ATER

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How ATER rewrote its risk factors

10-K ITEM 1A · FY2024 → FY2025

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Overview We are a consumer products company that predominantly operates through online retail channels such as Amazon, Walmart, and Target and its own direct to consumer websites.
We sell on Amazon.com, Walmart.com, Target.com and our own websites, with the large majority of our sales being made through Amazon.com.
During 2025, the U.S. government announced a series of new tariff policies affecting imports from several countries, including China.
While these actions impact a range of global trade flows, the new tariffs targeting imports from China are the most significant for our business.
As a result of these tariffs, we experienced an increase in our cost of goods sold during the year ended December 31, 2025.
In response, we implemented targeted price increases across affected product categories to partially offset the higher input costs.
These pricing actions, however, contributed to a decline in unit volumes as consumer demand responded to the higher retail prices.
We have implemented a range of mitigation strategies to address the impact of these tariffs on our supply chain and margins.
These efforts include diversifying sourcing outside of China, renegotiating supplier terms, redesigning certain products to reduce tariff exposure, and implementing selective price increases where appropriate.
We continue to evaluate additional structural and operational measures to further reduce tariff-related exposure.
Expenses: Sales and Distribution Expenses —Sales and distribution expenses consist of online advertising costs, marketing and promotional costs, sales and ecommerce platform commissions, fulfillment, including shipping and handling, and warehouse costs (i.e., sales and distribution variable expenses).
General and Administrative Expenses —General and administrative expenses include cash and stock compensation and employee benefits for executive management, finance administration, legal, technology, and human resources, facility costs, insurance, travel, professional service fees, and other general overhead costs, including the costs of being a public company.
Results of Operations Comparison of Years Ended December 31, 2025 and 2024 The following table summarizes our results of operations for the years ended December 31, 2025 and 2024, together with the changes in those items in dollars and percentage: December 31, December 31, Change 2025 2024 Amount % (in thousands, except percentages) Net revenue $ 68,975 $ 99,045 $ (30,070 ) (30.4 )% Cost of goods sold 29,825 37,550 (7,725 ) (20.6 )% Gross profit 39,150 61,495 (22,345 ) (36.3 )% Operating expenses: Sales and distribution (1) 41,455 55,979 (14,524 ) (25.9 )% General and administrative (1) 11,846 17,339 (5,493 ) (31.7 )% Impairment loss on intangibles 3,822 — 3,822 100.0 % Total operating expenses 57,123 73,318 (16,195 ) 42.4 % Operating loss (17,973 ) (11,823 ) (6,150 ) (52.0 )% Interest expense, net (98 ) (10.3 )% Change in fair value of warrant liabilities (109 ) (924 ) 88.2 % Other expense, net 273.8 % Loss before income taxes (18,943 ) (11,909 ) (7,034 ) (59.1 )% Provision (benefit) for income taxes (47 ) 187.2 % Net loss $ (18,984 ) $ (11,862 ) $ (7,122 ) (60.0 )% (1) Amounts include stock-based compensation expense as follows: December 31, December 31, Change 2025 2024 Amount % (in thousands, except percentages) Sales and distribution expenses $ $ 1,783 $ (1,356 ) (76.1 )% General and administrative expenses 1,753 5,727 (3,974 ) (69.4 )% Total stock-based compensation expense $ 2,180 $ 7,510 $ (5,330 ) (71.0 )% The following table sets forth the components of our results of operations as a percentage of net revenue: December 31, December 31, 2025 2024 Net revenue 100.0 % 100.0 % Cost of goods sold 43.2 37.9 Gross profit 56.8 62.1 Operating expenses: Sales and distribution 60.1 56.5 General and administrative 17.2 17.5 Impairment loss on intangibles 5.5 — Total operating expenses 82.8 74.0 Operating loss (26.0 ) (11.9 ) Interest expense, net 1.2 1.0 Change in fair value of warrant liabilities (0.2 ) (0.9 ) Other expense, net 0.4 0.1 Loss before income taxes (27.4 ) (12.0 ) Provision (benefit) for income taxes 0.1 (0.0 ) Net loss (27.5 )% (12.0 )% Net Revenue Revenue by Product Categories : The following table sets forth our net revenue disaggregated by product categories: December 31, December 31, Change 2025 2024 Amount % (in thousands, except percentages) Direct $ 65,764 $ 97,341 $ (31,577 ) (32.4 )% Wholesale 3,211 1,704 1,507 88.4 % Net revenue $ 68,975 $ 99,045 $ (30,070 ) (30.4 )% Net revenue decreased $30.1 million, or 30.4%, during the year ended December 31, 2025 to $69.0 million, compared to $99.1 million for the year ended December 31, 2024.
