The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our condensed consolidated
financial statements and related notes appearing elsewhere in this Quarterly
Report on Form 10-Q and with our audited financial statements and related notes
thereto for the year ended December 31, 2021 included in our Annual Report on
Form 10-K for the year ended December 31, 2021 as filed with the Securities and
Exchange Commission (the "SEC") on March 16, 2022. As discussed in the section
titled "Special Note Regarding Forward-Looking Statements", the following
discussion and analysis contains forward-looking statements that involve risks
and uncertainties, as well as assumptions that, if they never materialize or
prove incorrect, could cause our results to differ materially from those
expressed or implied by such forward-looking statements. Factors that could
cause or contribute to these differences include, but are not limited to, those
identified in the section titled "Special Note Regarding Forward Looking
Statements" and those discussed in the section titled "Risk Factors" under Part
II, Item 1A in this Quarterly Report on Form 10-Q.

Unless the context otherwise requires, the terms "Aterian," the "Company," "we,"
"us" and "our" in this Quarterly Report on Form 10-Q refer to Aterian, Inc. and
our consolidated subsidiaries, including Aterian Group, Inc.

Overview



We are a technology-enabled consumer products platform that uses "data science"
(which includes but is not limited to, machine learning, natural language
processing, and data analytics) to design, develop, market and sell products.
We were founded on the premise that if a company selling consumer packaged goods
was founded today, it would apply data science, the synthesis of massive
quantities of data and the use of social proof to validate high caliber product
offerings as opposed to over-reliance on brand value and other traditional
marketing tactics. Today, we predominantly operate through online retail
channels such as Amazon.com ("Amazon") and Walmart, Inc.

We have launched and sold hundreds of SKUs on e-commerce platforms. Through the
success of a number of those products we have incubated our own brands. We also
have purchased brands and products when we believe it is advantageous. Today,
we own and operate fourteen brands that sell products in multiple categories,
including home and kitchen appliances, kitchenware, heating, cooling and air
quality appliances (dehumidifiers, humidifiers and air conditioners), health and
beauty products and essential oils. Our fourteen brands include, hOmeLabs;
Vremi; Squatty Potty; Xtava; RIF6; Aussie Health; Holonix; Truweo; Mueller;
Pursteam; Pohl and Schmitt; Spiralizer; Healing Solutions; and Photo Paper
Direct.

Seasonality of Business and Product Mix



Our individual product categories are typically affected by seasonal sales
trends primarily resulting from the timing of the summer season for certain of
our environmental appliance products and the fall and holiday season for our
small kitchen appliances and accessories. With our current mix of environmental
appliances, the sales of those products tend to be significantly higher in the
summer season. Further, our small kitchen appliances and accessories tend to
have higher sales during the fourth quarter, which includes Thanksgiving and the
December holiday season. As a result, our operational results, cash flows, cash
and inventory positions may fluctuate materially in any quarterly period
depending on, among other things, adverse weather conditions, shifts in the
timing of certain holidays and changes in our product mix.

Each of our products typically goes through the Launch phase and depending on
its level of success is moved to one of the other phases as further described
below:

i. Launch phase: During this phase, we leverage our technology to target

opportunities identified using AIMEE (Artificial Intelligence Marketplace

e-Commerce Engine) and other sources. During this period of time, due to

the combination of discounts and investment in marketing, our net margin

for a product could be as low as approximately negative 35%. Net margin is

calculated by taking net revenue less the cost of goods sold, less

fulfillment, online advertising and selling expenses. These costs primarily

reflect the estimated variable costs related to the sale of a product.

ii. Sustain phase: Our goal is for every product we launch to enter the

sustain phase and become profitable, with a target average of positive 15%

net margin, within approximately three months of launch on average. Net

margin primarily reflects a combination of manual and automated

adjustments in price and marketing spend. Over time, our products benefit


        from economies of scale stemming from purchasing power both with
        manufacturers and with fulfillment providers.

iii. Milk phase or Liquidate phase: If a product does not enter the sustain

phase or if the customer satisfaction of the product (i.e., ratings) is

not satisfactory, then it will go to the liquidate phase and we will sell


         through the remaining inventory. In order to enter the milk phase, we
         believe that a product must be well received and become a strong leader

in its category in both customer satisfaction and volume sold as compared


         to its competition. Products in the milk phase that have achieved
         profitability should benefit from pricing power and we expect their
         profitability to increase accordingly. To date, none of


                                       33

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our products have achieved the milk phase and we can provide no assurance

that any of our products will do so in the future.




To date, our operating results have included a mix of products in the launch and
sustain phases, and we expect such results to include a mix of products in all
phases at any given period. Product mix can affect our gross profit and the
variable portion of our sales and distribution expenses. Ultimately, we believe
that the future cash flow generated by our products in the sustain phase will
outpace the amount that we will reinvest into launching new products, driving
net revenue and profitability at the company level while we continue to invest
in growth and technology. Due to the impact of the COVID-19 pandemic on the
global supply chain, we have had to increase our inventory on hand to avoid
disruption in sales. The unpredictability of container availability, space on
vessels and shipping lead times, as well as associated manufacturing lead time,
has caused us to secure more inventory upfront. Having more inventory on hand
not only impacts our working capital but also requires us to increase our
storage capacity, through our warehouse network, which of itself has a capital
impact.

The following table shows the number of launches of new products included in our net revenue that have achieved, or are expected to achieve, more than approximately $0.5 million in net revenue per year on average.




                             Three Months Ended March 31,
                               2021                  2022
Launches of new products              21                   -


Our growth in direct revenue can be impacted by the timing and the season in
which products are launched and any mergers or acquisitions. There were no new
product launches in the quarter ended March 31, 2022, as we paused new product
launches  due to global supply chain unpredictability.

