Aterian enters $1 million unsecured loan agreement with stockholder

Aterian, Inc. (NASDAQ:ATER) disclosed this week that it entered into an unsecured promissory note agreement with Chen Zhipeng, a stockholder of the company. According to a press release statement included in a Securities and Exchange Commission filing, the agreement was executed on Tuesday. The financing comes as the company, with a market capitalization of just $10.52 million and shares trading at $0.62, faces ongoing cash flow challenges. According to InvestingPro data, Aterian’s financial health is rated as "WEAK," with the company burning through cash at a concerning pace—posting a negative levered free cash flow of $2.6 million in the last twelve months.

Under the terms of the agreement, the lender has committed to provide advances to Aterian in an aggregate principal amount of up to $1,000,000. Any funds advanced will accrue interest at an annual rate of 8.0%, calculated on a 360-day year and accruing daily from the date of funding. The note matures eight months from its date, with the possibility of an extension if both parties agree in writing.

Aterian may request advances up to the maximum amount prior to the maturity date, specifying the amount and intended use of funds, subject to the lender’s written approval. The company can prepay the outstanding principal and accrued interest without penalty at any time before a private placement equity financing notice is delivered.

If Aterian undertakes a private placement of equity or equity-linked securities for cash, the company must notify the lender at least 18 calendar days before the anticipated closing. The lender then has a one-time irrevocable option to receive repayment in cash or apply some or all of the outstanding amount toward the purchase of the new securities at the same price and terms as other investors. If no such financing occurs before the note’s maturity, the lender may elect to convert some or all of the outstanding amount into common shares at a price determined in accordance with Nasdaq Listing Rule 5635(d).

Issuance of shares or securities under this agreement is subject to compliance with Nasdaq’s share issuance limits and other listing requirements. Any portion of the outstanding amount that cannot be converted due to these limitations must be repaid in cash.

Events of default include missed payments, failure to use funds as agreed, bankruptcy events, or other material breaches. The note is governed by New York law.

This information is based on a press release statement contained in Aterian’s recent SEC filing.

In other recent news, Aterian, Inc. has announced significant changes in its control and board composition, alongside an upcoming contingent value rights (CVR) payment. The company disclosed that David E. Lazar sold his interests in a substantial number of preferred shares, which were converted into 241,861,970 shares of common stock before the sale. This transaction, valued at $12 million, has reduced Mr. Lazar’s ownership to approximately 3.1% of Aterian’s outstanding common stock, meaning he no longer holds control over the company. Aterian has clarified that no individual purchaser now holds more than 9.99% of the fully diluted outstanding common stock. Consequently, the company believes that no single person or group has acquired control. These developments are part of Aterian’s recent strategic changes. The board changes and the CVR payment are also notable aspects of the company’s latest announcements.