The decrease in net revenue was primarily attributable to a decrease in direct net revenue of $31.6 million, or 32.4%, related to the newly implemented tariffs which increased our cost of goods sold, prompting us to raise prices to mitigate the impact.
These pricing actions, combined with the broader challenging macroeconomic environment, led to a reduction in unit volume as consumer demand softened at elevated price levels.
December 31, December 31, 2025 2024 (in thousands) Heating, cooling and air quality $ 13,945 $ 26,398 Kitchen appliances 8,468 9,565 Health and beauty 10,620 13,467 Cookware, kitchen tools and gadgets 2,620 5,924 Home office 6,265 8,017 Housewares 14,904 22,521 Essential oils and related accessories 12,139 12,719 Other Total net revenue $ 68,975 $ 99,045 Every category of business had a reduction in sales compared to the prior year primarily related to the newly implemented tariffs which increased our cost of goods sold, prompting us to raise prices to mitigate the impact.
Cost of Goods Sold and Gross Profit December 31, December 31, Change 2025 2024 Amount % (in thousands, except percentages) Cost of goods sold $ 29,825 $ 37,550 $ (7,725 ) (20.6 )% Gross profit $ 39,150 $ 61,495 $ (22,345 ) (36.3 )% Cost of goods sold decreased by $7.7 million to $29.8 million for the year ended December 31, 2025 from $37.6 million for the year ended December 31, 2024 primarily from reduced sales volume.
The decrease in cost of goods sold was primarily attributable to a decrease of $9.5 million in cost of goods sold from our direct businesses, partially offset by an increase of $1.8 million in cost of goods sold from our wholesale businesses.
Gross profit decreased to 56.8% for the year ended December 31, 2025 from 62.1% for the year ended December 31, 2024.
The decrease in gross profit was due primarily to product mix, as well as higher cost of goods sold resulting from the impact of newly implemented tariffs, partially offset by the benefit of price increases taken to mitigate these costs.
During the year ended December 31, 2025, the Company accrued approximately $0.4 million for estimated costs associated with a product recall and related remediation activities involving certain houseware appliances that the Company ceased selling during the year ended December 31, 2024.
These costs are included in cost of goods sold on the Consolidated Statement of Operations.
Sales and Distribution Expenses December 31, December 31, Change 2025 2024 Amount % (in thousands, except percentages) Sales and distribution expenses $ 41,455 $ 55,979 $ (14,524 ) (25.9 )% Sales and distribution variable expenses which included e-commerce platform commissions, online advertising and logistics expenses, decreased to $41.5 million for the year ended December 31, 2025 from $56.0 million for the year ended December 31, 2024.
This decrease is primarily attributable to the decrease in the volume of products sold during the year ended December 31, 2025, as our ecommerce platform commissions, online advertising, selling and logistics expenses decreased to $32.4 million during the year ended December 31, 2025 as compared to $44.6 million in the prior year period.
Our sales and distribution fixed costs (e.g., salary and office expenses) including stock-based compensation decreased to $9.0 million for the year ended December 31, 2025, from $11.4 million for the year ended December 31, 2024.
This decrease is primarily attributable to lower stock-compensation expense of $1.4 million, lower headcount expense of $1.3 million, and lower miscellaneous expenses of $0.6 million, partially offset by higher restructuring costs of $0.9 million.
