What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2024-03-08 compared with 2023-03-16 · 211 added, 221 removed, 880 unchanged (33% of the section changed)

57 unchanged sentences

Long term liabilities

Lease financing obligation, net of current portion — 37,527

Operating lease liabilities, net of current portion 21,738 29,842

23 unchanged sentences

Marketing 36,440 47,782 54,260

Restructuring 2,205 — —

Research and development 6,214 6,996 7,679

9 unchanged sentences

Basic and diluted 94,516,690 92,201,806 71,126,218

Other comprehensive income (loss)

Other comprehensive loss

Unrealized gain (loss) on short-term investments, net of taxes 32 9 ( 135 )

7 unchanged sentences

Balances at December 31, 2020 49,100,928 $ 376,404 34,089,186 $ 3 $ 116,055 $ ( 352,977 ) $ 94 $ ( 236,825 )

49,100,928 $ 376,404 34,033,074 $ 3 $ 108,109 $ ( 338,511 ) $ 122 $ ( 230,277 )

Net loss — — — — — ( 38,679 ) — ( 38,679 )

2 unchanged sentences

Stock-based compensation — — — — 16,847 — — 16,847

Balances at December 31, 2020

49,100,928 $ 376,404 34,089,186 $ 3 $ 116,055 $ ( 352,977 ) $ 94 $ ( 236,825 )

Net loss — — — — — ( 38,679 ) — (38,679) ( 38,679 )

Other comprehensive loss — — — — — — ( 135 ) ( 135 )

Stock options exercised — — 1,170,803 — 5,730 — — 5,730

Stock-based compensation — — — — 16,847 — — 16,847

Vested restricted stock — — 173,835 —

7 unchanged sentences

Balance at December 31, 2021 — $ — 91,512,140 $ 9 $ 570,794 $ ( 391,656 ) $ ( 41 ) $ 179,106

— $ — 91,512,140 $ 9 $ 570,794 $ ( 391,656 ) $ ( 41 ) $ 179,106

Net loss — — — — — ( 49,019 ) — ( 49,019 )

7 unchanged sentences

Balance at December 31, 2022 — $ — 92,907,351 $ 9 $ 586,213 $ ( 439,830 ) $ ( 32 ) $ 146,360

— $ — 92,896,736 $ 9 $ 586,213 $ ( 439,830 ) $ ( 32 ) $ 146,360

Net loss — — — — — ( 39,238 ) — ( 39,238 )

Other comprehensive loss — — — — — — 32 32

Stock options exercised — — 2,300 — 4 — — 4

Stock-based compensation — — — — 15,804 — — 15,804

Vested restricted stock — — 2,831,801 — — — — —

Shares issued under employee stock purchase plan — — 126,969 — 177 — — 177

Balance at December 31, 2023 — $ — 95,868,421 $ 9 $ 602,198 $ ( 479,068 ) $ — $ 123,139

The accompanying notes are an integral part of these Consolidated Financial Statements.

6 unchanged sentences

Net loss $ ( 39,238 ) $ ( 49,019 ) $ ( 38,679 )

Adjustments to reconcile net loss to net cash used in operating activities:

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Depreciation and amortization 2,740 2,753 4,146

8 unchanged sentences

Operating lease liabilities ( 7,688 ) ( 7,007 ) —

Net cash used in operating activities ( 76,275 ) ( 38,154 ) ( 12,066 )

Net cash provided by (used in) operating activities 19,353 ( 76,275 ) ( 38,154 )

Cash flows from investing activities

3 unchanged sentences

Purchases of property and equipment ( 1,838 ) ( 1,617 ) ( 220 )

Purchases of intangible assets ( 10 ) — —

Net cash provided by (used in) investing activities 3,835 34,963 ( 8,623 )

7 unchanged sentences

Payments on finance lease liabilities ( 58 ) ( 303 ) ( 1,126 )

Net cash provided by (used in) financing activities 38 60,368 ( 973 )

Net (decrease) increase in cash, cash equivalents and restricted cash ( 41,274 ) 13,591 23,657

Net cash provided by financing activities 122 38 60,368

Net increase (decrease) in cash, cash equivalents and restricted cash 23,310 ( 41,274 ) 13,591

Cash, cash equivalents and restricted cash

12 unchanged sentences

Equipment acquired under capital lease obligations $ — $ — $ 123

Deferred IPO costs included in accounts payable and accrued expenses $ — $ — $ 533

Capital expenditures included in accounts payable and accrued expenses $ 25 $ 54 $ 33

7 unchanged sentences

(the “Company”) was incorporated in the State of California on July 19, 2011 and on May 23, 2012 was re-incorporated in the State of Delaware under the same name.

The Company is a digitally-native consumer products company born in the Gen Z era to make purpose-driven consumer products designed for all people.

The Company is a personal care company dedicated to creating clean- and sustainably-designed products.

The Company sells its products through digital and retail sales channels in the following product categories:

20 unchanged sentences

The consolidated financial statements include the accounts of the Company, and its wholly owned subsidiaries after elimination of intercompany transactions and balances.

Restructuring

The Company incurs restructuring costs in connection with the exiting of certain products and geographical locations, workforce reductions, and other actions.

Such costs include employee termination benefits (one-time arrangements), termination of contractual obligations, non-cash asset charges, including asset impairments, and other direct incremental costs.

The Company records employee termination liabilities once they are both probable and estimable for severance provided under the Company’s existing severance policy.

Other costs associated with a restructuring initiative, such as consulting and professional fees, product or geographical exit costs, accelerated amortization associated with a restructuring initiative, are recognized in the period in which the liability is incurred.

Accrued restructuring costs are recorded within Accrued Expenses in the consolidated balance sheets.

Refer to Note 17, "Restructuring" included in these consolidated financial statements for more information on the Company's restructuring initiatives.

In April 2021, the Company effected a 1-for-2 forward stock split of its common and redeemable convertible preferred stock.

8 unchanged sentences

Actual results could differ from those estimates.

The Company’s estimates, which are subject to varying degrees of judgment, include the valuation of inventories, sales returns and allowances, allowances for doubtful accounts, valuation of short-term investments, capitalized software, useful lives associated with long-lived assets, incremental borrowing rates associated with leases, valuation allowances with respect to deferred tax assets, accruals and contingencies, recoverability of non-cash marketing credits, recoverability of goodwill and long-lived assets, and the valuation and assumptions underlying stock-based compensation and for the periods prior to the Company's IPO, the fair value of common stock.

On an ongoing basis, the Company evaluates its estimates compared to historical experience and trends, which form the basis for making judgments about the carrying value of assets and liabilities.

In March 2020, the World Health Organization declared the outbreak of the novel coronavirus disease (“COVID-19”) a pandemic.

The full extent to which the outbreak of the COVID-19 pandemic and any COVID-19 variants will impact the Company’s business, results of operations and financial condition is still unknown and will depend on future developments, which are uncertain and cannot be predicted, including, but not limited to, the duration and spread of the COVID-19 outbreak and its variants, their severity, the actions to contain the virus and its variants or treat their impact, and how quickly and to what extent normal economic and operating conditions can resume.

In light of the unknown ultimate duration and severity of COVID-19 and the impact of any COVID-19 variants, the Company faces a greater degree of uncertainty than normal in making certain judgments and estimates needed to apply significant accounting policies.

The Company assessed certain accounting matters and estimates that generally require consideration of forecasted information in context with the information reasonably available to the Company as of December 31, 2023 and through the date these consolidated financial statements were issued.

1 unchanged sentence

However, these estimates and judgments may change as new events occur and additional information is obtained, which may result in changes being recognized in the Company’s consolidated financial statements in future periods.

