0000950170-23-040550 | 10-Q | XBRL Viewer

Restructuring (Tables)

6 Months Ended

Jun. 30, 2023

Restructuring and Related Activities [Abstract]

The following table provides a summary of the restructuring costs incurred:


	Three and Six Months Ended
	June 30, 2023
	(in thousands)
Employee severance	$	520
Retention bonus settled		411
Contract termination costs		285
Total restructuring costs	$	1,216

Stock-Based Compensation

6 Months Ended

Jun. 30, 2023

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 June 30, 2023, 98,371 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 June 30, 2023, 3,399,489 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 June 30, 2023, there were 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 June 30, 2023, 2,250,000 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 six months ended June 30, 2023:


	Options Outstanding
	Number of Options			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (years)		Aggregate Intrinsic Value
Balance—January 1, 2023		368,596		$	9.26		5.89	$	—
Options granted		—		$	—	—		$	—
Options exercised		—		$	—	—		$	—
Options canceled		(168,564	)	$	9.32	—		$	—
Balance—June 30, 2023		200,032		$	9.21		5.41	$	—
Exercisable as of June 30, 2023		200,032		$	9.21		5.41	$	—
Vested and expected to vest as of June 30, 2023		200,032		$	9.21		5.41	$	—

As of June 30, 2023, all options have been fully expensed.

A summary of restricted stock award activity within the Company’s equity plans and changes for the six months ended June 30, 2023 is as follows:


Restricted Stock Awards	Shares			Weighted Average Grant- Date Fair Value
Nonvested at January 1, 2023		4,223,023		$	4.85
Granted		8,090,965		$	0.61
Vested		(2,458,850	)	$	3.00
Forfeited		(1,128,411	)	$	4.13
Nonvested at June 30, 2023		8,726,727		$	1.53

As of June 30, 2023, the total unrecognized compensation expense related to unvested shares of restricted common stock was $13.0 million, which the Company expects to recognize over an estimated weighted-average period of 2.6 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 six months ended June 30, 2022 and 2023 (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2023		2022		2023
	(in thousands)				(in thousands)
Sales and distribution expenses	$	2,882	$	1,091	$	3,229	$	1,761
Research and development expenses		633		423		907		857
General and administrative expenses		2,533		1,709		4,777		2,921
Total stock-based compensation expense	$	6,048	$	3,223	$	8,913	$	5,539

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended						6 Months Ended		12 Months Ended
	Jun. 30, 2023	Mar. 31, 2023	Dec. 31, 2022	Sep. 30, 2022	Jun. 30, 2022	Mar. 31, 2022	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2022
OPERATING ACTIVITIES:
Net loss							$ (60,587)	$ (59,085)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation and amortization							2,964	3,894
Provision for sales returns							(170)	226
Amortization of deferred financing cost and debt discounts							213	213
Stock-based compensation							5,539	8,913
Gain from decrease of contingent earn-out liability fair value					$ (1,691)			(4,466)
Change in inventory provisions							262
Loss in connection with the change in warrant fair value	$ (2,197)				6,014		(1,843)	7,893
Gain in connection with settlement of note payable								(2,012)
Loss on initial issuance of equity								5,835
Impairment loss on goodwill			$ 500	$ 90,900		$ 29,000		29,020	$ 120,400
Impairment loss on intangibles	22,785	$ 16,700					39,445		3,118
Allowance for doubtful accounts and other								127
Changes in assets and liabilities:
Accounts receivable							(267)	3,304
Inventory							6,721	(13,071)
Prepaid and other current assets							2,469	2,108
Accounts payable, accrued and other liabilities							(3,603)	(5,010)
Cash used in operating activities							(8,857)	(22,111)
INVESTING ACTIVITIES:
Purchase of fixed assets							(66)	(16)
Purchase of Step and Go assets							(125)
Cash used in investing activities							(191)	(16)
FINANCING ACTIVITIES:
Proceeds from equity offering, net of issuance costs								27,007
Repayments on note payable to Smash							(501)	(1,778)
Payment of Squatty Potty earn-out								(3,983)
Borrowings from MidCap credit facilities							38,060	71,914
Repayments for MidCap credit facilities							(43,572)	(70,972)
Insurance obligation payments							(534)	(719)
Cash provided by financing activities							(6,547)	21,469
Foreign currency effect on cash, cash equivalents, and restricted cash							255	(602)
Net change in cash and restricted cash for the year							(15,340)	(1,260)
Cash and restricted cash at beginning of year		$ 46,629		$ 37,055		$ 38,315	46,629	38,315	38,315
Cash and restricted cash at end of year	31,289		46,629		37,055		31,289	37,055	46,629
RECONCILIATION OF CASH AND RESTRICTED CASH
Cash	28,867				34,781		28,867	34,781
Restricted Cash-Prepaid and other current assets	2,293				2,145		2,293	2,145
Restricted cash-Other non-current assets	129				129		129	129
TOTAL CASH AND RESTRICTED CASH	$ 31,289		$ 46,629		$ 37,055		31,289	37,055	$ 46,629
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest							1,038	828
Cash paid for taxes							80	58
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Non-cash consideration paid to contractors							$ 321	1,137
Fair value of warrants issued in connection with equity offering								18,982
Issuance of common stock related to exercise of warrants								767
Exercise of prefunded warrants								$ 15,039

Goodwill and Intangibles (Additional Information) (Details) - USD ($) $ in Thousands	3 Months Ended					6 Months Ended		12 Months Ended
	Jun. 30, 2023	Mar. 31, 2023	Dec. 31, 2022	Sep. 30, 2022	Mar. 31, 2022	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2022	Dec. 31, 2023	Oct. 04, 2022
Goodwill [Line Items]
Purchase price										$ 700
Goodwill	$ 0					$ 0				$ 500
Impairment loss on goodwill			$ 500	$ 90,900	$ 29,000		$ 29,020	$ 120,400
Intangible impairment charge	$ 22,785	$ 16,700				$ 39,445		$ 3,118
Scenario Forecast
Goodwill [Line Items]
Goodwill									$ 0

- Definition

Amount after accumulated impairment loss of an asset representing future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized.

+ References + Details

Credit Facility, Term Loans and Warrants - Additional Information (Details) - USD ($)					3 Months Ended	6 Months Ended
	Oct. 04, 2022	Sep. 29, 2022	Mar. 01, 2022	Dec. 22, 2021	Sep. 30, 2022	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2022
Debt Instrument [Line Items]
Common stock, par value						$ 0.0001		$ 0.0001
Gross proceeds from the Registered Direct Offering							$ 27,007,000
MidCap Credit Facility
Debt Instrument [Line Items]
Gross proceeds received				$ 27,600,000
Aggregate principal amount				$ 110,000,000.0
Warrants to purchase shares				200,000
Credit facility maximum borrowing amount				$ 40,000,000.0
Warrants to purchase shares, exercise price						$ 4.70
Debt offset against and expense over the term				3 years
Common stock, par value				$ 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.
Warrants term						10 years
Warrant
Debt Instrument [Line Items]
Initial liability on issuance						$ 19,000,000.0
Warrant liability						$ 1,600,000
Securities Purchase Agreement \| Common Stock
Debt Instrument [Line Items]
Warrants to purchase shares		10,643,034	4,827,242
Number of common shares issued	10,643,034	10,643,034	6,436,322
Gross proceeds from the Registered Direct Offering	$ 20.2
Securities Purchase Agreement \| Common Stock Warrant
Debt Instrument [Line Items]
Warrants to purchase shares			2,260,388
Accrued, Unpaid interest			$ 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			3,013,850
Accrued, Unpaid interest			$ 2.9099
Securities Purchase Agreement \| Accredited Purchasers \| Common Stock
Debt Instrument [Line Items]
Warrants to purchase shares		10,526,368
Accrued, Unpaid interest		$ 1.90
Number of common shares issued		10,526,368
Securities Purchase Agreement \| Insiders [Member]
Debt Instrument [Line Items]
Number of common shares issued		116,666
Securities Purchase Agreement \| Insiders [Member] \| Common Stock
Debt Instrument [Line Items]
Warrants to purchase shares		116,666
Accrued, Unpaid interest		$ 2.10
SOFR Plus \| MidCap Credit Facility
Debt Instrument [Line Items]
Credit facility, interest rate per annum				0.10%

Subsequent Events (Additional Information) (Details) $ in Millions	Jul. 26, 2023 USD ($)
Subsequent Event \| Separation and Release Agreement
Subsequent Event [Line Items]
Lump sum payment amount	$ 0.4

Organization and Description of Business - Additional Information (Details) $ / shares in Units, $ in Millions			3 Months Ended	6 Months Ended
	May 09, 2023 USD ($) Contractor Employee	Apr. 24, 2023 $ / shares	Jun. 30, 2023 USD ($)	Jun. 30, 2023 USD ($) $ / shares	Jun. 30, 2022 USD ($)
Organization And Description Of Business [Line Items]
Going concern, net loss				$ 60.6
Going concern, net cash used in operating activities				8.9
Going concern, unrestricted cash and cash equivalents			$ 28.9	28.9
Going concern, accumulated deficit			685.8	685.8
Going concern, revenue				$ 70.1	$ 99.9
Number of consecutive business days below closing minimum bid requirement		30 years		30 days
Minimum bid price requirement \| $ / shares		$ 1.00		$ 1.00
Stock exchange stock trading price description				The Bid Price Notice has no immediate effect on the continued listing status of our common stock on The Nasdaq Capital Market, and, therefore, our listing remains fully effective.
Number of employees plan to reduce \| Employee	50
Number of contractors plan to reduce \| Contractor	15
Restructuring charges			$ 1.2	$ 0.5
Workforce Severance
Organization And Description Of Business [Line Items]
Restructuring charges	$ 0.5
Retention Bonus Settled
Organization And Description Of Business [Line Items]
Restructuring charges	0.4
System Contract Terminations
Organization And Description Of Business [Line Items]
Restructuring charges	$ 0.3
Maximum
Organization And Description Of Business [Line Items]
Number of consecutive business days below closing minimum bid requirement				20 days
Minimum closing bid price \| $ / shares		$ 1.00

Summary of Significant Accounting Policies - Summary of Activity of Level 3 Liabilities Carried at Fair Value on Recurring Basis (Details) - Fair Value, Recurring - Level 3 - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2023	Dec. 31, 2022
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Warrants liability, Beginning balance	$ 3,473
Change in fair value of warrants	(1,843)	$ 3,473
Warrants liability, Ending balance	$ 1,630	$ 3,473

Commitments and Contingencies

6 Months Ended

Jun. 30, 2023

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 each of December 31, 2022 and June 30, 2023, the Company estimates that the potential liability, including current sales tax payable is approximately $0.7 million and $0.9 million, respectively, which has been recorded as an accrued liability. 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. The Company fully reserved $4.1 million within Prepaid and Other Current Assets on its Consolidated Financial Statements during the year-ended December 31, 2022. 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 June 30, 2023.