As a percentage of net revenue, sales and distribution expenses increased to 60.1% for the year ended December 31, 2025, from 56.5% for the year ended December 31, 2024.
E-commerce platform commissions, online advertising, selling and logistics expenses included within sales and distribution expenses, as a percentage of net revenue, were 47.0% for the year ended December 31, 2025 as compared to 45.0% for the year ended December 31, 2024.
This increase in sales and distribution expenses as a percentage of revenue is primarily due to product mix and an increase in marketing costs.
General and Administrative Expenses December 31, December 31, Change 2025 2024 Amount % (in thousands, except percentages) General and administrative expenses $ 11,846 $ 17,339 $ (5,493 ) (31.7 )% The decrease in general and administrative expenses was primarily the result of a decrease of $4.0 million in stock-compensation expense, a decrease of $1.6 million in headcount expense, and a decrease of $0.4 million in other miscellaneous costs, partially offset by an increase of $0.5 million in restructuring costs.
Interest expense, net December 31, December 31, Change 2025 2024 Amount % (in thousands, except percentages) Interest expense, net $ $ $ (98 ) (10.3 )% The decrease in interest expense, net of $0.1 million is primarily related to a decrease in interest expense of $0.3 million due to lower average borrowings and a decrease in interest income of $0.2 million compared to the prior period.
Impairment loss on intangibles December 31, December 31, Change 2025 2024 Amount % (in thousands, except percentages) Impairment loss on intangibles $ 3,822 $ — $ (3,822 ) % In December 2025, the Company announced that its Board of Directors had initiated a process to explore strategic alternatives to maximize shareholder value.
This announcement constituted a triggering event under ASC 350, Intangibles—Goodwill and Other, requiring the Company to perform an interim impairment assessment of its definite-lived brand intangible assets.
The Company estimated the fair value of its definite-lived brand assets using market-based inputs, including indicative valuations from market participants obtained during the strategic alternative process.
Based on this assessment, the Company determined that the carrying value of certain brand intangible assets exceeded their estimated fair value.
Accordingly, the Company recorded a non-cash impairment charge of approximately $ 3.8 million during the fourth quarter of 2025.
The impairment charge is included within impairment loss on intangibles on the Consolidated Statement of Operations.
Change in fair value of warrant liabilities December 31, December 31, Change 2025 2024 Amount % (in thousands, except percentages) Change in fair value of warrant liabilities $ (109 ) $ (924 ) $ 88.2 % The 2025 and 2024 activity is related to the change in fair value of the warrant liabilities from the common stock warrants from our March 2022 equity raise of capital.
The change in fair value of warrant liabilities during the year ended December 31, 2025 primarily relates to the reduced share price compared to the prior period.
Liquidity and Capital Resources Cash Flows for Years-Ended December 31, 2025 and 2024 The following table provides information regarding our cash flows for the years-ended December 31, 2025 and 2024: December 31, December 31, 2025 2024 (in thousands) Cash (used in) provided by operating activities $ (10,895 ) $ 2,165 Cash used in investing activities (51 ) (242 ) Cash used in financing activities (2,518 ) (4,914 ) Effect of exchange rate on cash (61 ) Net change in cash and restricted cash for the period $ (13,141 ) $ (3,052 ) Net Cash (Used in) Provided by Operating Activities Net cash used in operating activities was $10.9 million for the year ended December 31, 2025, primarily driven by net cash losses from operations of $10.8 million and a $0.1 million outflow from changes in working capital, mainly related to changes in accounts receivable, purchases of inventory, and payments of accounts payable.

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Overview We are a technology-enabled consumer products company that predominantly operates through online retail channels such as Amazon, Walmart, and Target and its own direct to consumer websites.
During the year ended December 31, 2023, the Company enacted a strategy to reduce the number of SKUs it sells and is no longer pursuing future sales of SKUs that are either not profitable or not core to the Company’s strategy.
