And Other Current Assets

Prepaids and other current assets consisted of the following as of December 31, 2021 and September 30, 2022:


	December 31, 2021		September 30, 2022
	(in thousands)
Prepaid inventory	$	4,137	$	1,952
Restricted cash		7,998		2,914
Prepaid insurance		2,440		2,519
Consulting fees		2,263		—
Prepaid logistics costs		2,865		860
Right-of-Use-Asset (1)		—		241
Other		1,331		1,973
Prepaid and other current assets	$	21,034	$	10,459

(1)

On January 1, 2022, the Company recorded an aggregate of approximately $0.7 million of right-of-use assets and corresponding $0.7 million of lease liabilities upon adoption of ASC 842. Current Right-of-use assets of $0.2 million and corresponding lease liabilities are included in the prepaid and other current assets and accrued and other current liabilities line items respectively on the condensed consolidated balance sheets as of September 30, 2022. See the discussion for the adoption of the lease accounting standard described in Note 2.

Subsequent Events

9 Months Ended

Sep. 30, 2022

Subsequent Events [Abstract]

Subsequent Events

12. SUBSEQUENT EVENTS

On October 4, 2022, the Company closed the acquisition of the assets of a brand in the health and wellness category for a purchase price of $0.7 million.

Acquisition - Additional Information (Details)							1 Months Ended	3 Months Ended		9 Months Ended		12 Months Ended
Acquisition - Additional Information (Details)	Sep. 29, 2022 shares	Dec. 01, 2021 USD ($)	May 06, 2021 USD ($)	May 05, 2021 USD ($) shares	Feb. 02, 2021 USD ($) shares	Dec. 01, 2020 USD ($) $ / shares shares	Nov. 30, 2021 USD ($) shares	Sep. 30, 2022 USD ($)	Sep. 30, 2021 USD ($)	Sep. 30, 2022 USD ($) shares	Sep. 30, 2021 USD ($) shares	Dec. 31, 2021 USD ($) $ / shares	Dec. 31, 2022 USD ($)
Business Acquisition [Line Items]
Issuance of common stock, shares \| shares	10,643,034
Business acquisition, earnout payments										$ (3,983,000)
Common stock issued								$ 7,000		7,000		$ 5,000
Acquisition date, initial fair value anoint of earn-out payment		$ 5,200,000
Change in fair value of contingent earn-out liabilities								(774,000)	$ (4,245,000)	$ (5,240,000)	$ (11,949,000)
Remaining earn-out liability												9,223,000
Business combination, contingent consideration earn out amount												9,223,000
Healing Solutions LLC
Business Acquisition [Line Items]
Payments To Acquire Businesses Gross					$ 15,300,000
Business acquisition shares issued/issuable \| shares					1,387,759
Withheld of cash purchase price to serve collateral for sellers payment					$ 2,000,000.0
Withheld of cash purchase price payment period					within 60 days of the Closing Date
Business combination, acquired receivables, description					The shares would be issued to Healing Solutions following the final determination of inventory values pursuant to the terms of the Asset Purchase Agreement, which determination is expected to occur approximately nine to ten months following the Closing Date and such shares will be subject to vesting restrictions which will lapse on the date that is the one-year anniversary after the Closing Date.
Estimated earnout liability					$ 11,273,000
Inventory					5,285,000
Business Combination Recognized Identifiable Assets Acquired And Liabilities Assumed Cash And Equivalents					15,280,000
Acquisition date, initial fair value anoint of earn-out payment					$ 16,500,000
Business combination contingent consideration earnout fair value							$ 1,400,000
Remaining earn-out liability												0
Business combination, contingent consideration earn out amount												0
Healing Solutions LLC \| After 15 Months Following Closing Date
Business Acquisition [Line Items]
Business acquisition shares issued/issuable \| shares										0
Healing Solutions LLC \| Nine Months Following Closing Date
Business Acquisition [Line Items]
Business acquisition shares issued/issuable \| shares										528,670
Healing Solutions LLC \| After Nine Months But Before 12 Months Following Closing Date
Business Acquisition [Line Items]
Business acquisition shares issued/issuable \| shares										396,502
Healing Solutions LLC \| After12 Months But Before 15 Months Following Closing Date
Business Acquisition [Line Items]
Business acquisition shares issued/issuable \| shares										264,335
Squatty Potty, LLC
Business Acquisition [Line Items]
Payments To Acquire Businesses Gross				$ 19,000,000.0
Estimated earnout liability				3,502,000
Inventory				1,100,000
Business acquisition, earnout payments										$ (3,983,000)		4,000,000.0
Business acquisition, payment for transition services												8,000,000.0
Business Combination Recognized Identifiable Assets Acquired And Liabilities Assumed Cash And Equivalents				19,040,000
Acquisition date, initial fair value anoint of earn-out payment			$ 3,500,000
Remaining earn-out liability								0		0		3,983,000
Business combination, contingent consideration earn out amount								0		0		3,983,000
Squatty Potty, LLC \| Event Occurs in 12 Months Ending 12/31/2021
Business Acquisition [Line Items]
Business combination, contingent consideration earn out amount, maximum												3,900,000
Squatty Potty, LLC \| Event Occurs in Six Months Following Closing Date
Business Acquisition [Line Items]
Remaining earn-out liability												3,900,000
Business combination, contingent consideration earn out amount												3,900,000
Photo Paper Direct Ltd.
Business Acquisition [Line Items]
Payments To Acquire Businesses Gross				$ 8,300,000
Business acquisition shares issued/issuable \| shares				704,548
Estimated earnout liability				$ 911,000
Business acquisition, earnout payments												6,000,000.0
Business Combination Recognized Identifiable Assets Acquired And Liabilities Assumed Cash And Equivalents				8,293,000
Common stock issued												2,000,000.0
Acquisition date, initial fair value anoint of earn-out payment				900,000
Business combination contingent consideration earnout fair value												0.0
Photo Paper Direct Ltd. \| Inventory and Other Working Capital Assets, Including Cash on Hand
Business Acquisition [Line Items]
Business acquisition, assets acquired				5,400,000
Business Combination Recognized Identifiable Assets Acquired And Liabilities Assumed Cash And Equivalents				$ 3,000,000.0
Smash Assets
Business Acquisition [Line Items]
Business acquisition shares issued/issuable \| shares						4,220,000
Total consideration						$ 25,000,000.0
Shares issued, price per share \| $ / shares						$ 6.89
Value of certain inventory						$ 15,600,000
Remaining earn-out liability								0		0		5,240,000
Business combination, contingent consideration earn out amount								$ 0		$ 0		5,240,000
Smash Assets \| Sellers Brokers
Business Acquisition [Line Items]
Business acquisition shares issued/issuable \| shares						164,000
Smash Assets \| Year Two Earn-Out \| Forecast
Business Acquisition [Line Items]
Business combination contingent consideration earn out generated amount													$ 500,000
Business combination, contingent consideration earn out amount, maximum													15,500,000
Business combination contingent consideration subject to cap													27,500,000
Business combination contingent consideration entitled to receive amount in cash equal to shares													$ 100,000
Smash Assets \| Year One Earn-Out
Business Acquisition [Line Items]
Business combination, contingent consideration earn out amount, maximum												$ 18,500,000
Business combination contingent consideration contribution margin ratio												1.67
Business combination contingent consideration earn out margin \| $ / shares												$ 1.00
Business combination, contingent consideration earn out amount, minimum												$ 15,500,000
Business combination contingent consideration arrangements earn out maximum												$ 5,000,000.0
Common Stock
Business Acquisition [Line Items]
Issuance of common stock, shares \| shares										7,003,332	2,666,667
Common Stock \| Healing Solutions LLC
Business Acquisition [Line Items]
Business acquisition shares issued/issuable \| shares					1,387,759
Entitled to receive number of shares of common stock \| shares					170,042
Issuance of common stock, shares \| shares							1,400,000
Common Stock \| Healing Solutions LLC \| Maximum
Business Acquisition [Line Items]
Entitled to receive number of shares of common stock \| shares					280,000
Common Stock \| Healing Solutions LLC \| After 15 Months Following Closing Date \| Maximum
Business Acquisition [Line Items]
Entitled to receive number of shares of common stock \| shares					528,670
Common Stock \| Photo Paper Direct Ltd.
Business Acquisition [Line Items]
Business acquisition shares issued/issuable \| shares				704,500

Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
CURRENT ASSETS:
Cash	$ 25,997	$ 30,317
Accounts receivable—net	4,933	10,478
Inventory	60,457	63,045
Prepaid and other current assets	10,459	21,034
Total current assets	101,846	124,874
PROPERTY AND EQUIPMENT—net	856	1,254
GOODWILL—net		119,941
OTHER INTANGIBLES—net	56,265	64,955
OTHER NON-CURRENT ASSETS	2,564	2,546
TOTAL ASSETS	161,531	313,570
CURRENT LIABILITIES:
Credit facility	23,919	32,845
Accounts payable	13,491	21,716
Seller notes	2,326	7,577
Contingent earn-out liability		3,983
Warrant liability	6,308
Accrued and other current liabilities	14,533	17,621
Total current liabilities	60,577	83,742
OTHER LIABILITIES	1,673	360
CONTINGENT EARN-OUT LIABILITY		5,240
Total liabilities	62,250	89,342
COMMITMENTS AND CONTINGENCIES (Note 9)
STOCKHOLDERS’ EQUITY:
Common stock, par value $0.0001 per share-500,000,000 shares authorized and 55,090,237 shares outstanding at December 31, 2021; 500,000,000 shares authorized and 69,540,749 shares outstanding at September 30, 2022	7	5
Additional paid-in capital	705,775	653,650
Accumulated deficit	(604,946)	(428,959)
Accumulated other comprehensive loss	(1,555)	(468)
Total stockholders’ equity	99,281	224,228
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$ 161,531	$ 313,570

Stock-Based Compensation

9 Months Ended

Sep. 30, 2022

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock-Based Compensation

STOCK-BASED COMPENSATION

The Company has four equity plans:

2014 Amended and Restated Equity Incentive Plan

The board of directors of Aterian Group, Inc., 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 September 30, 2022, 81,935 shares were reserved for awards available for future issuance under the Aterian 2014 Plan.

2018 Equity Incentive Plan

The Company’s board of directors (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 September 30, 2022, 672,979 shares were reserved for awards available for future issuance under the 2018 Plan.

Options granted to date under the Aterian 2014 Plan and the 2018 Plan generally vest either: (i) over a four-year period with 25% of the shares underlying the options vesting on the first anniversary of the vesting commencement date with the remaining 75% of the shares vesting on a pro-rata basis over the succeeding thirty-six months, subject to continued service with the Company through each vesting date, or (ii) over a three-year period with 33 1/3% of the shares underlying the options vesting on the first anniversary of the vesting commencement date with the remaining 66 2/3% of the shares vesting on a pro-rata basis over the succeeding twenty-four months, subject to continued service with the Company through each vesting date. Options granted are generally exercisable for up to 10 years subject to continued service with the Company.

