8-K
false000175771500017577152023-03-092023-03-09

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

PURSUANT TO SECTION 13 or 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): March 9, 2023

 

Aterian, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

 

 

 

 

Delaware

 

001-38937

 

83-1739858

(State or Other Jurisdiction

of Incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

Aterian, Inc.
37 East 18th Street, 7th Floor

New York, NY 10003

(Address of Principal Executive Offices)(Zip Code)

(347) 676-1681
(Registrant’s telephone number, including area code)

N/A

(Former Name, or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities Registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol

 

Name of each exchange on which registered

Common Stock, $0.0001 par value

 

ATER

 

The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

 


 

Item 2.02. Results of Operations and Financial Condition.

On March 9, 2023, Aterian, Inc. (the “Company”) issued a press release announcing its financial results for the year-ended December 31, 2022. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

The information in this Item 2.02, including the press release attached hereto as Exhibit 99.1, is intended to be furnished under Item 2.02 and Item 9.01 of Form 8-K and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01. Financial Statements and Exhibits.

 

(d) Exhibits

Number

Description

99.1

Press Release issued by Aterian, Inc., dated March 9, 2023

104

Cover Page Interactive Data File (embedded within the Inline XBRL)

 

 


 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

ATERIAN, INC.

 

 

 

 

 

 

 

 

 

Date: March 9, 2023

By:

/s/ Yaniv Sarig

 

 

 

Name: Yaniv Sarig

 

 

 

Title: President and Chief Executive Officer

 

 

 


EX-99

https://cdn.kscope.io/f43a43e7cc48cbdbdf5f5557eb763ce1-img100432197_0.jpg 

Exhibit 99.1

 

 

Aterian Reports Fourth Quarter & Full Year 2022 Results

 

Achieved Substantial Progress Selling Through High Cost Inventory to Drive Margin Expansion Starting In the First Quarter of 2023

 

Reaffirms Second Half 2023 Adjusted EBITDA Profitability Target

 

 

 

NEW YORK, March 9, 2023 – Aterian, Inc. (Nasdaq: ATER) (“Aterian” or the “Company”) today announced results for the fourth quarter and full year ended December 31, 2022.

 

Fourth Quarter Highlights

Fourth quarter 2022 net revenue declined 13.3% to $54.9 million, compared to $63.3 million in the fourth quarter of 2021.
Fourth quarter 2022 gross margin declined to 37.1%, compared to 45.6% in the fourth quarter of 2021, primarily reflecting the impact of our strategy of liquidating high cost inventory.
Fourth quarter 2022 contribution margin declined to (11.5)% from 7.9% in the fourth quarter of 2021, primarily reflecting the impact of our strategy of liquidating high cost inventory.
Fourth quarter 2022 operating loss declined to $(22.8) million compared to a loss of $(3.3) million in the fourth quarter of 2021. Fourth quarter 2022 operating loss includes a reserve for barter credits of ($1.6) million and ($2.7) million of non-cash stock compensation, and a non-cash loss on impairment of goodwill of ($0.5) million, while fourth quarter 2021 operating loss included a net gain of $14.4 million from the net change in fair value and settlement of earn-out liabilities and $(7.7)million of non-cash stock compensation.
Fourth quarter 2022 net loss of $(20.3) million declined from $(6.6) million in 2021. Fourth quarter 2022 net loss includes a reserve for barter credits of ($1.6) million, ($2.7) million of non-cash stock compensation, a non-cash loss on impairment of goodwill of ($0.5) million, and a gain on fair value of warrant liability of $2.8 million, while fourth quarter 2021 net loss included a net gain of $14.4 million from the net change in fair value and settlement of earn-out liabilities, $(7.7) million of non-cash stock compensation and loss on extinguishment of debt of $(2.1) million.
Fourth quarter 2022 adjusted EBITDA declined to $(16.2) million from $(3.0) million in the fourth quarter of 2021.
Total cash balance at December 31, 2022 was $43.6 million.

 

Full Year 2022 Highlights

Full year 2022 net revenue declined 10.7% year over year to $221.2 million, compared to $247.8 million in the full year of 2021.