Due to the COVID-19 pandemic's impact on the global supply chain, we have paused
the launch of new products. The sharp increase in shipping costs has made our
target competitive pricing difficult to achieve and the current unpredictability
of shipping container availability makes it more difficult for us to maintain
the required inventory levels, which in turn makes the potential and profitable
success of product launches even more difficult to achieve in this current
environment. Furthermore, we have concerns about the impact of Russia's invasion
of Ukraine on our business including its effects on the global economy, the
performance and cost of supply chain and financial markets. We will continue to
evaluate the impacts of this, in addition to the impacts of the COVID-19
pandemic, on our business.

Financial Operations Overview



Net Revenue-We derive our revenue from the sale of consumer products, primarily
in the U.S. We sell products directly to consumers through online retail
channels and through wholesale channels. Direct-to-consumer sales (i.e., direct
net revenue), which is currently the majority of our revenue, is done through
various online retail channels. We sell on Amazon.com, Walmart.com, and our own
websites, with substantially all of our sales made through Amazon.com. For all
of our sales and distribution channels, revenue is recognized when control of
the product is transferred to the customer (i.e., when our performance
obligation is satisfied), which typically occurs at the shipment date. Our
Platform as a Service ("Managed PaaS") currently has nominal net revenue
activity and for the near future is expected to be nominal, at best.  Currently,
we have limited resources at this time to invest in the Managed PaaS business
given the pressure of the macro environment as our priority and focus is on our
core business.

Cost of Goods Sold-Cost of goods sold consists of the book value of inventory
sold to customers during the reporting period and the amortization of inventory
step-up from acquisitions. Book value of inventory includes the amounts we pay
manufacturers for product, tariffs and duties associated with transporting
product across national borders, and freight costs associated with transporting
the product from our manufacturers to our warehouses, as applicable. When
circumstances dictate that we use net realizable value as the basis for
recording inventory, we base our estimates on expected future selling prices,
less expected disposal costs. The Office of the U.S. Trade Representative has
imposed additional tariffs on products imported from China. We contract
manufacturers, predominantly in China, through purchase orders, for our consumer
products. As such, this exposes us to risks associated with doing business
globally, including changes in tariffs, which impact a significant number of our
products. We can provide no assurances that future tariff increases will not be
enacted. These increases may affect the way we order products, as well as the
amount of product we order. If tariff increases are enacted in the future, our
pricing actions are expected to be intended to offset the full gross margin
impact from such tariffs.  Further, we have been affected by the COVID-19
pandemic and related global supply chain disruption. Together, these have led to
substantial increases in the costs of our supply chain, specifically, increases
in the costs of shipping containers, which we rely on to import our goods. We
have increased pricing, when possible, to offset the full gross margin impact
which at times has led to reduced sales velocity on certain products at certain
times of the year. There are no assurances that these pricing actions will not
reduce customer orders in the future.

                                       34
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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.



Sales and Distribution Expenses- Sales and distribution expenses consist of
online advertising costs, marketing and promotional costs, sales and e-commerce
platform commissions, fulfillment, including shipping and handling, and
warehouse costs (i.e., sales and distribution variable expenses). Sales and
distribution expenses also include employee compensation and benefits and other
related fixed costs. Shipping and handling expenses are included in our
consolidated statements of operations in sales and distribution expenses. This
includes inbound, pick and pack costs and outbound transportation costs to ship
goods to customers performed by e-commerce platforms or incurred directly by us,
through our own direct fulfillment platform, which leverages AIMEE and our
third-party logistics partners. Our sales and distribution expenses,
specifically our logistics expenses and online advertising, will vary quarter to
quarter as they are dependent on our sales volume, our product mix (i.e.,
products in the launch phase or sustain phase) and whether we fulfill products
ourselves, i.e., fulfillment by merchant ("FBM"), or through e-commerce platform
service providers, i.e., fulfillment by Amazon or fulfilled by Walmart. After a
product launches and reaches the sustain phase, we seek to maintain the product
within its targeted level of profitability. This profitability can be impacted
as each product has a unique fulfillment cost due to its size and weight. As
such, products with less expensive fulfillment costs as a percentage of net
revenue may allow for a lower gross margin, while still maintaining their
targeted profitability level. Conversely, products with higher fulfillment costs
will need to achieve a higher gross margin to maintain their targeted level of
profitability. We are FBM One Day and Two Day Prime certified, allowing us to
deliver our sales through Amazon, to approximately 76% of the U.S., within one
day and to over 99% of the U.S. within two days, based on our sales history. We
continually review the locations and capacity of our third-party warehouses to
ensure we have the appropriate geographic reach, which helps to reduce the
average last mile shipping zones to the end customer and as such our speed of
delivery improves while our shipping costs to customers decrease, prior to the
impacts on shipping providers' rates.

General and Administrative Expenses-General and administrative expenses include
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.

Interest Expense, Net-Interest expense, net includes the interest cost from our
credit facility and term loans, and includes amortization of deferred finance
costs and debt discounts from our credit facility (the "Credit Facility") with
MidCap Funding IV Trust ("MidCap") during the year ended December 31, 2021 and
the three months ended for March 31, 2022, and term loan interest with High
Trail Investments SA LLC ("High Trail SA") and High Trail Investments ON LLC
("High Trail ON" and, together with High Trail SA, "High Trail") during the year
ended December 31, 2021.