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.

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 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 court approval. The court preliminarily approved the settlement on August 3, 2023 and has scheduled a hearing for final approval for February 28, 2024. If that approval is not granted, the Company is prepared to continue the full defense of 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 earn-out amount (£6,902,816 or approximately $8.8 million) 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, which was granted on May 18, 2023. The parties are in the process of selecting an independent accountant to resolve the dispute, as required by the PPD Stock Purchase Agreement. The Company believes its calculations are accurate and intends to vigorously defend itself.

Nasdaq Listing - On April 24, 2023, we received a letter from the Listing Qualifications Staff of The Nasdaq Stock Market LLC (“Nasdaq”) indicating that, based upon the closing bid price of our common stock for the last 30 consecutive business days, the Company is not currently in compliance with the requirement to maintain a minimum bid price of $1.00 per share for continued listing on The Nasdaq Capital Market, as set forth in Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Notice”).

The Bid Price Notice has no immediate effect on the continued listing status of our common stock on The Nasdaq Capital Market, and, therefore, our listing remains fully effective.

The Company is provided a compliance period of 180 calendar days from the date of the Bid Price Notice, or until October 23, 2023, to regain compliance with the minimum closing bid requirement, pursuant to Nasdaq Listing Rule 5810(c)(3)(A). If at any time before October 23, 2023, the closing bid price of our common stock closes at or above $1.00 per share for a minimum of 10 consecutive business days, subject to Nasdaq’s discretion to extend this period pursuant to Nasdaq Listing Rule 5810(c)(3)(H) to 20 consecutive business days, Nasdaq will provide written notification that the Company has achieved compliance with the minimum bid price requirement, and the matter would be resolved. If the Company does not regain compliance during the compliance period ending October 23, 2023, then Nasdaq may grant the Company a second 180 calendar day period to regain compliance, provided the Company meets the continued listing requirement for market value of publicly-held shares and all other initial listing standards for The Nasdaq Capital

Market, other than the minimum closing bid price requirement, and notifies Nasdaq of its intent to cure the deficiency during the second compliance period.

The Company will continue to monitor the closing bid price of its Common Stock and seek to regain compliance with all applicable Nasdaq requirements within the allotted compliance periods. If the Company does not regain compliance within the allotted compliance periods, including any extensions that may be granted by Nasdaq, Nasdaq will provide notice that the Common Stock will be subject to delisting. The Company would then be entitled to appeal that determination to a Nasdaq hearings panel. There can be no assurance that the Company will regain compliance with the minimum bid price requirement during the 180-day compliance period, secure a second period of 180 days to regain compliance or maintain compliance with the other Nasdaq listing requirements.

Leases—The Company’s minimum lease liabilities have not changed significantly during the six months ended June 30, 2023.

Restructuring - Additional Information (Details) $ in Millions		3 Months Ended	6 Months Ended
	May 09, 2023 USD ($) Contractor Employee	Jun. 30, 2023 USD ($)	Jun. 30, 2023 USD ($)
Restructuring Cost and Reserve [Line Items]
Number of employees plan to reduce \| Employee	50
Number of contractors plan to reduce \| Contractor	15
Restructuring charges		$ 1.2	$ 0.5
Accrued Expenses and Other Current Liabilities
Restructuring Cost and Reserve [Line Items]
Restructuring charges			0.4
Other Liabilities
Restructuring Cost and Reserve [Line Items]
Restructuring charges			$ 0.1
Philippines
Restructuring Cost and Reserve [Line Items]
Number of employees plan to reduce \| Employee	50
Number of contractors plan to reduce \| Contractor	15
Employee Severance
Restructuring Cost and Reserve [Line Items]
Restructuring charges	$ 0.5

Summary of Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2023

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 June 30, 2022
	(in thousands)
	Direct		Wholesale/Other		Total
North America	$	56,947	$	256	$	57,203
Other		1,065		—		1,065
Total net revenue	$	58,012	$	256	$	58,268

	Three Months Ended June 30, 2023
	(in thousands)
	Direct		Wholesale/Other		Total
North America	$	33,175	$	796	$	33,971
Other		1,293		—		1,293
Total net revenue	$	34,468	$	796	$	35,264

	Six Months Ended June 30, 2022
	(in thousands)
	Direct		Wholesale/Other		Total
North America	$	95,580	$	1,884	$	97,464
Other		2,477		—		2,477
Total net revenue	$	98,057	$	1,884	$	99,941

	Six Months Ended June 30, 2023
	(in thousands)
	Direct		Wholesale/Other		Total
North America	$	65,137	$	2,312	$	67,449
Other		2,694		—		2,694
Total net revenue	$	67,831	$	2,312	$	70,143

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 for the three and six months ended June 30, 2023 and 2022:


	Three Months Ended June 30,
	2022		2023
	(in thousands)
Heating, cooling and air quality	$	23,729	$	8,394
Kitchen appliances		8,484		6,277
Health and beauty		3,901		3,834
Cookware, kitchen tools and gadgets		4,245		2,287
Home office		3,324		2,627
Housewares		8,144		6,931
Essential oils and related accessories		5,759		4,263
Other		682		651
Total net revenue	$	58,268	$	35,264


	Six Months Ended June 30,
	2022		2023
	(in thousands)
Heating, cooling and air quality	$	29,656	$	13,742
Kitchen appliances		16,934		12,648
Health and beauty		8,791		8,691
Personal protective equipment		1,050		549
Cookware, kitchen tools and gadgets		9,101		5,907
Home office		7,032		5,294
Housewares		14,690		13,140
Essential oils and related accessories		10,841		8,851
Other		1,846		1,321
Total net revenue	$	99,941	$	70,143

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, 2022 and June 30, 2023 (in thousands):


	December 31, 2022
	Fair Value Measurement Category
	Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	43,574	$	—	$	—
Restricted Cash		3,055		—		—
Liabilities:
Fair value of warrant liability		—		—		3,473

	June 30, 2023
	Fair Value Measurement Category
	Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	28,867	$	—	$	—
Restricted cash		2,422		—		—
Liabilities:
Fair value of warrant liability		—		—		1,630

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

A summary of the activity of the Level 3 liabilities carried at fair value on a recurring basis for the Year-ended December 31, 2022 and the six months ended June 30, 2023 is as follows (in thousands):



	December 31, 2022
Warrants liability as of January 1, 2022	$	—
Change in fair value of warrants		3,473
Warrants liability as of December 31, 2022	$	3,473

	June 30, 2023
Warrants liability as of January 1, 2023	$	3,473
Change in fair value of warrants		(1,843	)
Warrants liability as of June 30, 2023	$	1,630

- 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

6 Months Ended

Jun. 30, 2023

Prepaid Expense And Other Assets Current [Abstract]

Prepaid Expenses and Other Current Assets

PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid and other current assets consisted of the following as of December 31, 2022 and June 30, 2023 (in thousands):


	December 31, 2022		June 30, 2023
Prepaid inventory	$	1,342	$	1,063
Restricted cash		2,926		2,293
Prepaid insurance		1,991		311
Prepaid freight forwarder		576		442
Other		1,426		1,217
		8,261		5,326

Net Loss Per Share - Schedule of Basic and Diluted Net Loss per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Earnings Per Share [Abstract]
Net loss	$ (34,787)	$ (16,309)	$ (60,587)	$ (59,085)
Weighted-average number of shares outstanding used in computing net loss per share, basic	77,625,304	63,947,069	77,181,388	62,749,520
Weighted-average number of shares outstanding used in computing net loss per share, diluted	77,625,304	63,947,069	77,181,388	62,749,520
Net loss per share, basic	$ (0.45)	$ (0.26)	$ (0.78)	$ (0.94)
Net loss per share, diluted	$ (0.45)	$ (0.26)	$ (0.78)	$ (0.94)
Anti-dilutive shares excluded from computation of net loss per share (in shares)	23,104,652	13,292,054	23,363,793	11,004,788

- 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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- Definition

The amount of net income (loss) for the period available to each share of common stock or common unit outstanding during the reporting period and to each share or unit that would have been outstanding assuming the issuance of common shares or units for all dilutive potential common shares or units outstanding during the reporting period.

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

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+ Details

Stock-Based Compensation - Summary of Stock Option Activity (Details) - $ / shares	6 Months Ended	12 Months Ended
	Jun. 30, 2023	Dec. 31, 2022
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Options Outstanding, Number of Options, Shares, Beginning Balance	368,596
Options Outstanding, Number of Options, Cancelled, Shares	(168,564)
Options Outstanding, Number of Options, Shares, Ending Balance	200,032	368,596
Options Outstanding, Number of Options Exercisable, Shares, as of June 30, 2023	200,032
Options Outstanding, Number of Options, Vested and expected to vest, Shares as of June 30, 2023	200,032
Options Outstanding, Weighted Average Exercise Price, Beginning Balance	$ 9.26
Options Outstanding, Weighted Average Exercise Price, Cancelled	9.32
Options Outstanding, Weighted Average Exercise Price, Ending Balance	9.21	$ 9.26
Options Outstanding, Weighted Average Exercise Price, Exercisable as of June 30, 2023	9.21
Options Outstanding, Weighted Average Exercise Price, Vested and expected to vest as of June 30, 2023	$ 9.21
Options Outstanding, Weighted Average Remaining Contractual Life (Years)	5 years 4 months 28 days	5 years 10 months 20 days
Options Outstanding, Weighted Average Remaining Contractual Life (Years), Exercisable as of June 30, 2023	5 years 4 months 28 days
Options Outstanding, Weighted Average Remaining Contractual Life (Years), Vested and expected to vest as of June 30, 2023	5 years 4 months 28 days

Inventory

6 Months Ended

Jun. 30, 2023

Inventory Disclosure [Abstract]

Inventory

INVENTORY

Inventory consisted of the following as of December 31, 2022 and June 30, 2023 (in thousands):


	December 31,		June 30,
	2022		2023
Inventory on-hand	$	34,374	$	31,360
Inventory in-transit		9,292		5,323
Inventory	$	43,666	$	36,683

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 $8.6 million and $5.8 million as of December 31, 2022 and June 30, 2023, respectively.