Full year gross margin declined to 47.7% compared to 49.2% in 2021, reflecting impacts from global supply chain disruptions and related inflation and our strategy of liquidating high cost inventory.
Full year 2022 contribution margin declined to 1.8% from 10.1% in 2021, reflecting impacts from global supply chain disruptions and related inflation and our strategy of liquidating high cost inventory.
Full year 2022 operating loss of $(178.2) million declined from $(34.1) million in 2021. Full year operating loss includes a gain of $5.2 million from the change in fair value of contingent earn-out liabilities, ($14.6) million of non-cash stock compensation, a non-cash loss on impairment of goodwill of ($120.4) million, and a non-cash loss on impairment of intangibles of ($3.1) million, while full year 2021 operating loss included a net gain of $26.4 million net change in fair value and settlement of earn-out liabilities and $(29.0) million of non-cash stock compensation.
Full year 2022 net loss of $(196.3) million improved from $(236.0) million in 2021. Full year net loss includes a gain of $5.2 million from the change in fair value of contingent earn-out liabilities, ($14.6) million of non-cash stock compensation, a non-cash loss on impairment of goodwill of ($120.4) million, a non-cash loss on impairment of intangibles of ($3.1) million, a gain on extinguishment of seller note of $2.0 million, a loss on initial issuance of equity of ($18.7) million and gain of $0.5 million relating to the change in fair value of warrant liability, while full year 2021 net loss included change in fair value of derivative liability of $(3.3) million, loss on extinguishment of debt of $(138.9) million, change in fair value of warrant liability of $(26.5) million, loss on initial issuance of warrant of $(20.1) million, a net gain of $26.4 million net change in fair value and settlement of earn-out liabilities, and $(29.0) million of non-cash stock compensation.
Full year 2022 adjusted EBITDA declined to $(33.5) million from $(7.2) million in 2021.

 

Yaniv Sarig, Co-Founder and Chief Executive Officer, commented, “While consumer demand was softer year on year, we successfully executed on our strategy to cycle through expensive inventory. Due to the exorbitant shipping costs in bringing in this inventory, we applied discounts to excess inventory across the board, including some of our best products, to make room for inventory at a lower cost basis. This is not due to weakness in our portfolio but rather with international shipping rates normalizing we can restock our inventory at a lower cost basis. Combining this with our portfolio’s strong market share position, we remain on track to achieve adjusted EBITDA profitability in the second half of 2023.”

 

First Quarter 2023 & Second Half of 2023 Outlook

For the first quarter of 2023, taking into account the current global environment and inflation, we believe that net revenue will be between $32 million and $36 million. For the first quarter of 2023, the Company expects Adjusted EBITDA to remain in the range of $(4.8) million and $(5.8) million.

 

The Company also is reconfirming its prior guidance of expecting to be Adjusted EBITDA profitable in the second half of 2023.

 

Non-GAAP Financial Measures

For more information on our non-GAAP financial measures and a reconciliation of GAAP to non-GAAP measures, please see the “Non-GAAP Financial Measures” section below. The most directly comparable GAAP financial measure for EBITDA and Adjusted EBITDA is net loss and we expect to


report a net loss for the three months ending March 31, 2023 and the second half of 2023, due primarily to interest expense and stock-based compensation expense.

 

Webcast and Conference Call Information

Aterian will host a live conference call to discuss financial results today, March 9, 2023, at 5:00 p.m. Eastern Time, which will be accessible by telephone and the internet. To access the call, participants from within the U.S. should dial (833) 636-1351 and participants from outside the U.S. should dial (412) 902-4267 and ask to be joined into the Aterian, Inc. call. Participants may also access the call through a live webcast at https://ir.aterian.io. The archived online replay will be available for a limited time after the call in the Investors Relations section of the Aterian website.

 

About Aterian, Inc.

Aterian, Inc. (Nasdaq: ATER), is a leading technology-enabled consumer products platform that builds, acquires, and partners with best-in-class e-commerce brands by harnessing proprietary software and an agile supply chain to create top selling consumer products. The Company’s cloud-based platform, Artificial Intelligence Marketplace Ecommerce Engine (AIMEE™), leverages machine learning, natural language processing and data analytics to streamline the management of products at scale across the world’s largest online marketplaces, including Amazon, Shopify and Walmart. Aterian has thousands of SKUs across 14 owned and operated brands and sells products in multiple categories, including home and kitchen appliances, health and wellness, beauty and consumer electronics.