We sell on Amazon.com, Walmart.com, Target.com and our own websites, with substantially all of our sales made through Amazon.com.
Expenses: Research and Development Expenses —Research and development expenses include compensation and employee benefits for technology development employees, travel-related costs and fees paid to outside consultants related to the development of our intellectual property.
During the year ended December 31, 2024, the Company shifted its technology platform away from a fully internally developed model to an integrated third party model.
For the year ended December 31, 2024, technology and employee related costs have been presented in general and administrative costs on the Consolidated Statement of Operations.
Sales and Distribution Expenses —Sales and distribution expenses consist of online advertising costs, marketing and promotional costs, sales and ecommerce platform commissions, fulfillment, including shipping and handling, and warehouse costs (i.e., sales and distribution variable expenses).
General and Administrative Expenses —General and administrative expenses include cash and stock compensation and employee benefits for executive management, finance administration, legal, and human resources, facility costs, insurance, travel, professional service fees, and other general overhead costs, including the costs of being a public company.
For the year ended December 31, 2023, technology and employee-related costs were classified within research and development expenses.
For the year ended December 31, 2024, these costs have been presented within general and administrative expenses.
Results of Operations Comparison of Years Ended December 31, 2023 and 2024 The following table summarizes our results of operations for the years ended December 31, 2023 and 2024, together with the changes in those items in dollars and percentage: December 31, December 31, Change 2023 (1) 2024 (1) Amount % (in thousands, except percentages) Net revenue $ 142,566 $ 99,045 $ (43,521 ) (30.5 )% Cost of goods sold 72,281 37,550 (34,731 ) (48.0 )% Gross profit 70,285 61,495 (8,790 ) (12.5 )% Operating expenses: Sales and distribution 81,911 55,979 (25,932 ) (31.7 )% Research and development 4,616 — (4,616 ) (100.0 )% General and administrative 20,220 17,339 (2,881 ) (14.2 )% Impairment loss on intangibles 39,728 — (39,728 ) (100.0 )% Total operating expenses 146,475 73,318 (73,157 ) (49.9 )% Operating loss (76,190 ) (11,823 ) 64,367 84.5 % Interest expense, net 1,421 (472 ) (33.2 )% Change in fair value of warrant liabilities (2,440 ) (924 ) 1,516 62.1 % Other expense, net (199 ) (76.5 )% Loss before income taxes (75,431 ) (11,909 ) 63,522 84.2 % Benefit for income taxes (867 ) (47 ) 94.6 % Net loss $ (74,564 ) $ (11,862 ) $ 62,702 84.1 % (1) Amounts include stock-based compensation expense as follows: December 31, December 31, Change 2023 2024 Amount % (in thousands, except percentages) Sales and distribution expenses $ 2,439 $ 1,783 $ (656 ) (26.9 )% Research and development expenses 1,414 — (1,414 ) (100.0 )% General and administrative expenses 4,483 5,727 1,244 27.7 % Total stock-based compensation expense $ 8,336 $ 7,510 $ (826 ) (9.9 )% The following table sets forth the components of our results of operations as a percentage of net revenue: December 31, December 31, 2023 2024 Net revenue 100.0 % 100.0 % Cost of goods sold 50.7 37.9 Gross profit 49.3 62.1 Operating expenses: Sales and distribution 57.5 56.5 Research and development 3.2 — General and administrative 14.2 17.5 Impairment loss on intangibles 27.9 — Total operating expenses 102.7 74.0 Operating loss (53.4 ) (11.9 ) Interest expense, net 1.0 1.0 Change in fair value of warrant liabilities (1.7 ) (0.9 ) Other income, net 0.2 0.1 Loss before income taxes (52.9 ) (12.0 ) Benefit for income taxes (0.6 ) (0.0 ) Net loss (52.3 )% (12.0 )% Net Revenue Revenue by Product Categories : The following table sets forth our net revenue disaggregated by product categories: December 31, December 31, Change 2023 2024 Amount % (in thousands, except percentages) Direct $ 138,410 $ 97,341 $ (41,069 ) (29.7 )% Wholesale 4,156 1,704 (2,452 ) (59.0 )% Net revenue $ 142,566 $ 99,045 $ (43,521 ) (30.5 )% Net revenue decreased $43.5 million, or 30.5%, during the year ended December 31, 2024 to $99.1 million, compared to $142.6 million for the year ended December 31, 2023.