For example, based on macro trends within our Household and Wellness product category, consumer demand for sanitizing and disinfecting products has decelerated at a more rapid than expected rate as more consumers are vaccinated and retailers continue to manage heavy inventories of sanitization and disinfecting products in stores.

The Company recorded an inventory write-down, inclusive of overhead costs and tariffs, of $ 4.3 million and $ 5.6 million, during the year ended December 31, 2022 and 2021, respectively, relating to certain sanitization and disinfecting products as the amount of inventory was significantly in excess of the decreasing demand.

Included in these inventory write-down is $ 1.0 million and $ 0.7 million of Company earmarked donations of excess sanitization products during the year ended December 31, 2022 and 2021, respectively, which is included in selling, general and administrative expense on the consolidated statements of comprehensive loss.

The amount of excess sanitization products donated in future periods may differ from those earmarked for donations.

The Company will continue to monitor and evaluate the uncertainty and volatility of these conditions, in particular, the impact on the amount and valuation of the Company’s inventory in the future.

For example, based on macro trends within our Household and Wellness product category, consumer demand for sanitizing and disinfecting products decreased over the past few years.

As a result, the Company made a decision to exit certain elements of these products during the quarter ended March 31, 2023.

Refer to Note 17, "Restructuring" included in these consolidated financial statements for more information on the Company's restructuring initiatives.

Cash and Cash Equivalents

5 unchanged sentences

The Company includes its available-for-sale investments in current assets because the securities represent investments of cash available for current operations.

Available-for-sale investments are recorded at fair value, which is based on quoted market prices for such securities, if available, or is estimated on the basis of quoted market prices of financial instruments with similar

characteristics.

Unrealized holding gains and losses are excluded from earnings and are reported as a component of comprehensive loss.

Realized gains or losses are recorded in interest and other income (expense), net.

As of December 31, 2023, the Company did not hold any investments.

The Company evaluates the potential impairment through review of unrealized losses associated with its investments to determine if the impairment is “temporary” or “other-than-temporary.” A “temporary” unrealized loss is recorded in the accumulated other comprehensive loss component of stockholders’ deficit.

23 unchanged sentences

The Company does not obtain collateral or other security related to its accounts receivable.

Accounts receivable is presented net of allowances.

Accounts receivable is presented as net of allowance for credit losses.

The Company does not accrue interest on its trade receivables.

On a periodic basis, the Company evaluates accounts receivable estimated to be uncollectible, and provides allowances as necessary for doubtful accounts.

The allowance for doubtful accounts was $ 0.5 million and $ 0.2 million, respectively, as of December 31, 2022 and 2021.

The Company evaluates accounts receivable estimated to be uncollectible by considering the lifetime expected credit losses of our accounts receivable at time of inception, and records an allowance for credit losses, as necessary, with the balance of our accounts receivable presented at the net realizable value.

The Company considers factors in its allowance for credit losses such as historical analysis, credit quality of customers, the age of the accounts receivable balances and macroeconomic conditions that may impact on the Company's customers' ability to pay.

The allowance for credit losses was $ 0.4 million and $ 0.5 million, respectively, as of December 31, 2023 and 2022.

Inventories consist of finished goods and are stated at the lower of cost or estimated net realizable value.

2 unchanged sentences

The carrying value of inventories is reduced for any excess and obsolete inventory.

Excess and obsolete inventory reductions are determined based on assumptions about future demand and sales prices, estimates of the impact of competition, and

the age of inventory.

Excess and obsolete inventory reductions are determined based on assumptions about future demand and sales prices, estimates of the impact of competition, and the age of inventory.

If actual conditions are less favorable than those previously estimated by management, additional inventory write-downs could be required.

13 unchanged sentences

Immediately upon the completion of the Company's IPO, deferred offering costs of $ 5.5 million were reclassified into stockholders’ equity from other assets as a reduction from the proceeds of the offering.

Beginning with the year ended December 31, 2022, the Company accounts for leases in accordance with Accounting Standards Codification No.

Effective January 1, 2022, the Company accounts for leases in accordance with Accounting Standards Codification No.

842, Leases (“ASC 842”).

8 unchanged sentences

Leases with an estimated total term of 12 months or less are not recorded on the balance sheet and the lease expense is recognized on a straight-line basis over the lease term.

Deferred rent represented the difference between rent amounts paid and amounts recognized as straight-line expense.

The excess of straight-line rent expense over lease payments due was recorded as a deferred rent liability in accrued expenses, for the current portion, and other long-term liabilities, for the noncurrent portion, in the consolidated balance sheets.

With the adoption of ASC 842, deferred rent is no longer recorded.

As of December 31, 2021, the Company recorded deferred rent liabilities of $ 1.0 million in accrued expenses and $ 7.4 million in other long-term liabilities.

Generally, the Company’s lease agreements do not contain material residual value guarantees or material restrictive covenants.

6 unchanged sentences

Capitalization of these costs ceases once the project is substantially complete and the software is ready for its intended purpose.

Capitalized internal-use software and

website development costs, including purchased software, is recorded in property and equipment, net in the consolidated balance sheets.

Capitalized internal-use software and website development costs, including purchased software, is recorded in property and equipment, net in the consolidated balance sheets.

For cloud-computing service arrangements, the Company capitalizes implementation costs consistent with internal-use software costs.

Such capitalized costs are included within prepaid expenses and other current assets, for the current portion, and other assets, for the noncurrent portion, in the consolidated balance sheets and are expensed on a straight-line basis over the term of the service arrangement as selling, general and administrative expense.

Capitalized implementation costs from cloud computing service arrangements was $ 1.0 million, net of $ 1.8 million of accumulated amortization as of December 31, 2022 and $ 0.9 million, net of $ 1.2 million of accumulated amortization as of December 31, 2021.

Capitalized implementation costs from cloud computing service arrangements were $ 1.1 million, net of $ 2.4 million of accumulated amortization as of December 31, 2023 and $ 1.0 million, net of $ 1.8 million of accumulated amortization as of December 31, 2022.

Goodwill represents the excess of purchase price over the fair value of net assets acquired in a business combination.

2 unchanged sentences

Goodwill is assessed for possible impairment by performing a qualitative analysis to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

If, after assessing the totality of events or circumstances, the Company determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then additional impairment testing is not required.

However, if the Company concludes otherwise, then the Company is required to perform the first of a two-step impairment test.

The first step involves comparing the estimated fair value of a reporting unit with its respective book value, including goodwill.

If the estimated fair value exceeds book value, goodwill is considered not to be impaired and no additional steps are necessary.

If, however, the fair value of the reporting unit is less than its book value, then the carrying amount of the goodwill is compared with its implied fair value.

The estimate of implied fair value of goodwill may require valuations of certain internally generated and unrecognized intangible assets.

If the carrying amount of goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to the excess.

If factors indicate that the fair value of the asset is less

than its carrying amount, the Company will perform a quantitative test by determining the fair value of the reporting unit.

The estimated fair value of the reporting unit is based on a projected discounted cash flow model that includes significant assumptions and estimates, including discount rate, growth rate, and future financial performance.

Valuations of similar public companies may also be evaluated when assessing the fair value of the reporting unit.

If the carrying value of the reporting unit exceeds the fair value, then an impairment loss is recognized for the difference.

The Company tests goodwill for impairment annually at October 31.

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Income taxes are accounted for using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements.

Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statement and

tax basis of assets and liabilities and are measured using enacted tax rates in effect for the year in which the differences are expected to reverse.

Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statement and tax basis of assets and liabilities and are measured using enacted tax rates in effect for the year in which the differences are expected to reverse.

The effect of a change in tax rates or tax law on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

A valuation allowance is provided on deferred tax assets when it is determined that it is more likely than not that some portion or all of the net deferred tax assets will not be realized.

