Aterian (ATER) Risk Analysis

On July 22, 2026, the Securities and Exchange Commission ("SEC") approved a proposed rule change filed by The Nasdaq Stock Market LLC (File No. SR-NASDAQ-2026-004, as modified by Amendment No. 1) establishing a new continued listing requirement under Nasdaq Listing Rules 5450(a)(3) and 5550(a)(6). Under the rule as approved, companies listed on the Nasdaq Global and Capital Markets are required to maintain a minimum Market Value of Listed Securities ("MVLS") of at least $5.0 million. If a company's MVLS remains below $5.0 million for 30 consecutive business days, Nasdaq will issue an immediate Staff Delisting Determination and suspend trading in the company's common stock. Unlike other Nasdaq continued listing deficiencies (such as the $1.00 minimum bid price requirement, which typically provides a 180-day grace period), the rule provides no compliance or cure period prior to suspension. Furthermore, requesting an appeal before the Nasdaq Hearings Panel would not automatically stay the suspension of trading, meaning an affected company's common stock would be suspended from Nasdaq and forced to trade on the over-the-counter ("OTC") market during any appeal process. However, on July 29, 2026, the implementation of this new continued listing requirement was automatically stayed pursuant to Rule 431(e) of the SEC's Rules of Practice. The stay was triggered after the Small Public Company Coalition ("SPCC") and Cemtrex, Inc. each filed notices of their intent to petition the full Commission to review the approval order previously issued by the SEC's Division of Trading and Markets under delegated authority. On July 29, 2026, the SEC issued a letter confirming that the approval order had been automatically stayed pending further action by the Commission. As a result of the stay, Nasdaq's $5.0 million MVLS requirement is currently not effective. Under SEC procedures, the petitioners have five days from their notice to file formal petitions for review setting forth the legal and factual bases for challenging the approval. The Commission may decide whether to grant or decline review and, if granted, may affirm, modify, reverse, set aside, or remand the Division's approval order. There is no prescribed statutory timeline for the Commission to reach a final decision, and the stay remains in effect during this administrative review process. Furthermore, because seeking Commission review is generally a prerequisite to judicial review, the matter may ultimately be appealed to a federal court of appeals, which could extend the stay and delay potential implementation of the rule for a significant period. Notwithstanding the current stay, significant uncertainty remains regarding the ultimate outcome of the regulatory and potential judicial review processes. If the Commission affirms the rule, if the stay is lifted, or if the rule is otherwise upheld and becomes effective, and if our MVLS remains below $5.0 million for 30 consecutive business days: - Nasdaq would issue an immediate Staff Delisting Determination and suspend trading in our common stock without a compliance or cure period;   - Our common stock would likely be forced to trade on the OTC market, including during any appeal before a Nasdaq Hearings Panel;   - Trading on the OTC market would significantly reduce the liquidity, trading volume, and market price of our common stock;   - Our ability to raise additional capital through equity offerings would be severely limited;   - We could experience a loss of confidence among institutional investors, vendors, and business partners; and   - Our common stock could become subject to SEC "penny stock" regulations, imposing heightened disclosure and sales practice burdens on broker-dealers that further restrict secondary market trading. If the rule is ultimately reinstated and our market capitalization fluctuates below the required $5.0 million threshold for 30 consecutive business days, there can be no assurance that we will avoid immediate delisting or that a Hearings Panel would grant an exception, any of which would have a material adverse effect on our business, financial condition, results of operations, and the trading value of your investment.

On July 17, 2026, we completed the second closing under the Securities Purchase Agreement with David E. Lazar, resulting in the issuance of Series AAA Preferred Stock and a fundamental change in control of the Company. Upon full conversion of the Series AA and Series AAA Preferred Stock, Mr. Lazar controls approximately 95% of our fully diluted share capitalization. As a result, existing common stockholders have experienced immediate, severe dilution of their equity interests and voting power. This extreme concentration of ownership gives Mr. Lazar majority voting control and effective decision-making authority over our corporate strategy, business affairs, and all matters requiring stockholder approval. This includes the power to elect directors, approve major strategic transactions, amend our certificate of incorporation and bylaws, and authorize future equity or debt issuances. The interests of Mr. Lazar may differ substantially from the interests of our other stockholders. Additionally, his ability to control the Company may have the effect of delaying, deterring, or preventing a future change in control, takeover attempt, or merger that other stockholders might consider favorable or in their best financial interest.

Future sales and issuances of our capital stock or rights to purchase our capital stock could result in substantial dilution to our existing stockholders. We may sell common stock, convertible securities and other debt or equity securities in one or more transactions at prices and in a manner as we may determine from time to time. If we sell any such securities in subsequent transactions, the ownership of existing stockholders will be diluted, possibly materially. New investors in subsequent transactions could also gain rights, preferences and privileges senior to those of existing holders of our common stock. In addition, we issue to our employees equity awards under our equity incentive plans which could be material in amount. If our existing stockholders sell large numbers of shares of our common stock, or the public market perceives that those existing stockholders might sell shares of common stock, the market price of our common stock could decline significantly. Existing stockholder sales might also make it more difficult for us to sell additional equity securities at a time and price that we deem appropriate, or at all.

Our employees, directors and officers, and their affiliates, hold substantial amounts of shares of our common stock which is granted as a portion of their compensation. Sales by these stockholders, or the perception that such sales will occur, may cause the market price of our common stock to decline. Other than our stock ownership guidelines and our restrictions on trading that arise under securities laws (or pursuant to our securities trading policy that is intended to facilitate compliance with securities laws), including the prohibition on trading in securities by or on behalf of a person who is aware of nonpublic material information, we have no restrictions on the right of our employees, directors and officers, and their affiliates, to sell their unrestricted shares of common stock. Our employees, officers and directors periodically sell shares of common stock to cover tax liabilities from prior restricted stock awards.

The market price and trading volume of our common stock has at times experienced substantial price volatility. There has been, and we expect will continue to be, significant volatility in the market price and trading volume of our common stock. In certain instances, these fluctuations have been unrelated or disproportionate to our operating performance, financial condition, and cash flows. In addition, the market price of our common stock may be, and we believe has been, significantly impacted by investors covering large short positions in our common stock. In addition, there are many other factors that have caused and may continue to cause the market price of our common stock to fluctuate, including: our announcement of our Board's temporary suspension of our share repurchase program, actual or anticipated variations in our quarterly operating results, or the operating results, financial condition, and cash flows of companies perceived to be similar to us; deterioration and decline in general economic, industry and/or market conditions; changes in estimates of our financial results or recommendations by equity research analysts, including any decision by equity research analysts to initiate or discontinue coverage; announcements by us or our competitors of significant acquisitions, strategic alliances or joint ventures; and changes in our capital structure, such as future issuances of securities or the incurrence of additional debt.