Contingent Earn-Out Liabilities - Summary of Changes in Carrying Value of Estimated Contingent Earn-Out Liabilities (Details)	12 Months Ended
	Dec. 31, 2022 USD ($)
Business Acquisition [Line Items]
Beginning Balance	$ 9,223,000
Change in fair value of contingent earn-out liabilities	(5,240,000)
Payment of contingent earn-out liability	(3,983,000)
Smash Assets
Business Acquisition [Line Items]
Beginning Balance	5,240,000
Change in fair value of contingent earn-out liabilities	(5,240,000)
Ending Balance	0
Squatty Potty, LLC
Business Acquisition [Line Items]
Beginning Balance	3,983,000
Payment of contingent earn-out liability	(3,983,000)
Ending Balance	$ 0

Contingent Earn-Out Liabilities (Tables)

6 Months Ended

Jun. 30, 2023

Business Acquisition [Line Items]

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 as of December 31, 2022 (in thousands):


	December 31, 2022
	Smash Assets			Squatty Potty			Total
Balance—January 1, 2022	$	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—December 31, 2022	$	—		$	—		$	—

There was no activity for contingent earn-out liabilities for the six months ending June 30, 2023.

Organization and Description of Business

6 Months Ended

Jun. 30, 2023

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Organization and Description of Business

ORGANIZATION AND DESCRIPTION OF BUSINESS

Aterian, Inc. is a technology-enabled consumer products company that builds, acquires and partners with e-commerce brands. Aterian predominantly operates through online retail channels such as Amazon and Walmart. The Company operates its owned brands, which were either incubated or purchased, selling products in multiple categories, including home and kitchen appliances, kitchenware, cooling and air quality appliances (dehumidifiers, humidifiers and air conditioners), health and beauty products and essential oils.

Headquartered in New Jersey, Aterian also maintains offices in China, Philippines, and Poland.

Liquidity and Going Concern

As an emerging growth company in the early commercialization stage of its lifecycle, we are subject to inherent risks and uncertainties associated with the development of our enterprise. In this regard, substantially all of our efforts to date have been devoted to the development and sale of our products in the marketplace, which includes our investment in organic growth at the expense of short-term profitably, our investment in incremental growth through mergers & acquisitions (“M&A strategy”), our recruitment of management and technical staff, and raising capital to fund the development of our enterprise. As a result of these efforts, we have incurred significant losses and negative cash flows from operations since our inception and expect to continue to incur such losses and negative cash flows for the foreseeable future until such time that we reach a scale of profitability to sustain our operations. We have also experienced declining revenues due to macroeconomic factors, including increased interest rates and reduced consumer discretionary spending, and other factors, and we intend to focus our efforts on a more limited number of products. In addition, our recent financial performance has been adversely impacted by inflationary pressures and reduced consumer spending.

In order to execute our growth strategy, we have historically relied on outside capital through the issuance of equity, debt, and borrowings under financing arrangements (collectively “outside capital”) to fund our cost structure, and we expect to continue to rely on outside capital for the foreseeable future, specifically for our M&A strategy. While we believe we will eventually reach a scale of profitability to sustain our operations, there can be no assurance we will be able to achieve such profitability or do so in a manner that does not require our continued reliance on outside capital. Moreover, while we have historically been successful in raising outside capital, there can be no assurance we will be able to continue to obtain outside capital in the future or do so on terms that are acceptable to us.

As of the date the accompanying Condensed Consolidated Financial Statements were issued (the “issuance date”), we evaluated the significance of the following adverse financial conditions in accordance with Accounting Standard Codification 205-40, Going Concern:

• Since our inception, we have incurred significant losses and used cash flows from operations to fund our enterprise. In this regard, during the six months ended June 30, 2023, we incurred a net loss of $60.6 million and used net cash flows in our operations of $8.9 million. In addition, as of June 30, 2023, we had unrestricted cash and cash equivalents of $28.9 million available to fund our operations and an accumulated deficit of $685.8 million. Our revenue of $70.1 million for the six months ended June 30, 2023 declined from $99.9 million for the six months ended June 30, 2022.

• We are required to remain in compliance with certain financial covenants required by the MidCap Credit facility (See Note 6, Credit Facility, Term Loans and Warrants). We were in compliance with these financial covenants as of June 30, 2023, and expect to remain in compliance through at least June 30, 2024. However, with our short history of forecasting our business during the COVID-19 global pandemic, the current record global inflation and related global supply chain disruptions, we can provide no assurances that we will remain in compliance with our financial covenants. Further, absent of our ability to generate cash inflows from our operations or secure additional outside capital, we may be unable to remain in compliance with these financial covenants. In the event we are unable to remain in compliance with these financial covenants (or other non-financial covenants required by the MidCap Credit Facility), and we are unable to secure a waiver or forbearance, MidCap may, at its discretion, exercise any and all of its existing rights and remedies, which may include, among others, accelerating repayment of the outstanding borrowings and/or asserting its rights in the assets securing the loan.

• As of the issuance date, we have no firm commitments to secure additional outside capital from lenders or investors. While we expect to continue to explore raising additional outside capital, specifically to fund our M&A strategy, there can be no assurance we will be able obtain capital or do so on terms that are acceptable to us. Accordingly, absent our ability to generate cash inflows from our operations and/or secure additional outside capital in the near term, we may be unable to meet our obligations as they become due over the next twelve months beyond the issuance date.

• The Company's plan is to continue to closely monitor our operating forecast, to pursue our M&A strategy, to pursue additional sources of outside capital on terms that are acceptable to us, and to secure a waiver or forbearance from MidCap if we are unable to remain in compliance with one or more of the covenants required by the MidCap Credit Facility. Further, the Company intends

to rationalize down a number of SKUs that are either not profitable or not core to the Company’s strategy. If some or all of our plans prove unsuccessful, we may need to implement short-term changes to our operating plan, including but not limited to delaying expenditures, reducing investments in new products, delaying the development of our software, or reducing our sale and distribution infrastructure. We may also need to seek long-term strategic alternatives, such as a significant curtailment of our operations, a sale of certain of our assets, a divestiture of certain product lines, a sale of the entire enterprise to strategic or financial investors, and/or allow our enterprise to become insolvent.

These uncertainties raise substantial doubt about our ability to continue as a going concern. The accompanying Condensed Consolidated Financial Statements have been prepared on the basis that we will continue to operate as a going concern, which contemplates that we will be able to realize assets and settle liabilities and commitments in the normal course of business for the foreseeable future. Accordingly, the accompanying Condensed Consolidated Financial Statements do not include any adjustments that may result from the outcome of these uncertainties.

On April 24, 2023, we received a letter from the Listing Qualifications Staff of The Nasdaq Stock Market LLC (“Nasdaq”) indicating that, based upon the closing bid price of our common stock for the last 30 consecutive business days, the Company is not currently in compliance with the requirement to maintain a minimum bid price of $1.00 per share for continued listing on The Nasdaq Capital Market, as set forth in Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Notice”). The Bid Price Notice has no immediate effect on the continued listing status of our common stock on The Nasdaq Capital Market, and, therefore, our listing remains fully effective.

In the future, if our common stock remains below the continued listing standard of $1.00 per share or otherwise fails to satisfy any of the Nasdaq continued listing requirements, and if we are unable to cure such deficiency during any subsequent cure period, our common stock could be delisted from the Nasdaq. If our common stock ultimately were to be delisted for any reason, we could face a number of significant material adverse consequences, including limited availability of market quotations for our common stock; limited news and analyst coverage; decreased ability to obtain additional financing or failure to comply with the terms of our agreement with our current lender; limited liquidity for our stockholders due to thin trading; and the potential loss of confidence by investors, employees and other third parties who we do business with.

On May 9, 2023, the Company announced a plan to reduce expenses by implementing a reduction in its current workforce impacting approximately 50 employees and 15 contractors, primarily in the Philippines. The Company recognized restructuring charges in connection with the workforce reduction plan, primarily from severance of $0.5 million, retention bonus settlement of $0.4 million, and system contract terminations of $0.3 million.

Condensed Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-in Capital	Accumulated Deficit	Accumulated Other Comprehensive Loss
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	(59,085)			(59,085)
Issuance of restricted common stock	1	$ 1
Issuance of shares of restricted common stock, shares		4,020,674
Forfeiture of shares of restricted common stock, shares		(201,596)
Exercise of prefunded warrants	15,039		15,039
Exercise of prefunded warrants, shares		3,013,850
Issuance of common stock settlement of seller note	767		767
Issuance of common stock settlement of seller note, shares		292,887
Issuance of common stock, net of issuance costs	27,007	$ 1	27,006
Issuance of common stock, net of issuance costs, shares		7,003,332
Issuance of warrants in connection with offering	(18,982)		(18,982)
Loss on initial issuance of equity	5,835		5,835
Issuance of warrants to contractors	1,137		1,137
Stock-based compensation expense	5,503		5,503
Other comprehensive income (loss)	(602)				(602)
Ending balance at Jun. 30, 2022	200,848	$ 7	689,955	(488,044)	(1,070)
Ending balance, shares at Jun. 30, 2022		69,219,384
Beginning balance at Mar. 31, 2022	197,352	$ 6	669,720	(471,735)	(639)
Beginning balance, shares at Mar. 31, 2022		62,348,318
Net loss	(16,309)			(16,309)
Issuance of restricted common stock	1	$ 1
Issuance of shares of restricted common stock, shares		3,865,218
Forfeiture of shares of restricted common stock, shares		(8,002)
Exercise of prefunded warrants	15,039		15,039
Exercise of prefunded warrants, shares		3,013,850
Issuance of warrants to contractors	1,137		1,137
Stock-based compensation expense	4,059		4,059
Other comprehensive income (loss)	(431)				(431)
Ending balance at Jun. 30, 2022	200,848	$ 7	689,955	(488,044)	(1,070)
Ending balance, shares at Jun. 30, 2022		69,219,384
Beginning balance at Dec. 31, 2022	101,952	$ 8	728,339	(625,251)	(1,144)
Beginning balance, shares at Dec. 31, 2022		80,752,290
Net loss	(60,587)			(60,587)
Issuance of restricted common stock	1	$ 1
Issuance of shares of restricted common stock, shares		8,090,965
Forfeiture of shares of restricted common stock, shares		(1,128,411)
Issuance of common stock	290		290
Issuance of common stock, shares		300,000
Stock-based compensation expense	5,249		5,249
Other comprehensive income (loss)	255				255
Ending balance at Jun. 30, 2023	47,160	$ 9	733,878	(685,838)	(889)
Ending balance, shares at Jun. 30, 2023		88,014,844
Beginning balance at Mar. 31, 2023	78,767	$ 8	730,825	(651,051)	(1,015)
Beginning balance, shares at Mar. 31, 2023		81,134,161
Net loss	(34,787)			(34,787)
Issuance of restricted common stock	1	$ 1
Issuance of shares of restricted common stock, shares		7,422,861
Forfeiture of shares of restricted common stock, shares		(542,178)
Stock-based compensation expense	3,053		3,053
Other comprehensive income (loss)	126				126
Ending balance at Jun. 30, 2023	$ 47,160	$ 9	$ 733,878	$ (685,838)	$ (889)
Ending balance, shares at Jun. 30, 2023		88,014,844