 

Forward Looking Statements

All statements other than statements of historical facts included in this press release that address activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements including, in particular, the statements regarding our strong market share position, goal to achieve adjusted EBITDA profitability in the second half of 2023 and international shipping rates normalizing;. These forward-looking statements are based on management’s current expectations and beliefs and are subject to a number of risks and uncertainties and other factors, all of which are difficult to predict and many of which are beyond our control and could cause actual results to differ materially and adversely from those described in the forward-looking statements. These risks include, but are not limited to, those related to the global shipping disruptions, our ability to continue as a going concern, our ability to meet financial covenants with our lenders, our ability to create operating leverage and efficiency when integrating companies that we acquire, including through the use of our team’s expertise, the economies of scale of our supply chain and automation driven by our platform; those related to our ability to grow internationally and through the launch of products under our brands and the acquisition of additional brands; those related to the impact of COVID-19, including its impact on consumer demand, our cash flows, financial condition, forecasting and revenue growth rate; our supply chain including sourcing, manufacturing, warehousing and fulfillment; our ability to manage expenses, working capital and capital expenditures efficiently; our business model and our technology platform; our ability to disrupt the consumer products industry; our ability to grow market share in existing and new product categories; our ability to generate profitability and stockholder value; international tariffs and trade measures; inventory management, product liability claims, recalls or other safety and regulatory concerns; reliance on third party online marketplaces; seasonal and quarterly variations in our revenue; acquisitions of other companies and technologies and our ability to integrate such companies and technologies with our business; our ability to continue to access debt and equity capital (including on terms advantageous to the Company) and the extent of our leverage; and other factors discussed in the “Risk Factors” section of our most recent periodic reports filed with the Securities and Exchange Commission (“SEC”), all of which you may obtain for free on the SEC’s website at www.sec.gov.

 

Although we believe that the expectations reflected in our forward-looking statements are reasonable, we do not know whether our expectations will prove correct. You are cautioned not to place undue reliance on


these forward-looking statements, which speak only as of the date hereof, even if subsequently made available by us on our website or otherwise. We do not undertake any obligation to update, amend or clarify these forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

 

 

 

 

 

Investor Contact:

Ilya Grozovsky

Director of Investor Relations & Corp. Development

Aterian, Inc.

ilya@aterian.io

917-905-1699

 


ATERIAN, INC.

Consolidated Balance Sheets

(in thousands, except share and per share data)

 

 

December 31,
2021

 

 

December 31,
2022

 

ASSETS

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

Cash

 

$

30,317

 

 

$

43,574

 

Accounts receivable—net

 

 

10,478

 

 

 

4,515

 

Inventory

 

 

63,045

 

 

 

43,666

 

Prepaid and other current assets

 

 

21,034

 

 

 

8,261

 

Total current assets

 

 

124,874

 

 

 

100,016

 

PROPERTY AND EQUIPMENT—net

 

 

1,254

 

 

 

853

 

GOODWILL—net

 

 

119,941

 

 

 

 

OTHER INTANGIBLES—net

 

 

64,955

 

 

 

54,757

 

OTHER NON-CURRENT ASSETS

 

 

2,546

 

 

 

813

 

TOTAL ASSETS

 

$

313,570

 

 

$

156,439

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

Credit facility

 

$

32,845

 

 

$

21,053

 

Accounts payable

 

 

21,716

 

 

 

16,035

 

Seller notes

 

 

7,577

 

 

 

1,693

 

Contingent earn-out liability

 

 

3,983

 

 

 

 

Accrued and other current liabilities

 

 

17,621

 

 

 

14,254

 

Total current liabilities

 

 

83,742

 

 

 

53,035

 

OTHER LIABILITIES

 

 

360

 

 

 

1,452

 

CONTINGENT EARN-OUT LIABILITY

 

 

5,240

 

 

 

 

Total liabilities

 

 

89,342

 

 

 

54,487

 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

 

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 80,752,290 shares outstanding at December 31, 2022

 

 

5

 

 

 

8

 

Additional paid-in capital

 

 

653,650

 

 

 

728,339

 

Accumulated deficit

 

 

(428,959

)

 

 

(625,251

)

Accumulated other comprehensive income

 

 

(468

)

 

 

(1,144

)

Total stockholders’ equity

 

 

224,228

 

 

 

101,952

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

$

313,570

 

 

$

156,439

 

 


ATERIAN, INC.