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Results of Operations

Comparison of the Three Months Ended March 31, 2021 and 2022



The following table summarizes our results of operations for the three months
ended March 31, 2021 and 2022, together with the changes in those items in
dollars and percentages:


                                       Three Months Ended March 31,                  Change
                                         2021                 2022            Amount           %
                                            (in thousands, except percentages)
NET REVENUE                         $       48,136       $       41,673     $   (6,463 )        (13.4 )%
COST OF GOODS SOLD                          22,073               18,066         (4,007 )        (18.2 )
GROSS PROFIT                                26,063               23,607         (2,456 )         (9.4 )
OPERATING EXPENSES:
Sales and distribution expenses
(1)                                         25,069               22,974         (2,095 )         (8.4 )
Research and development expenses
(1)                                          2,124                1,144           (980 )        (46.1 )
General and administrative
expenses (1)                                10,976                9,541         (1,435 )        (13.1 )
Impairment loss on goodwill                      -               29,020         29,020          100.0
Change in fair value of
contingent earn-out liabilities             15,645               (2,775 )      (18,420 )       (117.7 )
TOTAL OPERATING EXPENSES:                   53,814               59,904          6,090           11.3
OPERATING LOSS                             (27,751 )            (36,297 )       (8,546 )        (30.8 )
INTEREST EXPENSE-net                         4,420                  802         (3,618 )        (81.9 )
GAIN ON EXTINGUISHMENT OF SELLER
NOTE                                             -               (2,012 )       (2,012 )       (100.0 )
LOSS ON INITIAL ISSUANCE OF
EQUITY                                           -                5,835          5,835          100.0
CHANGE IN FAIR VALUE OF WARRANT
LIABILITY                                   30,202                1,879        (28,323 )        (93.8 )
LOSS ON INITIAL ISSUANCE OF
WARRANT                                     20,147                    -        (20,147 )       (100.0 )
OTHER EXPENSE                                   33                  (25 )          (58 )       (175.8 )
LOSS BEFORE INCOME TAXES                   (82,553 )            (42,776 )       39,777           48.2
PROVISION FOR INCOME TAXES                       -                    -              -              -
NET LOSS                            $      (82,553 )     $      (42,776 )   $   39,777           48.2 %



(1) Amounts include stock-based compensation expense as follows:





                                           Three Months Ended March 31,
                                             2021                2022
                                                  (in thousands)

Sales and distribution expenses $ 955 $ 347 Research and development expenses

                  883                 274
General and administrative expenses              5,061               2,244

Total stock-based compensation expense $ 6,899 $ 2,865







                                       36

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The following table sets forth the components of our results of operations as a
percentage of net revenue:

                                                        Three Months Ended March 31,
                                                        2021                     2022
NET REVENUE                                                  100.0 %                  100.0 %
COST OF GOODS SOLD                                            45.9 %                   43.4 %
GROSS PROFIT                                                  54.1 %                   56.6 %
OPERATING EXPENSES:
Sales and distribution expenses                               52.1 %                   55.1 %
Research and development expenses                              4.4 %                    2.7 %
General and administrative expenses                           22.8 %                   22.9 %
Impairment loss on goodwill                                    0.0 %                   69.6 %
Change in fair value of contingent earn-out
liabilities                                                   32.5 %                   (6.7 )%
TOTAL OPERATING EXPENSES:                                    111.8 %                  143.7 %
OPERATING LOSS                                               (57.7 )%                 (87.1 )%
INTEREST EXPENSE-net                                           9.2 %                    1.9 %
GAIN ON EXTINGUISHMENT OF SELLER NOTE                          0.0 %                   (4.8 )%
LOSS ON INITIAL ISSUANCE OF EQUITY                             0.0 %                   14.0 %
CHANGE IN FAIR VALUE OF WARRANT LIABILITY                     62.7 %                    4.5 %
LOSS ON INITIAL ISSUANCE OF WARRANT                           41.9 %                    0.0 %
OTHER EXPENSE                                                  0.1 %                   (0.1 )%
LOSS BEFORE INCOME TAXES                                    (171.5 )%                (102.6 )%
PROVISION FOR INCOME TAXES                                     0.0 %                    0.0 %
NET LOSS                                                    (171.5 )%                (102.6 )%


Net Revenue

Revenue by Product Categories:



The following table sets forth our net revenue disaggregated by product
categories:


                     Three Months Ended March 31,                Change
                       2021                 2022           Amount         %
                         (in thousands, except percentages)
Direct            $       46,152       $       40,044     $ (6,108 )     (13.2 )%
Wholesale/Other            1,984                1,629         (355 )     (17.9 )%
Net revenue       $       48,136       $       41,673     $ (6,463 )     (13.4 )%



Net revenue decreased $6.5 million, or 13.4%, during the three months ended
March 31, 2022 to $41.7 million, compared to $48.2 million for the three months
ended March 31, 2021. The decrease in net revenue was primarily attributable to
a decrease in direct net revenue of $6.1 million, or a 13.2% decrease. Direct
net revenue consists of both organic net revenue and net revenue from our
mergers and acquisitions ("M&A"). For the three months ended March 31, 2022,
organic revenue was $29.8 million and revenue from our M&A businesses was $9.6
million. For the three months ended March 31, 2021, organic revenue was $17.4
million and revenue from our M&A businesses was $28.7 million. Our organic
revenue increased by $12.4 million, or 70.8%, during the three months March 31,
2022, as compared to the three months ended March 31, 2021. This increase was
primarily driven by prior year M&A revenue moving into organic revenue after one
year, offset by increased pricing on our products affected by global supply
chain disruption which led to reduced sales velocity, reduced product launches
and inventory shorts due to delayed receipt of goods for the three months ended
March 31, 2022.

                                       37
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                                         Three Months Ended March 31,
                                           2021                 2022
                                                (in thousands)

Heating, cooling and air quality $ 6,138 $ 5,926 Kitchen appliances

                            12,150                8,450
Health and beauty                              3,642                4,890
Personal protective equipment                  1,154                1,040
Cookware, kitchen tools and gadgets            6,098                4,856
Home office                                      809                3,708
Housewares                                     7,182                6,547
Essential oils                                 7,353                5,082
Other                                          3,610                1,174
Total net revenue                     $       48,136       $       41,673


Heating, cooling and air quality accounted for $5.9 million in net revenue for
the three months ended March 31, 2022, which was essentially flat, compared to
$6.1 million for the three months ended March 31, 2021.