2019 Equity Plan

The Board adopted the Aterian, Inc. 2019 Equity Plan (the “2019 Equity Plan”) on March 20, 2019. The 2019 Equity Plan was approved by its stockholders on May 24, 2019. As of September 30, 2022, no shares were reserved for future issuance and there were no longer any awards outstanding under the 2019 Equity Plan. Shares of restricted common stock granted under the 2019 Equity Plan initially vested in substantially equal installments on the 6th, 12th, 18th and 24th monthly anniversary of the closing of the Company’s initial public offering (“IPO”). The Company and the 2019 Equity Plan participants subsequently agreed to extend the vesting date of the shares granted under the 2019 Equity Plan a number of times and the last remaining shares granted under the 2019 Equity Plan vested on March 14, 2022. Awards granted under the 2019 Equity Plan and not previously forfeited upon termination of service carried dividend and voting rights applicable to the Company’s common stock, irrespective of any vesting requirement. Under ASC Topic 718, the Company treats each award in substance as multiple awards as a result of the graded vesting and the fact that there is more than one requisite service period. Upon the prerequisite service period becoming probable, the day of the IPO, the Company recorded a cumulative catch up expense and the remaining expense was recorded under graded vesting. In the event the service of a participant in the 2019 Equity Plan (each, a “Participant”) was terminated due to an “involuntary termination”, then all of such Participant’s unvested shares of restricted common stock were to vest on the date of such involuntary termination unless, within three business days of such termination (1) the Company’s board of directors unanimously determines that such vesting should not occur and (2) the remaining Participants holding restricted share awards covering at least 70% of the shares of restricted common stock issued and outstanding under the 2019 Equity Plan determine that such vesting should not occur. In the event of a forfeiture, voluntary or involuntary, of shares of restricted common stock granted under the 2019 Equity Plan, such shares were automatically reallocated

to the remaining Participants in proportion to the number of shares of restricted common stock covered by outstanding awards that each such Participant holds.

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 2,700,000 shares of the Company’s common stock (subject to adjustment for recapitalizations, stock splits, reorganizations and similar transactions). The Inducement Plan is administered by the Compensation Committee and expires ten years from the date of effectiveness. As of September 30, 2022, 710,000 shares had been granted pursuant to the Inducement Plan and 1,990,000 shares were reserved for future issuance under the Inducement Plan.

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 nine months ended September 30, 2022:


	Options Outstanding
	Number of Options			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (years)		Aggregate Intrinsic Value
Balance—January 1, 2022		522,905		$	9.25		6.77	$	25,971
Options granted		—		$	—		—	$	—
Options exercised		—		$	—		—	$	—
Options cancelled		(154,309	)	$	9.24		—	$	—
Balance—September 30, 2022		368,596		$	9.26		6.14	$	—
Exercisable as of September 30, 2022		368,596		$	9.26		6.14	$	—
Vested and expected to vest as of September 30, 2022		368,596		$	9.26		6.14	$	—

As of September 30, 2022, all options have been fully expensed.

A summary of restricted stock award activity within the Company’s equity plans and changes for the nine months ended September 30, 2022 is as follows:


Restricted Stock Awards	Shares			Weighted Average Grant- Date Fair Value
Nonvested at January 1, 2022		2,106,180		$	14.94
Granted		4,350,642		$	3.17
Vested		(1,622,006	)	$	8.31
Forfeited		(233,561	)	$	14.79
Nonvested at September 30, 2022		4,601,255		$	5.25

As of September 30, 2022, the total unrecognized compensation expense related to unvested shares of restricted common stock was $22.1 million, which the Company expects to recognize over an estimated weighted-average period of 2.38 years.

Stock-based compensation expense is allocated based on the cost center to which the award holder belongs. The following table summarizes the total stock-based compensation expense by function, including expense related to consultants, for the three and nine months ended September 30, 2021 and 2022:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2022		2021		2022
	(in thousands)				(in thousands)
Sales and distribution expenses	$	2,444	$	999	$	4,968	$	4,228
Research and development expenses		1,776		511		3,880		1,418
General and administrative expenses		5,350		1,433		12,482		6,208
Total stock-based compensation expense	$	9,570	$	2,943	$	21,330	$	11,854

Acquisition - Summary of Changes in Carrying Value of Estimated Contingent Earn-Out Liabilities (Details) - USD ($)	9 Months Ended	12 Months Ended
	Sep. 30, 2022	Dec. 31, 2021
Business Acquisition [Line Items]
Business combination, contingent consideration earn-out amount	$ 9,223,000
Change in fair value of contingent earn-out liabilities	(5,240,000)
Business acquisition, earn-out payments	3,983,000
Business combination, contingent consideration earn-out amount		$ 9,223,000
Smash Assets
Business Acquisition [Line Items]
Business combination, contingent consideration earn-out amount	5,240,000
Change in fair value of contingent earn-out liabilities	(5,240,000)
Business combination, contingent consideration earn-out amount	0	5,240,000
Healing Solutions LLC
Business Acquisition [Line Items]
Business combination, contingent consideration earn-out amount	0
Business combination, contingent consideration earn-out amount		0
Squatty Potty, LLC
Business Acquisition [Line Items]
Business combination, contingent consideration earn-out amount	3,983,000
Business acquisition, earn-out payments	3,983,000	(4,000,000.0)
Business combination, contingent consideration earn-out amount	$ 0	3,983,000
Photo Paper Direct Ltd.
Business Acquisition [Line Items]
Business acquisition, earn-out payments		$ (6,000,000.0)

Inventory (Tables)

9 Months Ended

Sep. 30, 2022

Inventory Disclosure [Abstract]

Schedule of Inventory

Inventory consisted of the following as of December 31, 2021 and September 30, 2022:


	December 31, 2021		September 30, 2022
	(in thousands)
Inventory on-hand	$	48,079	$	54,267
Inventory in-transit		14,966		6,190
Inventory	$	63,045	$	60,457

Subsequent Events - Additional Information (Details) $ in Millions	Oct. 04, 2022 USD ($)
Subsequent Event
Subsequent Event [Line Items]
Purchase price	$ 0.7

Acquisition - Pro Forma Information (Parenthetical) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Business Acquisition [Line Items]
NET REVENUE	$ 66,326	$ 68,121	$ 166,268	$ 184,446
Operating loss	$ (108,941)	(7,527)	$ (155,364)	(30,812)
Healing Solutions LLC
Business Acquisition [Line Items]
NET REVENUE		6,800		27,100
Operating loss		1,100		6,300
Squatty Potty, LLC
Business Acquisition [Line Items]
NET REVENUE		3,200		5,400
Operating loss		2,000		2,800
Photo Paper Direct Ltd.
Business Acquisition [Line Items]
NET REVENUE		4,200		7,200
Operating loss		$ 1,500		$ 2,100

- Definition

Amount, excluding tax collected from customer, of revenue from satisfaction of performance obligation by transferring promised good or service to customer. Tax collected from customer is tax assessed by governmental authority that is both imposed on and concurrent with specific revenue-producing transaction, including, but not limited to, sales, use, value added and excise.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 30
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Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
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-Section 50
-Paragraph 40
-URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e9031-108599

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 41
-Subparagraph (a)
-URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e9038-108599

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 32
-Subparagraph (b)
-URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8933-108599

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 32
-Subparagraph (a)
-URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8933-108599

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 4
-Subparagraph (a)
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130543-203045

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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-URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8736-108599

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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-Paragraph 22
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Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 42
-URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e9054-108599

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 5
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130545-203045

Reference 11: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 924
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SAB Topic 11.L)
-URI https://asc.fasb.org/extlink&oid=6472922&loc=d3e499488-122856

+ Details

Acquisition - Amounts Assigned to Goodwill and Major Intangibles Asset Classifications (Details) - USD ($) $ in Thousands	Dec. 31, 2021	May 06, 2021	May 05, 2021	Feb. 02, 2021
Business Acquisition [Line Items]
Goodwill	$ 119,941
Deferred tax liability		$ (1,500)
Healing Solutions LLC
Business Acquisition [Line Items]
Goodwill				$ 39,975
Net assets acquired				71,292
Squatty Potty, LLC
Business Acquisition [Line Items]
Goodwill			$ 16,872
Net assets acquired			30,773
Photo Paper Direct Ltd.
Business Acquisition [Line Items]
Goodwill			15,774
Net assets acquired			25,617
Deferred tax liability			(1,481)
Inventory \| Healing Solutions LLC
Business Acquisition [Line Items]
Intangible assets				8,215
Inventory \| Squatty Potty, LLC
Business Acquisition [Line Items]
Intangible assets			1,471
Inventory \| Photo Paper Direct Ltd.
Business Acquisition [Line Items]
Intangible assets			2,846
Working Capital \| Healing Solutions LLC
Business Acquisition [Line Items]
Intangible assets				202
Working Capital \| Squatty Potty, LLC
Business Acquisition [Line Items]
Intangible assets			230
Working Capital \| Photo Paper Direct Ltd.
Business Acquisition [Line Items]
Intangible assets			2,144
Trademarks \| Healing Solutions LLC
Business Acquisition [Line Items]
Intangible assets				$ 22,900
Trademarks \| Squatty Potty, LLC
Business Acquisition [Line Items]
Intangible assets			6,500
Trademarks \| Photo Paper Direct Ltd.
Business Acquisition [Line Items]
Intangible assets			5,400
Customer Relations \| Squatty Potty, LLC
Business Acquisition [Line Items]
Intangible assets			5,700
PP&E \| Photo Paper Direct Ltd.
Business Acquisition [Line Items]
Intangible assets			86
Real Property \| Photo Paper Direct Ltd.
Business Acquisition [Line Items]
Intangible assets			$ 848

Acquisition (Tables)

9 Months Ended

Sep. 30, 2022

Business Acquisition [Line Items]

Pro Forma Information

The following unaudited pro forma information illustrates the impact of the acquisitions on the Company’s net revenue for the three and nine months ended September 30, 2021. The acquisitions are reflected in the following pro forma information as if the acquisitions had occurred on January 1, 2021.


	Three Months Ended September 30, 2021			Nine Months Ended September 30, 2021
	(in thousands)
Net revenue as reported	$	68,121		$	184,446
Healing Solutions net revenue (1)		—			4,600
Squatty Potty net revenue (2)		—			6,024
Photo Paper Direct net revenue (3)		—			6,807
Net revenue pro forma	$	68,121		$	201,877

Operating loss as reported	$	(7,527	)	$	(30,812	)
Healing Solutions income (1)		—			382
Squatty Potty income (2)		—			1,772
Photo Paper Direct income (3)		—			2,114
Operating loss pro forma	$	(7,527	)	$	(26,544	)

(1)

In the accompanying condensed consolidated financial statements for the three and nine months ended September 30, 2021, net revenue as reported includes $6.8 million and $27.1 million of net revenue, respectively, from this acquisition. For the three and nine months ended September 30, 2021, operating loss as reported, includes $1.1 million and $6.3 million of operating income, respectively, from this acquisition.

(2)

In the accompanying condensed consolidated financial statements for the three and nine months ended September 30, 2021, net revenue as reported includes $3.2 million and $5.4 million of net revenue, respectively, from this acquisition. For the three and nine months ended September 30, 2021, operating loss as reported, includes $2.0 million and $2.8 million of operating income, respectively, from this acquisition.

(3)

In the accompanying condensed consolidated financial statements for the three and nine months ended September 30, 2021, net revenue as reported includes $4.2 million and $7.2 million of net revenue, respectively, from this acquisition. For the three and nine months ended September 30, 2021, operating loss as reported, includes $1.5 million and $2.1 million of operating income, respectively, from this acquisition.