Consolidated Statements of Operations

(in thousands, except share and per share data)

 

 

 

Three Months Ended

December 31,

 

 

Year-Ended

December 31,

 

 

 

2021

 

 

2022

 

 

2021

 

 

2022

 

NET REVENUE

 

$

63,321

 

 

$

54,902

 

 

$

247,767

 

 

$

221,170

 

COST OF GOODS SOLD

 

 

34,440

 

 

 

34,534

 

 

 

125,904

 

 

 

115,652

 

GROSS PROFIT

 

 

28,881

 

 

 

20,368

 

 

 

121,863

 

 

 

105,518

 

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and distribution

 

 

30,653

 

 

 

32,507

 

 

 

127,369

 

 

 

121,139

 

Research and development

 

 

2,617

 

 

 

  1,430

 

 

 

9,837

 

 

 

6,012

 

General and administrative

 

 

13,292

 

 

 

  8,758

 

 

 

45,099

 

 

 

38,239

 

Impairment loss on goodwill

 

 

 

 

 

     468

 

 

 

 

 

 

120,409

 

Impairment loss on intangibles

 

 

 

 

 

 

 

 

 

 

 

3,118

 

Settlement of a contingent earn-out liability

 

 

4,164

 

 

 

 

 

 

4,164

 

 

 

 

Change in fair value of contingent earn-out liabilities

 

 

(18,580

)

 

 

 

 

 

(30,529

)

 

 

(5,240

)

TOTAL OPERATING EXPENSES:

 

 

32,146

 

 

 

43,163

 

 

 

155,940

 

 

 

283,677

 

OPERATING LOSS

 

 

(3,265

)

 

 

(22,795

)

 

 

(34,077

)

 

 

(178,159

)

INTEREST EXPENSE—net

 

 

778

 

 

 

      560

 

 

 

12,655

 

 

 

2,603

 

GAIN ON EXTINGUISHMENT OF SELLER NOTE

 

 

 

 

 

 

 

 

 

 

 

(2,012

)

LOSS ON INITIAL ISSUANCE OF EQUITY

 

 

 

 

 

 

 

 

 

 

 

18,669

 

CHANGE IN FAIR VALUE OF DERIVATIVE LIABILITY

 

 

 

 

 

 

 

 

3,254

 

 

 

 

LOSS ON EXTINGUISHMENT OF DEBT

 

 

2,096

 

 

 

 

 

 

138,859

 

 

 

 

CHANGE IN FAIR VALUE OF WARRANT LIABILITY

 

 

 

 

 

  (2,835

)

 

 

26,455

 

 

 

(470

)

LOSS ON INITIAL ISSUANCE OF WARRANTS

 

 

 

 

 

 

 

 

20,147

 

 

 

 

OTHER EXPENSE (INCOME)—net

 

 

2

 

 

 

(83)

 

 

 

45

 

 

 

(281

)

LOSS BEFORE INCOME TAXES

 

 

(6,141

)

 

 

(20,437

)

 

 

(235,492

)

 

 

(196,668

)

PROVISION (BENEFIT) FOR INCOME TAXES

 

 

468

 

 

 

      (133)

 

 

 

532

 

 

 

(376)

 

NET LOSS

 

$

(6,609

)

 

$

 (20,304

)

 

$

(236,024

)

 

$

(196,292

)

Net loss per share, basic and diluted

 

$

(0.13

)

 

$

(0.27

)

 

$

(6.67

)

 

$

(2.95

)

Weighted-average number of shares outstanding, basic and diluted

 

 

50,159,967

 

 

 

75,824,531

 

 

 

35,379,005

 

 

 

66,529,565

 

 


 

 

                                              ATERIAN, INC.