A valuation allowance is recorded on deferred tax assets when it is determined that it is more likely than not that some portion or all of the net deferred tax assets will not be realized.

The Company recognizes the tax benefit from uncertain tax positions only if it is more likely than not that the tax positions will be sustained on examination by the tax authorities, based on the technical merits of the position.

3 unchanged sentences

The Company records foreign currency gains or losses in other income, net in the consolidated statements of comprehensive loss, related to transactions denominated in currencies other than the U.S.

During the years ended December 31, 2022, 2021 and 2020, realized and unrealized foreign currency (losses) and gains, net were $( 0.2 ) million, $( 0.1 ) million and $ 0.1 million, respectively.

During the years ended December 31, 2023, 2022 and 2021, realized and unrealized foreign currency losses, net were immaterial, $ 0.2 million and $ 0.1 million, respectively.

Contingent Liabilities

6 unchanged sentences

The Company recognizes stock-based compensation expense for employees and non-employees based on the grant-date fair value of stock award over the applicable service period.

For awards that vest based on continued service, stock-based compensation cost is recognized on a straight-line basis over the requisite service period, which is generally the vesting period of the awards.

For awards that vest based on continued service, stock-based

compensation cost is recognized on a straight-line basis over the requisite service period, which is generally the vesting period of the awards.

For awards with performance vesting conditions, stock-based compensation cost is recognized on a graded vesting basis over the requisite service period when it is probable the performance condition will be achieved.

The grant date fair value of restricted stock awards that contain service vesting conditions is estimated based on the fair value of the underlying shares on grant date, with a cumulative adjustment for the portion of the service period that occurred for the period prior to the performance condition becoming probable of being achieved.

The grant date fair value of restricted stock awards that contain service vesting conditions is estimated based on the fair value of the underlying shares on the grant date, with a cumulative adjustment for the portion of the service period that occurred for the period prior to the performance condition becoming probable of being achieved.

For awards that contain service, performance or a combination of both vesting conditions, the grant date fair value of restricted stock award is estimated based on the fair value of the underlying shares on grant date while the Black-Scholes option-pricing model is used to estimate the grant date fair value of stock option awards.

56 unchanged sentences

The Company recognizes revenue when these gift cards are redeemed for products and the revenue recognition criteria as described above have been met.

For the year ended December 31, 2022 and 2021, revenue recognized from the use of gift cards was $ 0.8 million and $ 0.9 million, respectively.

For the year ended December 31, 2020 revenue recognized from the use of gift cards was no t material.

For the years ended December 31, 2023, 2022 and 2021, revenue recognized from the use of gift cards was $ 0.6 million, $ 0.8 million and $ 0.9 million, respectively.

As of December 31, 2023 and 2022, deferred revenue related to gift card purchases was $ 1.0 million and $ 0.8 million, respectively.

8 unchanged sentences

When estimating returns, the Company also considers future business initiatives and relevant anticipated future events.

Estimated sales returns and ultimate losses may vary from actual results, which could be material to the consolidated financial statements.

Estimated sales returns and ultimate losses may

vary from actual results, which could be material to the consolidated financial statements.

The estimated sales returns allowance is recorded as a reduction of revenue.

6 unchanged sentences

In developing its estimate, the Company uses historical analysis and contractual rates in determining the accruals for these activities.

The Company also considers the susceptibility of the incentive to outside influences, the length of time until the uncertainty is

resolved and the Company’s experience with similar contracts.

The Company also considers the susceptibility of the incentive to outside influences, the length of time until the uncertainty is resolved and the Company’s experience with similar contracts.

Judgment is required to determine the timing and amount of recognition of sales incentive program accruals which the Company estimates based on past practice with similar arrangements.

9 unchanged sentences

Ending balance $ 8,380 $ 6,396 $ 6,494

At December 31, 2022 and 2021 , $ 5.8 million and $ 6.1 million, respectively, of the ending allowance balances were recorded as a reduction to accounts receivable.

As of December 31, 2023 and 2022 , $ 6.8 million and $ 5.8 million, respectively, of the ending allowance balances were recorded as a reduction to accounts receivable.

Contract Assets

13 unchanged sentences

As of December 31, 2023 and 2022 , the current portion of deferred advertising costs was $ 0.4 million and $ 1.6 million, respectively, which is included in prepaid expenses and other current assets.

As of December 31, 2022 and 2021 , the noncurrent portion of deferred advertising costs was immaterial and $ 0.1 million, respectively, which is included in other assets.

As of December 31, 2023 and 2022 , the noncurrent portion of deferred advertising costs was immaterial, respectively, which is included in other assets.

Advertising expense was $ 33.8 million, $ 44.8 million and $ 49.2 million for the years ended December 31, 2023, 2022 and 2021, respectively.

9 unchanged sentences

Recently Adopted Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") No 2016-02, Leases (Topic 842), as subsequently amended, collectively codified under Topic 842.

Topic 842 requires lessees to recognize on the balance sheet assets and liabilities for leases with lease terms of more than twelve months.

Consistent with current GAAP, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease.

However, unlike prior guidance which requires only capital leases to be recognized on the balance sheet, the new ASU requires both types of leases to be recognized on the balance sheet.

ASU 2016-02 was effective for public business entities for fiscal years beginning after December 15, 2018.

In June 2020, FASB issued ASU No.

2020-05, Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842) – Effective Dates for Certain Entities , which extended the effective date of this guidance for certain non-public entities for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022, with early adoption permitted.

The Company adopted this guidance on January 1, 2022 on a modified retrospective basis under ASU 2018-11.

As such, prior periods were not respectively adjusted.

The Company also elected the package of practical expedients to leases that commenced before the effective date whereby the Company elected to not reassess the following:

(i) whether any expired or existing contracts contain leases;

(ii) the lease classification for any expired or existing leases;

(iii) initial direct costs for any existing leases.

The Company made an accounting policy election to not recognize lease assets and lease liabilities for leases in all asset classes with lease terms less than twelve months.

The Company recognizes lease expense for such leases generally on a straight-line basis over the lease term.

The Company also elected to combine lease and non-lease components on its leases into a single lease component.

Upon adoption of this guidance on January 1, 2022, the Company recognized $ 36.1 million in right of use assets ("ROU"), and corresponding lease liabilities of $ 37.5 million, net of the current portion of lease liability of $ 7.0 million, on its consolidated balance sheet.

In addition, the Company recognized a decrease to assets and liabilities of $ 37.6 million and $ 38.4 million, respectively, and a decrease to the beginning accumulated deficit of $ 0.8 million, as a result of the derecognition of its build-to-suit arrangement that was reassessed to be an operating lease under the new guidance.

The adoption of this guidance did not have a material impact on the Company's consolidated statements of comprehensive loss or the consolidated statements of cash flows.

Refer to Note 16, "Leases" included in these consolidated financial statements for more information on leases.

In December 2019, the FASB issued ASU No.

2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes ("ASC 740").

This standard simplifies the accounting for income taxes by removing certain exceptions to the general principles in ASC 740 as well as by improving consistent application of the topic by clarifying and amending existing guidance.

For public business entities, the ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020.

For all other entities, the ASU is effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022.

An entity that elects to early adopt the amendments in an interim period should reflect any adjustments as of the beginning of the annual period that includes that interim period.

Additionally, an entity that elects early adoption must adopt all the amendments in the same period.

The adoption of ASC 740 did not have a material impact on the Company’s consolidated financial statements.

Recently Issued Accounting Pronouncements – Not Yet Adopted

In June 2016, the FASB issued ASU No.

In June 2016, the Financial Accounting Standard Board ("FASB") issued Accounting Standard Update ("ASU") No.