Contingent Earn-Out Liabilities - Additional Information (Details) - USD ($)	May 05, 2021	Dec. 01, 2020	Jun. 30, 2023	Dec. 31, 2022	Dec. 31, 2021
Business Acquisition [Line Items]
Business combination, contingent consideration earn out amount			$ 0		$ 9,223,000
Squatty Potty, LLC
Business Acquisition [Line Items]
Acquisition date, initial fair value anoint of earn-out payment	$ 3,500,000
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]
Business combination, contingent consideration earn out amount					3,900,000
Smash Assets
Business Acquisition [Line Items]
Business acquisition shares issued/issuable		4,220,000
Total consideration		$ 25,000,000.0
Shares issued, price per share		$ 6.89
Value of certain inventory		$ 15,600,000
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		164,000

Goodwill and Intangibles

6 Months Ended

Jun. 30, 2023

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, 2022 (in thousands):


	January 1, 2022		Year-Ended December 31, 2022					December 31, 2022
	Gross Carrying Amount		Additions		Impairments (1)			Net Book Value
Goodwill	$	119,941	$	468	$	(120,409	)	$	—

(1)

The Company evaluated current economic conditions during 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 believed that these conditions were factors in our market capitalization falling below the book value of net assets during the fiscal quarters ending March 31, 2022 and September 30, 2022. Accordingly, the Company concluded a triggering event had occurred in each of these periods and performed interim goodwill impairment analyses. As a result, the Company recorded a goodwill impairment charge of approximately $29.0 million and $90.9 during the three months ended March 31, 2022 and September 30, 2022, respectively. On October 4, 2022, the Company acquired Step and Go, a brand in the health and Wellness category, for $0.7 million. As part of the purchase price allocation of the acquisition, $0.5 million was attributed to goodwill. As our market capitalization was further reduced below net assets as of December 31, 2022, we concluded a triggering event has occurred to test goodwill, an impairment loss on goodwill of $0.5 million was recorded for the three months ended December 31, 2022, which is included in impairment loss on goodwill in the Consolidated Statement of Operations for the year-ended December 31, 2022.

For the year-ended December 31, 2022, total goodwill impairment was approximately $120.4 million. There is no goodwill balance as of December 31, 2023 and June 30, 2023.

The following tables summarize the changes in the Company’s intangible assets as of December 31, 2022 and June 30, 2023 (in thousands):


	January 1, 2022		Year-Ended December 31, 2022					December 31, 2022			December 31, 2022
	Gross Carrying Amount		Additions		Impairments (1)			Accumulated Amortization			Net Book Value
Trademarks	$	65,910		192	$	(3,087	)	$	(13,008	)	$	50,007
Non-competition agreement		111		—		(31	)		(80	)		—
Transition services agreement		23		—		—			(23	)		—
Customer relations		5,700		—		—			(950	)		4,750
Other		700		—		—			(700	)		—
Total intangibles	$	72,444	$	192	$	(3,118	)	$	(14,761	)	$	54,757

	January 1, 2023		Six Months Ended June 30, 2023					June 30, 2023			June 30, 2023
	Gross Carrying Amount		Additions		Impairments (2)			Accumulated Amortization			Net Book Value
Trademarks	$	62,202		—	$	(39,445	)	$	(14,793	)	$	7,964
Non-competition agreement		11		—		—			(11	)		—
Transition services agreement		12		—		—			(12	)		—
Customer relations		5,700		—		—			(1,235	)		4,465
Other		700		—		—			(700	)		—
Total intangibles	$	68,625	$	—	$	(39,445	)	$	(16,751	)	$	12,429

(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 for the year-ended December 31, 2022.

(2) On March 20, 2023, the Company made certain leadership changes in our essential oil business resulting in a change in strategy and outlook for the business which will result in a reduced portfolio offering. This reduction in the portfolio will be impactful to our essential oil business's future revenues and profitability and as a result the Company made revisions to our internal forecasts. The Company concluded that this change was an interim triggering event for the three months ending March 31, 2023 indicating the carrying value of our essential oil business's long-lived assets including trademarks may not be recoverable. Accordingly, the

Company performed an interim impairment test of the trademark and assessed the recoverability of the related intangible assets by using level 3 inputs and comparing the carrying value of an asset group to the net undiscounted cash flow expected to be generated. The recoverability test indicated that certain definite-live trademark intangible assets were impaired. The Company concluded the carrying value of the trademark exceeded its estimated fair value which was determined utilizing the relief-from-royalty method to determine discounted projected future cash flows which resulted in an impairment charge. The Company recorded an intangible impairment charge of $16.7 million in the three months ending March 31, 2023 within impairment loss on intangibles on the condensed consolidated statement of operations.

During the three months ended June 30, 2023, the Company had a substantial decrease in its market capitalization, primarily relating to a decrease in share price. Further, the Company continues to see reduced net revenues across its portfolio due to the current macroeconomic environment reducing demand for consumer goods. Finally, during the three months ending June 30, 2023, the Company implemented a strategy of rationalizing certain less profitable products and reducing its product offering, specifically related to its kitchen appliance products. As a result of this rationalization, along with the reduced demand for its products, the Company has made certain revisions to its internal forecasts for its Paper business and Kitchen appliance business. The Company concluded that these factors were an interim triggering event for the three months ending June 30, 2023 indicating the carrying value of our Paper and Kitchen appliance business’s long-lived assets, including trademarks, may not be recoverable. Accordingly, the Company performed an interim impairment test of the trademark and assessed the recoverability of the related intangible assets by using level 3 inputs and comparing the carrying value of an asset group to the net undiscounted cash flow expected to be generated. The recoverability test indicated that certain definite-live trademark intangible assets were impaired. The Company concluded the carrying value of the trademark exceeded its estimated fair value which was determined utilizing the relief-from-royalty method to determine discounted projected future cash flows which resulted in an impairment charge. The Company recorded an intangible impairment charge of $22.8 million for the Paper business and Kitchen appliance business during the three months ending June 30, 2023 within impairment loss on intangibles on the condensed consolidated statement of operations.

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 2023	$	826
2024		1,631
2025		1,590
2026		1,590
2027		1,590
2028		1,590
Thereafter		3,612
Total	$	12,429

Goodwill and Intangibles - Summary of Changes in Goodwill and Intangible Assets (Parenthetical) (Details) - USD ($) $ in Thousands	3 Months Ended					6 Months Ended		12 Months Ended
	Jun. 30, 2023	Mar. 31, 2023	Dec. 31, 2022	Sep. 30, 2022	Mar. 31, 2022	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2022
Goodwill And Intangible Assets Disclosure [Abstract]
Impairment loss on goodwill			$ 500	$ 90,900	$ 29,000		$ 29,020	$ 120,400
Intangible impairment charge	$ 22,785	$ 16,700				$ 39,445		$ 3,118

Restructuring - Summary of Restructuring Costs (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2023	Jun. 30, 2023
Restructuring Cost and Reserve [Line Items]
Total restructuring costs	$ 1,216	$ 1,216
Employee Severance
Restructuring Cost and Reserve [Line Items]
Total restructuring costs	520	520
Retention Bonus Settled
Restructuring Cost and Reserve [Line Items]
Total restructuring costs	411	411
Contract Termination Costs
Restructuring Cost and Reserve [Line Items]
Total restructuring costs	$ 285	$ 285

Prepaid Expenses and Other Current Assets - Summary of Prepaid and Other Current Assets (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Prepaid Expense And Other Assets Current [Abstract]
Prepaid inventory	$ 1,063	$ 1,342
Restricted cash	2,293	2,926
Prepaid insurance	311	1,991
Prepaid freight forwarder	442	576
Other	1,217	1,426
Prepaid and other current assets	$ 5,326	$ 8,261

Inventory (Tables)

6 Months Ended

Jun. 30, 2023

Inventory Disclosure [Abstract]

Schedule of Inventory

Inventory consisted of the following as of December 31, 2022 and June 30, 2023 (in thousands):


	December 31,		June 30,
	2022		2023
Inventory on-hand	$	34,374	$	31,360
Inventory in-transit		9,292		5,323
Inventory	$	43,666	$	36,683

Accrued and Other Current Liabilities

6 Months Ended

Jun. 30, 2023

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, 2022 and June 30, 2023 (in thousands):


	December 31, 2022		June 30, 2023
Accrued compensation costs	$	53	$	81
Accrued professional fees and consultants		461		287
Accrued logistics costs		609		956
Accrued restructuring costs		-		349
Product related accruals		1,248		1,002
Sales tax payable		711		931
Sales return reserve		646		476
Accrued fulfillment expense		755		545
Accrued insurance		356		42
Federal payroll taxes payable		1,467		1,320
Accrued interest payable		190		107
Warrant liability		3,473		1,630
All other accruals		4,285		4,252
Accrued and current liabilities		14,254		11,978

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.

Condensed Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Income Statement [Abstract]
Net revenue	$ 35,264	$ 58,268	$ 70,143	$ 99,941
Cost of good sold	20,368	26,917	36,151	44,982
Gross profit	14,896	31,351	33,992	54,959
Operating expenses:
Sales and distribution	20,557	31,866	40,783	54,840
Research and development	1,709	1,730	2,956	2,877
General and administrative	6,281	9,571	12,240	19,112
Impairment loss on goodwill				29,020
Impairment loss on intangibles	22,785		39,445
Change in fair value of contingent earn-out liabilities		(1,691)		(4,466)
Total operating expenses	51,332	41,476	95,424	101,383
Operating loss	(36,436)	(10,125)	(61,432)	(46,424)
Interest expense, net	346	338	717	1,138
Gain on extinguishment of seller note				(2,012)
Loss on initial issuance of equity				5,835
Change in fair value of warrant liability	(2,197)	6,014	(1,843)	7,893
Other (income) expense, net	176		229	(25)
Loss before income taxes	(34,761)	(16,477)	(60,535)	(59,253)
Provision (benefit) for income taxes	26	(168)	52	(168)
Net loss	$ (34,787)	$ (16,309)	$ (60,587)	$ (59,085)
Net loss per share, basic	$ (0.45)	$ (0.26)	$ (0.78)	$ (0.94)
Net loss per share, diluted	$ (0.45)	$ (0.26)	$ (0.78)	$ (0.94)
Weighted-average number of shares outstanding, basic	77,625,304	63,947,069	77,181,388	62,749,520
Weighted-average number of shares outstanding, diluted	77,625,304	63,947,069	77,181,388	62,749,520