                                                    Consolidated Statements of Cash Flows

                                        (in thousands)

 

 

 

 

 

Year-Ended December 31,

 

 

 

2021

 

 

2022

 

OPERATING ACTIVITIES:

 

 

 

 

 

 

Net loss

 

$

(236,024

)

 

$

(196,292

)

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

7,326

 

 

 

7,521

 

Provision for sales returns

 

 

43

 

 

 

56

 

Amortization of deferred financing cost and debt discounts

 

 

7,742

 

 

 

429

 

Stock-based compensation

 

 

28,987

 

 

 

14,594

 

Gain from increase of contingent earn-out liability fair value

 

 

(30,529

)

 

 

(5,240

)

Loss in connection with settlement of earn-out

 

 

4,164

 

 

 

Loss (Gain) in connection with the change in warrant fair value

 

 

26,455

 

 

 

(470

)

Gain in connection with settlement of note payable

 

 

 

 

(2,012

)

Loss on initial issuance of warrants

 

 

20,147

 

 

 

Issuance of common stock

 

 

 

 

 

43

 

Loss on initial issuance of equity

 

 

 

 

18,669

 

Loss from extinguishment of High Trail December 2020 and February 2021 Term Loan

 

 

28,240

 

 

 

Loss from extinguishment of High Trail April 2021 Term Loan

 

 

106,991

 

 

 

Loss from extinguishment of High Trail Term Loan

 

 

2,096

 

 

 

Loss from extinguishment of Credit Facility

 

 

1,532

 

 

 

Provision for barter credits

 

 

1,000

 

 

 

1,643

 

Loss from derivative liability discount related to term loan

 

 

3,254

 

 

 

Impairment loss on goodwill

 

 

 

 

120,409

 

Impairment loss on intangibles

 

 

 

 

3,118

 

Allowance for doubtful accounts and other

 

 

4,200

 

 

 

367

 

Changes in assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(4,554

)

 

 

5,596

 

Inventory

 

 

(19,303

)

 

 

19,438

 

Prepaid and other current assets

 

 

(7,856

)

 

 

5,564

 

Accounts payable, accrued and other liabilities

 

 

14,120

 

 

 

(10,910

)

Cash provided (used) by operating activities

 

 

(41,969

)

 

 

(17,477

)

INVESTING ACTIVITIES:

 

 

 

 

 

 

Purchase of fixed assets

 

 

(32

)

 

 

(82

)

Purchase of Healing Solutions assets

 

 

(15,250

)

 

 

Purchase of Photo Paper Direct, net of cash acquired

 

 

(10,583

)

 

 

Purchase of Squatty Potty assets

 

 

(19,040

)

 

 

Purchase of Step and Go assets

 

 

 

 

(595

)

Cash used in investing activities

 

 

(44,905

)

 

 

(677

)

FINANCING ACTIVITIES:

 

 

 

 

 

 

Proceeds from warrant exercise

 

 

9,085

 

 

 

Proceeds from cancellation of warrant

 

 

16,957

 

 

 

Proceeds from issuance of common stock from follow-on public offering, net of issuance costs

 

 

36,735

 

 

 

Proceeds from equity offering, net of issuance costs

 

 

 

 

46,834

 

Proceeds from exercise of stock options

 

 

9,033

 

 

 

Repayments on note payable to Smash

 

 

(10,495

)

 

 

(3,423

)

Payment of earnout to Squatty Potty

 

 

(7,971

)

 

 

(3,983

)

Borrowings from MidCap credit facilities

 

 

48,750

 

 

 

136,687

 

Repayments from MidCap credit facilities

 

 

(28,274

)

 

 

(148,907

)

Debt issuance costs from MidCap credit facility

 

 

(849

)

 

 

Repayments for High Trail April 2021 Note

 

 

(10,139)

 

 

 

Repayments for High Trail December 2021 Note

 

 

               (27,500)

 

 

 

Repayments for High Trail December 2020 Note and February 2021 Note

 

 

(59,500

)

 

 

Borrowings from High Trail February 2021 Note

 

 

14,025

 

 

 

Borrowings from High Trail April 2021 Note

 