Summary of Changes in Carrying Value of Estimated Contingent Earn-Out Liabilities

The following table summarizes the changes in the carrying value of estimated contingent earn-out liabilities (in thousands) as of September 30, 2022 (in thousands):


	September 30, 2022
	Smash Assets			Healing Solutions		Squatty Potty			Photo Paper Direct		Total
Balance—December 31, 2021	$	5,240		$	—	$	3,983		$	—	$	9,223
Change in fair value of contingent earn-out liabilities		(5,240	)		—		—			—		(5,240	)
Payment of contingent earn-out liability		—			—		(3,983	)		—		(3,983	)
Balance—September 30, 2022	$	—		$	—	$	—		$	—	$	—

Healing Solutions LLC

Business Acquisition [Line Items]

Allocation of Purchase Price to Assets Acquired and Liabilities Assumed Based on Estimated Fair Values at Acquisition Date

The following presents the allocation of purchase price to the assets acquired and liabilities assumed, based on the estimated fair values at acquisition date:


	Amount allocated
	(in thousands)
Cash purchase price	$	15,280
1,387,759 shares of Common Stock issued at the Closing		39,454
Seller note for inventory		5,285
Estimated earnout liability		11,273
Total consideration to be paid	$	71,292

Amounts Assigned to Goodwill and Major Intangibles Asset Classifications

The amounts assigned to goodwill and major intangible asset classifications were as follows:


	Total
	(in thousands)
Inventory	$	8,215
Working Capital		202
Trademarks (10 year useful life)		22,900
Goodwill		39,975
Net assets acquired	$	71,292

Squatty Potty, LLC

Business Acquisition [Line Items]

Allocation of Purchase Price to Assets Acquired and Liabilities Assumed Based on Estimated Fair Values at Acquisition Date

The following presents the allocation of purchase price to the assets acquired and liabilities assumed, based on the estimated fair values at acquisition date:


	Amount
	allocated
	(in thousands)
Cash purchase price	$	19,040
Transition services payments		8,231
Estimated earnout liability		3,502
Total consideration	$	30,773

Amounts Assigned to Goodwill and Major Intangibles Asset Classifications

The amounts assigned to goodwill and major intangible asset classifications were as follows:


	Total
	(in thousands)
Inventory	$	1,471
Working Capital		230
Trademarks (10 year useful life)		6,500
Customer relationships		5,700
Goodwill (1)		16,872
Net assets acquired	$	30,773

(1)

Goodwill is expected to be deductible for tax purposes. The goodwill is attributable to expected synergies resulting from integrating the Squatty Potty products into the Company’s existing sales channel.

Photo Paper Direct Ltd.

Business Acquisition [Line Items]

Allocation of Purchase Price to Assets Acquired and Liabilities Assumed Based on Estimated Fair Values at Acquisition Date

The following presents the allocation of purchase price to the assets acquired and liabilities assumed, based on the estimated fair values at acquisition date:


		Amount
		allocated
		(in thousands)
Cash purchase price	$		8,293
704,548 shares of common stock issued			11,075
Working capital adjustment			5,338
Estimated earnout liability			911
Total consideration	$		25,617

Amounts Assigned to Goodwill and Major Intangibles Asset Classifications

The amounts assigned to goodwill and major intangible asset classifications were as follows:


		Total
		(in thousands)
Inventory	$		2,846
PP&E			86
Real Property			848
Working Capital			2,144
Trademarks (10 year useful life)			5,400
Goodwill (1)			15,774
Deferred tax liability (2)			(1,481	)
Net assets acquired	$		25,617

(1)

Estimate based on preliminary purchase price and most recent book values of tangible assets and prior to any deferred tax assets/liabilities. Subject to change based on the actual closing balance sheet and any purchase accounting adjustments. Goodwill is expected to be deductible for tax purposes. The goodwill is attributable to expected synergies resulting from integrating the Photo Paper Direct products into the Company’s existing sales channels.

(2)

A measurement period adjustment was recorded that resulted in a deferred tax liability of $1.5 million, and corresponding increase in goodwill.

Inventory - Additional Information (Details) - USD ($) $ in Millions	Sep. 30, 2022	Dec. 31, 2021
Inventory Disclosure [Abstract]
Inventory on-hand held by Amazon	$ 12.5	$ 8.4

Document and Entity Information - shares	9 Months Ended
Document and Entity Information - shares	Sep. 30, 2022	Nov. 04, 2022
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2022
Document Fiscal Year Focus	2022
Document Fiscal Period Focus	Q3
Entity Registrant Name	Aterian, Inc.
Entity Central Index Key	0001757715
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Small Business	true
Entity Shell Company	false
Entity Emerging Growth Company	true
Entity Ex Transition Period	false
Entity Common Stock, Shares Outstanding		80,870,618
Entity File Number	001-38937
Entity Tax Identification Number	83-1739858
Entity Address, Address Line One	37 East 18th Street
Entity Address, Address Line Two	7th Floor
Entity Address, City or Town	New York
Entity Address, State or Province	NY
Entity Address, Postal Zip Code	10003
City Area Code	347
Local Phone Number	676-1681
Entity Incorporation, State or Country Code	DE
Document Quarterly Report	true
Document Transition Report	false
Title of each class	Common Stock, $0.0001 par value per share
Trading Symbol(s)	ATER
Name of each exchange on which registered	NASDAQ

Condensed Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Income Statement [Abstract]
NET REVENUE	$ 66,326	$ 68,121	$ 166,268	$ 184,446
COST OF GOODS SOLD	36,135	33,946	81,118	91,464
GROSS PROFIT	30,191	34,175	85,150	92,982
OPERATING EXPENSES:
Sales and distribution	33,792	32,337	88,632	96,716
Research and development	1,706	2,767	4,582	7,220
General and administrative	10,369	10,843	29,481	31,807
Impairment loss on goodwill	90,921		119,941
Impairment loss on intangibles	3,118		3,118
Change in fair value of contingent earn-out liabilities	(774)	(4,245)	(5,240)	(11,949)
TOTAL OPERATING EXPENSES:	139,132	41,702	240,514	123,794
OPERATING LOSS	(108,941)	(7,527)	(155,364)	(30,812)
INTEREST EXPENSE—net	904	2,786	2,043	11,877
GAIN ON EXTINGUISHMENT OF SELLER NOTE			(2,012)
LOSS ON INITIAL ISSUANCE OF EQUITY	12,834		18,669
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	(5,528)	(8,134)	2,365	26,455
LOSS ON INITIAL ISSUANCE OF WARRANT				20,147
OTHER EXPENSE (INCOME)	(174)	5	(199)	43
LOSS BEFORE INCOME TAXES	(116,977)	(110,535)	(176,230)	(229,351)
PROVISION FOR (BENEFIT FROM) INCOME TAXES	(75)	21	(243)	64
NET LOSS	$ (116,902)	$ (110,556)	$ (175,987)	$ (229,415)
Net loss per share, basic	$ (1.81)	$ (3.13)	$ (2.78)	$ (7.55)
Net loss per share, diluted	$ (1.81)	$ (3.13)	$ (2.78)	$ (7.55)
Weighted-average number of shares outstanding, basic	64,648,650	35,359,999	63,397,196	30,383,375
Weighted-average number of shares outstanding, diluted	64,648,650	35,359,999	63,397,196	30,383,375

Prepaid Expenses and Other Current Assets - Summary of Prepaids and Other Current Assets (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Prepaid Expense And Other Assets Current [Abstract]
Prepaid inventory	$ 1,952	$ 4,137
Restricted cash	2,914	7,998
Prepaid insurance	2,519	2,440
Consulting fees		2,263
Prepaid logistics costs	860	2,865
Right-of-Use-Asset	241
Other	1,973	1,331
Prepaid and other current assets	$ 10,459	$ 21,034

Inventory

9 Months Ended

Sep. 30, 2022

Inventory Disclosure [Abstract]

Inventory

INVENTORY

Inventory consisted of the following as of December 31, 2021 and September 30, 2022:


	December 31, 2021		September 30, 2022
	(in thousands)
Inventory on-hand	$	48,079	$	54,267
Inventory in-transit		14,966		6,190
Inventory	$	63,045	$	60,457

The Company’s inventory on-hand is held either with Amazon or the Company’s other third-party warehouses. The Company does not have any contractual right of returns with its contract manufacturers. The Company’s inventory on-hand held by Amazon was approximately $8.4 million and $12.5 million as of December 31, 2021 and September 30, 2022, respectively.

Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2022

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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.

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


	Three Months Ended September 30, 2021
	(in thousands)
	Direct		Wholesale/Other		Total
North America	$	64,920	$	2,046	$	66,966
Other		1,155		—		1,155
Total net revenue	$	66,075	$	2,046	$	68,121

	Three Months Ended September 30, 2022
	(in thousands)
	Direct		Wholesale/Other		Total
North America	$	62,818	$	2,530	$	65,348
Other		978		—		978
Total net revenue	$	63,796	$	2,530	$	66,326


	Nine Months Ended September 30, 2021
	(in thousands)
	Direct		Wholesale/Other		Total
North America	$	178,218	$	4,138	$	182,356
Other		2,090		—		2,090
Total net revenue	$	180,308	$	4,138	$	184,446

	Nine Months Ended September 30, 2022
	(in thousands)
	Direct		Wholesale/Other		Total
North America	$	158,399	$	4,415	$	162,814
Other		3,454		—		3,454
Total net revenue	$	161,853	$	4,415	$	166,268

Net Revenue by Product Categories. The following table sets forth the Company’s net revenue disaggregated by product categories:


	Three Months Ended September 30,
	2021		2022
	(in thousands)
Heating, cooling and air quality	$	29,988	$	27,179
Kitchen appliances		8,084		10,504
Health and beauty		1,273		3,661
Personal protective equipment		1,298		516
Cookware, kitchen tools and gadgets		5,221		5,128
Home office		4,190		3,045
Housewares		10,418		8,787
Essential oils and related accessories		5,722		6,262
Other		1,927		1,244
Total net revenue	$	68,121	$	66,326


	Nine Months Ended September 30,
	2021		2022
	(in thousands)
Heating, cooling and air quality	$	62,968	$	56,835
Kitchen appliances		29,208		27,438
Health and beauty		6,736		12,452
Personal protective equipment		2,957		1,565
Cookware, kitchen tools and gadgets		16,867		14,229
Home office		7,710		10,077
Housewares		26,709		23,478
Essential oils and related accessories		23,017		17,102
Other		8,274		3,092
Total net revenue	$	184,446	$	166,268

Goodwill—The Company operates under one business component which is the same as its reporting unit based on the guidance in ASC Topic 350-20.

Level 1—Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;

Level 3—Unobservable inputs that are supported by little or no market data for the related assets or liabilities.