Kitchen appliances accounted for $8.5 million in net revenue for the three
months ended March 31, 2022 compared to $12.2 million in net revenue for the
corresponding period in 2021, a decrease of $3.7 million primarily due to
reduced launches in the current period as well as reduced sales volume, which we
attribute to both reduced e-commerce demand due to the reopening of brick &
mortar retail, and increased sale prices due to global supply chain disruptions
and inventory shorts due to delayed receipt of goods. Cookware, kitchen tools
and gadgets accounted for approximately $4.9 million in net revenue for the
three months ended March 31, 2022 compared to $6.1 million in net revenue for
the corresponding period in 2021, a decrease of $1.2 million primarily driven by
reduced sales volume, which we attribute to both reduced e-commerce demand due
to the reopening of brick & mortar retail, and increased sale prices due to
global supply chain disruptions and inventory shorts due to delayed receipt of
goods.

Home office products accounted for $3.7 million in net revenue for the three months ended March 31, 2022 compared to $0.8 million in net revenue for the corresponding period in 2021, an increase of $2.9 million primarily due to growth in our existing products and new products obtained through M&A businesses.



Essential oils accounted for $5.0 million in net revenue for the three months
ended March 31, 2022 compared to $7.4 million in net revenue for the
corresponding period in 2021, decrease of a $2.3 million primarily driven by
reduced sales volume, which we attribute to both reduced e-commerce demand due
to the reopening of brick & mortar retail, and increased sale prices due to
global supply chain disruptions and inventory shorts due to manufacturing
delays.

Cost of Goods Sold and Gross Margin



                        Three Months Ended March 31,                Change
                          2021                 2022           Amount         %
                            (in thousands, except percentages)
Cost of goods sold   $       22,073       $       18,066     $ (4,007 )     (18.2 )%
Gross profit         $       26,063       $       23,607     $ (2,456 )      (9.4 )%



Cost of goods sold decreased by $4.0 million, from $22.1 million for the three
months ended March 31, 2021 to $18.1 million for the three months ended March
31, 2022. The decrease in cost of goods sold was primarily attributable to a
decrease of $6.0 million in cost of goods sold from our organic business, offset
by a $10.1 million increase in cost of goods sold from our M&A businesses.

Gross profit improved from 54.1% for the three-months ended March 31, 2021 to
56.6% for the three months ended March 31, 2022. The improvement in gross margin
was due to a change of product mix as our net revenue from our M&A businesses,
which have a higher gross margin of 66.8% than our organic business' gross
margin of 54.2%, offset by the impact from increased costs of our supply chain.
The majority of our M&A businesses' net revenue tends to be from smaller
products that have higher gross margins versus our organic business' net
revenue, which tends to be oversized goods that have lower gross margins. We
expect to see future impacts in our gross margin on both our M&A and organic
businesses as the international shipping container crisis continues to drive

                                       38
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shipping container costs higher and cause reductions in delivery reliability and
other delays, which also increases related shipping container delivery costs, as
well as other inflationary pressures.

Sales and Distribution Expenses



                                       Three Months Ended March 31,                  Change
                                         2021                 2022            Amount           %
                                            (in thousands, except percentages)

Sales and distribution expenses $ 25,069 $ 22,974 $ (2,095 ) (8.4 )%





Sales and distribution expenses, which included e-commerce platform commissions,
online advertising and logistics expenses (i.e., variable sales and distribution
expense), decreased to $23.0 million for the three months ended March 31, 2022
from $25.1 million for the three months ended March 31, 2021. This decrease of
$2.0 million is primarily attributable to the decrease in the volume of products
sold in the three months ended March 31, 2022, as our e-commerce platform
commissions, online advertising, selling and logistics expenses decreased to
$19.8 million in the three months ended March 31, 2022 as compared to $21.7
million in the prior period.

Our sales and distribution fixed costs (e.g., salary and office expenses)
including stock based compensation stayed relatively flat at $3.2 million for
the three months ended March 31, 2022 from $3.3 million for the three months
ended March 31, 2021.

As a percentage of net revenue, sales and distribution expenses increased to
55.1% for the three months ended March 31, 2022 from 52.1% for the three months
ended March 31, 2021 primarily from an increase in last mile shipping costs.
E-commerce platform commissions, online advertising, selling and logistics
expenses included within sales and distribution expenses, as a percentage of net
revenue, were 47.5% for the three months ended March 31, 2022 as compared to
45.2% for the three months ended March 31, 2021. This increase in sales and
distribution expenses is predominantly due to product mix and to the increase in
last mile shipping costs, specifically for oversized goods, due to the demand on
those third-party providers' delivery networks. We expect to see these cost
increases continue in the near-term.

Research and Development Expenses



                                      Three Months Ended March 31,                  Change
                                        2021                2022            Amount            %
                                           (in thousands, except percentages)

Research and development expenses $ 2,124 $ 1,144 $

(980 ) (46.1 )%





The decrease in research and development expenses was primarily attributable to
a decrease of stock-based compensation expense of approximately $0.6 million and
a decrease of headcount expenses of $0.3 million.

General and Administrative Expenses



                                         Three Months Ended March 31,                  Change
                                           2021                 2022            Amount           %
                                              (in thousands, except percentages)

General and administrative expenses $ 10,976 $ 9,541

$ (1,435 ) (13.1 )%





The decrease in general and administrative expenses was primarily due to a
decrease of stock compensation expenses of $2.8 million offset by an increase of
$0.4 million related to the fixed costs expenses related to headcount and an
increase of $0.8 million related to the legal settlement of the Mueller Action
(see Note 9 of our condensed consolidated financial statements in this Quarterly
Report on Form 10-Q for additional details).