 

110,000

 

 

 

Debt issuance costs from High Trail February 2021 Note

 

 

(1,462

)

 

 

Debt issuance costs from High Trail April 2021 Note

 

 

(2,202

)

 

 

Insurance financing proceeds

 

 

2,424

 

 

 

2,099

 

Insurance obligation payments

 

 

(3,048

)

 

 

(2,311

)

Cash provided by financing activities

 

 

95,569

 

 

 

26,996

 

EFFECT OF EXCHANGE RATE ON CASH

 

 

(477

)

 

 

(528

)

NET CHANGE IN CASH AND RESTRICTED CASH FOR THE YEAR

 

 

8,218

 

 

 

8,314

 

CASH AND RESTRICTED CASH AT BEGINNING OF YEAR

 

 

30,097

 

 

 

38,315

 

CASH AND RESTRICTED CASH AT END OF YEAR

 

 

38,315

 

 

 

46,629

 

RECONCILIATION OF CASH AND RESTRICTED CASH

 

 

 

 

 

 

CASH

 

 

30,317

 

 

 

43,574

 

RESTRICTED CASH—Prepaid and other current assets

 

 

7,849

 

 

 

2,926

 

RESTRICTED CASH—Other non-current assets

 

 

149

 

 

 

129

 

TOTAL CASH AND RESTRICTED CASH

 

$

38,315

 

 

$

46,629

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

 

 

 

 

 

 

Cash paid for interest

 

$

5,611

 

 

$

1,875

 

Cash paid for taxes

 

$

41

 

 

$

100

 

Non-cash consideration paid to contractors

 

$

-

 

 

$

1,137

 

Modification of warrants between equity and liability

 

$

75,828

 

 

$

 

Non-cash consideration paid to contractors

 

$

7,289

 

 

$

 

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

 

$

51,284

 

 

$

 

Notes Payable of acquisition

 

$

16,550

 

 

$

 

Issuance of common stock in connection with Healing Solutions and Photo Paper Direct acquisitions

 

$

50,529

 

 

$

 

Issuance of common stock - debt repayment

 

$

125,562

 

 

$

 

Issuance of common stock - Healing Solutions earnout settlement

 

$

7,914

 

 

$

 

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

 

 

Non-GAAP Financial Measures

We believe that our financial statements and the other financial data included in this Annual Report have been prepared in a manner that complies, in all material respects, with generally accepted accounting principles in the U.S. (“GAAP”). However, for the reasons discussed below, we have presented certain non-GAAP measures herein.

We have presented the following non-GAAP measures to assist investors in understanding our core net operating results on an on-going basis: (i) Contribution Margin; (ii) Contribution margin as a percentage of net revenue; (iii) EBITDA (iv) Adjusted EBITDA; and (v) Adjusted EBITDA as a percentage of net revenue. These non-GAAP financial measures may also assist investors in making comparisons of our core operating results with those of other companies.

As used herein, Contribution margin represents gross profit less amortization of inventory step-up from acquisitions (included in cost of goods sold), reserve on barter credits and e-commerce platform commissions, online advertising, selling and logistics expenses (included in sales and distribution expenses). As used herein, Contribution margin as a percentage of net revenue represents Contribution margin divided by net revenue. As used herein, EBITDA represents net loss plus depreciation and amortization, interest expense, net and provision for income taxes. As used herein, Adjusted EBITDA represents EBITDA plus stock-based compensation expense, changes in fair-market value of earn-outs, settlement of earn-outs, amortization of inventory step-up from acquisitions (included in cost of goods sold), reserve for barter credits, profit and loss impacts from the issuance of common stock and/or warrants, changes in fair-market value of warrant liability, professional fees and transition costs related to acquisitions, litigation settlements, impairment on goodwill and intangibles,loss from extinguishment of debt and other expenses, net. As used herein, Adjusted EBITDA as a percentage of net revenue represents Adjusted EBITDA divided by net revenue. Contribution margin, EBITDA and Adjusted EBITDA do not represent and should not be considered as alternatives to loss from operations or net loss, as determined under GAAP.