The following table summarizes the fair value of the Company’s financial assets that are measured at fair value as of December 31, 2021 and September 30, 2022 (in thousands):


	December 31, 2021
	Fair Value Measurement Category
	Level 1		Level 2		Level 3

Assets:
Cash and cash equivalents	$	30,317	$	—	$	—
Restricted cash		7,998		—		—
Liabilities:
Estimated fair value of contingent earn-out considerations		—		—		9,223


	September 30, 2022
	Fair Value Measurement Category
	Level 1		Level 2		Level 3

Assets:
Cash and cash equivalents	$	25,997	$	—	$	—
Restricted cash		3,043		—		—
Liabilities:
Fair value of contingent earn-out considerations		—		—		—
Fair value of warrant liability		—		—		6,308

A summary of the activity of the Level 3 liabilities carried at fair value on a recurring basis for the nine months ended September 30, 2022 is as follows (in thousands):


Balance at December 31, 2021	$	9,223
Change in fair value of contingent earn-out liability		(5,240	)
Payment of contingent earn-out liability		(3,983	)
Balance at September 30, 2022	$	—

Balance at December 31, 2021	$	—
Issuance of warrants in connection with offering		18,982
Change in fair value of warrant liability		2,365
Exercise of prefunded warrants		(15,039	)
Balance at September 30, 2022	$	6,308

Adopted Accounting Standards

Recently Issued Accounting Pronouncements

Stock-Based Compensation - Summary of Restricted Stock Award Activity (Details) - Restricted Stock	9 Months Ended
	Sep. 30, 2022 $ / shares shares
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Shares, Nonvested at January 1, 2022 \| shares	2,106,180
Shares, Granted \| shares	4,350,642
Shares, Vested \| shares	(1,622,006)
Shares, Forfeited \| shares	(233,561)
Shares, Nonvested at September 30, 2022 \| shares	4,601,255
Weighted Average Grant-Date Fair Value, Nonvested at January 1, 2022 \| $ / shares	$ 14.94
Weighted Average Grant-Date Fair Value, Granted \| $ / shares	3.17
Weighted Average Grant-Date Fair Value, Vested \| $ / shares	8.31
Weighted Average Grant-Date Fair Value, Forfeited \| $ / shares	14.79
Weighted Average Grant-Date Fair Value, Nonvested at September 30, 2022 \| $ / shares	$ 5.25

Goodwill and Intangibles

9 Months Ended

Sep. 30, 2022

Goodwill And Intangible Assets Disclosure [Abstract]

Goodwill and Intangibles

11.

GOODWILL AND INTANGIBLES

The following tables summarize the changes in the Company’s intangible assets as of December 31, 2021 and September 30, 2022 (in thousands):


	December 31, 2020		For the year ended December 31, 2021					December 31, 2021
	Gross Carrying Amount		Additions		Impairments			Net Book Value
Goodwill	$	47,318	$	72,623	$	—		$	119,941
-

	December 31, 2021		Nine Months Ended September 30, 2022					September 30, 2022
	Gross Carrying Amount		Additions		Impairments (1)			Net Book Value
Goodwill	$	119,941	$	—	$	(119,941	)	$	—

(1)

The following tables summarize the changes in the Company’s intangible assets as of December 31, 2021 and September 30, 2022 (in thousands):


	December 31, 2020		For the year ended December 31, 2021								December 31, 2021
	Gross Carrying Amount		Additions		Impairments			Accumulated Amortization			Net Book Value
Trademarks	$	31,810	$	34,100	$	—		$	(6,332	)	$	59,578
Non-competition agreement		111		—		—			(54	)		57
Transition services agreement		23		—		—			(23	)		—
Customer relations		—		5,700		—			(380	)		5,320
Other		—		700		—			(700	)		—
Total intangibles	$	31,944	$	40,500	$	—		$	(7,489	)	$	64,955

	December 31, 2021		Nine Months Ended September 30, 2022								September 30, 2022
	Gross Carrying Amount		Additions		Impairments (1)			Accumulated Amortization			Net Book Value
Trademarks	$	65,910	$	—	$	(3,087	)	$	(11,450	)	$	51,373
Non-competition agreement		111		—		(31	)		(80	)		—
Transition services agreement		23		—		—			(23	)		—
Customer relations		5,700		—		—			(808	)		4,892
Other		700		—		—			(700	)		—
Total intangibles	$	72,444	$	—	$	(3,118	)	$	(13,061	)	$	56,265

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


Remainder of 2022	$	1,701
2023		6,802
2024		6,781
2025		6,740
2026		6,740
Thereafter		27,501
Total	$	56,265

Accrued and Other Current Liabilities - Schedule of Components of Accrued Expenses and Other Current Liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Accrued Liabilities And Other Liabilities [Abstract]
Accrued compensation costs	$ 199	$ 162
Accrued professional fees and consultants	305	331
Accrued logistics costs	1,058	578
Product related accruals	1,516	2,984
Sales tax payable	1,251	678
Sales return reserve	724	590
Accrued fulfillment expense	949	744
Accrued insurance	1,680	967
Federal payroll taxes payable	1,416	4,449
Accrued interest payable	183	338
Accrued legal	3,191	375
Right-of-Use-Liabilities	252
All other accruals	1,809	5,425
Accrued and other current liabilities	$ 14,533	$ 17,621

Credit Facility, Term Loans and Warrants

9 Months Ended

Sep. 30, 2022

Debt Disclosure [Abstract]

Credit Facility, Term Loans and Warrants

CREDIT FACILITY, TERM LOANS AND WARRANTS

High Trail Loan - December 2020 Note

On December 1, 2020, the Company refinanced a $15.0 million term loan with Horizon Technology Finance Corporation through the issuance of a senior secured note with an aggregate principal amount of $43.0 million issued on December 1, 2020 (the “December

2020 Note”) to High Trail Investments SA LLC (“High Trail SA”). The Company received gross proceeds of $38.0 million in exchange for the December 2020 Note. The December 2020 Note was to be repaid over 24 equal monthly cash payments of $1.8 million. The December 2020 Note was extinguished on April 8, 2021 in exchange for an April 2021 Note (see the discussion under the heading High Trail April 2021 of this Note 6 below).

High Trail - February 2021 Note

On February 2, 2021, the Company entered into a second, separate transaction with High Trail Investments ON LLC (“High Trail ON” and, together with High Trail SA, “High Trail”), where it issued to High Trail ON a 0% coupon senior secured promissory note in an aggregate principal amount of $16.5 million (as amended, the “February 2021 Note”) that was to mature on February 1, 2023.

High Trail - April 2021 Note

On April 8, 2021, the Company refinanced all its existing debt with High Trail and Midcap Funding IV Trust (“MidCap”). As such, the Company entered into a new securities purchase and exchange agreement (the “Securities Purchase Agreement”) with High Trail SA and High Trail ON, pursuant to which, among other things, the Company issued and sold to High Trail, in a private placement transaction (the “2021 Private Placement”), (i) senior secured promissory notes in an aggregate principal amount of $110.0 million (the “April 2021 Notes”) that accrued interest at a rate of 8% per annum and were to mature on April 8, 2024, and (ii) warrants to purchase up to an aggregate of 2,259,166 shares of the Company’s common stock in exchange for: (a) a cash payment by High Trail to the Company of $57.7 million, (b) the cancellation of the December 2020 Note, and (c) the cancellation of the February 2021 Note. On April 8, 2021, the Company used $14.8 million of the net proceeds from the 2021 Private Placement to repay all amounts owed under the 2018 $25.0 million credit facility with MidCap (the “2018 Credit Facility”). Pursuant to ASC Topic 470, Debt, the Company concluded the High Trail April 2021 Note transaction resulted in the extinguishment of the two prior High Trail December 2020 and February 2021 term loans in the amount of $28.2 million of extinguishment of which has been classified within loss on extinguishment of debt on the condensed consolidated statements of operations. The Company breached its Adjusted EBITDA covenant with its lender, High Trail, and in August 2021, the Company secured a waiver from its lender with the partial repayment of the loan. See the High Trail Letter Agreements and Omnibus Amendment section for additional information.

The April Letter Agreement

On April 8, 2021, the Company entered into a Letter Agreement (the “April Letter Agreement”) with High Trail SA and High Trail ON, pursuant to which, among other things, (i) the Company and High Trail SA agreed to amend the terms of the Letter Agreement to provide that the Company would prepare and file by June 30, 2021 a registration statement (the “Resale Registration Statement”) with the Securities and Exchange Commission for the purposes of registering for resale the December Warrant Shares, the Penny Warrant Shares and the Restricted Shares (as defined below), (ii) the Company issued 130,000 shares of its common stock to High Trail SA (the “Restricted Shares”), and (iii) High Trail SA and High Trail ON agreed to waive any Default or Event of Default (as such terms are defined in the December 2020 Note or the February 2021 Note) caused by the Company’s failure to file a resale registration statement by March 26, 2021. On April 8, 2021, the Company entered into (i) an amendment (the “SPA Amendment”) to that certain Securities Purchase Agreement, dated as of November 30, 2020, by and between the Company and High Trail SA (the “December 2020 SPA”), and to that certain Securities Purchase Agreement, dated as of February 2, 2021, by and between the Company and High Trail ON (the “February 2021 SPA”), (ii) an amendment to the February Warrant (the “February Warrant Amendment”), (iii) an amendment to the Penny Warrant (the “Penny Warrant Amendment”), and (iv) an amendment to the Additional Warrant (the “Additional Warrant Amendment” and, together with the February Warrant Amendment and the Penny Warrant Amendment, the “Warrant Amendments”). The SPA Amendment amended the December 2020 SPA and the February 2021 SPA to, among other things, allow for the issuance of the April 2021 Notes and to waive certain rights of High Trail under the December 2020 SPA and the February 2021 SPA. The Warrant Amendments amended the February Warrant, the Penny Warrant and the Additional Warrant to amend the definition of “Black Scholes Value” in each warrant to provide that the expected volatility used in the Black Scholes Value shall equal 100% instead of the greater of 100% and the 100-day volatility obtained from the HVT function on Bloomberg (determined utilizing a 365-day annualization factor) as of the trading day immediately following the public announcement of a Change of Control (as defined in each of the warrants), or, if the Change of Control is not publicly announced, the date the Change of Control is consummated. The Warrant Amendments to the February Warrant, the Penny Warrant and the Additional Warrant resulted in an $80.0 million reclassification from a liability to a component of equity and resulted in a $21.3 million reclassification from a component of equity to a liability as of December 31, 2021. The Restricted Shares were expensed as part of extinguishment loss, valued based on the fair market value on April 8, 2021 for $4.1 million, with the offset impacting stockholders’ equity.

High Trail Letter Agreements and Omnibus Amendment

On August 9, 2021, pursuant to those certain Letter Agreements entered into between the Company and High Trail with respect to each of the April 2021 Notes (collectively, the “August Letter Agreements”), High Trail notified the Company that High Trail