Impairment loss on goodwill

                                  Three Months Ended March 31,                Change
                               2021                   2022              Amount         %
                                     (in thousands, except percentages)
Impairment loss on goodwill   $     -         $             29,020     $ 29,020       100.0 %




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We assessed our goodwill as of March 31, 2022 due to an interim triggering event
due related to our reduced market capitalization and determined that our
goodwill was impaired. As a result, we recorded a goodwill impairment charge of
$29.0 million in the three months ended March 31, 2022, primarily due to the
decrease in our market capitalization. Refer to Note 2 and critical accounting
policies.

Change in fair value of contingent earn-out liabilities



                                       Three Months Ended March 31,                  Change
                                         2021                 2022            Amount           %
                                            (in thousands, except percentages)

Change in fair value of contingent earn-out liabilities $ 15,645 $ (2,775 ) $ (18,420 ) (117.7 ) %





The change in fair value of contingent earn-out liabilities was related to our
M&A, which includes a re-assessment of the estimated fair value of contingent
consideration as part of the purchase price, primarily driven by the fluctuation
in our share price since the date of each acquisition and contribution margin
projections.

Interest expense, net

                            Three Months Ended March 31,                Change
                              2021                  2022          Amount         %
                               (in thousands, except percentages)
Interest expense, net   $          4,420         $       802     $ (3,618 )     (81.9 )%



The decrease in interest expense was primarily related to the payment in the
High Trail loan in the prior period which had higher borrowings and interest
rates compared to this current period which only includes our MidCap credit
facility.

Loss on initial issuance of equity



                                       Three Months Ended March 31,                 Change
                                         2021                 2022           Amount           %
                                            (in thousands, except percentages)

Loss on initial issuance of equity $ - $ 5,835 $ 5,835

            100 .0%



The loss on initial issuance of equity is attributable to the issuance of common shares and initial valuation of the pre-funded warrants and common stock warrants from our March 2022 equity raise.

Change in fair market value of warrant liability



                                       Three Months Ended March 31,                  Change
                                         2021                 2022            Amount           %
                                            (in thousands, except percentages)
Change in fair market value of
warrant liability                   $        30,202       $       1,879     $  (28,323 )       (100.0 )%
Loss on initial issuance of
warrant                             $        20,147       $           -     $  (20,147 )       (100.0 )%



The expense activity in 2021 is attributable to the issuance of the warrants in
connection with the December 2020 Note and the February 2021 Note and related
change in the fair value of warrant liability and loss on initial issuance of
warrant for the three months ended March 31, 2021, which was primarily driven by
the extinguishment of the warrants. The 2022 activity is related to the change
in fair market value of the warrant liabilities from the pre-funded warrants and
common stock warrants from our March 2022 equity raise.

Gain on extinguishment of seller note



                                          Three Months Ended March 31,                 Change
                                            2021                 2022           Amount           %
                                               (in thousands, except percentages)

Gain on extinguishment of seller note $ - $ (2,012 )

$ (2,012 ) (100.0 )%

The gain is attributable to the settlement of the Truweo seller note, which resulted in a $2.0 million in gain on extinguishment of seller note upon the extinguishment of the debt.


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Liquidity and Capital Resources

Cash Flows for the Three Months Ended March 31, 2021 and 2022

The following table provides information regarding our cash flows for the three months ended March 31, 2021 and 2022, respectively:



                                                         Three Months Ended March 31,
                                                          2021                   2022
                                                                (in thousands)
Cash used in operating activities                   $         (8,495 )     $        (13,170 )
Cash used in investing activities                            (15,300 )                  (16 )
Cash provided by financing activities                         38,501        

21,716


Effect of exchange rate on cash                                  (99 )                 (171 )

Net change in cash and restricted cash for period $ 14,607 $ 8,359

Net Cash Used in Operating Activities



Net cash used in operating activities was $8.5 million for the three months
ended March 31, 2021, resulting from our net cash losses from operations of $4.6
million, offset by cash from working capital of $3.9 million from changes in
accounts receivable, purchase of inventory and insurance and payments of
accounts payable.

Net cash used in operating activities was $13.2 million for the three months
ended March 31, 2022, resulting from our net cash losses from operations of $5.9
million, offset by and impacts from working capital of $7.3 million from changes
in accounts receivable, purchases of inventory and insurance and payments of
accounts payable.


Net Cash Used in Investing Activities



For the three months ended March 31, 2021, net cash used in investing activities
of $15.3 million was primarily from the acquisition of the assets of Healing
Solutions for $15.3 million.


For the three months ended March 31, 2022, net cash used in investing activities was less than $0.1 million.

Net Cash Provided by Financing Activities



For the three months ended March 31, 2021, cash provided by financing activities
of $38.5 million was primarily from proceeds from cancellation of a warrant of
$17.0 million, proceeds from warrant exercises of $8.9 million, proceeds from
exercise of stock options of $8.7 million, borrowings from our prior credit
facility of $14.5 million and borrowings from the February 2021 Note of $14.0
million, offset by repayments of our prior credit facility of $12.3 million and
$4.7 million seller note repayments.

For the three months ended March 31, 2022, cash provided by financing activities
of $21.8 million was primarily from proceeds from an equity offering of $27.0
million and borrowings from the Credit Facility of $30.4 million offset by $1.0
million of repayments of notes issued to certain sellers in connection with our
M&A activity and repayments of the Credit Facility of $33.8 million.

Sources of Liquidity and Going Concern-As of March 31, 2022, the Company had
total cash and cash equivalents of $44.3 million and an accumulated deficit of
$471.7 million. In addition, the Company's net loss and net cash used in
operating activities amounted to $42.8 million and $13.2 million, respectively,
for the three months ended March 31, 2022.