Accrued and Other Current Liabilities - Schedule of Components of Accrued Expenses and Other Current Liabilities (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Accrued Liabilities And Other Liabilities [Abstract]
Accrued compensation costs	$ 81	$ 53
Accrued professional fees and consultants	287	461
Accrued logistics costs	956	609
Accrued restructuring costs	349
Product related accruals	1,002	1,248
Sales tax payable	931	711
Sales return reserve	476	646
Accrued fulfillment expense	545	755
Accrued insurance	42	356
Federal payroll taxes payable	1,320	1,467
Accrued interest payable	107	190
Warrant liability	1,630	3,473
All other accruals	4,252	4,285
Accrued and other current liabilities	$ 11,978	$ 14,254

Prepaid Expenses and Other Current Assets (Tables)

6 Months Ended

Jun. 30, 2023

Prepaid Expense And Other Assets Current [Abstract]

Schedule of Prepaid and Other Current Assets

Prepaid and other current assets consisted of the following as of December 31, 2022 and June 30, 2023 (in thousands):


	December 31, 2022		June 30, 2023
Prepaid inventory	$	1,342	$	1,063
Restricted cash		2,926		2,293
Prepaid insurance		1,991		311
Prepaid freight forwarder		576		442
Other		1,426		1,217
		8,261		5,326

Stock-Based Compensation - Summary of Restricted Stock Award Activity (Details) - Restricted Stock	6 Months Ended
	Jun. 30, 2023 $ / shares shares
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Shares, Nonvested at January 1, 2023 \| shares	4,223,023
Shares, Granted \| shares	8,090,965
Shares, Vested \| shares	(2,458,850)
Shares, Forfeited \| shares	(1,128,411)
Shares, Nonvested at June 30, 2023 \| shares	8,726,727
Weighted Average Grant-Date Fair Value, Nonvested at January 1, 2023 \| $ / shares	$ 4.85
Weighted Average Grant-Date Fair Value, Granted \| $ / shares	0.61
Weighted Average Grant-Date Fair Value, Vested \| $ / shares	3.00
Weighted Average Grant-Date Fair Value, Forfeited \| $ / shares	4.13
Weighted Average Grant-Date Fair Value, Nonvested at June 30, 2023 \| $ / shares	$ 1.53

Inventory - Schedule of Inventory (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Inventory Disclosure [Abstract]
Inventory on-hand	$ 31,360	$ 34,374
Inventory in-transit	5,323	9,292
Inventory	$ 36,683	$ 43,666

Inventory - Additional Information (Details) - USD ($) $ in Millions	Jun. 30, 2023	Dec. 31, 2022
Inventory Disclosure [Abstract]
Inventory on-hand held by Amazon	$ 5.8	$ 8.6

Goodwill and Intangibles (Tables)

6 Months Ended

Jun. 30, 2023

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, 2022 (in thousands):


	January 1, 2022		Year-Ended December 31, 2022					December 31, 2022
	Gross Carrying Amount		Additions		Impairments (1)			Net Book Value
Goodwill	$	119,941	$	468	$	(120,409	)	$	—

(1)

For the year-ended December 31, 2022, total goodwill impairment was approximately $120.4 million. There is no goodwill balance as of December 31, 2023 and June 30, 2023.

The following tables summarize the changes in the Company’s intangible assets as of December 31, 2022 and June 30, 2023 (in thousands):


	January 1, 2022		Year-Ended December 31, 2022					December 31, 2022			December 31, 2022
	Gross Carrying Amount		Additions		Impairments (1)			Accumulated Amortization			Net Book Value
Trademarks	$	65,910		192	$	(3,087	)	$	(13,008	)	$	50,007
Non-competition agreement		111		—		(31	)		(80	)		—
Transition services agreement		23		—		—			(23	)		—
Customer relations		5,700		—		—			(950	)		4,750
Other		700		—		—			(700	)		—
Total intangibles	$	72,444	$	192	$	(3,118	)	$	(14,761	)	$	54,757

	January 1, 2023		Six Months Ended June 30, 2023					June 30, 2023			June 30, 2023
	Gross Carrying Amount		Additions		Impairments (2)			Accumulated Amortization			Net Book Value
Trademarks	$	62,202		—	$	(39,445	)	$	(14,793	)	$	7,964
Non-competition agreement		11		—		—			(11	)		—
Transition services agreement		12		—		—			(12	)		—
Customer relations		5,700		—		—			(1,235	)		4,465
Other		700		—		—			(700	)		—
Total intangibles	$	68,625	$	—	$	(39,445	)	$	(16,751	)	$	12,429

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 2023	$	826
2024		1,631
2025		1,590
2026		1,590
2027		1,590
2028		1,590
Thereafter		3,612
Total	$	12,429

Stock-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2023

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Summary of Stock Options Activity

The following is a summary of stock option activity during the six months ended June 30, 2023:


	Options Outstanding
	Number of Options			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (years)		Aggregate Intrinsic Value
Balance—January 1, 2023		368,596		$	9.26		5.89	$	—
Options granted		—		$	—	—		$	—
Options exercised		—		$	—	—		$	—
Options canceled		(168,564	)	$	9.32	—		$	—
Balance—June 30, 2023		200,032		$	9.21		5.41	$	—
Exercisable as of June 30, 2023		200,032		$	9.21		5.41	$	—
Vested and expected to vest as of June 30, 2023		200,032		$	9.21		5.41	$	—

Summary of Restricted Stock Award Activity

A summary of restricted stock award activity within the Company’s equity plans and changes for the six months ended June 30, 2023 is as follows:


Restricted Stock Awards	Shares			Weighted Average Grant- Date Fair Value
Nonvested at January 1, 2023		4,223,023		$	4.85
Granted		8,090,965		$	0.61
Vested		(2,458,850	)	$	3.00
Forfeited		(1,128,411	)	$	4.13
Nonvested at June 30, 2023		8,726,727		$	1.53

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 six months ended June 30, 2022 and 2023 (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2023		2022		2023
	(in thousands)				(in thousands)
Sales and distribution expenses	$	2,882	$	1,091	$	3,229	$	1,761
Research and development expenses		633		423		907		857
General and administrative expenses		2,533		1,709		4,777		2,921
Total stock-based compensation expense	$	6,048	$	3,223	$	8,913	$	5,539

Summary of Significant Accounting Policies - Net Revenue Disaggregated by Sales Channel and Geographic Region (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Disaggregation Of Revenue [Line Items]
Total net revenue	$ 35,264	$ 58,268	$ 70,143	$ 99,941
Direct
Disaggregation Of Revenue [Line Items]
Total net revenue	34,468	58,012	67,831	98,057
Wholesale/Other
Disaggregation Of Revenue [Line Items]
Total net revenue	796	256	2,312	1,884
North America
Disaggregation Of Revenue [Line Items]
Total net revenue	33,971	57,203	67,449	97,464
North America \| Direct
Disaggregation Of Revenue [Line Items]
Total net revenue	33,175	56,947	65,137	95,580
North America \| Wholesale/Other
Disaggregation Of Revenue [Line Items]
Total net revenue	796	256	2,312	1,884
Other
Disaggregation Of Revenue [Line Items]
Total net revenue	1,293	1,065	2,694	2,477
Other \| Direct
Disaggregation Of Revenue [Line Items]
Total net revenue	$ 1,293	$ 1,065	$ 2,694	$ 2,477

- 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
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-SubTopic 10
-Section 50
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-Paragraph 1
-Subparagraph (SAB Topic 11.L)
-URI https://asc.fasb.org/extlink&oid=6472922&loc=d3e499488-122856

+ Details

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
CURRENT ASSETS:
Cash	$ 28,867	$ 43,574
Accounts receivable, net	4,782	4,515
Inventory	36,683	43,666
Prepaid and other current assets	5,326	8,261
Total current assets	75,658	100,016
Property and equipment, net	839	853
Other intangibles, net	12,429	54,757
Other non-current assets	543	813
Total assets	89,469	156,439
Current Liabilities:
Credit facility	15,748	21,053
Accounts payable	11,821	16,035
Seller notes	1,206	1,693
Accrued and other current liabilities	11,978	14,254
Total current liabilities	40,753	53,035
Other liabilities	1,556	1,452
Total liabilities	42,309	54,487
Commitments and contingencies (Note 9)
Stockholders' equity:
Common stock, $0.0001 par value, 500,000,000 shares authorized and 80,752,290 and 88,014,844 shares outstanding at December 31, 2022 and June 30, 2023, respectively	9	8
Additional paid-in capital	733,878	728,339
Accumulated deficit	(685,838)	(625,251)
Accumulated other comprehensive loss	(889)	(1,144)
Total stockholders’ equity	47,160	101,952
Total liabilities and stockholders' equity	$ 89,469	$ 156,439

Credit Facility, Term Loans and Warrants

6 Months Ended

Jun. 30, 2023

Debt Disclosure [Abstract]

Credit Facility, Term Loans and Warrants

CREDIT FACILITY, TERM LOANS AND WARRANTS

MidCap Credit Facility

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, and Midcap Funding IV Trust, 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 $40.0 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 of Term Secured Overnight Financing Rate ("Term SOFR"), which is defined as SOFR plus 0.10%, plus 5.50%. 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. 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 December 31, 2021.

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, is immediately exercisable, has a term of ten years from the date of issuance and is exercisable on a cash or cashless basis.