declared an event of default under the April 2021 Notes as a result of the Company’s Adjusted EBITDA (as defined in the April 2021 Notes) not being equal to at least $12 million for the 12 month period ended June 30, 2021 and further notified the Company that High Trail immediately accelerated a total of $18.7 million of the principal amount of the April 2021 Notes, requiring the Company to immediately pay $21.5 million (such amount equal to 115% of the principal amount that was accelerated, as required under the terms of the April 2021 Notes, plus $0.3 million of accrued but unpaid interest on the principal amount that was accelerated) (the “Current Event of Default Acceleration Amount”). Pursuant to the August Letter Agreements, the Company agreed, among other things, to pay the Current Event of Default Acceleration Amount in cash by August 9, 2021 and that any portion not paid in cash would be paid in shares of the Company’s common stock under the terms of the April 2021 Notes, with the number of shares issuable equal to the unpaid Current Event of Default Acceleration Amount divided by 80% of the lesser of (i) the Daily VWAP (as defined in the April 2021 Notes) on August 9, 2021 and (ii) the average of the lowest two (2) Daily VWAPs during the ten (10) day VWAP trading period ending on August 9, 2021. Pursuant to the August Letter Agreements, High Trail waived the events of default relating to the Company’s failure to satisfy the Adjusted EBITDA covenant under the April 2021 Notes, effective upon the payment in cash of $10.1 million of the Current Event of Default Acceleration Amount and the issuance of the shares of the Company’s common stock for the remaining $11.7 million of the Current Event of Default Acceleration Amount. The Company paid High Trail an aggregate of $10.1 million in cash on August 9, 2021 and in accordance with the April 2021 Notes and the August Letter Agreements, paid the remaining $11.7 million of the Current Event of Default Acceleration Amount by issuing to High Trail an aggregate of 2,841,251 shares of common stock (with the shares issued at a price of $4.1007 per share, which was, in accordance with the April 2021 Notes, equal to 80% of the Daily VWAP on August 9, 2021). In connection with the August Letter Agreements, on August 9, 2021, the Company also entered into an Omnibus Amendment to Senior Secured Notes Due 2024 and Warrants to Purchase Common Stock with High Trail (the “Omnibus Amendment”), whereby: (i) the Company agreed to increase the minimum cash threshold covenant in the April 2021 Notes from $15.0 million to $30.0 million through October 31, 2021; (ii) the Company agreed to add a liquidity covenant to the April 2021 Notes whereby it must have liquidity, on each day through October 31, 2021, calculated as (A) inventory, net, plus (B) accounts receivable, net (each determined in accordance with GAAP) in an aggregate minimum amount equal to $65.0 million less (C) any amount of cash and cash equivalents in excess of $30 million; (iii) the definition of “Permitted Investment” in the April 2021 Notes was modified such that the consent of High Trail was now required for certain merger and acquisition activity; (iv) the Company agreed that the exercise prices of the following warrants to purchase shares of the Company’s common stock previously issued to High Trail will be modified to be equal to the lesser of: (X) the closing price of the Company’s common stock on August 9, 2021 or (Y) the VWAP of the Company’s common stock on August 9, 2021: (1) the February Warrant; (2) the Additional Warrant; and (3) the Warrants (collectively, the “High Trail Warrants”); (v) High Trail agreed that it would not exercise the High Trail Warrants prior to October 17, 2021 (the day that was 60 days after the registration statement registering for resale the 2,666,667 shares of common stock the Company issued on June15, 2021 was declared effective); and (vi) if, at any time on or after January 7, 2022, High Trail is unable to exercise the High Trail Warrants due to the agreement described in clause (v), the Company agreed to pay High Trail, as liquidated damages, a cash payment that will be equal to (a) the weighted average price of the Company’s common stock on the date High Trail seeks to exercise any of the High Trail Warrants, minus the then-current exercise price of the High Trail Warrants, multiplied by (b) the number of shares subject to the High Trail Warrants that it then desires to exercise.

High Trail Debt Repayment

On September 22, 2021, the Company entered into letter agreements (the “September Letter Agreements”) with High Trail with respect to the April 2021 Notes. Pursuant to the September Letter Agreements, (i) High Trail notified the Company that High Trail declared events of default under the April 2021 Notes and further notified the Company that High Trail accelerated an aggregate of $66.3 million of the principal amount of the April 2021 Notes, requiring the Company to pay $76.9 million (such amount equal to 115% of the principal amount that was accelerated, as required under the terms of the April 2021 Notes, plus $0.3 million of accrued but unpaid interest on the principal amount that was accelerated) (collectively, the “Acceleration Amount”), (ii) High Trail agreed, contingent and effective upon the repayment of the Acceleration Amount in shares of the Company’s common stock in accordance with the April 2021 Notes and the September Letter Agreements and the satisfaction of all of the Company’s other obligations under the September Letter Agreements and the Second Omnibus Amendment (as defined below), to waive the events of default, (iii) the Company agreed that until November 1, 2021, the Company would not, subject to certain exceptions, issue, offer, sell or otherwise dispose of any equity security, equity-linked security or related security, and (iv) the Company agreed that, as a result of the occurrence of the events of default, it no longer has the right to require High Trail to exercise the High Trail Warrants if the price of the Company’s common stock exceeds 200% of the exercise price of the High Trail Warrants for 20 consecutive trading days and certain other conditions were satisfied. Under the terms of the April 2021 Notes, High Trail had the right, by delivering a notice to the Company (each, a “Stock Payment Notice”) to require the Company to satisfy its obligation to repay all or any portion of the Acceleration Amount in shares of the Company’s common stock, with the number of shares issuable determined by dividing the portion of the Acceleration Amount that High Trail requests, pursuant to a Stock Payment Notice, to be repaid in shares of the Company’s common stock, by 80% of the lesser of (A) the Daily VWAP (as defined in the April 2021 Notes) on the date of delivery of the Stock Payment Notice, and (B) the average of the lowest two Daily VWAPs during the ten (10) day VWAP trading period ending on the date of delivery of the Stock Payment Notice. Pursuant to the September Letter Agreements, High Trail agreed to deliver Stock Payment Notices as soon as it was practicable to do so without High Trail and its affiliates collectively beneficially owning in the aggregate in excess of 9.99% of the Company’s outstanding common stock. In connection with the September Letter

Agreements, on September 22, 2021, the Company also entered into a Second Omnibus Amendment to Senior Secured Notes Due 2024 and Warrants to Purchase Common Stock with High Trail (the “Second Omnibus Amendment”), whereby: (i) the maturity date of the April 2021 Notes was changed from April 8, 2024 to April 1, 2023; (ii) the definition of “Permitted Investment” in the April 2021 Notes was modified to include an exception for certain acquisitions of all or substantially all of the assets of another person or a majority of the equity interests of another person; (iii) the definition of “Target Adjusted EBITDA” was modified to reflect certain updated projections of the Company; (iv) the liquidity requirements as set forth in the Omnibus Amendment were removed; (v) the minimum cash threshold covenant was changed from $30.0 million to $15.0 million; (vi) the definition of “Adjusted EBITDA” in the April 2021 Notes was modified to be equal to not less than the Target Adjusted EBITDA for the three-month period ending on the last day of each applicable fiscal quarter instead of the 12-month period ending on such day; and (vii) the exercise prices of the High Trail Warrants were modified to be equal to $0.01. High Trail reserved the right to void the term of the Second Omnibus Amendment in full or in part in the event that the Company breached any of the terms of the September Letter Agreements or otherwise failed to timely deliver shares of stock of the Company to High Trail as required thereunder. In accordance with the April 2021 Notes and the September Letter Agreements, effective September 22, 2021, the Company issued to High Trail an aggregate of 3,474,814 shares of its common stock, and effective September 23, 2021, the Company issued to High Trail an aggregate of 5,838,096 shares of its common stock, satisfying its obligation to repay the Acceleration Amount in full. Pursuant to ASC Topic 470, Debt, the Company concluded that as a result of the High Trail Letter Agreements and Omnibus Amendment and the High Trail Debt Repayment, the April 2021 Notes were extinguished on September 22, 2021 in exchange for the $25.0 million of Notes due April 2023. The Company paid off the remaining $25.0 million High Trail Term Loan as of December 31, 2021 (see the discussion under the heading MidCap Credit Facility - December 2021 of this Note 6 below). Pursuant to ASC Topic 470, Debt, the Company concluded the High Trail Term Loan transaction resulted in the extinguishment of the High Trail Term Loan in the amount of $2.5 million of extinguishment, which has been classified within loss on extinguishment of debt on the consolidated statements of operations. For the year-ended December 31, 2021, the Company recorded a total of $138.9 million of debt extinguishment loss which includes the $107.0 million from the High Trail Letter Agreements and Omnibus Amendment and the High Trail Debt Repayment, $28.2 million from the High Trail December 2020 and February 2021 term loans as part of the issuance of the April 2021 Notes, of $2.5 million of extinguishment from the remaining $25.0 million of High Trail Term Loan and $1.5 million from the repayment of the 2018 Credit Facility.

MidCap Credit Facility – December 2021

On December 22, 2021, the Company entered into a Credit and Security Agreement (the “Credit Agreement”) together with certain of its subsidiaries party thereto as borrowers, the entities party thereto as lenders (the “Lenders”), and MidCap, as administrative agent, pursuant to which, among other things, (i) the Lenders agreed to provide a three year revolving credit facility in a principal amount of up to $50.0 million subject to a borrowing base consisting of, among other things, inventory and sales receivables (subject to certain reserves), and (ii) the Company agreed to issue to MidCap Funding XXVII Trust a warrant (the “MidCap Warrant”) to purchase up to an aggregate of 200,000 shares of common stock of the Company, par value $0.0001 per share, in exchange for the Lenders extending loans and other extensions of credit to the Company under the Credit Agreement. On December 22, 2021, the Company used $27.6 million of the net proceeds from the initial loan under the Credit Agreement to repay all remaining amounts owed under those certain senior secured promissory notes issued by the Company to High Trail Investments SA LLC and High Trail Investments ON LLC in an initial principal amount of $110.0 million, as amended (the “Terminated Notes”). 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 per annum equal to 5.50%, plus, at the Company’s option, either a base rate or a LIBOR rate. The Company will also be required to pay a commitment fee of 0.50% in respect of the undrawn portion of the commitments, which is generally based on average daily usage of the facility during the immediately preceding fiscal quarter. The Credit Agreement does not require any amortization payments. The Credit Agreement imposes certain customary affirmative and negative covenants upon the Company including restrictions related to dividends and other foreign subsidiaries limitations. The Credit Agreement minimum liquidity covenant 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, $12.5 million and (b) at all other times, $15.0 million of cash on hand. The Credit Agreement includes events of default that are customary for these types of credit facilities, including the occurrence of a change of control. The Company was in compliance with the financial covenants contained within the Credit Agreement as of September 30, 2022. The Company had approximately $0.0 million and $4.0 million of availability on the Midcap Credit Facility as of December 31, 2021 and September 30, 2022, respectively. The MidCap Warrant has an exercise price of $4.70 per share, subject to adjustment for stock splits, reverse stock splits, stock dividends and similar transactions, was immediately exercisable, has a term of ten years from the date of issuance and is exercisable on a cash or cashless basis. The Company evaluated the terms of each warrant to determine the appropriate accounting and classification pursuant to ASC 480 and ASC 815. Based on the Company’s evaluation, it concluded that the MidCap Warrant should be classified as equity with no subsequent remeasurement at each quarter so long as such warrants remain to be classified as equity.

The Company’s credit facility consisted of the following as of December 31, 2021 and September 30, 2022:


	December 31, 2021			September 30, 2022
	(in thousands)
MidCap Credit Facility – December 2021	$	34,119		$	24,873
Less: deferred debt issuance costs		(691	)		(518	)
Less: discount associated with issuance of warrants		(583	)		(436	)
Total MidCap Credit Facility – December 2021	$	32,845		$	23,919

Interest Expense, Net

Interest expense, net consisted of the following for the three and nine months ended September 30, 2021 and 2022:


	Three Months Ended					Nine Months Ended
	September 30, 2021			September 30, 2022		September 30, 2021			September 30, 2022
	(in thousands)					(in thousands)
Interest expense	$	2,919		$	904	$	12,470		$	2,043
Interest income		(133	)		—		(593	)		—
Total Interest expense, net	$	2,786		$	904	$	11,877		$	2,043

Securities Purchase Agreement and Warrants

On March 1, 2022, the Company entered into Securities Purchase Agreements (the “Purchase Agreements”) with certain accredited investors identified on the signature pages to the Purchase Agreements (collectively, the “Purchasers”) pursuant to which, among other things, the Company issued and sold to the Purchasers, in a private placement transaction (the “2022 Private Placement”), (i) 6,436,322 shares of the Company’s common stock (the “Shares”), and accompanying warrants to purchase an aggregate of 4,827,242 shares of common stock, and (ii) prefunded warrants to purchase up to an aggregate of 3,013,850 shares of common stock (the “Prefunded Warrants”) and accompanying warrants to purchase an aggregate of 2,260,388 shares of common stock. The accompanying warrants to purchase common stock are referred to herein collectively as the “Common Stock Warrants”, and the Common Stock Warrants and the Prefunded Warrants are referred to herein collectively as the “Warrants”. Under the Purchase Agreements, each Share and accompanying Common Stock Warrant were sold together at a combined price of $2.91, and each Prefunded Warrant and accompanying Common Stock Warrant were sold together at a combined price of $2.9099, for gross proceeds of approximately $27.5 million. In connection with the 2022 Private Placement, the Company entered into a registration rights agreement (the “Registration Rights Agreement”) with the Purchasers, pursuant to which the Company agreed to register for resale the Shares, as well as the shares of common stock issuable upon exercise of the Warrants (the “Warrant Shares”). Under the Registration Rights Agreement, the Company agreed to file a registration statement covering the resale by the Purchasers of the Shares and Warrant Shares within 30 days following the agreement date. The Company filed such resale registration statement on March 28, 2022, and it was declared effective by the SEC on April 8, 2022.