As an emerging growth company, we have been dependent on outside capital through
the issuance of equity to investors and borrowings from lenders (collectively
"outside capital") since our inception to execute our growth strategy of
investing in organic growth at the expense of short-term profitably and
investing in incremental growth through mergers and acquisitions ("M&A
strategy"). In addition, our recent financial performance has been adversely
impacted by the COVID-19 global pandemic and related global shipping disruption,
in particular with respect to substantial increases in supply chain costs for
shipping containers (See COVID-19 Pandemic and the Supply Chain below for
additional details). As a result, we have incurred significant losses and will

                                       41
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remain dependent on outside capital for the foreseeable future until such time
that we can realize our strategy of growth by generating profits through our
organic growth and M&A strategy, and reduce our reliance on outside capital.

Given the inherent uncertainties associated with executing our growth strategy,
as well as the uncertainty associated with the ongoing COVID-19 global pandemic,
recent record increases in inflation and related global supply chain disruption,
we can provide no assurances that we will be able to obtain sufficient outside
capital or generate sufficient cash from operations to fund our obligations as
they become due over the next twelve months from the date these condensed
consolidated financial statements were issued.

Since our inception, we have been able to successfully raise a substantial
amount of outside capital to fund our growth strategy. However, as of March 31,
2022, we have had no firm commitments of additional outside capital from current
or prospective investors or lenders. Furthermore, given the inherent
uncertainties associated with our growth strategy, we may be unable to remain in
compliance with the financial covenants required by the credit facility
agreement over the next twelve months. These uncertainties raise substantial
doubt about our ability to continue as a going concern.

In order to alleviate substantial doubt, we plan to continue to closely monitor
our operating forecast, pursue additional sources of outside capital, and pursue
our M&A strategy. If we are (a) unable to improve our operating results, (b)
obtain additional outside capital on terms that are acceptable to us to fund our
operations and M&A strategy, and/or (c) secure a waiver or forbearance from the
lender if we are unable to remain in compliance with the financial covenants
required by the credit facility agreement, we may make significant changes to
our operating plan, such as delaying expenditures, reducing investments in new
products, delaying the development of our software, reducing our sale and
distribution infrastructure, or otherwise significantly reducing the scope of
our business. Moreover, if we breach the financial covenants required by the
credit facility agreement and fail to secure a waiver or forbearance from the
lender, such breach or failure could accelerate the repayment of the outstanding
borrowings under the credit facility agreement or the exercise of other rights
or remedies the lender may have under applicable law. We can provide no
assurance a waiver or forbearance will be granted or the outstanding borrowings
under the credit facility will be successfully refinanced on terms that are
acceptable to the Company.

COVID-19 Pandemic and the Supply Chain- The full impact of the COVID-19 pandemic
on our supply chain, including the impact associated with preventive and
precautionary measures that we, other businesses and governments are taking,
continues to evolve.

During 2022 to date, we continue to be impacted by the COVID-19 pandemic and
related global shipping disruption. Together these have led to substantial
increases in supply chain costs, in particular for shipping containers, which we
rely on to import our goods, as reduced reliability and timely delivery of
shipping containers and have substantially increased our last mile shipping
costs on our oversized goods. These cost increases have been particularly
substantial for oversized goods, which is a material part of our business. The
reduced reliability and delivery of such shipping containers is forcing us to
spend more on premium shipping to ensure goods are delivered, if at all, and the
lack of reliability and timely delivery has further down chain impacts as it
takes longer for containers to be offloaded and returned.  Further, this global
shipping disruption is forcing us to increase our inventory on-hand, including
by advance ordering and taking possession of inventory earlier than expected,
negatively impacting our working capital.

Third party last mile shipping partners, such as UPS and FedEx, continue to
increase the cost of delivering goods to the end consumers as their delivery
networks continue to be impacted by the COVID-19 pandemic. The COVID-19 pandemic
continues to bring uncertainty to consumer demand as price increases related to
raw materials, the importing of goods, including tariffs, and the cost of
delivering goods to consumers has led to inflation across the U.S. As such, the
Company has noticed changes to consumer buying habits, which may lead to reduced
demand for its products. Further, recent record inflation has added additional
pressure to the cost of the Company's supply chain.

We continue to consider the impact of the COVID-19 pandemic on our supply chain
on the assumptions and estimates used when preparing our consolidated financial
statements including inventory valuation, and the impairment of long-lived
assets. These assumptions and estimates may change as the current situation
evolves or new events occur, and additional information is obtained. If the
economic conditions caused by the COVID-19 pandemic and the negative impact on
our supply chain worsen beyond what is currently estimated by management, such
future changes may have an adverse impact on our results of operations,
financial position, and liquidity.

MidCap Credit Facility - December 2021-On December 22, 2021, we entered into a
Credit Facility with MidCap, pursuant to which, among other things, (i) the
lenders party thereto as lenders (the "Lenders") agreed to provide a 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) we agreed to issue to MidCap
Funding XXVII Trust a warrant to purchase up to an aggregate of

                                       42
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200,000 shares of our common stock, in exchange for the Lenders extending loans and other extensions of credit to us under the Credit Facility.



The credit facility contains a financial covenant that requires that we maintain
a minimum unrestricted cash balance or minimum borrowing availability of (a)
$12.5 million during the period from February 1st through and including May 31st
of each calendar year, and (b) $15.0 million at all other times thereafter. 

At


our election, we may elect to comply with an alternative financial covenant that
would require us to maintain a minimum borrowing availability under the credit
facility of $10.0 million at all times. We currently do not anticipate electing
the alternative financial covenant over the next twelve months and are in
compliance with the minimum liquidity covenant as of the date these condensed
consolidated financial statements were issued.


On December 22, 2021, we used $27.6 million of the net proceeds from the initial
borrowing under the Credit Facility to repay all amounts owed under those
certain senior secured promissory notes issued by us to High Trail in an initial
principal amount of $110.0 million, as amended. We expect to use the remaining
proceeds of any loans under the Credit Facility for working capital and general
corporate purposes.

We are in compliance with the financial covenants contained within the Credit
Agreement as of March 31, 2022. As of March 31, 2022, we had approximately $29.4
million outstanding on the credit facility and $3.6 million of availability on
the credit facility.