2016-13, Financial Instruments Credit Losses (Topic 326):

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2019-10 which delayed the effective dates of the guidance.

This guidance is effective for public business

entities that meet the definition of an SEC filer, excluding entities eligible to be smaller reporting companies (“SRC”) for fiscal years beginning after December 15, 2019 and all other entities for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

This guidance is effective for public business entities that meet the definition of an SEC filer, excluding entities eligible to be smaller reporting companies (“SRC”) for fiscal years beginning after December 15, 2019 and all other entities for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

Early adoption is permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.

The Company does not expect the adoption of ASC 326 to have a material impact on the Company’s consolidated financial statements.

Effective January 1, 2023, the Company adopted this standard, which did not have a material impact on the Company’s consolidated financial statements.

Recently Issued Accounting Pronouncements – Not Yet Adopted

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures , which expands reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

The amendments in the ASU require that a public entity discloses, on an annual and interim basis, significant segment expenses that are regularly provided to an entity's chief operating decision maker ("CODM"), a description of other segment items by reportable segment, and any additional measures of a segment's profit or loss used by the CODM when deciding how to allocate resources.

The amendments in this ASU are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Retrospective application is required for all prior periods presented, and early adoption is permitted.

The Company does not expect the adoption of ASU No.

2023-07 to have a material impact on the Company’s consolidated financial statements or disclosures.

In December 2023, the FASB issued ASU No.

2023-09, I ncome Taxes:

Improvements to Income Tax Disclosures .

This guidance requires consistent categories and greater disaggregation of information in the rate reconciliation and disclosures of income taxes paid by jurisdiction.

For public business entities, the amendments in this update are effective for annual periods beginning after December 15, 2024.

The Company does not expect the adoption of ASU No.

2023-09 to have a material impact on the Company’s consolidated financial statements or disclosures.

Disaggregation of Revenue

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Non-Monetary Transactions

During the years ended December 31, 2022 and 2021, the Company entered into trade agreements with a vendor to exchange excess inventory for future marketing and transportation credits.

The Company recognized revenue reflecting the fair value of the marketing and transportation credits, with the corresponding asset included in prepaid expenses and other current assets and other assets in the accompanying consolidated balance sheets.

The Company has in the past and may in the future enter into trade agreements with a vendor to exchange excess inventory for future marketing and transportation credits.

The Company recognizes revenue reflecting the fair value of the marketing and transportation credits upon delivery of goods, with the corresponding short and long-term asset included in prepaid expenses and other current assets and other assets in the accompanying consolidated balance sheets.

The Company may use the marketing and transportation credits over four years from the date of the respective agreement, with an option to extend for another two years if agreed upon by both parties.

For the years ended December 31, 2022 and 2021, the Company recognized $ 3.2 million and $ 4.2 million, respectively, of revenue and $ 1.7 million and $ 2.2 million, respectively, of associated cost of revenue based on timing of delivery of goods.

For the year ended December 31, 2023, the Company did not enter into any new trade agreements.

For the years ended December 31, 2023, 2022 and 2021, the Company recognized $ 0.0 million , $ 3.2 million and $ 4.2 million, respectively, of revenue and $ 0.0 million , $ 1.7 million and $ 2.2 million, respectively, of associated cost of revenue based on the timing of delivery of goods, related to these marketing and transportation credits.

The Company assesses the recoverability of the marketing and transportation credits periodically.

1 unchanged sentence

Any impairment losses are charged to operations as they become determinable.

During the years ended December 31, 2022 and 2021, the Company recorded no impairment losses related to these credits and used an aggregate of $ 1.4 million and $ 0.4 million, respectively, of credits.

For the years ended December 31, 2023, 2022 and 2021, the Company recorded no impairment losses related to these credits and used an aggregate of $ 0.3 million, $ 1.4 million and $ 0.4 million, respectively, of credits.

Intangible Assets, Net

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15,829 15,839

40,154 80,720

Subtotal 40,808 40,154

Accumulated depreciation and amortization

2 unchanged sentences

$ 13,486 $ 14,327

(1) As part of the adoption of ASC 842 the build-to-suit arrangement was derecognized.

For each of the years ended December 31, 2023, 2022 and 2021, depreciation of equipment under capital lease obligations was $ 0.0 million , $ 0.3 million and $ 0.4 million, respectively.

See Note 2 "Summary of Significant Accounting Policies" and Note 16 "Leases" for more information on the adoption of ASC 842.

Total depreciation and amortization expense for property and equipment, inclusive of depreciation expense for equipment under capital lease obligations consisted of the following:

6 unchanged sentences

Total depreciation and amortization expense $ 2,669 $ 2,682 $ 4,081

As of December 31, 2022 and 2021 , all investments in debt securities are classified as available-for-sale investments.

All investments in debt securities, if any, are classified as available-for-sale investments.

All investments are reported within current assets because the securities represent investments of cash available for current operations.

As of December 31, 2022 and 2021 , the Company held $ 5.7 million and $ 36.4 million, respectively, of investments with contractual maturities of less than one year.

As of December 31, 2022, the Company did no t have any investments with contractual maturities between one and two years.

As of December 31, 2021 , the Company held $ 6.0 million of investments with contractual maturities between one and two years.

As of December 31, 2023, the Company did not hold any investments in debt securities.

As of December 31, 2022, the Company held $ 5.7 million of investments with contractual maturities of less than one year.

As of December 31, 2022, the Company did not have any investments with contractual maturities between one and two years.

Available-for-sale investments are recorded at fair value, and unrealized holding gains and losses are recorded as a component of other comprehensive income (loss).

7 unchanged sentences

Total investments $ 5,682 $ — $ ( 33 ) $ 5,650

As of December 31, 2021

Cost or Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Total Estimated Fair Value

(In thousands)

Corporate bonds $ 18,605 $ — $ ( 28 ) $ 18,577

Certificates of deposit 17,099 — ( 5 ) 17,095

government and agency securities 6,725 — ( 9 ) 6,716

Total investments $ 42,429 $ — $ ( 42 ) $ 42,388

Realized gains and losses on investments in debt securities for the years ended December 31, 2023, 2022 and 2021 were immaterial .

Unrealized losses on investments for the year ended December 31, 2023 was immaterial.

Fair Value Measurements

6 unchanged sentences

Total cash equivalents 5,589 — — 5,589

Short-term investments

Corporate bonds — 3,193 — 3,193

Commercial paper — 582 — 582

Certificates of deposit — 1,875 — 1,875

Total short-term investments — 5,650 — 5,650

Total $ 9,595 $ 5,650 $ — $ 15,245

December 31, 2022

6 unchanged sentences

Corporate bonds — 3,193 — 3,193

Commercial paper — 582 — 582

Certificates of deposit — 1,875 — 1,875

government and agency securities — 6,716 — 6,716

Total short-term investments — 5,650 — 5,650

5 unchanged sentences

The 2021 Credit Facility included a subfacility that provided for the issuance of letters of credit in an amount of up to $ 10.0 million at any time outstanding, which reduced the amount available under the 2021 Credit Facility.

As of December 31, 2022 and 2021, there were outstanding standby letters of credit of $ 4.8 million and $ 6.3 million, respectively, related to lease obligations with $ 30.2 million and $ 28.7 million, respectively, available to be drawn upon.

As of December 31, 2022, there were outstanding standby letters of credit of $ 4.8 million related to lease obligations with $ 30.2 million available to be drawn upon.

The 2021 Credit Facility was subject to customary fees for loan facilities of this type, including a commitment fee based on the average daily undrawn portion of the revolving credit facility.

The Company recognized the commitment fee as incurred in interest and other expense, net in the consolidated statements of comprehensive loss.

For the year ended December 31, 2022 and 2021, the commitment fee incurred was immaterial.