Upon the issuance of the Prefunded Warrants and stock purchase warrants, the Company evaluated the terms of each Warrant to determine the appropriate accounting and classification pursuant to ASC 480 and ASC 815. Based on the Company’s evaluation and due to certain terms in the warrant agreements, it concluded the Prefunded Warrant and the stock purchase warrants should be classified as liabilities with subsequent remeasurement at each quarter so long as such warrants remain to be classified as liabilities. The Company recorded an initial liability on issuance of $19.0 million from this conclusion. As of September 30, 2022, the Company has $6.3 million as the liability related to the Warrants.

On September 29, 2022, the Company entered into securities purchase agreements (the “September Purchase Agreements”) with certain accredited investors, pursuant to which, among other things, the Company agreed to sell and issue, in a registered direct offering (the “Registered Direct Offering”), an aggregate of 10,643,034 shares of its Shares and accompanying warrants to purchase an aggregate of 10,643,034 shares of its common stock. 10,526,368 of the Shares and the accompanying warrants to purchase 10,526,368 shares of common stock were sold to certain accredited Purchasers that are not affiliated with the Company at a combined offering price of $1.90 per share and accompanying warrant to purchase one share of common stock. The remaining 116,666 of the Shares and the accompanying warrants to purchase 116,666 shares of common stock were sold to certain insiders of the Company, comprised of the Company’s President and Chief Executive Officer, Chief Financial Officer, Chief Legal Officer and Global Head of M&A and Chief Technology Officer, at a combined offering price of $2.10 per share and accompanying warrant to purchase one share of common stock.

The Registered Direct Offering closed on October 4, 2022 and the Company issued and sold an aggregate of 10,643,034 shares of common stock to the Purchasers. The gross proceeds to the Company from the Registered Direct Offering were approximately $20.2 million, before deducting fees payable to the placement agent and other estimated offering expenses payable by the Company. The Company currently intends to use the net proceeds from the Registered Direct Offering for working capital purposes, the conduct of its business and other general corporate purposes, which may include acquisitions, investments in or licenses of complementary products, technologies or businesses.

Pursuant to the ASC 815-40, the September Purchase Agreement represents a legally binding contract that meets the definition of a firm commitment and as such the Company recorded a derivative related to the offering of common stock (“forward contract”) and associated warrants for the three months ended September 30, 2022. The Company also concluded both the forward contract and the warrants should be classified within stockholders’ equity within the condensed consolidated balance sheet as of September 30, 2022. Additionally, the Company recorded $12.8 million derivative expense derived from the excess of the fair-value of the issuances of equity of common shares and common stock warrants over the anticipated proceeds to be received by the Company. This expense was recorded in loss on initial issuance of equity on the condensed consolidated statement of operations for the nine months ended September 30, 2022.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
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Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 20
-Section 50
-Paragraph 1B
-Subparagraph (h)
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Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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Reference 4: http://www.xbrl.org/2003/role/disclosureRef
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-Paragraph 1I
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Reference 5: http://www.xbrl.org/2003/role/disclosureRef
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-Paragraph 1I
-Subparagraph (d)
-URI https://asc.fasb.org/extlink&oid=123466505&loc=SL123495371-112611

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
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-Section S99
-Paragraph 1
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Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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-SubTopic 20
-Section 50
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-Subparagraph (g)
-URI https://asc.fasb.org/extlink&oid=123466505&loc=SL123495323-112611

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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-SubTopic 20
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-Subparagraph (b)
-URI https://asc.fasb.org/extlink&oid=123466505&loc=SL123495334-112611

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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-SubTopic 20
-Section 50
-Paragraph 1C
-Subparagraph (a)
-URI https://asc.fasb.org/extlink&oid=123466505&loc=SL123495334-112611

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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-Section 50
-Paragraph 1E
-Subparagraph (b)
-URI https://asc.fasb.org/extlink&oid=123466505&loc=SL123495348-112611

Reference 11: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 20
-Section 50
-Paragraph 1B
-URI https://asc.fasb.org/extlink&oid=123466505&loc=SL123495323-112611

Reference 12: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 20
-Section 50
-Paragraph 1I
-Subparagraph (b)
-URI https://asc.fasb.org/extlink&oid=123466505&loc=SL123495371-112611

Reference 13: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 20
-Section 50
-Paragraph 1B
-Subparagraph (i)
-URI https://asc.fasb.org/extlink&oid=123466505&loc=SL123495323-112611

+ Details

Organization and Description of Business

9 Months Ended

Sep. 30, 2022

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Organization and Description of Business

ORGANIZATION AND DESCRIPTION OF BUSINESS

Aterian, Inc., formerly known as Mohawk Group Holdings, Inc., and its subsidiaries (“Aterian” or the “Company”), is a technology-enabled consumer products platform that builds, acquires and partners with e-commerce brands. The Company’s proprietary software and agile supply chain helps create a growing base of consumer products. Aterian predominantly operates through online retail channels such as Amazon and Walmart, Inc. The Company owns and operates its many brands, which were either incubated or purchased, selling products in multiple categories, including home and kitchen appliances, kitchenware, heating, cooling and air quality appliances (dehumidifiers, humidifiers and air conditioners), health and beauty products and essentials oils.

Headquartered in New York, Aterian’s offices can also be found in China, the Philippines and Poland.

Going Concern—As of September 30, 2022, the Company had total cash and cash equivalents of $26.0 million and an accumulated deficit of $605.0 million. In addition, the Company’s net loss and net cash used in operating activities amounted to $176.0 million and $19.5 million, respectively, for the nine months ended September 30, 2022.

On September 29, 2022, the Company entered into a securities purchase agreement for 10,643,034 shares of common stock and accompanying warrants to purchase 10,643,034 shares of common stock for the gross proceeds of $20.2 million which were received upon closing on October 4, 2022. See Note 6.

As an emerging growth company, the Company has been dependent on outside capital through the issuance of equity to investors and borrowings from lenders (collectively “outside capital”) since its inception to execute its growth strategy of investing in organic growth at the expense of short-term profitably and investing in incremental growth through mergers and acquisitions (“M&A strategy”). In addition, the Company’s recent financial performance has been adversely impacted by the COVID-19 global pandemic and related global shipping disruption, in particular with respect to substantial increases in supply chain costs for shipping containers (See COVID-19 Pandemic and the Supply Chain section below). As a result, the Company has incurred significant losses and will remain dependent on outside capital for the foreseeable future until such time that the Company can realize its strategy of growth by generating profits through its organic growth and M&A strategy, and reduce its reliance on outside capital.

Given the inherent uncertainties associated with executing the Company’s growth strategy, as well as the uncertainty associated with the ongoing COVID19 global pandemic, recent record increases in inflation and related global supply chain disruption, management can provide no assurances the Company will be able to obtain sufficient outside capital or generate sufficient cash from operations to fund the Company’s obligations as they become due over the next twelve months from the date these consolidated financial statements were issued.

In addition, as disclosed in Note 6 below, the Company entered into a $50.0 million asset backed credit agreement in December 2021 (the “MidCap Credit Facility”). The MidCap Credit Facility contains a financial covenant that requires the Company to maintain a minimum unrestricted cash balance or minimum borrowing availability 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 thereafter. At its election, the Company may elect to comply with an alternative financial covenant that would require the Company to maintain a minimum borrowing availability under the MidCap Credit Facility of $10.0 million at all times. The Company does not anticipate electing the alternative financial covenant over the next twelve months and was in compliance with the minimum liquidity covenant as of the date these condensed consolidated financial statements were issued.

Since its inception, the Company has been able to successfully raise a substantial amount of outside capital to fund the Company’s growth strategy including the October 4, 2022 offering where the Company raised $20.2 million, before deducting fees payable to the placement agent and other estimated offering expenses payable by the Company. While management believes the Company will be able to secure additional outside capital in the future, no assurances can be provided that such capital will be obtained or on terms that are acceptable to the Company. Furthermore, given the inherent uncertainties associated with the Company’s growth strategy, the Company may be unable to remain in compliance with the financial covenants required by the MidCap Credit Facility over the next twelve months. These uncertainties raise substantial doubt about the Company’s ability to continue as a going concern.

In order to alleviate substantial doubt, management plans to continue to closely monitor its operating forecast, pursue additional sources of outside capital, and pursue its M&A strategy. If the Company is (a) unable to improve its operating results, (b) obtain additional outside capital on terms that are acceptable to the Company to fund the Company’s operations and M&A strategy, and/or (c) secure a waiver or forbearance from the lender if the Company is unable to remain in compliance with the financial covenants

required by the MidCap Credit Facility, the Company will have to make significant changes to its operating plan, such as delay expenditures, reduce investments in new products, delay the development of its software, reduce its sale and distribution infrastructure, or otherwise significantly reduce the scope of its business. Moreover, if the Company breaches the financial covenants 11 required by the MidCap Credit Facility and fails to secure a waiver or forbearance from the lender, such breach or failure could accelerate the repayment of the outstanding borrowings under the MidCap Credit Facility or the exercise of other rights or remedies the lender may have under applicable law. Management can provide no assurance a waiver or forbearance will be granted or the outstanding borrowings under the MidCap Credit Facility will be successfully refinanced on terms that are acceptable to the Company.

The accompanying consolidated financial statements have been prepared on the basis that the Company will continue to operate as a going concern, which contemplates that the Company will be able to realize assets and settle liabilities and commitments in the normal course of business for the foreseeable future. Accordingly, the accompanying consolidated financial statements do not include any adjustments that may result from the outcome of these uncertainties.