The Company’s credit facility consisted of the following as of December 31, 2022 and June 30, 2023 (in thousands):


	December 31, 2022			June 30, 2023
MidCap Credit Facility	$	21,899		$	16,381
Less: deferred debt issuance costs		(459	)		(344	)
Less: discount associated with issuance of warrants		(387	)		(289	)
Total MidCap Credit Facility	$	21,053		$	15,748

Interest Expense, Net

Interest expense, net consisted of the following for the three and six months ended June 30, 2022 and 2023 (in thousands):


	Three Months Ended June 30,					Six Months Ended June 30,
	2022		2023			2022		2023
Interest expense	$	338	$	540		$	1,138	$	1,136
Interest income		—		(194	)		—		(419	)
Total interest expense, net	$	338	$	346		$	1,138	$	717

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 June 30, 2023, the Company has $1.6 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 common stock 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, 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 Agreements represent legally binding contracts 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 Consolidated Statement of Operations for the year-ended December 31, 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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+ Details

Commitments and Contingencies - Additional Information (Details) $ / shares in Units, $ in Thousands				1 Months Ended	3 Months Ended	6 Months Ended		12 Months Ended
	Apr. 24, 2023 $ / shares	Nov. 30, 2021 USD ($)	May 02, 2021 USD ($) Installment	Apr. 30, 2022 USD ($)	Mar. 31, 2022 USD ($)	Jun. 30, 2023 GBP (£)	Jun. 30, 2023 USD ($) $ / shares	Dec. 31, 2022 USD ($)
Commitment And Contingencies [Line Items]
Sales tax payable current							$ 931	$ 711
Stock exchange stock trading price description						The Bid Price Notice has no immediate effect on the continued listing status of our common stock on The Nasdaq Capital Market, and, therefore, our listing remains fully effective.	The Bid Price Notice has no immediate effect on the continued listing status of our common stock on The Nasdaq Capital Market, and, therefore, our listing remains fully effective.
Compliance period afforded to regain compliance with bid price requirements						180 days	180 days
Number of consecutive business days below closing minimum bid requirement	30 years					30 days	30 days
Minimum bid price requirement \| $ / shares	$ 1.00						$ 1.00
Maximum
Commitment And Contingencies [Line Items]
Minimum closing bid price \| $ / shares	$ 1.00
Number of consecutive business days below closing minimum bid requirement						20 days	20 days
Minimum
Commitment And Contingencies [Line Items]
Minimum closing bid price \| $ / shares							$ 1.00
Number of consecutive business days below closing minimum bid requirement						10 days	10 days
Settlement Agreement
Commitment And Contingencies [Line Items]
Agreement date			May 2, 2021
Proceeds to be received from settlement agreement			$ 3,000
Number of installments \| Installment			3
Settlement Agreement \| Prepaid Expenses and Other Current Assets
Commitment And Contingencies [Line Items]
Prepaid asset								4,100
Settlement Agreement \| First Payment
Commitment And Contingencies [Line Items]
Settlement received								$ 1,000
Settlement Agreement \| Third Payment
Commitment And Contingencies [Line Items]
Proceeds to be received from settlement agreement		$ 1,000
Securities Purchase Agreement \| Settlement Agreement
Commitment And Contingencies [Line Items]
Litigation settlement					$ 800
Litigation settlement in cash				$ 500
Litigation settlement coupons awarded				$ 300
PPD Stock Purchase Agreement
Commitment And Contingencies [Line Items]
Earn out payment amount						£ 6,902,816	$ 8,800

Goodwill and Intangibles - Summary of Estimated Aggregate Amortization Expense of Intangible Assets (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Goodwill And Intangible Assets Disclosure [Abstract]
Remainder of 2023	$ 826
2024	1,631
2025	1,590
2026	1,590
2027	1,590
2028	1,590
Thereafter	3,612
Total	$ 12,429	$ 54,757

Subsequent Events

6 Months Ended

Jun. 30, 2023

Subsequent Events [Abstract]

Subsequent Events

13. SUBSEQUENT EVENTS

On July 26, 2023, Yaniv Sarig notified the Board of his decision to resign as Chief Executive Officer of the Company and from the Board, effective as of July 26, 2023. Mr. Sarig’s decision to leave the Company is not due to any disagreement with the Company on any matter relating to the Company’s operations, policies or practices.

In connection with his departure, Mr. Sarig and the Company entered into a Separation and Release Agreement, effective July 26, 2023 (the “Separation and Release Agreement”). Pursuant to the Separation and Release Agreement, Mr. Sarig is entitled to a lump sum payment of $0.4 million. All of Mr. Sarig’s unvested equity awards were forfeited as of July 26, 2023.

Stock-Based Compensation - Additional Information (Details) $ in Millions	6 Months Ended
	Jun. 30, 2023 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 7 months 6 days
Total unrecognized compensation expense related to unvested shares of restricted common stock \| $	$ 13.0
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	98,371
2018 Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Shares reserved for future issuance	3,399,489
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	2,250,000
Options exercisable period	10 years
Number of shares available for grant	2,700,000

Net Loss Per Share (Tables)

6 Months Ended

Jun. 30, 2023

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 June 30,							Six Months Ended June 30,
		2022			2023			2022			2023
Net loss		$	(16,309	)	$	(34,787	)	$	(59,085	)	$	(60,587	)
Weighted-average number of shares used in computing net loss per share, basic and diluted			63,947,069			77,625,304			62,749,520			77,181,388
Net loss per share, basic and diluted		$	(0.26	)	$	(0.45	)	$	(0.94	)	$	(0.78	)

Anti-dilutive shares excluded from computation of net loss per share (in shares)			13,292,054			23,104,652			11,004,788			23,363,793

Credit Facility, Term Loans and Warrants - Schedule of Credit Facility and Term Loans (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Debt Instrument [Line Items]
Total MidCap Credit Facility	$ 15,748	$ 21,053
MidCap Credit Facility
Debt Instrument [Line Items]
MidCap Credit Facility	16,381	21,899
Less: deferred debt issuance costs	(344)	(459)
Less: discount associated with issuance of warrants	(289)	(387)
Total MidCap Credit Facility	$ 15,748	$ 21,053

- 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

Net Loss Per Share

6 Months Ended

Jun. 30, 2023

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 June 30,							Six Months Ended June 30,
		2022			2023			2022			2023
Net loss		$	(16,309	)	$	(34,787	)	$	(59,085	)	$	(60,587	)
Weighted-average number of shares used in computing net loss per share, basic and diluted			63,947,069			77,625,304			62,749,520			77,181,388
Net loss per share, basic and diluted		$	(0.26	)	$	(0.45	)	$	(0.94	)	$	(0.78	)

Anti-dilutive shares excluded from computation of net loss per share (in shares)			13,292,054			23,104,652			11,004,788			23,363,793

Credit Facility, Term Loans and Warrants - Schedule of Interest Expense, Net (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Debt Disclosure [Abstract]
Interest expense	$ 540	$ 338	$ 1,136	$ 1,138
Interest income	(194)		(419)
Total Interest expense, net	$ 346	$ 338	$ 717	$ 1,138

Summary of Significant Accounting Policies - Summary of Financial Assets Measured at Fair Value (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Level 1 \| Cash and Cash Equivalents
Assets:
Assets	$ 28,867	$ 43,574
Level 1 \| Restricted Cash - Prepaid and Other Current Assets
Assets:
Assets	2,422	3,055
Level 3 \| Fair Value of Warrant Liability
Liabilities:
Liabilities	$ 1,630	$ 3,473

Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2023

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation—The Condensed Consolidated Financial Statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

Unaudited Interim Financial Information—The accompanying interim Condensed Consolidated Financial Statements are unaudited and have been prepared on the same basis as the audited financial statements and, in the opinion of management, reflect all adjustments necessary for the fair presentation of the Company's financial position as of June 30, 2023 and the results of its operations and its cash flows for the periods ended June 30, 2023 and 2022. The financial data and other information disclosed in these notes related to the three and six months ended June 30, 2023 and 2022 are also unaudited. The results for the three and six months ended June 30, 2023 are not necessarily indicative of results to be expected for the year ending December 31, 2023, any other interim periods or any future year or period.

Use of Estimates—Preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the 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—The Condensed Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Restricted Cash—As of December 31, 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 Consolidated Balance Sheets, $2.0 million related to a letter of credit and $0.9 million for cash sweeps account related to the Midcap Credit Facility within "Prepaid and Other Current Assets" on the Consolidated Balance Sheets.

As of June 30, 2023, 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 $0.3 million

for cash sweeps account related to the Midcap Credit Facility within "Prepaid and Other Current Assets" on the Condensed Consolidated Balance Sheets.

Inventory and Cost of Goods Sold—The Company’s inventory consists almost entirely of finished goods. The Company currently records inventory on its balance sheet on a first-in first-out basis, or net realizable value, if it is below the Company’s recorded cost. The Company’s costs include the amounts it pays manufacturers for product, tariffs and duties associated with transporting product across national borders, and freight costs associated with transporting the product from its manufacturers to its warehouses, as applicable. The valuation of our inventory requires us to make judgments, based on available information such as historical data, about the likely method of disposition, such as through sales to individual customers or liquidations, and expected recoverable values of each disposition category. These assumptions about future disposition of inventory are inherently uncertain and changes in our estimates and assumptions may cause us to realize material write-downs in the future.

The “Cost of goods sold” line item in the Condensed Consolidated Statements of Operations consists of the book value of inventory sold to customers during the reporting period. When circumstances dictate that the Company use net realizable value as the basis for recording inventory, it bases its estimates on expected future selling prices less expected disposal costs.

Accounts Receivable—Accounts receivable are stated at historical cost less allowance for doubtful accounts. On a periodic basis, management evaluates its accounts receivable and determines whether to provide an allowance or if any accounts should be written off based on a past history of write-offs, collections and current credit conditions. A receivable is considered past due if the Company has not received payments based on agreed-upon terms. The Company generally does not require any security or collateral to support its receivables. The Company performs ongoing evaluations of its customers and maintains an allowance for bad and doubtful receivables. As of December 31, 2022 and June 30, 2023, the Company had an allowance for doubtful accounts of $0.4 million.

Revenue Recognition—The Company accounts for revenue in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC Topic 606”). The Company derives its revenue from the sale of consumer products. The Company sells its products directly to consumers through online retail channels and through wholesale channels.

For direct-to-consumer sales, the Company considers customer order confirmations to be a contract with the customer. Customer confirmations are executed at the time an order is placed through third-party online channels. For wholesale sales, the Company considers the customer purchase order to be the contract.

For all of the Company’s sales and distribution channels, revenue is recognized when control of the product is transferred to the customer (i.e., when the Company’s performance obligation is satisfied), which typically occurs at shipment date. As a result, the Company has a present and unconditional right to payment and record the amount due from the customer in accounts receivable.

Revenue from consumer product sales is recorded at the net sales price (transaction price), which includes an estimate of future returns based on historical return rates. There is judgment in utilizing historical trends for estimating future returns. The Company’s refund liability for sales returns was $0.6 million at December 31, 2022 and $0.5 million at June 30, 2023, which is included in accrued liabilities and represents the expected value of the refund that will be due to its customers.

The Company evaluated principal versus agent considerations to determine whether it is appropriate to record platform fees paid to Amazon as an expense or as a reduction of revenue. Platform fees are recorded as sales and distribution expenses and are not recorded as a reduction of revenue because it owns and controls all the goods before they are transferred to the customer. The Company can, at any time, direct Amazon, similarly, other third-party logistics providers (“Logistics Providers”), to return the Company’s inventory to any location specified by the Company. It is the Company’s responsibility to make customers whole following any returns made by customers directly to Logistic Providers and the Company retains the back-end inventory risk. Further, the Company is subject to credit risk (i.e., credit card charge backs), establishes prices of its products, can determine who fulfills the goods to the customer (Amazon or the Company) and can limit quantities or stop selling the goods at any time. Based on these considerations, the Company is the principal in this arrangement.