The interest rate applicable to the 2021 Credit Facility was, at the Company’s option, either (a) the LIBOR (or a replacement rate established in accordance with the terms of the 2021 Credit Facility) (subject to a 0.00 % LIBOR floor), plus a margin of 1.50 % or (b) the CB floating rate minus a margin of 0.50 %.

The CB floating rate is the higher of (a) the Wall Street Journal prime rate and (b)(i) 2.50 % plus (ii) the adjusted LIBOR rate for a one-month interest period.

As of December 31, 2022 and 2021, there was no outstanding balance under the 2021 Credit Facility.

Refer to Note 17, "Subsequent Events" included in these consolidated financial statements for more information on the termination of the 2021 Credit Facility, which was replaced with a new revolving credit facility.

The 2021 Credit Facility contained covenants that restrict, among other things, the Company's ability to sell assets, make investments and acquisitions, make capital expenditures, grant liens, pay dividends and make certain other restricted payments.

The Company was also subject to certain affirmative and negative covenants including the requirement that it maintains a total net

leverage ratio of not more than 3.50 :1.00 during the periods set forth in the 2021 Credit Facility.

Failure to do so, unless waived by the lenders under the 2021 Credit Facility pursuant to its terms, as amended, would have resulted in an event of default under the 2021 Credit Facility.

As of December 31, 2022, the Company was in compliance with the covenants under the 2021 Credit Facility.

For the year ended December 31, 2022, the commitment fee incurred was immaterial.

As of December 31, 2022, there was no outstanding balance under the 2021 Credit Facility.

In January 2023, the 2021 Credit Facility was terminated and replaced in its entirety with the 2023 Credit Facility (defined below).

2023 Credit Facility

In January 2023, the Company entered into a first lien credit agreement (the “2023 Credit Facility”), with JPMorgan Chase Bank, N.A., as administrative agent and lender, and the other lenders party thereto, which provides for a $ 35.0 million revolving credit facility that matures on April 30, 2026.

The 2023 Credit Facility includes a sub-facility that provides for the issuance of letters of credit in an amount of up to $ 15.0 million at any time outstanding.

Availability of the 2023 Credit Facility is based upon a borrowing base formula and periodic borrowing base certifications valuing certain of the Company’s accounts receivable and inventory as reduced by an availability block and certain reserves, if any.

The 2023 Credit Facility is subject to customary fees for loan facilities of this type, including a commitment fee based on the average daily undrawn portion of the 2023 Credit Facility.

The Company recognizes the commitment fee as incurred in interest and other income (expense), net in the consolidated statements of comprehensive loss.

For the year ended December 31, 2023, the commitment fee incurred was immaterial.

As of December 31, 2023, there were $ 3.7 million outstanding letters of credit and $ 17.7 million available to be drawn upon.

As of December 31, 2023, there was no outstanding balance under the 2023 Credit Facility.

The interest rate applicable to the 2023 Credit Facility is, at the Company’s option, either (a) the Adjusted Term SOFR rate (subject to a 0.00 % floor), plus a margin ranging from 1.50 % to 2.25 % or (b) the CB floating rate, (i) plus a margin of 0.25 % or (ii) minus a margin ranging from 0.25 % to 0.50 %.

The margin is based upon the Company’s fixed charge coverage ratio.

The CB floating rate is the higher of (a) the Wall Street Journal prime rate and (b) 2.50 %.

The 2023 Credit Facility will terminate and borrowings thereunder, if any, would be due in full on April 30, 2026.

Debt under the 2023 Credit Facility is guaranteed by substantially all of the Company’s material domestic subsidiaries and is secured by substantially all of the Company’s and such subsidiaries’ assets.

The 2023 Credit Facility contains covenants that restrict, among other things, the Company's ability to sell assets, make investments and acquisitions, grant liens, change the Company’s lines of business, pay dividends and make certain other restricted payments.

The Company is subject to certain affirmative and negative covenants including the requirement that it maintains a minimum total fixed charge coverage ratio during the periods set forth in the 2023 Credit Facility.

Failure to do so, unless waived by the lenders under the 2023 Credit Facility pursuant to its terms, as amended, would result in an event of default under the 2023 Credit Facility.

As of December 31, 2023, the Company is in compliance with all covenants under the 2023 Credit Facility.

Accrued Expenses

7 unchanged sentences

Accrued rent (2)

Accrued restructuring (3)

Other accrued expenses 6,104 6,164

1 unchanged sentence

_______________

(1) Includes $ 4.3 million of CEO transition related expense.

(2) Represents short-term operating lease liabilities upon adoption of ASC 842.

(1) Includes $ 1.2 million and $ 4.3 million of Chief Executive Officer and Chief Financial Officer executive transition related expense as of December 31, 2023 and 2022, respectively.

(2) Represents short-term operating lease liabilities.

Refer to Note 16, "Leases" included in these consolidated financial statements for more information on leases.

(3) Refer to Note 17, "Restructuring" included in these consolidated financial statements for more information on the Company's restructuring initiative.

Redeemable Convertible Preferred Stock and Stockholders’ Deficit

45 unchanged sentences

The Company submitted a refund request for the taxes and interest paid, following the Department's June 9, 2021 decision, that were subject to abatement under the December 2016 Abatement Agreement.

The Company recognized $ 0.7 million in other income in interest and other expense, net on the consolidated statements of comprehensive loss during the year ended December 31, 2022 related to the anticipated refund of taxes and interest paid.

On September 23, 2020, the Center for Advanced Public Awareness (“CAPA”) served a 60-Day Notice of Violation on the Company, alleging that the Company violated California’s Health and Safety Code (“Prop 65”) because of the amount of lead in the Company’s Diaper Rash Cream and seeking statutory penalties and product warnings available under Prop 65.

9 unchanged sentences

District Court for the Central District of California.

These related complaints have been transferred to the same court and a Lead Plaintiff has been appointed in the matter, and a putative consolidated class action complaint was filed by the Lead Plaintiff on February 21, 2022, alleging claims and seeking relief under Sections 11 and 15 of the Securities Act of 1933 relating to the Company’s IPO.

Defendants’ motion to dismiss the putative consolidated class action complaint was filed on March 14, 2022.

On July 18, 2022, the Company's motion to dismiss was granted in part and denied in part.

On May 1, 2023, the Lead Plaintiff’s motion for class certification in the consolidated class action was granted in part and denied in part, with the U.S.

District Court for the Central District of California limiting the certified class to only those persons and entities that purchased or otherwise acquired the Company’s publicly traded common stock pursuant and traceable to the Company’s IPO offering documents prior to August 19, 2021, as well as all persons and entities that acquired ownership of a trading account, retirement account, or any other similar investment account or portfolio containing the Company’s publicly traded common stock that was purchased or otherwise acquired pursuant and traceable to the IPO offering documents prior to August 19, 2021, and were damaged thereby.

On August 14, 2023 the Lead Plaintiff filed an amended consolidated class action complaint naming as additional defendants Catterton Management Company L.L.C., L Catterton VIII, L.P., L.

Catterton VIII Offshore, L.P., THC Shared Abacus, LP, Catterton Managing Partner VIII, L.L.C., and C8 Management, L.L.C.

On October 16, 2023 those additional defendants filed a motion to

dismiss the Second Amended Complaint with respect to the claims against them.

On January 31, 2024, that motion to dismiss was granted by the court to the extent those additional defendants challenged the claims as untimely.

The court granted Lead Plaintiff leave to amend within fourteen days of that order.

A derivative complaint was filed by Hayato Ono on behalf of the Company on November 29, 2021 in the U.S.

5 unchanged sentences

A fourth derivative complaint was filed by David Butler in the U.S.

District Court for the District of Delaware on October 19, 2022

with similar allegations.