Condensed Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($) $ in Thousands	Total	June 30, 2020	High Trail	Asset Purchase Agreement	Common Stock	Common Stock June 30, 2020	Common Stock March 12, 2020	Common Stock High Trail	Common Stock Asset Purchase Agreement	Additional Paid-in Capital	Additional Paid-in Capital High Trail	Additional Paid-in Capital Asset Purchase Agreement	Retained Earnings	AOCI Attributable to Parent
Beginning balance at Dec. 31, 2020	$ 23,382				$ 3					$ 216,305			$ (192,935)	$ 9
Beginning balance, shares at Dec. 31, 2020					27,074,791
Net loss	(229,415)												(229,415)
Issuance of common stock upon exercise of stock option grants	8,749									8,749
Issuance of common stock upon exercise of stock option grants, shares					1,011,422
Issuance of common stock related to exercise of warrants	40,284									40,284
Issuance of common stock related to exercise of warrants, shares					2,926,508
Issuance of common stock in connection with acquisition of Healing Solutions assets	39,454									39,454
Issuance of common stock in connection with acquisition of Healing Solutions assets, shares					1,387,759
Issuance of restricted stock awards	4,412									4,412
Issuance of restricted stock awards, shares					254,104
Issuance of warrants to High Trail	39,016									39,016
Issuance of common stock	36,735		$ 129,620	$ 11,075				$ 2		36,735	$ 129,618	$ 11,075
Issuance of common stock, shares					2,666,667			12,284,161	704,548
Reclassification of warrants to equity	97,088									97,088
Reclassification of warrants to liability	(21,260)									(21,260)
Fair value of warrant modification on extinguishment	17,399									17,399
Issuance of restricted common stock, shares					2,020,697
Forfeiture of restricted common stock, shares					(280,997)
Exercise of stock options	8,749									8,749
Exercise of stock options, shares					1,011,422
Stock-based compensation expense	16,421									16,421
Other comprehensive loss	(305)													(305)
Ending balance at Sep. 30, 2021	212,655				$ 5					635,296			(422,350)	(296)
Ending balance, shares at Sep. 30, 2021					50,049,660
Issuance of warrants in connection with offering	(97,088)									(97,088)
Beginning balance at Jun. 30, 2021	175,777				$ 3					487,605			(311,794)	37
Beginning balance, shares at Jun. 30, 2021					35,734,767
Net loss	(110,556)												(110,556)
Issuance of common stock upon exercise of stock option grants	17,399									17,399
Issuance of common stock upon exercise of stock option grants, shares					32,927
Issuance of common stock related to exercise of warrants, shares					1,879,368
Issuance of common stock			$ 125,564					$ 2			$ 125,562
Issuance of common stock, shares								12,154,161
Reclassification of warrants to equity	17,065									17,065
Reclassification of warrants to liability	(21,260)									(21,260)
Issuance of RSU issued to consultant	1,043									1,043
Issuance of RSU issued to consultant, shares					145,408
Issuance of restricted common stock, shares					125,055
Forfeiture of restricted common stock, shares					22,026
Exercise of stock options	17,399									17,399
Exercise of stock options, shares					32,927
Stock-based compensation expense	7,882									7,882
Other comprehensive loss	(259)													(259)
Ending balance at Sep. 30, 2021	212,655				$ 5					635,296			(422,350)	(296)
Ending balance, shares at Sep. 30, 2021					50,049,660
Issuance of warrants in connection with offering	(17,065)									(17,065)
Beginning balance at Dec. 31, 2021	224,228				$ 5					653,650			(428,959)	(468)
Beginning balance, shares at Dec. 31, 2021					55,090,237
Net loss	(175,987)												(175,987)
Issuance of common stock	43									43
Issuance of common stock, shares					23,362
Issuance of common stock	27,007				$ 1					27,006
Issuance of common stock, shares					7,003,332
Reclassification of warrants to equity	18,982									18,982
Issuance of restricted common stock, shares		$ 1				$ 1
Issuance of restricted common stock, shares						4,350,642
Forfeiture of restricted common stock, shares							(233,561)
Exercise of prefunded warrants	15,039									15,039
Exercise of prefunded warrants, shares					3,013,850
Issuance of common stock for settlement of seller note	767									767
Issuance of common stock for settlement of seller note, shares					292,887
Loss on initial issuance of equity	18,669									18,669
Issuance of warrants to contractors	1,137									1,137
Stock-based compensation expense	8,446									8,446
Other comprehensive loss	(1,087)													(1,087)
Ending balance at Sep. 30, 2022	99,281				$ 7					705,775			(604,946)	(1,555)
Ending balance, shares at Sep. 30, 2022					69,540,749
Issuance of warrants in connection with offering	(18,982)									(18,982)
Beginning balance at Jun. 30, 2022	200,848				$ 7					689,955			(488,044)	(1,070)
Beginning balance, shares at Jun. 30, 2022					69,219,384
Net loss	(116,902)												(116,902)
Issuance of common stock	43									43
Issuance of common stock, shares					23,362
Issuance of restricted common stock, shares						329,968
Forfeiture of restricted common stock, shares						(31,965)
Loss on initial issuance of equity	12,834									12,834
Stock-based compensation expense	2,943									2,943
Other comprehensive loss	(485)													(485)
Ending balance at Sep. 30, 2022	$ 99,281				$ 7					$ 705,775			$ (604,946)	$ (1,555)
Ending balance, shares at Sep. 30, 2022					69,540,749

Prepaid Expenses and Other Current Assets

9 Months Ended

Sep. 30, 2022

Prepaid Expense And Other Assets Current [Abstract]

Prepaid Expenses and Other Current Assets

PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaids and other current assets consisted of the following as of December 31, 2021 and September 30, 2022:


	December 31, 2021		September 30, 2022
	(in thousands)
Prepaid inventory	$	4,137	$	1,952
Restricted cash		7,998		2,914
Prepaid insurance		2,440		2,519
Consulting fees		2,263		—
Prepaid logistics costs		2,865		860
Right-of-Use-Asset (1)		—		241
Other		1,331		1,973
Prepaid and other current assets	$	21,034	$	10,459

(1)

On January 1, 2022, the Company recorded an aggregate of approximately $0.7 million of right-of-use assets and corresponding $0.7 million of lease liabilities upon adoption of ASC 842. Current Right-of-use assets of $0.2 million and corresponding lease liabilities are included in the prepaid and other current assets and accrued and other current liabilities line items respectively on the condensed consolidated balance sheets as of September 30, 2022. See the discussion for the adoption of the lease accounting standard described in Note 2.

Acquisition

9 Months Ended

Sep. 30, 2022

Business Combinations [Abstract]

Acquisitions

10.

ACQUISITION

2021 Acquisitions

Healing Solutions

On February 2, 2021 (the “Closing Date”), the Company entered into and closed the Asset Purchase Agreement with Healing Solutions, LLC (“Healing Solutions”). Pursuant to the Asset Purchase Agreement, the Company purchased and acquired certain assets of Healing Solutions (the “Healing Solutions Assets”) related to Healing Solutions’ retail and e-commerce business under the Healing Solutions’ brands, Tarvol, Sun Essential Oils and Artizen (among others), which primarily sells essential oils through Amazon and other marketplaces (the “Asset Purchase”). The Asset Purchase was accounted for as a business combination using the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations. As consideration for the Asset Purchase, the Company (i) paid to Healing Solutions $15.3 million in cash (the “Cash Purchase Price”), and (ii) issued 1,387,759 shares of common stock to Healing Solutions, the cost basis of which was the closing price per share of the common stock on the Closing Date. At the closing (the “Closing”), the Company withheld $2.0 million of the Cash Purchase Price to serve as collateral for Healing Solutions’ payment of certain overdue trade payables to be released to Healing Solutions in accordance with the terms of the Asset Purchase Agreement. This amount was paid by the Company within 60 days of the Closing Date.

In addition, Healing Solutions would be entitled to receive 170,042 shares of common stock (up to a maximum of 280,000 shares pursuant to certain terms and valuation at the measurement date) in respect of certain inventory. The shares would be issued to Healing Solutions following the final determination of inventory values pursuant to the terms of the Asset Purchase Agreement, which determination is expected to occur approximately nine to ten months following the Closing Date and such shares will be subject to vesting restrictions which will lapse on the date that is the one-year anniversary after the Closing Date. Pursuant to the terms of the Asset Purchase Agreement, Healing Solutions was required to use its commercially reasonable efforts to identify one or more suppliers of finished goods inventory of all SKUs that constitute assets acquired in the Asset Purchase (“New Suppliers”) and to initiate discussions with such New Suppliers for the purpose of negotiating new supply agreements between the Company or its affiliates, on the one hand, and the New Supplier, on the other hand, for the purchase of such SKUs following the Closing on terms acceptable to the Company in its sole discretion, acting reasonably. If, on or before the date that is 15 months after the Closing Date, an Earn-Out Consideration Event (as defined in the Asset Purchase Agreement) had occurred, then Healing Solutions was to be entitled to receive up to a maximum of 528,670 shares of common stock, which number of shares was subject to reduction in accordance with the terms of the Asset Purchase Agreement based on the time period within which the Earn-Out Consideration Event occurs. In November 2021, the Company issued 1.4 million shares of common stock in full settlement of the Earn-Out. As of December 31, 2021, there was no remaining earn-out liability related to Healing Solutions. See the discussion below under the heading Contingent Earn-Out Liability Considerations of this Note 10 for additional information.

The following presents the allocation of purchase price to the assets acquired and liabilities assumed, based on the estimated fair values at acquisition date:


	Amount allocated
	(in thousands)
Cash purchase price	$	15,280
1,387,759 shares of Common Stock issued at the Closing		39,454
Seller note for inventory		5,285
Estimated earnout liability		11,273
Total consideration to be paid	$	71,292

The amounts assigned to goodwill and major intangible asset classifications were as follows:


	Total
	(in thousands)
Inventory	$	8,215
Working Capital		202
Trademarks (10 year useful life)		22,900
Goodwill		39,975
Net assets acquired	$	71,292

Goodwill is expected to be deductible for tax purposes. The goodwill is attributable to expected synergies resulting from integrating the Healing Solutions’ products into the Company’s existing sales channels.

Squatty Potty Assets

On May 5, 2021, the Company acquired the business of e-commerce and retail company Squatty Potty, LLC (“Squatty Potty”), a leading online seller of health and wellness products, in an asset purchase transaction. Currently, Squatty Potty products are sold in thousands of retail locations including Bed, Bath & Beyond, Walmart and Target. As consideration for Squatty Potty’s assets, the Company paid approximately $19.0 million in cash. The Company also paid approximately $1.1 million as consideration related to acquired inventory. In addition, and subject to the achievement of contribution margin metrics for the year-ended December 31, 2021, the Company agreed to pay Squatty Potty a maximum earn-out of approximately $4.0 million, payable in shares of common stock or cash at Squatty Potty’s discretion. The Company also agreed to pay Squatty Potty $8.0 million for transition services, payable in shares of common stock or cash at Squatty Potty’s discretion. See the discussion below under the heading Contingent Earn-Out Liability Considerations of this Note 10 for additional information.

The following presents the allocation of purchase price to the assets acquired and liabilities assumed, based on the estimated fair values at acquisition date:


	Amount
	allocated
	(in thousands)
Cash purchase price	$	19,040
Transition services payments		8,231
Estimated earnout liability		3,502
Total consideration	$	30,773

The amounts assigned to goodwill and major intangible asset classifications were as follows:


	Total
	(in thousands)
Inventory	$	1,471
Working Capital		230
Trademarks (10 year useful life)		6,500
Customer relationships		5,700
Goodwill (1)		16,872
Net assets acquired	$	30,773

(1)

Photo Paper Direct

On May 5, 2021, the Company closed the acquisition of all outstanding stock of e-commerce company Photo Paper Direct Ltd. (“Photo Paper Direct”), a leading online seller of printing supplies. As consideration for Photo Paper Direct’s stock, the Company paid approximately $8.3 million in cash and issued approximately 704,500 shares of the Company’s common stock. The Company also paid approximately $5.4 million in cash as consideration related to Photo Paper Direct’s inventory and other working capital assets, including cash on hand of approximately $3.0 million. In addition, and subject to the achievement of certain Adjusted EBITDA metrics by December 31, 2021, the Company agreed to issue to Photo Paper Direct a maximum earn-out of $6.0 million in cash and $2.0 million in the Company’s common stock. The earn-out was not achieved. See the discussion below under the heading Contingent Earn-Out Liability Considerations of this Note 10 for additional information.