The decrease in net revenue was primarily attributable to a decrease in direct net revenue of $41.1 million, or 29.7%, which was primarily relating to a reduction in our product offering due to our SKU rationalization, competitive pricing pressure and other competitive dynamics on marketplaces.
December 31, December 31, 2023 2024 (in thousands) Heating, cooling and air quality $ 34,686 $ 26,398 Kitchen appliances 24,181 9,565 Health and beauty 16,025 13,467 Cookware, kitchen tools and gadgets 11,696 5,924 Home office 9,781 8,017 Housewares 26,093 22,521 Essential oils and related accessories 17,204 12,719 Other 2,900 Total net revenue $ 142,566 $ 99,045 Every category of business had a reduction in sales compared to the prior year primarily relating to the SKU rationalization that took place during the year ended December 31, 2024 and softness in consumer demand due the macroeconomic environment.
In addition, there were competitive pricing pressures coupled with certain key products losing their prominent positioning on Amazon due to competition, specifically in the kitchen appliance businesses.
These factors resulted in a reduction of units sold and a reduction in certain retail sales prices.
Cost of Goods Sold and Gross Profit December 31, December 31, Change 2023 2024 Amount % (in thousands, except percentages) Cost of goods sold $ 72,281 $ 37,550 $ (34,731 ) (48.0 )% Gross profit $ 70,285 $ 61,495 $ (8,790 ) (12.5 )% Cost of goods sold decreased by $34.7 million from $72.3 million for the year ended December 31, 2023 to $37.6 million for the year ended December 31, 2024 primarily from reduced sales volume.
The decrease in cost of goods sold was primarily attributable to a decrease of $27.6 million in cost of goods sold from our direct businesses and a decrease of $7.1 million in cost of goods sold from our wholesale businesses.
Gross profit increased from 49.3% for the year ended December 31, 2023 to 62.1% for the year ended December 31, 2024.
The increase in gross profit was primarily due to a reduction in liquidation of high priced excess inventory at reduced prices compared to the prior year.
Sales and Distribution Expenses December 31, December 31, Change 2023 2024 Amount % (in thousands, except percentages) Sales and distribution expenses $ 81,911 $ 55,979 $ (25,932 ) (31.7 )% Sales and distribution expenses which included e-commerce platform commissions, online advertising and logistics expenses (i.e., variable sales and distribution expense), decreased to $56.0 million for the year ended December 31, 2024 from $81.9 million for the year ended December 31, 2023.
This decrease is primarily attributable to the decrease in the volume of products sold during the year ended December 31, 2024, as our e-commerce platform commissions, online advertising, selling and logistics expenses decreased to $44.6 million for the year ended December 31, 2024 as compared to $68.9 million in the prior year.
Our sales and distribution fixed costs (e.g., salary and office expenses) including stock-based compensation decreased to $11.4 million for the year ended December 31, 2024, from $13.0 million for the year ended December 31, 2023.
This decrease is primarily attributable to a decrease in headcount expense of $1.6 million, a decrease in stock-based compensation expenses of $0.7 million and a decrease in restructuring costs of $0.4 million, partially offset by an increase in expenses related to a new Amazon Seller Program of $0.8 million.
As a percentage of net revenue, sales and distribution expenses decreased to 56.5% for the year ended December 31, 2024, from 57.5% for the year ended December 31, 2023.
E-commerce platform commissions, online advertising, selling and logistics expenses included within sales and distribution expenses, as a percentage of net revenue, were 45.0% for the year ended December 31, 2024 as compared to 48.3% for the year ended December 31, 2023.
This decrease in sales and distribution expenses as a percentage of revenue is primarily due to product mix and a decrease in logistics costs.