District Court for the District of Delaware on October 19, 2022 with similar allegations.

Each of these federal and state court derivative cases have been stayed pending the outcome of a motion for summary judgment in the securities class action.

Defendants’ motion to dismiss the putative consolidated class action complaint was filed on March 14, 2022.

On July 18, 2022, the Company's motion to dismiss was granted in part and denied in part.

The Company believes the securities complaints are without merit and intends to vigorously defend itself against these allegations.

These matters are in the preliminary stages of litigation with uncertain outcomes at this time.

Therefore, the Company cannot estimate the probability of the loss or make an estimate of the loss or range of loss in these matters.

Therefore, the Company cannot estimate the probability of loss or make an estimate of the loss or range of loss in these matters.

On August 10, 2022, Catrice Sida and Kris Yerby filed a putative class action complaint in the U.S.

2 unchanged sentences

On December 6, 2022, the Company's motion to dismiss was denied.

The Company believes this complaint is without merit and intends to vigorously defend itself in this matter.

The matter is in the preliminary stages of litigation and its outcome is uncertain at this time.

Therefore, the Company cannot estimate the probability of loss or make an estimate of the range of loss in this matter.

The Company’s motion to stay pending the Ninth Circuit Court of Appeals’ review of the Central District of California’s decision in Whiteside v.

Kimberly-Clark Corp., No.

5:22-cv-1988 JGB (SPx), 2023 WL 4328175 (C.D.

June 1, 2023) was denied on September 5, 2023.

On February 20, 2024, the parties filed a Notice of Settlement to notify the court that the parties have agreed to settle the matter on an individual, non-class basis.

The plaintiffs will file a Stipulation of Dismissal upon finalization of the settlement agreement.

As of December 31, 2023 and 2022, the Company was not subject to any other currently pending legal matters or claims that based on its current evaluation are expected to have a material adverse effect on its financial position, results of operations, or cash flows should such matters be resolved unfavorably.

1 unchanged sentence

In the ordinary course of business, the Company may provide indemnifications of varying scope and terms to investors, directors and officers with respect to certain matters, including, but not limited to, losses arising out of the Company’s breach of such agreements, services to be provided by the Company, or from intellectual property infringement claims made by third parties.

These indemnifications may survive termination of the underlying agreement and the maximum potential amount of future payments the Company could be required to make under these indemnification provisions may not be subject to maximum loss clauses.

The maximum potential amount of future payments the Company could be required to make under these indemnification provisions is indeterminable.

The Company has never paid a material claim, nor has the Company been involved in litigation in connection with these indemnification arrangements.

These indemnifications may survive termination of the underlying agreement and the maximum potential number of future payments the Company could be required to make under these indemnification provisions may not be subject to maximum loss clauses.

The maximum potential number of future payments the Company could be required to make under these indemnification provisions is indeterminable.

The Company has never been involved in litigation in connection with these indemnification arrangements.

As of December 31, 2023 and 2022, the Company has not accrued a liability for these guarantees as the likelihood of incurring a payment obligation, if any, in connection with these guarantees is not probable or reasonably estimable due to the unique facts and circumstances involved.

23 unchanged sentences

14,888,007 $ 5.24 4.0 $ 3,024

Granted — $ —

Exercised ( 2,300 ) $ 1.70

Forfeited/Cancelled ( 1,569,911 ) $ 5.17

Outstanding at December 31, 2023

13,315,796 $ 5.25 3.0 $ —

Exercisable at December 31, 2022

14,503,073 $ 5.23 3.9 $ 3,024

Exercisable at December 31, 2023

13,266,609 $ 5.25 3.0 $ —

From 2018 to 2020, the Company granted stock options that vest based upon achieving a qualifying liquidity event, provided the employee remains employed on the date the vesting condition is satisfied.

In conjunction with the IPO, 2,442,918 stock option awards with a weighted average exercise price of $ 5.54 vested based on the achievement of the IPO qualifying liquidity event, which resulted in the recognition of stock-based compensation expense of $ 3.1 million upon the effective date of the IPO registration statement.

The intrinsic value of options exercised during the years ended December 31, 2022, 2021 and 2020 were $ 0.1 million , $ 6.0 million and $ 0.3 million, respectively.

The intrinsic value of options exercised during the years ended December 31, 2023, 2022 and 2021 were immaterial , $ 0.1 million and $ 6.0 million, respectively.

This intrinsic value represents the difference between the fair value of the Company’s common stock on the date of exercise and the exercise price of each option.

1 unchanged sentence

As of December 31, 2023 and 2022, there was $ 0.1 million and $ 1.0 million, respectively, of unrecognized stock-based compensation expense related to unvested stock options, which is expected to be recognized over a weighted-average period of 0.5 years and 1.3 years, respectively.

During the year ended December 31, 2023, the Company extended the post-termination exercise period for each outstanding stock option held by certain former executives such that the post-termination exercise period will end on the earlier of (i) the original expiration date of the stock option, or (ii) the date that is the 3-year anniversary of certain former executives no longer providing services to the Company.

There were no changes to the exercise price or other terms of these stock options, and these stock options were already fully vested prior to the modification.

As a result of this modification, we recognized incremental stock-based compensation expense of $ 0.5 million for the year ended December 31, 2023.

2021 Equity Incentive Plan

1 unchanged sentence

All equity-based awards granted on or after the effectiveness of the 2021 Plan are granted under the 2021 Plan.

The 2021 Plan provides for grants of incentive stock options (“ISOs”) within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), to the Company’s employees and its parent and subsidiary corporations’ employees, and for the grant of nonstatutory stock options (“NSOs”), stock appreciation rights, restricted stock awards, restricted stock units ("RSUs") awards, performance awards and other forms of awards to the Company’s employees, directors and consultants and any of its affiliates’ employees and consultants.

subsidiary corporations’ employees, and for the grant of nonstatutory stock options (“NSOs”), stock appreciation rights, restricted stock awards, restricted stock units ("RSUs") awards, performance awards and other forms of awards to the Company’s employees, directors and consultants and any of its affiliates’ employees and consultants.

Initially, the maximum number of shares of the Company’s common stock that may be issued under its 2021 Plan will not exceed 25,025,580 shares of the Company’s common stock.

12 unchanged sentences

452,951 4,165,403 $ 3.44 $ 8.09

Transfer from Employee to Non-Employee Director (2)

1,147,566 ( 1,147,566 ) $ 9.02 $ 9.02

(1) Includes 8,050 shares of common stock, that were withheld to cover taxes on the release of vested RSUs and became available for future grants pursuant to the 2021 Plan during the year ended December 31, 2022.

Granted 1,376,563 7,505,557 $ 2.01 $ 1.71

( 1,382,224 ) ( 1,449,577 ) $ 5.84 $ 6.31

Forfeited ( 637,657 ) ( 1,774,563 ) $ 7.07 $ 5.44

Unvested RSUs at December 31, 2023

957,199 7,299,254 $ 2.19 $ 2.38

_______________

(1) The Company extended the post-termination stock option exercise period for certain former executives, resulting in stock-based compensation expense of $ 0.5 million during the year ended December 31, 2023.

Additionally, the Company modified certain former executives' RSUs to accelerate vesting, resulting in stock-based compensation expense of $ 3.1 million during the year ended December 31, 2023.

(2) Relates to former Chief Executive Officer ("CEO") RSUs that were reclassified to non-employee director shares for disclosure purposes.

The former CEO was not re-nominated for election by the Board in connection with the annual stockholder meeting in May 2023.

As of December 31, 2023 and 2022, there was $ 16.6 million and $ 31.2 million, respectively, of unrecognized stock-based compensation expense related to unvested RSUs, which is expected to be recognized over a weighted-average period of 3.0 years and 2.5 years, respectively.

