Note 19 - Subsequent Events

12 Months Ended

Dec. 31, 2025

Notes to Financial Statements

Subsequent Events [Text Block]

19. SUBSEQUENT EVENTS

Restructuring

In January 2026, the Company implemented a fixed cost reduction plan that included a workforce reduction affecting approximately 16 employees and independent contractors. The Company expects to substantially complete this reduction by the end of the first quarter of 2026. The Company expects to recognize restructuring charges in connection with the plan, primarily related to severance, of $0.3 million. The Company expects the charges will be recognized and paid in the first quarter of 2026.

Tariffs

On February 20, 2026, the U.S. Supreme Court ruled in Learning Resources Inc. v. Trump that the International Emergency Economic Powers Act (IEEPA) does not authorize the President to impose tariffs. This ruling effectively invalidated several tariff regimes in effect during 2025 under which the Company paid significant duties. While this decision may entitle the Company to refunds for previously paid IEEPA tariffs, the timing and process for such refunds remain uncertain, and no asset has been recognized as of December 31, 2025.

Furthermore, on February 24, 2026, the U.S. government implemented a new 10% baseline global tariff under Section 122 of the Trade Act of 1974 for a period of 150 days, unless extended by Congress. The Company is currently evaluating the impact of these new tariffs on its 2026 cost of goods sold and overall financial condition.

Product Recall

In February 2026, the Company announced a voluntary recall in coordination with the CPSC for approximately 195,000 units of our PurSteam Mighty Lil Steamers and Elite Travel Steamers due to reports of hot water expelling from the nozzle, which has resulted in reported burn injuries.

In March 2026, a purported class action complaint was filed against the Company in the United States District Court for the District of New Jersey (Sarah Brannon v. Aterian, Inc.) relating to the recalled products. The complaint alleges, among other things, breach of warranty, consumer protection violations, and product liability claims and seeks unspecified damages and other relief. The Company intends to vigorously defend itself in this matter. At this time, the Company is unable to reasonably estimate a potential loss or range of loss associated with this litigation.

Midcap Credit Facility Amendment

On March 13, 2026, the Company and its subsidiaries entered into Amendment No. 5 to its Credit and Security Agreement with MidCap Funding IV Trust. Under the terms of the amendment, the Company’s minimum liquidity covenant was reduced from $5.0 million to $3.5 million during the Minimum Liquidity Covenant Reduction Period. This reduction period commenced on the Fifth Amendment Effective Date and is subject to extension at the Company's option on a weekly basis through May 9, 2026, provided it remains in compliance with certain fee payment obligations.

The Company conducted a review for additional subsequent events and determined that no additional subsequent events had occurred through the issuance date that would require additional disclosures.