Research and Development Expenses December 31, December 31, Change 2023 2024 Amount % (in thousands, except percentages) Research and development expenses $ 4,616 $ — $ (4,616 ) (100.0 )% During the year ended December 31, 2024, the Company shifted its technology platform away from a fully internally developed model to an integrated third party model.
Therefore, beginning with the year ended December 31, 2024, technology and employee related costs have been presented in general and administrative costs on the Consolidated Statements of Operations.
General and Administrative Expenses December 31, December 31, Change 2023 2024 Amount % (in thousands, except percentages) General and administrative expenses $ 20,220 $ 17,339 $ (2,881 ) (14.2 )% The decrease in general and administrative expenses was primarily the result of a decrease of $2.3 million in depreciation and amortization, a decrease of $0.9 million in insurance expenses, and a decrease of $0.6 million in professional fees, partially offset by an increase in stock-compensation expense of $1.2 million.
Impairment loss on Intangibles December 31, December 31, Change 2023 2024 Amount % (in thousands, except percentages) Impairment loss on intangibles $ 39,728 $ — $ (39,728 ) (100.0 )% Certain asset groups experienced a significant decrease in sales and contribution margin during the year ended December 31, 2023.
This was considered a triggering event for the year ended December 31, 2023.
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.
There was no impairment loss on intangibles during the year ended December 31, 2024.
Interest expense, net December 31, December 31, Change 2023 2024 Amount % (in thousands, except percentages) Interest expense, net $ 1,421 $ $ (472 ) (33.2 )% The decrease in interest expense, net of $0.5 million is primarily relating to a decrease in interest expense of $0.9 million and an increase in interest income of $0.4 million compared to the prior period due to lower average borrowings.
Change in fair market value of warrant liabilities December 31, December 31, Change 2023 2024 Amount % (in thousands, except percentages) Change in fair market value of warrant liabilities $ (2,440 ) $ (924 ) $ 1,516 62.1 % The 2023 and 2024 activity is related to the change in fair market value of the warrant liabilities from the common stock warrants from our March 2022 equity raise of capital.
The change in fair value of warrant liabilities during the year ended December 31, 2024 primarily relates to the reduced share price compared to the prior period.
Liquidity and Capital Resources Cash Flows for Years-Ended December 31, 2023 and 2024 The following table provides information regarding our cash flows for the years-ended December 31, 2023 and 2024: December 31, December 31, 2023 2024 (in thousands) Cash (used in) provided by operating activities $ (13,388 ) $ 2,165 Cash used in investing activities (244 ) (242 ) Cash used in financing activities (11,108 ) (4,914 ) Effect of exchange rate on cash (61 ) Net change in cash and restricted cash for the period $ (24,434 ) $ (3,052 ) Net Cash (Used in) Provided by Operating Activities Net cash used in operating activities was $13.4 million for the year ended December 31, 2023, resulting primarily from our net cash losses from operations of $28.9 million, offset by an inflow from working capital of $15.5 million from changes in accounts receivable, purchases of inventory and payments of accounts payable.
The reduction of gross inventory of $26.4 million from December 31, 2022 to December 31, 2023 primarily relates to the liquidation of high priced excess inventory and a reduction of purchases for the period.
Net Cash Used in Investing Activities Net cash used in investing activities was $0.2 million for the year ended December 31, 2023, resulting primarily from the remaining payment for the purchase of Step and Go assets which was acquired during the three months ending December 31, 2022.
Net Cash Used in Financing Activities For the year ended December 31, 2023, cash used in financing activities of $11.1 million primarily from the net repayments for our MidCap credit facility of $10.4 million, repayment of seller notes of $0.6 million and net payments of insurance financing of $0.1 million.

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Sentence-level comparison of Item 1A in the two most recent 10-Ks (FY2024 ↗, FY2025 ↗). A reworded sentence counts as one dropped and one added, so heavy edits read as low “kept”. Headings and page furniture are stripped; nothing is summarised by a model.

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