10 unchanged sentences

For the year ended December 31, 2023 and 2022, employees who elected to participate in the ESPP purchased 126,969 and 95,742 shares of common stock, respectively, under the 2021 ESPP, resulting in cash proceeds to the Company of $ 0.2 million and $ 0.3 million, respectively.

The weighted average price at purchase was $ 2.68 and $ 7.37 per share, respectively.

average price at purchase was $ 1.39 and $ 2.68 per share, respectively.

As of December 31, 2023 and 2022, the Company had 2,756,394 and 1,955,107 , respectively, remaining authorized shares available for purchase.

6 unchanged sentences

Weighted average grant-date fair value per share $ 0.56 — $ 0.67 $ 1.09 — $ 1.12

2023 Inducement Plan

In March 2023, the Company's Compensation Committee adopted the 2023 Inducement Plan (the “Inducement Plan”).

The Inducement Plan reserved 4,000,000 shares of the Company’s common stock for issuance under the Inducement Plan to individuals who satisfy the standards for inducement grants under the relevant Nasdaq Stock Market rules.

On March 21, 2023, the Company granted 1,845,238 RSUs to the Chief Executive Officer under the Inducement Plan.

On May 18, 2023, the Company granted 843,565 RSUs to the Chief Growth Officer under the Inducement Plan.

On November 1, 2023, the Company granted 827,357 RSUs to the Chief Financial Officer under the Inducement Plan.

Stock-Based Compensation Expense

4 unchanged sentences

Selling, general and administrative (1)

$ 15,465 $ 14,593 $ 15,820

Research and development 339 485 1,027

Total stock-based compensation expense $ 15,804 $ 15,078 $ 16,847

__________________

Additionally, the Company modified certain former executives' RSUs to accelerate vesting, resulting in stock-based compensation expense of $ 3.1 million during the year ended December 31, 2023.

Net Income (Loss) per Share Attributable to Common Stockholders

2 unchanged sentences

In periods where the Company has net losses, losses are not allocated to participating securities as they are not required to fund the losses.

The Company considers its redeemable convertible preferred stock to be participating securities as preferred stockholders have rights to participate in dividends with the common stockholders.

The Company considered its redeemable convertible preferred stock to be participating securities as preferred stockholders have rights to participate in dividends with the common stockholders.

Basic net income (loss) attributable to common stockholders per share is calculated by dividing net income (loss) attributable to common stockholders by the weighted-average number of shares of common stock outstanding.

9 unchanged sentences

Net loss attributable to common stockholders - basic and diluted $ ( 39,238 ) $ ( 49,019 ) $ ( 30,322 )

Net loss attributable to common stockholders - diluted $ ( 49,019 ) $ ( 30,322 ) $ ( 14,466 )

Weighted average shares of common stock outstanding - basic 94,516,690 92,201,806 71,126,218

11 unchanged sentences

2023 2022 2021

Redeemable convertible preferred stock (1)

— — 49,100,928

Stock options to purchase common stock 13,315,796 14,888,007 16,440,539

2 unchanged sentences

Total 21,643,391 19,568,799 19,450,563

___________________

(1) Immediately prior to the completion of the IPO, 49,100,928 outstanding shares of redeemable convertible preferred stock with a carrying value of $ 376.4 million converted into 49,649,023 shares of common stock.

The components of income tax provision consisted of the following:

23 unchanged sentences

4,654 8,047 1,737

Other adjustments ( 233 ) — —

Income tax provision $ 75 $ 110 $ 77

18 unchanged sentences

Deferred tax liabilities

Deferred revenue — —

Property and equipment

Prepaid expenses

5 unchanged sentences

Effective January 1, 2022, the Tax Cuts and Jobs Act ("TCJA") of 2017 eliminated the option to deduct research and development expenses in the current year and now requires taxpayers to capitalize and amortize research and development expenses to Internal Revenue Code of 1986, as amended, (“IRC”) Section 174.

Although Congress is considering legislation that would reinstate and extend Section 174 expensing for certain research and development expenses, the possibility that this will happen is uncertain.

The capitalized expenses are amortized over a 5-year period for domestic expenses and a 15-year period for foreign expenses.

As of December 31, 2022, the Company's deferred tax assets related to capitalized research and development expenses was $ 1.5 million.

As of December 31, 2022 and 2021 , the Company had federal and state net operating loss carryforwards of $ 301.0 million and $ 272.0 million, respectively, and federal and state net operating loss carryforwards of $ 271.0 million and $ 248.0 million, respectively.

As of December 31, 2023 and 2022 , the Company's deferred tax assets related to capitalized research and development expenses were $ 4.3 million and $ 1.5 million, respectively.

As of December 31, 2023 , the Company had federal and state net operating loss carryforwards tax effect of $ 311.0 million and $ 274.0 million, respectively.

As of December 31, 2022, The Company had federal and state net operating loss carryforwards tax effect of $ 301.0 million and $ 272.0 million, respectively.

Federal and state net operating loss carryforwards begin to expire in 2032.

As of December 31, 2022, the Company did no t have any state tax credits.

As of December 31, 2021, the Company had state tax credits of $ 0.1 million, which began to expire in 2021.

As of December 31, 2023 and 2022 , the Company did no t have any state tax credits.

Federal net operating losses generated after January 1, 2018 would not expire, but would only be available to offset up to 80% of the Company’s future taxable income.

16 unchanged sentences

$ 94,103 $ 86,659 $ 84,934

Increase (decrease) to valuation allowance

Increase to valuation allowance

4,654 8,047 1,737

9 unchanged sentences

On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022 (the “Act”), which contains provisions that became effective on January 1, 2023, including a 15% corporate minimum tax and a 1% excise tax on stock buybacks.

While the Company is still evaluating the impact of the Act, the Company does not currently expect any material changes on its consolidated financial position, results of operations and cash flows.

The Company does not currently expect any material changes on its consolidated financial position, results of operations and cash flows.

Related Party Transactions

4 unchanged sentences

is owned by a major shareholder of the Company.

Based on services provided, the Company incurred $ 0.1 million of advertising costs for this related party during the year ended December 31, 2022, which is reported as marketing expense in the Company’s consolidated statements of comprehensive loss.

Based on services provided, the Company incurred $ 0.03 million and $ 0.1 million, respectively, of advertising costs for this related party during the year ended December 31, 2023 and 2022, which is reported as marketing expense in the Company’s consolidated statements of comprehensive loss.

The Company’s lease portfolio includes both real estate and non-real estate type leases which are accounted for as either finance or operating leases.

2 unchanged sentences

The Company’s leases have remaining lease terms of less than one to six years .

Renewal options that are deemed reasonably certain are included as part of the lease term for purposes of calculating the ROU assets and lease liability.

The Company uses a discount rate to calculate the ROU asset and lease liability.

When the implicit rate is known or provided in the lease documents, the Company is required to use this rate.

In cases in which the implicit rate is not known, the Company uses an estimated incremental borrowing rate.

Most of the Company’s leases do not contain an implicit interest rate;

therefore, judgement is required in determining a rate that reflects what would be paid to borrow, on a collateralized basis and over a similar term, for the lease obligations.

The Company takes into consideration the terms of its 2023 Credit Facility and any new debt agreements, lease terms, and current interest rates to determine the incremental borrowing rate at lease commencement date.

In connection with two of the Company’s facilities leases, the Company is required to obtain irrevocable letters of credit in lieu of security deposits.

2 unchanged sentences

In connection with the Company’s warehouse lease, the letter of credit balance is reduced annually by a stated amount in the lease agreement, so long as the Company complies with certain covenants.