We present Contribution margin and Contribution margin as a percentage of net revenue, as we believe each of these measures provides an additional metric to evaluate our operations and, when considered with both our GAAP results and the reconciliation to gross profit, provides useful supplemental information for investors. Specifically, Contribution margin and Contribution margin as a percentage of net revenue are two of our key metrics in running our business. All product decisions made by us, from the approval of launching a new product and to the liquidation of a product at the end of its life cycle, are measured primarily from Contribution margin and/or Contribution margin as a percentage of net revenue. Further, we believe these measures provide improved transparency to our stockholders to determine the performance of our products prior to fixed costs as opposed to referencing gross profit alone.

 

In the reconciliation to calculate contribution margin, we add e-commerce platform commissions, online advertising, selling and logistics expenses (“sales and distribution variable expense”), and the reserve for barter credits to gross profit to inform users of our financial statements of what our product profitability is at each period prior to fixed costs (such as sales and distribution expenses such as salaries as well as research and development expenses and general administrative expenses). By excluding these fixed costs, we believe this allows users of our financial statements to understand our products performance and allows them to measure our products performance over time.

 

We present EBITDA, Adjusted EBITDA and Adjusted EBITDA as a percentage of net revenue because we believe each of these measures provides an additional metric to evaluate our operations and, when considered with both our GAAP results and the reconciliation to net loss, provide useful supplemental information for investors. We use these measures with financial measures prepared in accordance with GAAP, such as sales and gross margins, to assess our historical and prospective operating performance, to provide meaningful comparisons of operating performance across periods, to enhance our understanding of our operating performance and to compare our performance to that of our peers and competitors. We believe EBITDA, Adjusted EBITDA and Adjusted EBITDA as a percentage of net revenue are useful to investors in assessing the operating performance of our business without the effect of non-cash items.

Contribution margin, Contribution margin as a percentage of net revenue, EBITDA, Adjusted EBITDA and Adjusted EBITDA as a percentage of net revenue should not be considered in isolation or as alternatives to net loss, loss from operations or any other measure of financial performance calculated and prescribed in accordance with GAAP. Neither EBITDA, Adjusted EBITDA or Adjusted EBITDA as a percentage of net revenue should be considered a measure of discretionary cash available to us to invest in the growth of our business. Our Contribution margin, Contribution margin as a percentage of net revenue, EBITDA, Adjusted EBITDA and Adjusted EBITDA as a percentage of net revenue may not be comparable to similar titled measures in other organizations because other organizations may not calculate Contribution margin, Contribution margin as a percentage of net revenue, EBITDA, Adjusted EBITDA or Adjusted EBITDA as a percentage of net revenue in the same manner as we do. Our presentation of Contribution margin and Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by the expenses that are excluded from such terms or by unusual or non-recurring items.


 

Contribution margin, Contribution margin as a percentage of net revenue, EBITDA, Adjusted EBITDA and Adjusted EBITDA as a percentage of net revenue should not be considered in isolation or as alternatives to net loss, loss from operations or any other measure of financial performance calculated and prescribed in accordance with GAAP. Neither EBITDA, Adjusted EBITDA or Adjusted EBITDA as a percentage of net revenue should be considered a measure of discretionary cash available to us to invest in the growth of our business. Our Contribution margin, Contribution margin as a percentage of net revenue, EBITDA, Adjusted EBITDA and Adjusted EBITDA as a percentage of net revenue may not be comparable to similar titled measures in other organizations because other organizations may not calculate Contribution margin, Contribution margin as a percentage of net revenue, EBITDA, Adjusted EBITDA or Adjusted EBITDA as a percentage of net revenue in the same manner as we do. Our presentation of Contribution margin and Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by the expenses that are excluded from such terms or by unusual or non-recurring items.

 

We recognize that EBITDA, Adjusted EBITDA and Adjusted EBITDA as a percentage of net revenue, have limitations as analytical financial measures. For example, neither EBITDA nor Adjusted EBITDA reflects:

our capital expenditures or future requirements for capital expenditures or mergers and acquisitions;
the interest expense or the cash requirements necessary to service interest expense or principal payments, associated with indebtedness;
depreciation and amortization, which are non-cash charges, although the assets being depreciated and amortized will likely have to be replaced in the future, or any cash requirements for the replacement of assets;
changes in cash requirements for our working capital needs; or
changes in fair value of contingent earn-out liabilities, warrant liabilities, and amortization of inventory step-up from acquisitions (included in cost of goods sold).