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 June 30, 2022
	(in thousands)
	Direct		Wholesale/Other		Total
North America	$	56,947	$	256	$	57,203
Other		1,065		—		1,065
Total net revenue	$	58,012	$	256	$	58,268

	Three Months Ended June 30, 2023
	(in thousands)
	Direct		Wholesale/Other		Total
North America	$	33,175	$	796	$	33,971
Other		1,293		—		1,293
Total net revenue	$	34,468	$	796	$	35,264

	Six Months Ended June 30, 2022
	(in thousands)
	Direct		Wholesale/Other		Total
North America	$	95,580	$	1,884	$	97,464
Other		2,477		—		2,477
Total net revenue	$	98,057	$	1,884	$	99,941

	Six Months Ended June 30, 2023
	(in thousands)
	Direct		Wholesale/Other		Total
North America	$	65,137	$	2,312	$	67,449
Other		2,694		—		2,694
Total net revenue	$	67,831	$	2,312	$	70,143

Net Revenue by Product Categories. The following table sets forth the Company’s net revenue disaggregated by product categories for the three and six months ended June 30, 2023 and 2022:


	Three Months Ended June 30,
	2022		2023
	(in thousands)
Heating, cooling and air quality	$	23,729	$	8,394
Kitchen appliances		8,484		6,277
Health and beauty		3,901		3,834
Cookware, kitchen tools and gadgets		4,245		2,287
Home office		3,324		2,627
Housewares		8,144		6,931
Essential oils and related accessories		5,759		4,263
Other		682		651
Total net revenue	$	58,268	$	35,264


	Six Months Ended June 30,
	2022		2023
	(in thousands)
Heating, cooling and air quality	$	29,656	$	13,742
Kitchen appliances		16,934		12,648
Health and beauty		8,791		8,691
Personal protective equipment		1,050		549
Cookware, kitchen tools and gadgets		9,101		5,907
Home office		7,032		5,294
Housewares		14,690		13,140
Essential oils and related accessories		10,841		8,851
Other		1,846		1,321
Total net revenue	$	99,941	$	70,143

Intangibles—We review long-lived assets for impairment when performance expectations, events, or changes in circumstances indicate that the asset's carrying value may not be recoverable. The evaluation is performed at the lowest level of identifiable cash flows by comparing the carrying value of the asset group to the undiscounted cash flows. If the evaluation indicates that the carrying amount of the assets may not be recoverable, any potential impairment is measured based upon the fair value of the related asset or asset group as determined by an appropriate market appraisal or other valuation technique.

On March 20, 2023, the Company made certain leadership changes in our essential oil business resulting in a change in strategy and outlook for the business which will result in a reduced portfolio offering. This reduction in the portfolio will be impactful to our essential oil business's future revenues and profitability and as a result the Company made revisions to our internal forecasts. The Company concluded that this change was an interim triggering event for the three months ending March 31, 2023 indicating the carrying value of our essential oil business's long-lived assets including trademarks may not be recoverable. Accordingly, the Company performed an interim impairment test of the trademark and assessed the recoverability of the related intangible assets by using level 3 inputs and comparing the carrying value of an asset group to the net undiscounted cash flow expected to be generated. The recoverability test indicated that certain definite-live trademark intangible assets were impaired. The Company concluded the carrying value of the trademark exceeded its estimated fair value which was determined utilizing the relief-from-royalty method to determine discounted projected future cash flows which resulted in an impairment charge. The Company recorded an intangible impairment charge of $16.7 million during the three months ending March 31, 2023 within impairment loss on intangibles on the condensed consolidated statement of operations.

During the three months ended June 30, 2023, the Company had a substantial decrease in its market capitalization, primarily relating to a decrease in share price. Further, the Company continues to see reduced net revenues across its portfolio due to the current macroeconomic environment reducing demand for consumer discretionary goods. Finally, during the three months ending June 30, 2023, the Company implemented a strategy of rationalizing certain less profitable products and reducing its product offering, specifically related to its kitchen appliance products. As a result of this rationalization, along with the reduced demand for its products, the Company has made certain revisions to its internal forecasts for its Paper business and Kitchen appliance business. The Company concluded that these factors were an interim triggering event for the three months ending June 30, 2023 indicating the carrying value of our Paper and Kitchen appliance business’s long-lived assets, including trademarks, may not be recoverable. Accordingly, the Company performed an interim impairment test of the trademark and assessed the recoverability of the related intangible assets by using level 3 inputs and comparing the carrying value of an asset group to the net undiscounted cash flow expected to be generated. The recoverability test indicated that certain definite-live trademark intangible assets were impaired. The Company concluded the carrying value of the trademark exceeded its estimated fair value which was determined utilizing the relief-from-royalty method to determine discounted projected future cash flows which resulted in an impairment charge. The Company recorded an intangible impairment charge of $22.8 million for the Paper business and Kitchen appliance business during the three months ending June 30, 2023 within impairment loss on intangibles on the condensed consolidated statement of operations.

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 June 30, 2023, 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, 2022 and June 30, 2023 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 (as defined in the “Securities Purchase Agreement and Warrants” section of this Quarterly Report) and stock purchase warrants issued in connection with the 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 the estimated fair value of the warrant liabilities include the fair value of the underlying stock at the valuation date, the term of the warrants, and the expected volatility of the underlying stock. The significant unobservable input used in the fair value measurement of the warrant liabilities is the estimated term of the warrants. Upon the issuance of the 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 Condensed Consolidated Balance Sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair values. Fair value is defined as the exchange price that would be received for an asset or an exit price that would be paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The authoritative guidance on fair value measurements establishes a three-tier fair value hierarchy for disclosure of fair value measurements as follows:

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

Level 2—Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and

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

The following table summarizes the fair value of the Company’s financial assets that are measured at fair value as of December 31, 2022 and June 30, 2023 (in thousands):


	December 31, 2022
	Fair Value Measurement Category
	Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	43,574	$	—	$	—
Restricted Cash		3,055		—		—
Liabilities:
Fair value of warrant liability		—		—		3,473

	June 30, 2023
	Fair Value Measurement Category
	Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	28,867	$	—	$	—
Restricted cash		2,422		—		—
Liabilities:
Fair value of warrant liability		—		—		1,630



	December 31, 2022
Warrants liability as of January 1, 2022	$	—
Change in fair value of warrants		3,473
Warrants liability as of December 31, 2022	$	3,473

	June 30, 2023
Warrants liability as of January 1, 2023	$	3,473
Change in fair value of warrants		(1,843	)
Warrants liability as of June 30, 2023	$	1,630

Adopted Accounting Standards

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 Consolidated Financial Statements.

In September 2022, the FASB issued ASU 2022-04, Disclosures for Supplier Finance Arrangements. This amendment 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. The new guidance was early adopted on January 1, 2022, with no impact on the Company’s Consolidated Financial Statements.

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. The Company adopted this standard on January 1, 2023, but it does not have a material impact on the 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 intraperiod tax allocation, among others. This standard is effective for fiscal years beginning after December 15, 2021, and for interim periods beginning after December 15, 2022, with early adoption permitted. The Company adopted this standard on January 1, 2023, but it does not have a material impact on the Consolidated Financial Statements.

Recent Accounting Pronouncements

The JOBS Act permits an emerging growth company to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We have elected to use this extended transition period until we are no longer an emerging growth company or until we affirmatively and irrevocably opt out of the extended transition period. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2023

Accounting Policies [Abstract]

Basis of Presentation

Unaudited Interim Financial Information

Use of Estimates

Principles of Consolidation

Restricted Cash

for cash sweeps account related to the Midcap Credit Facility within "Prepaid and Other Current Assets" on the Condensed Consolidated Balance Sheets.

Inventory and Cost of Goods Sold

Accounts Receivable

Revenue Recognition

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 June 30, 2022
	(in thousands)
	Direct		Wholesale/Other		Total
North America	$	56,947	$	256	$	57,203
Other		1,065		—		1,065
Total net revenue	$	58,012	$	256	$	58,268

	Three Months Ended June 30, 2023
	(in thousands)
	Direct		Wholesale/Other		Total
North America	$	33,175	$	796	$	33,971
Other		1,293		—		1,293
Total net revenue	$	34,468	$	796	$	35,264

	Six Months Ended June 30, 2022
	(in thousands)
	Direct		Wholesale/Other		Total
North America	$	95,580	$	1,884	$	97,464
Other		2,477		—		2,477
Total net revenue	$	98,057	$	1,884	$	99,941

	Six Months Ended June 30, 2023
	(in thousands)
	Direct		Wholesale/Other		Total
North America	$	65,137	$	2,312	$	67,449
Other		2,694		—		2,694
Total net revenue	$	67,831	$	2,312	$	70,143

Net Revenue by Product Categories. The following table sets forth the Company’s net revenue disaggregated by product categories for the three and six months ended June 30, 2023 and 2022:


	Three Months Ended June 30,
	2022		2023
	(in thousands)
Heating, cooling and air quality	$	23,729	$	8,394
Kitchen appliances		8,484		6,277
Health and beauty		3,901		3,834
Cookware, kitchen tools and gadgets		4,245		2,287
Home office		3,324		2,627
Housewares		8,144		6,931
Essential oils and related accessories		5,759		4,263
Other		682		651
Total net revenue	$	58,268	$	35,264


	Six Months Ended June 30,
	2022		2023
	(in thousands)
Heating, cooling and air quality	$	29,656	$	13,742
Kitchen appliances		16,934		12,648
Health and beauty		8,791		8,691
Personal protective equipment		1,050		549
Cookware, kitchen tools and gadgets		9,101		5,907
Home office		7,032		5,294
Housewares		14,690		13,140
Essential oils and related accessories		10,841		8,851
Other		1,846		1,321
Total net revenue	$	99,941	$	70,143

Intangibles

During the three months ended June 30, 2023, the Company had a substantial decrease in its market capitalization, primarily relating to a decrease in share price. Further, the Company continues to see reduced net revenues across its portfolio due to the current macroeconomic environment reducing demand for consumer discretionary goods. Finally, during the three months ending June 30, 2023, the Company implemented a strategy of rationalizing certain less profitable products and reducing its product offering, specifically related to its kitchen appliance products. As a result of this rationalization, along with the reduced demand for its products, the Company has made certain revisions to its internal forecasts for its Paper business and Kitchen appliance business. The Company concluded that these factors were an interim triggering event for the three months ending June 30, 2023 indicating the carrying value of our Paper and Kitchen appliance business’s long-lived assets, including trademarks, may not be recoverable. Accordingly, the Company performed an interim impairment test of the trademark and assessed the recoverability of the related intangible assets by using level 3 inputs and comparing the carrying value of an asset group to the net undiscounted cash flow expected to be generated. The recoverability test indicated that certain definite-live trademark intangible assets were impaired. The Company concluded the carrying value of the trademark exceeded its estimated fair value which was determined utilizing the relief-from-royalty method to determine discounted projected future cash flows which resulted in an impairment charge. The Company recorded an intangible impairment charge of $22.8 million for the Paper business and Kitchen appliance business during the three months ending June 30, 2023 within impairment loss on intangibles on the condensed consolidated statement of operations.