As a result of the adoption of ASC 842, the following adjustments were made to the opening balances of the Company’s consolidated balance sheet (in thousands):

December 31, 2021 Impact due to Adoption of

ASC 842 January 1, 2022

Property and equipment, net (1)

52,952 ( 37,581 ) $ 15,371

Operating lease ROU (2)

— 36,127 $ 36,127

Liabilities, redeemable convertible preferred stock and stockholders’ equity (deficit)

Accrued expenses (2)

$ 19,003 $ 5,113 $ 24,116

Lease financing obligation, net of current portion (1)

37,527 ( 37,527 ) $ —

Operating lease liabilities, net of current portion (2)

— 37,531 $ 37,531

Other long-term liabilities (3)

7,487 ( 7,415 ) $ 72

Accumulated equity (deficit) (4)

( 391,656 ) 845 $ ( 390,811 )

___________________

(1) Represents the derecognition of non-Company owned property that was capitalized under previously existing built-to-suit accounting policies.

(2) Represents the recognition of operating lease ROU assets and corresponding current and non-current lease liabilities.

(3) Represents reclassification of deferred rent to operating lease ROU assets upon adoption of ASC 842.

(4) Represents a decrease to the beginning fiscal 2022 accumulated deficit related to the adoption of ASC 842.

The components of lease expense were as follows (in thousands):

8 unchanged sentences

______________________

(1) Interest expense on the Company's build-to-suit lease was previously included in interest and other income (expense), net on the consolidated statements of comprehensive loss and with the adoption of ASC 842 it is now included in cost of revenue, along with the operating lease expense, on the consolidated statements of comprehensive loss.

(1) Represents the straight-line lease expense of operating leases, inclusive of amortization of ROU assets and the interest component of operating lease liabilities.

For the years ended December 31, 2021 and 2020, rent expense under ASC 840 was $ 5.0 million and $ 5.2 million, respectively.

For the years ended December 31, 2021 and 2020, sublease rent income was $ 2.5 million and $ 2.7 million, respectively .

For the year ended December 31, 2021, rent expense under ASC 840 was $ 5.0 million.

For the year ended December 31, 2021, sublease rent income was $ 2.5 million .

Based on the nature of the ROU assets, amortization of finance leases and amortization of operating ROU assets, operating lease expense and other lease expense are recorded within either cost of revenue or selling, general and administrative expenses and interest on finance lease liabilities is recorded within interest and other expense, net in the consolidated statements of comprehensive loss.

The following tables set forth the amount of lease assets and lease liabilities included in the Company’s consolidated balance sheets (in thousands):

Assets Financial Statement Line Item December 31, 2022

As of December 31,

Assets Financial Statement Line Item 2023 2022

Finance lease assets Property and equipment, net $ 17 $ 70

7 unchanged sentences

Supplemental information related to the Company’s leases for the year ended December 31, 2023 was as follows:

For the year ended December 31,

Weighted-average remaining lease term (in years)

12 unchanged sentences

2024 $ 8,704 22

2024 8,704 21

Thereafter — —

2 unchanged sentences

Present value of future lease payments $ 29,843 $ 23

As of December 31, 2021, the future minimum rental payments under non-cancelable leases with offsetting sublease revenue were as follows:

(in thousands) Facility

Leases Subleases Build-to-Suit

Lease Capital

Years Ending December 31,

2022 $ 5,231 $ ( 1,936 ) $ 2,639 $ 280

2023 5,754 ( 1,994 ) 2,714 57

Restructuring

Transformation Initiative

In 2023, the Company executed a broad-based Transformation Initiative designed to build the Honest brand and drive growth in higher-margin areas of the portfolio, strengthen the Company’s cost structure, drive focus on the most productive areas of our business, deliver greater impact from brand-building investments, and improve executional excellence across the enterprise.

Restructuring costs are one of the elements of the Transformation Initiative and are included in restructuring on the consolidated statements of comprehensive loss:

• Employee-Related Costs – Employee-related costs are primarily comprised of severance and other post-employment benefit costs, calculated based on salary levels, prior service and other statutory minimum benefits, if applicable.

• Asset-Related Costs – Asset-related costs consist of accelerated amortization related to visual merchandise in an international retail store taken out of service prior to its existing useful life as a direct result of the restructuring initiatives, as well as asset impairments related to technology taken out of service.

• Contract Terminations – Costs related to contract terminations include continuing payments to a third-party after the Company has ceased benefiting from the rights conveyed in the contract, or a payment made to terminate a contract prior to its expiration.

Other costs associated with the Transformation Initiative are comprised of the following:

• Sales Returns and Cost of Revenue – Product returns, chargebacks and markdowns are recorded as a reduction to revenue and inventory write-offs, write-downs or destruction costs as a direct result of the restructuring initiatives to exit certain products or geographic locations are recorded as a component of cost of revenue on the consolidated statements of comprehensive loss when estimable and reasonably assured.

• Other Costs – The Company incurred other costs related to the restructuring initiatives, which are included in selling, general and administrative expense on the consolidated statements of comprehensive loss and primarily include the following:

▪ Donation expenses related to inventory reserves, including tariffs, and

▪ Consulting and other professional services.

Restructuring Costs

Employee-Related Costs Asset-Related Costs Contract Terminations Total

Charges for the year ended December 31, 2023

$ 1,142 $ 193 $ 870 $ 2,205

Changes in accrued expenses as of December 31, 2023 relating to the Transformation Initiative were:

Restructuring Costs

Employee-Related Costs (1)

Contract Terminations Inventory Reserves Total

Balance at December 31, 2022

$ — $ — $ — $ —

Charges (adjustments) 1,142 479 5,166 6,787

Cash payments ( 786 ) ( 479 ) ( 500 ) ( 1,765 )

Non-cash asset write-offs — — ( 2,085 ) ( 2,085 )

Balance at December 31, 2023

$ 356 $ — $ 2,581 $ 2,937

Thereafter 1,357 ( 369 ) 2,888 —

Future minimum lease payments (income) $ 30,593 $ ( 10,647 ) $ 16,845 $ 358

Amount representing interest ( 8 )

Present value of future lease payments $ 350

Subsequent Events

The 2023 Credit Facility includes an uncommitted accordion feature that allows for increases in the revolving commitment to as much as an additional $ 35.0 million, for up to $ 70.0 million in potential revolving commitments.The 2023 Credit Facility includes a subfacility that provides for the issuance of letters of credit in an amount of up to $ 15.0 million at any time outstanding.

The 2023 Credit Facility is subject to customary fees for loan facilities of this type, including a commitment fee based on the average daily undrawn portion of the 2023 Credit Facility.

The interest rate applicable to the 2023 Credit Facility will be, at the Company’s option, either (a) the Adjusted Term SOFR Rate (subject to a 0 .00 % floor), plus a margin ranging from 1.50 % to 2.25 % or (b) the CB floating rate, (i) plus a margin of 0.25 % or (ii) minus a margin ranging from 0.25 % to 0.50 %.

The margin will be based upon the Company’s fixed charge coverage ratio.

The CB floating rate is the higher of (a) the Wall Street Journal prime rate and (b) 2.50%.

In January 2023, u pon entry into the 2023 Credit Facility, the Company’s existing 2021 Credit Facility was terminated.

As of March 16, 2023, there was no outstanding balance under the 2023 Credit Facility.

(1) Included in accrued expenses as of December 31, 2023.

Refer to Note 9, "Accrued Expenses" included elsewhere in these consolidated financial statements.

The Company records costs associated with the restructuring initiatives once the relevant accounting criteria have been met.

Accrued restructuring costs of $ 0.4 million related to severance costs as of December 31, 2023 are expected to result in cash expenditures funded from cash provided by operations in future periods and is included in accrued expenses on the consolidated balance sheets.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosures

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data