Securities Purchase Agreement and Warrants-On March 1, 2022, we 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, we issued and sold to the Purchasers, in a private placement transaction
(the "Private Placement"), (i) 6,436,322 shares of our common stock (the
"Shares"), par value $0.0001 per share (the "Common Stock"), and accompanying
warrants to purchase an aggregate of 4,827,242 shares of common stock,
and (ii) pre-funded warrants to purchase up to an aggregate of 3,013,850 shares
of common stock (the "Pre-Funded 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 Pre-Funded
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 Pre-Funded Warrant and
accompanying Common Stock Warrant were sold together at a combined price of
$2.9099, for gross proceeds of approximately $27.5 million.

Non-GAAP Financial Measures



We believe that our financial statements and the other financial data included
in this Quarterly Report on Form 10-Q have been prepared in a manner that
complies, in all material respects, with generally accepted accounting
principles in the U.S. ("GAAP"). However, for the reasons discussed below, we
have presented certain non-GAAP measures herein.

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

As used herein, Contribution margin represents gross profit less amortization of
inventory step-up from acquisitions (included in cost of goods sold) and
e-commerce platform commissions, online advertising, selling and logistics
expenses (included in sales and distribution expenses).  As used herein,
Contribution margin as a percentage of net revenue represents Contribution
margin divided by net revenue. As used herein, EBITDA represents net loss plus
depreciation and amortization, interest expense, net and provision for income
taxes. As used herein, Adjusted EBITDA represents EBITDA plus stock-based
compensation expense, changes in fair-market value of earn-outs, amortization of
inventory step-up from acquisitions (included in cost of goods sold), changes in
fair-market value of warrant liability, professional fees and transition costs
related to acquisitions, loss from extinguishment of debt, impairment of
goodwill, loss on initial issuance of equity, litigation reserve and other
expenses, net.  As used herein, Adjusted EBITDA as a percentage of net revenue
represents Adjusted EBITDA divided by net revenue. Contribution margin, EBITDA
and Adjusted EBITDA do not represent and should not be considered as
alternatives to loss from operations or net loss, as determined under GAAP.
We present Contribution margin and Contribution margin as a percentage of net
revenue, as we believe each of these measures provides an additional metric to
evaluate our operations and, when considered with both our GAAP results and the
reconciliation to gross profit, provides useful supplemental information for
investors.  Specifically, Contribution margin and Contribution margin as a
percentage of net revenue are two of our key metrics in running our business.
All product decisions made by us, from the approval of launching a new product
and to the liquidation of a product at the end of its life cycle, are measured
primarily from Contribution margin and/or Contribution margin as a percentage of
net revenue.  Further, we believe these measures provide improved transparency
to our stockholders to determine the performance of our products prior to fixed
costs as opposed to referencing gross profit alone.

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

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

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

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

• our capital expenditures or future requirements for capital expenditures or

mergers and acquisitions;

• the interest expense or the cash requirements necessary to service interest

expense or principal payments, associated with indebtedness;

• depreciation and amortization, which are non-cash charges, although the

assets being depreciated and amortized will likely have to be replaced in


      the future, or any cash requirements for the replacement of assets;


  • changes in cash requirements for our working capital needs; or


   •  changes in fair value of contingent earn-out liabilities, warrant
      liabilities, and amortization of inventory step-up from acquisitions
      (included in cost of goods sold).

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

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

• general and administrative expense necessary to operate our business;

• research and development expenses necessary for the development, operation

and support of our software platform;

• the fixed costs portion of our sales and distribution expenses including


      stock-based compensation expense; or


   •  changes in fair value of contingent earn-out liabilities, warrant
      liabilities, and amortization of inventory step-up from acquisitions
      (included in cost of goods sold).




                                       44

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                                                           Three Months Ended March 31,
                                                           2021                     2022
                                                        (in thousands, except percentages)
Gross profit                                         $          26,063        $         23,607
Contribution margin                                  $           6,134        $          3,830
Gross profit as a percentage of net revenue                       54.1 %                  56.6 %
Contribution margin as a percentage of net revenue                12.7 %                   9.2 %
Net Loss                                             $         (82,553 )      $        (42,776 )
EBITDA                                               $         (76,929 )      $        (40,128 )
Adjusted EBITDA                                      $          (1,194 )      $         (4,541 )
Net loss as a percentage of net revenue                         (171.5 )%               (102.6 )%
Adjusted EBITDA as a percentage of net revenue                    (2.5 )%                (10.9 )%


Adjusted EBITDA

EBITDA represents net loss plus depreciation and amortization, interest expense,
net and provision for income taxes. Adjusted EBITDA represents EBITDA plus
stock-based compensation expense, changes in fair-market value of earn-outs,
amortization of inventory step-up from acquisitions (included in cost of goods
sold), change in fair-market value of warrant liability, professional fees and
transition costs related to acquisitions, loss from extinguishment of debt,
impairment of goodwill, loss on initial issuance of equity, litigation reserve
and other expenses, net. As used herein, Adjusted EBITDA as a percentage of net
revenue represents Adjusted EBITDA divided by net revenue.