The following presents the allocation of purchase price to the assets acquired and liabilities assumed, based on the estimated fair values at acquisition date:


		Amount
		allocated
		(in thousands)
Cash purchase price	$		8,293
704,548 shares of common stock issued			11,075
Working capital adjustment			5,338
Estimated earnout liability			911
Total consideration	$		25,617

The amounts assigned to goodwill and major intangible asset classifications were as follows:


		Total
		(in thousands)
Inventory	$		2,846
PP&E			86
Real Property			848
Working Capital			2,144
Trademarks (10 year useful life)			5,400
Goodwill (1)			15,774
Deferred tax liability (2)			(1,481	)
Net assets acquired	$		25,617

(1)

(2)

A measurement period adjustment was recorded that resulted in a deferred tax liability of $1.5 million, and corresponding increase in goodwill.

Pro Forma Information

The Company had no acquisitions for the three and nine months ended September 30, 2022.


	Three Months Ended September 30, 2021			Nine Months Ended September 30, 2021
	(in thousands)
Net revenue as reported	$	68,121		$	184,446
Healing Solutions net revenue (1)		—			4,600
Squatty Potty net revenue (2)		—			6,024
Photo Paper Direct net revenue (3)		—			6,807
Net revenue pro forma	$	68,121		$	201,877

Operating loss as reported	$	(7,527	)	$	(30,812	)
Healing Solutions income (1)		—			382
Squatty Potty income (2)		—			1,772
Photo Paper Direct income (3)		—			2,114
Operating loss pro forma	$	(7,527	)	$	(26,544	)

(1)

(2)

(3)

The Company engaged a third-party valuation specialist to perform a valuation of the intangible assets acquired for all acquisitions. In performing the valuation, the Company’s management assessed the reasonableness of the projected financial information (“PFI”) by comparing it to the Company’s historical results and financial information for a peer group of the most similar public companies. Based on this review, the Company’s management determined the PFI is reasonable for business and intangible asset valuation purposes.

Contingent Earn-Out Liability Considerations

The Company reviews and re-assesses the estimated fair value of contingent consideration on a quarterly basis, and the updated fair value could differ materially from the initial estimates. Adjustments to the estimated fair value related to changes in all other unobservable inputs are reported in operating income (loss).

On December 1, 2020, the Company acquired the assets of leading e-commerce business brands Mueller, Pursteam, Pohl and Schmitt, and Spiralizer (the “Smash Assets”) for total consideration of (i) $25.0 million, (ii) 4,220,000 shares of common stock, the cost basis of which was $6.89 (closing stock price at closing of the transaction), of which 164,000 of such shares were issued to the sellers brokers and (iii) a seller note in the amount of $15.6 million, representing the value of certain inventory that the sellers had paid for but not yet sold as of the closing date.

As part of the acquisition of the Smash Assets, the sellers of the Smash Assets are entitled to earn-out payments based on the achievement of certain contribution margin thresholds on certain products of the acquired business. Earn-out payments will be due to the sellers for year one, or calendar year 2021 in the first quarter of 2022, and year two, or calendar year 2022, will be due in the first quarter of 2023. For the year-ended December 31, 2021 (year one of the earn-out), the earn-out payment will be calculated based on the contribution margin generated on certain products for an amount equal to $1.67 for every $1.00 of such contribution margin that is greater than $15.5 million and less than or equal to $18.5 million. Such earn-out payment cannot exceed $5.0 million. In addition, during the year-ending December 31, 2022 (year two of the earn-out), for each $0.5 million of contribution margin generated on certain products in excess of $15.5 million, subject to a cap of $27.5 million, the sellers shall be entitled to receive an amount in cash equal to the value of 0.1 million shares of the Company’s common stock multiplied by the average of the volume-weighted-average closing price per share of the Company’s common stock, for the 30 consecutive trading days ending on December 31, 2022.

As of December 31, 2021, the fair value amount of the earn-out payment was appropriately $5.2 million. As of September 30, 2022, there is no remaining earn-out liability related to Smash Assets.

As part of the acquisition of the Healing Solutions Assets, Healing Solutions was entitled to earn-out payments based on the achievement of certain contribution margin thresholds on certain products of the acquired business. If the earn-out consideration event occurred: (i) prior to the date that is nine months following the Closing Date, the Company will issue 528,670 shares of its common stock to Healing Solutions; (ii) on or after the date that is nine months following the Closing Date but before the date that is 12 months following the Closing Date, the Company was to issue 396,502 shares of common stock to Healing Solutions; or (iii) on or after the date that is 12 months following the Closing Date but before the date that is 15 months following the Closing Date (the date that is 15 months following the Closing Date, the “Earn-Out Termination Date”), the Company was to issue 264,335 shares of common stock to Healing Solutions; or after 15 months, the Company would not have any obligation to issue any shares of its common stock to Healing Solutions.

As of February 2, 2021, the acquisition date, the initial fair value amount of the earn-out payment with respect to the Healing Solutions Assets was appropriately $16.5 million. In November 2021, the Company issued 1.4 million shares of common stock in full settlement of the earn-out. As of December 31, 2021 there is no remaining earn-out liability related to Healing Solutions.

As part of the acquisition of the Squatty Potty Assets, Squatty Potty is entitled to earn-out payments based on the achievement of certain contribution margin thresholds on certain products of the acquired business. If the earn-out consideration event occurs in 12 months ended December 31, 2021, the maximum payment amount is $3.9 million and if the termination of the transition service agreement is prior to the date that is nine months following the Closing Date, an additional $3.9 million.

As of May 5, 2021, the acquisition date, the initial fair value amount of the earn-out payment with respect to the Squatty Potty Assets was appropriately $3.5 million. As of September 30, 2022, there is no remaining earn-out liability related to Squatty Potty.

As of May 5, 2021, the acquisition date of Photo Paper Direct Ltd. (“Photo Paper Direct”), the initial fair value amount of the earn-out payment with respect to the Photo Paper Direct acquisition was appropriately $0.9 million. As of December 31, 2021, the fair value amount of the earn-out payment with respect to the Photo Paper Direct acquisition was approximately $0.0 million as the earnout was not achieved.

The following table summarizes the changes in the carrying value of estimated contingent earn-out liabilities (in thousands) as of September 30, 2022 (in thousands):


	September 30, 2022
	Smash Assets			Healing Solutions		Squatty Potty			Photo Paper Direct		Total
Balance—December 31, 2021	$	5,240		$	—	$	3,983		$	—	$	9,223
Change in fair value of contingent earn-out liabilities		(5,240	)		—		—			—		(5,240	)
Payment of contingent earn-out liability		—			—		(3,983	)		—		(3,983	)
Balance—September 30, 2022	$	—		$	—	$	—		$	—	$	—

Goodwill and Intangibles - Summary of Changes in Goodwill and Intangible Assets (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended		12 Months Ended
	Sep. 30, 2022	Sep. 30, 2022	Sep. 30, 2021	Dec. 31, 2021
Disclosure Of Goodwill And Intangible Assets [Line Items]
Net Book Value				$ 119,941
Gross Carrying Amount		$ 72,444	$ 31,944	31,944
Additions			40,500
Gross Carrying Amount				72,444
Intangible Impairments	$ (3,118)	(3,118)
Accumulated Amortization	(13,061)	(13,061)		(7,489)
Net Book Value	56,265	56,265		64,955
Trademarks
Disclosure Of Goodwill And Intangible Assets [Line Items]
Gross Carrying Amount		65,910	31,810	31,810
Additions			34,100
Gross Carrying Amount				65,910
Intangible Impairments		(3,087)
Accumulated Amortization	(11,450)	(11,450)		(6,332)
Net Book Value	51,373	51,373		59,578
Non-Competition Agreement
Disclosure Of Goodwill And Intangible Assets [Line Items]
Impairments	(31)	(31)
Gross Carrying Amount		111	111	111
Gross Carrying Amount				111
Accumulated Amortization	(80)	(80)		(54)
Net Book Value				57
Transition Services Agreement
Disclosure Of Goodwill And Intangible Assets [Line Items]
Gross Carrying Amount		23	23	23
Gross Carrying Amount				23
Accumulated Amortization	(23)	(23)		(23)
Customer Relations
Disclosure Of Goodwill And Intangible Assets [Line Items]
Gross Carrying Amount		5,700
Additions			5,700
Gross Carrying Amount				5,700
Accumulated Amortization	(808)	(808)		(380)
Net Book Value	4,892	4,892		5,320
Other
Disclosure Of Goodwill And Intangible Assets [Line Items]
Gross Carrying Amount		700
Additions			700
Gross Carrying Amount				700
Accumulated Amortization	(700)	(700)		(700)
Goodwill
Disclosure Of Goodwill And Intangible Assets [Line Items]
Gross Carrying Amount		119,941	$ 47,318	47,318
Additions				72,623
Impairments	$ (119,941)	$ (119,941)
Net Book Value				$ 119,941

Summary of Significant Accounting Policies - Net Revenue Disaggregated by Sales Channel and Geographic Region (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Disaggregation Of Revenue [Line Items]
Total net revenue	$ 66,326	$ 68,121	$ 166,268	$ 184,446
North America
Disaggregation Of Revenue [Line Items]
Total net revenue	65,348	66,966	162,814	182,356
Other
Disaggregation Of Revenue [Line Items]
Total net revenue	978	1,155	3,454	2,090
Direct
Disaggregation Of Revenue [Line Items]
Total net revenue	63,796	66,075	161,853	180,308
Direct \| North America
Disaggregation Of Revenue [Line Items]
Total net revenue	62,818	64,920	158,399	178,218
Direct \| Other
Disaggregation Of Revenue [Line Items]
Total net revenue	978	1,155	3,454	2,090
Wholesale/Other
Disaggregation Of Revenue [Line Items]
Total net revenue	2,530	2,046	4,415	4,138
Wholesale/Other \| North America
Disaggregation Of Revenue [Line Items]
Total net revenue	$ 2,530	$ 2,046	$ 4,415	$ 4,138

- Definition

+ References

+ Details

Condensed Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Statement Of Income And Comprehensive Income [Abstract]
NET LOSS	$ (116,902)	$ (110,556)	$ (175,987)	$ (229,415)
OTHER COMPREHENSIVE LOSS:
Foreign currency translation adjustments	(485)	(259)	(1,087)	(305)
Other comprehensive loss	(485)	(259)	(1,087)	(305)
COMPREHENSIVE LOSS	$ (117,387)	$ (110,815)	$ (177,074)	$ (229,720)

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References

+ Details

Summary of Significant Accounting Policies - Summary of Activity of the Level 3 Liabilities Carried at Fair Value on a Recurring Basis (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Change in fair value of contingent earn-out liabilities	$ (774)	$ (4,245)	$ (5,240)	$ (11,949)
Payment of contingent earn-out liability			(3,983)	$ (3,988)
Fair value of warrants issued in connection with equity offering			18,982
Exercise of prefunded warrants			(15,039)
Level 3 \| Fair Value of Contingent Earn-out Considerations
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Liabilities carried at fair value on a recurring basis, Beginning balance			9,223
Fair Value, Recurring \| Level 3
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Fair value of warrants issued in connection with equity offering			18,982
Change in fair value of warrant liability			2,365
Exercise of prefunded warrants			(15,039)
Liabilities carried at fair value on a recurring basis, Ending balance	$ 6,308		6,308
Fair Value, Recurring \| Level 3 \| Fair Value of Contingent Earn-out Considerations
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Liabilities carried at fair value on a recurring basis, Beginning balance			9,223
Change in fair value of contingent earn-out liabilities			(5,240)
Payment of contingent earn-out liability			$ (3,983)