Fair Value of Financial Instruments

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, 2022 and June 30, 2023 (in thousands):


	December 31, 2022
	Fair Value Measurement Category
	Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	43,574	$	—	$	—
Restricted Cash		3,055		—		—
Liabilities:
Fair value of warrant liability		—		—		3,473

	June 30, 2023
	Fair Value Measurement Category
	Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	28,867	$	—	$	—
Restricted cash		2,422		—		—
Liabilities:
Fair value of warrant liability		—		—		1,630



	December 31, 2022
Warrants liability as of January 1, 2022	$	—
Change in fair value of warrants		3,473
Warrants liability as of December 31, 2022	$	3,473

	June 30, 2023
Warrants liability as of January 1, 2023	$	3,473
Change in fair value of warrants		(1,843	)
Warrants liability as of June 30, 2023	$	1,630

Recent Accounting Pronouncements

Adopted Accounting Standards

Recent Accounting Pronouncements

Summary of Significant Accounting Policies - Net Revenue Disaggregated by Product Categories (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Disaggregation Of Revenue [Line Items]
Total net revenue	$ 35,264	$ 58,268	$ 70,143	$ 99,941
Product Revenue \| Heating, Cooling and Air Quality
Disaggregation Of Revenue [Line Items]
Total net revenue	8,394	23,729	13,742	29,656
Product Revenue \| Kitchen Appliances
Disaggregation Of Revenue [Line Items]
Total net revenue	6,277	8,484	12,648	16,934
Product Revenue \| Health and Beauty
Disaggregation Of Revenue [Line Items]
Total net revenue	3,834	3,901	8,691	8,791
Product Revenue \| Personal Protective Equipment
Disaggregation Of Revenue [Line Items]
Total net revenue			549	1,050
Product Revenue \| Cookware, Kitchen Tools and Gadgets
Disaggregation Of Revenue [Line Items]
Total net revenue	2,287	4,245	5,907	9,101
Product Revenue \| Home Office
Disaggregation Of Revenue [Line Items]
Total net revenue	2,627	3,324	5,294	7,032
Product Revenue \| Housewares
Disaggregation Of Revenue [Line Items]
Total net revenue	6,931	8,144	13,140	14,690
Product Revenue \| Essential Oils and Related Accessories
Disaggregation Of Revenue [Line Items]
Total net revenue	4,263	5,759	8,851	10,841
Product Revenue \| Other
Disaggregation Of Revenue [Line Items]
Total net revenue	$ 651	$ 682	$ 1,321	$ 1,846

Restructuring

6 Months Ended

Jun. 30, 2023

Restructuring and Related Activities [Abstract]

Restructuring

12. RESTRUCTURING

On May 9, 2023, the Company announced a plan to reduce expenses and re-align the organization’s structure by implementing a reduction in its current workforce impacting approximately 50 employees and 15 contractors, primarily in the Philippines. The headcount reduction is part of the Company's cost-saving initiatives to navigate challenges in the industry and to better position itself for future growth opportunities. The Company incurred $1.2 million of restructuring charges during the three months ended June 30, 2023.

The following table provides a summary of the restructuring costs incurred:


	Three and Six Months Ended
	June 30, 2023
	(in thousands)
Employee severance	$	520
Retention bonus settled		411
Contract termination costs		285
Total restructuring costs	$	1,216

As of June 30, 2023, the Company has a liability of $0.5 million for restructuring costs, of which $0.4 million is included in accrued expenses and other current liabilities and $0.1 million is included in other liabilities on the consolidated balance sheet.

The accounting for the restructuring costs follows the provisions of ASC 420, "Accounting for Costs Associated with Exit or Disposal Activities," which requires the recognition of a liability once the restructuring plan is communicated to affected employees and meets

the criteria of being probable and reasonably estimable. The Company recognizes a liability for employee severance, other benefits, and involuntary terminations on the communication date.

The Company will continue to assess the restructuring plan's progress and provide updates as required in future financial statements if there are material changes to the initial estimates or additional significant restructuring activities.

Credit Facility, Term Loans and Warrants (Tables)

6 Months Ended

Jun. 30, 2023

Debt Disclosure [Abstract]

Schedule of Credit Facility

The Company’s credit facility consisted of the following as of December 31, 2022 and June 30, 2023 (in thousands):


	December 31, 2022			June 30, 2023
MidCap Credit Facility	$	21,899		$	16,381
Less: deferred debt issuance costs		(459	)		(344	)
Less: discount associated with issuance of warrants		(387	)		(289	)
Total MidCap Credit Facility	$	21,053		$	15,748

Schedule of Interest Expense, Net

Interest expense, net consisted of the following for the three and six months ended June 30, 2022 and 2023 (in thousands):


	Three Months Ended June 30,					Six Months Ended June 30,
	2022		2023			2022		2023
Interest expense	$	338	$	540		$	1,138	$	1,136
Interest income		—		(194	)		—		(419	)
Total interest expense, net	$	338	$	346		$	1,138	$	717

Condensed Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Statement Of Income And Comprehensive Income [Abstract]
Net loss	$ (34,787)	$ (16,309)	$ (60,587)	$ (59,085)
Other comprehensive loss:
Foreign currency translation adjustments	126	(431)	255	(602)
Other comprehensive loss	126	(431)	255	(602)
Comprehensive loss	$ (34,661)	$ (16,740)	$ (60,332)	$ (59,687)

- Definition

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

+ References

+ Details

Accrued and Other Current Liabilities (Tables)

6 Months Ended

Jun. 30, 2023

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, 2022 and June 30, 2023 (in thousands):


	December 31, 2022		June 30, 2023
Accrued compensation costs	$	53	$	81
Accrued professional fees and consultants		461		287
Accrued logistics costs		609		956
Accrued restructuring costs		-		349
Product related accruals		1,248		1,002
Sales tax payable		711		931
Sales return reserve		646		476
Accrued fulfillment expense		755		545
Accrued insurance		356		42
Federal payroll taxes payable		1,467		1,320
Accrued interest payable		190		107
Warrant liability		3,473		1,630
All other accruals		4,285		4,252
Accrued and current liabilities		14,254		11,978

Document and Entity Information - shares	6 Months Ended
Document and Entity Information - shares	Jun. 30, 2023	Aug. 04, 2023
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2023
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q2
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		85,322,493
Entity File Number	001-38937
Entity Tax Identification Number	83-1739858
Entity Address, Address Line One	350 Springfield Avenue
Entity Address, Address Line Two	Suite 200
Entity Address, City or Town	Summit
Entity Address, State or Province	NJ
Entity Address, Postal Zip Code	07901
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 Balance Sheets (Parenthetical) - $ / shares	Jun. 30, 2023	Dec. 31, 2022
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	88,014,844	80,752,290

Summary of Significant Accounting Policies - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended	12 Months Ended
	Jun. 30, 2023	Mar. 31, 2023	Jun. 30, 2023	Dec. 31, 2022
Significant Accounting Policies [Line Items]
Allowance for doubtful accounts	$ 400		$ 400	$ 400
Intangible impairment charge	22,785	$ 16,700	39,445	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 \| MidCap Credit Facility
Significant Accounting Policies [Line Items]
Restricted cash deposit associated with credit facility	300		300	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
Accrued Liabilities
Significant Accounting Policies [Line Items]
Refund liabilities for sales returns	$ 500		$ 500	$ 600

Stock-Based Compensation - Summary of Total Stock-based Compensation Expense by Function (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock-based compensation expense	$ 3,223	$ 6,048	$ 5,539	$ 8,913
Sales and Distribution Expenses
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock-based compensation expense	1,091	2,882	1,761	3,229
Research and Development Expense
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock-based compensation expense	423	633	857	907
General and Administrative Expense
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock-based compensation expense	$ 1,709	$ 2,533	$ 2,921	$ 4,777

Goodwill and Intangibles - Summary of Changes in Goodwill and Intangible Assets (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended	12 Months Ended
	Jun. 30, 2023	Mar. 31, 2023	Jun. 30, 2023	Dec. 31, 2022	Oct. 04, 2022
Disclosure Of Goodwill And Intangible Assets [Line Items]
Net Book Value	$ 0		$ 0		$ 500
Gross Carrying Amount		$ 68,625	68,625	$ 72,444
Additions				192
Intangible Impairments	(22,785)	(16,700)	(39,445)	(3,118)
Accumulated Amortization	(16,751)		(16,751)	(14,761)
Net Book Value	12,429		12,429	54,757
Trademarks
Disclosure Of Goodwill And Intangible Assets [Line Items]
Gross Carrying Amount		62,202	62,202	65,910
Additions				192
Intangible Impairments			(39,445)	(3,087)
Accumulated Amortization	(14,793)		(14,793)	(13,008)
Net Book Value	7,964		7,964	50,007
Non-Competition Agreement
Disclosure Of Goodwill And Intangible Assets [Line Items]
Gross Carrying Amount		11	11	111
Intangible Impairments				(31)
Accumulated Amortization	(11)		(11)	(80)
Transition Services Agreement
Disclosure Of Goodwill And Intangible Assets [Line Items]
Gross Carrying Amount		12	12	23
Accumulated Amortization	(12)		(12)	(23)
Customer Relations
Disclosure Of Goodwill And Intangible Assets [Line Items]
Gross Carrying Amount		5,700	5,700	5,700
Accumulated Amortization	(1,235)		(1,235)	(950)
Net Book Value	4,465		4,465	4,750
Other
Disclosure Of Goodwill And Intangible Assets [Line Items]
Gross Carrying Amount		$ 700	700	700
Accumulated Amortization	$ (700)		$ (700)	(700)
Goodwill
Disclosure Of Goodwill And Intangible Assets [Line Items]
Gross Carrying Amount				119,941
Additions				468
Impairments				$ (120,409)

Contingent Earn-Out Liabilities

6 Months Ended

Jun. 30, 2023

Business Combinations [Abstract]

Contingent Earn-Out Liabilities

10.

CONTINGENT EARN-OUT LIABILITIES

The Company reviews and reassesses 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.

As of December 31, 2022 and June 30, 2023, there was no remaining earn-out liability related to Smash Assets.

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 the 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 December 31, 2022 and June 30, 2023, there was no remaining earn-out liability related to Squatty Potty.

The following table summarizes the changes in the carrying value of estimated contingent earn-out liabilities as of December 31, 2022 (in thousands):


	December 31, 2022
	Smash Assets			Squatty Potty			Total
Balance—January 1, 2022	$	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—December 31, 2022	$	—		$	—		$	—

There was no activity for contingent earn-out liabilities for the six months ending June 30, 2023.