Additionally, Adjusted EBITDA excludes non-cash expense for stock-based compensation, which is and is expected to remain a key element of our overall long-term incentive compensation package.

 

We also recognize that Contribution margin and Contribution margin as a percentage of net revenue have limitations as analytical financial measures. For example, Contribution margin does not reflect:

general and administrative expense necessary to operate our business;
research and development expenses necessary for the development, operation and support of our software platform;
the fixed costs portion of our sales and distribution expenses including stock-based compensation expense; or
changes in fair value of contingent earn-out liabilities, warrant liabilities, and amortization of inventory step-up from acquisitions (included in cost of goods sold).

 

Contribution Margin

The following table provides a reconciliation of Contribution margin to gross profit and Contribution margin as a percentage of net revenue to gross profit as a percentage of net revenue, which are the most directly comparable financial measures presented in accordance with GAAP.

 

 

Three Months Ended

December 31,

 

 

Year-Ended

December 31,

 

 

 

2021

 

 

2022

 

 

2021

 

 

2022

 

 

 

(in thousands, except percentages)

 

 

(in thousands, except percentages)

 

Gross Profit

 

$

28,881

 

 

$

20,368

 

 

$

121,863

 

 

$

105,518

 

Add:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of inventory step-up from acquisitions (included in cost of goods sold)

 

 

542

 

 

 

 

 

 

5,458

 

 

 

 

Reserve on barter credits

 

 

1,000

 

 

 

1,643

 

 

 

1,000

 

 

 

1,643

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

E-commerce platform commissions, online advertising, selling and logistics expenses

 

 

(25,413

)

 

 

(28,331

)

 

 

(103,283

)

 

 

(103,258

)

Contribution margin

 

$

5,010

 

 

$

(6,320)

 

 

$

25,038

 

 

$

3,903

 

Gross Profit as a percentage of net revenue

 

 

45.6

%

 

 

37.1

%

 

 

49.2

%

 

 

47.7

%

Contribution margin as a percentage of net revenue

 

 

7.9

%

 

 

(11.5)

%

 

 

10.1

%

 

 

1.8

%

 


Adjusted EBITDA

The following table provides a reconciliation of EBITDA and Adjusted EBITDA to net loss, which is the most directly comparable financial measure presented in accordance with GAAP:

 

 

 

Three Months Ended

December 31,

 

 

Year-Ended

December 31,

 

 

 

2021

 

 

2022

 

 

2021

 

 

2022

 

 

 

(in thousands, except percentages)

 

 

(in thousands, except percentages)

 

 Net loss

 

$

(6,609

)

 

$

(20,304

)

 

$

(236,024

)

 

$

(196,292

)

 Add:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Provision for income taxes

 

468

 

 

(133)

 

 

532

 

 

(376

)

 Interest expense, net

 

 

778

 

 

 

560

 

 

 

12,655

 

 

 

2,603

 

 Depreciation and amortization

 

 

2,569

 

 

 

1,758

 

 

 

7,326

 

 

 

7,521

 

 EBITDA

 

 

(2,794

)

 

 

(18,119

)

 

 

(215,511

)

 

 

(186,544

)

 Other expense (income), net

 

 

2

 

 

 

(83

)

 

 

45

 

 

 

(281

)

 Change in fair value of contingent earn-out liabilities

 

 

(18,580

)

 

 

 

 

 

(30,529

)

 

 

(5,240

)

 Settlement of a contingent earn-out liability

 

 

4,164

 

 

 

 

 

 

4,164

 

 

 

 

 Impairment loss on goodwill

 

 

 

 

 

468

 

 

 

 

 

 

120,409

 

 Impairment loss on intangibles

 

 

 

 

 

 

 

 

 

 

 

3,118

 

 Gain on extinguishment of seller note

 

 

 

 

 

 

 

 

 

 

 

(2,012

)

 Amortization of inventory step-up from acquisitions (included in cost of goods sold)