The following table provides a reconciliation of EBITDA and Adjusted EBITDA to
net loss, which is the most directly comparable financial measure presented in
accordance with GAAP:
                                                           Three Months Ended March 31,
                                                          2021                    2022
                                                        (in thousands, except percentages)
Net loss                                             $       (82,553 )      $         (42,776 )
Add:
Interest expense, net                                          4,420                      802
Depreciation and amortization                                  1,204                    1,846
EBITDA                                                       (76,929 )                (40,128 )
Other expense (income), net                                       33                      (25 )
Impairment loss on goodwill                                        -                   29,020
Change in fair value of contingent earn-out
liabilities                                                   15,645                   (2,775 )
Amortization of inventory step-up from
acquisitions (included in cost of goods sold)                  1,808                        -
Gain on extinguishment of seller note                              -                   (2,012 )
Loss on initial issuance of equity                                 -                    5,835
Change in fair market value of warrant liability              30,202                    1,879
Loss on initial issuance of warrant                           20,147                        -
Professional fees related to acquisitions                        449                        -
Litigation reserve                                                 -                      800
Transition cost from acquisitions                                552                        -
Stock-based compensation expense                               6,899                    2,865
Adjusted EBITDA                                      $        (1,194 )      $          (4,541 )
Net loss as a percentage of net revenue                       (171.5 )%                (102.6 )%
Adjusted EBITDA as a percentage of net revenue                  (2.5 )%                 (10.9 )%






Contribution Margin

Contribution margin represents gross profit less amortization of inventory step-up from acquisitions (included in cost of goods sold) and e-commerce platform commissions, online advertising, selling and logistics expenses (included in sales and distribution


                                       45
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expenses). Contribution margin as a percentage of net revenue represents Contribution margin divided by net revenue. The following table provides a reconciliation of Contribution margin to gross profit and Contribution margin as a percentage of net revenue to gross profit as a percentage of net revenue, which are the most directly comparable financial measures presented in accordance with GAAP.




                                                          Three Months Ended March 31,
                                                           2021                    2022
                                                       (in thousands, except percentages)
Gross Profit                                         $          26,063        $       23,607
Add:
Amortization of inventory step-up from
acquisitions (included in cost of goods sold)                    1,808                     -

Less:


E-commerce platform commissions, online
advertising, selling and logistics expenses                    (21,737 )             (19,777 )
Contribution margin                                  $           6,134        $        3,830
Gross Profit as a percentage of net revenue                       54.1 %                56.6 %
Contribution margin as a percentage of net revenue                12.7 %                 9.2 %


Critical Accounting Policies and Use of Estimates



Our unaudited condensed consolidated financial statements have been prepared in
accordance with U.S. generally accepted accounting principles ("GAAP"). The
preparation of these unaudited condensed consolidated financial statements
requires us to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses and the related disclosures. We base
our estimates on historical experience and on other assumptions that we believe
to be reasonable under the circumstances. These estimates and assumptions form
the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or conditions.

There have been no material changes to our critical accounting policies as
compared to the critical accounting policies and significant judgments and
estimates as disclosed in our Annual Report on Form 10-K for fiscal year ended
December 31, 2021, as filed with the SEC on March 16, 2022 (our "Annual
Report"). For additional information, please refer to Note 2 of our condensed
consolidated financial statements in this Quarterly Report on Form 10-Q.

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



The Company engaged a third-party valuation specialist to assist management in
performing an interim goodwill impairment test in March 2022. For goodwill,
impairment testing is based upon the best information available using a
combination of the discounted cash flow method (a form of the income approach)
and the guideline public company method.

The Company has experienced high volatility on its stock and saw its market
capitalization reduce through March 31, 2022. This was considered an interim
triggering event for the three months ended March 31, 2022. The Company assessed
its goodwill as of March 31, 2022 and determined that the Company's goodwill was
impaired. As a result, the Company recorded a goodwill impairment charge of
$29.0 million in the three months ended March 31, 2022 primarily due to the
decrease in its market capitalization.

Under the income approach, or discounted cash flow method, the significant
assumptions used are projected net revenue, projected contribution margin
(product operating margin before fixed costs), fixed costs, and terminal growth
rates. Projected net revenue, projected contribution margin and terminal growth
rates were determined to be significant assumptions because they are the three
primary drivers of the projected cash flows in the discounted cash flow fair
value model. Under the guideline public company method, significant assumptions
relate to the selection of appropriate guideline companies, the valuation
multiples used in the market analysis and the Company's market capitalization.

Goodwill was $120.0 million and $90.9 million, at December 31, 2021 and March 31, 2022, respectively.



The Company believes that the assumptions and estimates made are reasonable and
appropriate, and changes in the assumptions and estimates could have a material
impact on its reported financial results.


                                       46
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While the Company believes our conclusions regarding the estimates of fair value
of its reporting unit is appropriate, these estimates are subject to uncertainty
and by nature include judgments and estimates regarding various factors. These
factors include the rate and extent of growth in the markets that our reporting
unit serves, the realization of future sales price and volume increases,
fluctuations in price and availability of key raw materials, future operating
efficiencies and, as it pertains to discount rates, the volatility in interest
rates and costs of equity.

Some of the inherent estimates and assumptions used in determining fair value of
the Company's reporting unit are outside the control of management, including
interest rates, tax rates, credit ratings and industry growth. Given the current
COVID-19 global pandemic and the uncertainties regarding the financial potential
impact on the Company's business, there can be no assurance that the Company's
estimates and assumptions regarding the impact of COVID-19 and the recovery
period made for purposes of the goodwill impairment testing performed will prove
to be accurate predictions of the future. While the Company believes it has made
reasonable estimates and assumptions to calculate the fair values of its
reporting unit, it is possible changes could occur. As for the Company's
reporting unit, if in future years, the reporting unit's actual results are not
consistent with the Company's estimates and assumptions used to calculate fair
value, the Company may be required to recognize material impairments to
goodwill. The Company will continue to monitor its reporting unit for any
triggering events or other signs of impairment. The Company may be required to
perform additional impairment testing based on changes in the economic
environment, disruptions to the Company's business, significant declines in
operating results of the Company's reporting unit, further sustained
deterioration of the Company's market capitalization, and other factors, which
could result in impairment charges in the future. Although management cannot
predict when improvements in macroeconomic conditions will occur, if consumer
confidence and consumer spending decline significantly in the future or the
market capitalization deteriorates significantly from current levels, it is
reasonably likely the Company will be required to record impairment charges in
the future that could be material to the Company's consolidated balance sheet or
results of operations.



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