What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2026-02-25 compared with 2025-02-26 · 257 added, 223 removed, 773 unchanged (38% of the section changed)

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Consolidated Statements of Comprehensive Loss

Consolidated Statements of Stockholders’ Equity (Deficit)

Consolidated Statements of Stockholders’ Equity

Consolidated Statements of Cash Flows

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We have audited the accompanying consolidated balance sheets of The Honest Company, Inc.

and its subsidiaries (the "Company") as of December 31, 2024 and 2023, and the related consolidated statements of comprehensive loss, of stockholders' equity (deficit) and of cash flows for each of the three years in the period ended December 31, 2024, including the related notes (collectively referred to as the "consolidated financial statements").

and its subsidiaries (the "Company") as of December 31, 2025 and 2024, and the related consolidated statements of comprehensive loss, of stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2025, including the related notes (collectively referred to as the "consolidated financial statements").

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025 in conformity with accounting principles generally accepted in the United States of America.

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We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers

/s/ PricewaterhouseCoopers LLP

Los Angeles, California

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Operating lease liabilities, net of current portion 4,919 13,197

Other long-term liabilities — 34

Total liabilities 55,738 73,086

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The Honest Company, Inc.

Consolidated Statements of Stockholders’ Equity (Deficit)

Consolidated Statements of Stockholders’ Equity

(in thousands, except share amounts)

Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Total Stockholders' Equity (Deficit)

Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Total Stockholders' Equity

Shares Amount

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Shares issued under 2021 ESPP 126,969 — 177 — — 177

Common stock withheld for tax obligation and net settlement ( 8,050 ) — ( 37 ) — — ( 37 )

ASC 842 transition effect — — — 845 — 845

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

Net loss — — — ( 6,124 ) — ( 6,124 )

Other comprehensive loss — — — — 32 32

Stock options exercised 8,007,999 1 41,453 — — 41,454

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Net loss $ ( 15,686 ) $ ( 6,124 ) $ ( 39,238 )

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

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization 2,901 2,843 2,740

Stock-based compensation 10,512 15,675 15,804

Fixed asset impairment 2,878 — —

Amortization of operating ROU assets 6,649 6,444 6,257

Apparel inventory write-down 15,899 — —

Other 6,175 746 ( 1,369 )

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Operating lease liabilities ( 8,943 ) ( 8,105 ) ( 7,688 )

Net cash provided by (used in) operating activities 1,541 19,353 ( 76,275 )

Net cash provided by operating activities 15,121 1,541 19,353

Cash flows from investing activities

Purchases of short-term investments — — ( 12,782 )

Proceeds from maturities of short-term investments — — 5,683

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Purchases of intangible assets — — ( 10 )

Net cash provided by (used in) investing activities ( 530 ) 3,835 34,963

Net cash provided (used in) provided by investing activities ( 1,510 ) ( 530 ) 3,835

Cash flows from financing activities

Proceeds from exercise of stock options 384 41,453 4

Taxes paid related to net share settlement of equity awards — — ( 37 )

Proceeds from 2021 ESPP 152 163 176

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Net cash provided by financing activities 535 41,597 122

Net increase (decrease) in cash and cash equivalents 42,608 23,310 ( 41,274 )

Net increase in cash and cash equivalents 14,146 42,608 23,310

Cash and cash equivalents

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The Honest Company, Inc.

(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 personal care company dedicated to creating cleanly-formulated and sustainably-designed products.

(the “Company” or “Honest”) 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 personal care company dedicated to creating cleanly-formulated and sustainably-designed products for everyone from babies to adults.

The Honest Standard, the Company’s rigorous set of guiding principles that shape every step of product innovation and development, reflects Honest’s ongoing dedication to safety, transparency and integrity.

As a leader in clean and sustainable products, Honest continues to set a new standard for clean formulations, bringing joy to a community that seeks authenticity, transparency and efficacy in everyday essentials.

Summary of Significant Accounting Policies

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Certain reclassifications to the Company's previously reported financial information have been made to conform to the current period presentation.

The Company made reclassifications to the consolidated statement of cash flows, including a reclassification of $ 6.3 million and $ 6.2 million, respectively, was made from "Other" to "Amortization of operating right-of-use ("ROU") assets" in the "adjustments to reconcile net loss to net cash provided by (used in) operating activities" section of the consolidated statements of cash flow for the years ended December 31, 2023 and 2022 to conform to the current year presentation, among other immaterial reclassifications.

Additionally, the Company made immaterial reclassifications to separately present the lease liability within the deferred tax assets and the right-of-use asset within the deferred tax liabilities related to the implementation of Accounting Standards Codification No.

842 (" ASC 842") in Note 13, "Income Taxes", for the year ended December 31, 2023 to conform to the current year presentation.

Restructuring

In 2023, the Company incurred 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 recorded employee termination liabilities once they were 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.

The Company incurred restructuring costs in connection with the Transformation 2.0:

Powering Honest Growth ("Powering Honest Growth").

Powering Honest Growth is aimed at improving simplicity, focus and profitability, which includes exiting certain lower margin, non-strategic categories and channels, including exiting Honest.com fulfillment and apparel, as well as exiting retail and online stores in Canada, optimizing the Company's cost structure by rightsizing selling, general and administrative expenses and implementing supply chain efficiencies.

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

The Company recorded employee termination liabilities once the Company committed to a plan and communicated such terminations to employees.

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

Accrued restructuring costs as of December 31, 2025 are recorded within Accrued Expenses in the consolidated balance sheets.

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The Company’s Chief Executive Officer ("CEO"), as the chief operating decision maker ("CODM"), organizes the Company, manages resource allocations, and measures performance on the basis of one operating segment.

The Company evaluates performance based on consolidated net income (loss).

The Company evaluates performance based on consolidated net income (loss) to monitor budget versus actual results and period-over-period comparisons.

The CODM additionally considers forecasted information on a quarterly basis for net income (loss) when making decisions regarding capital and personnel needs.

The CODM reviews information at the consolidated entity level, and does not distinguish the principal business, or group the operations, by geographic locations or industry types for purposes of measuring performance or allocating resources.

While the Company creates products that are sold across retail channels and direct-to-consumer ("DTC"), all products are managed as one brand of products under one operating and reportable segment.

While the Company creates products that are sold across retail channels and, prior to December 31, 2025 direct-to-consumer ("DTC"), all products are managed as one brand of products under one operating and reportable segment.

Furthermore, the Company notes that monitoring financial results as one reportable segment helps the CODM manage expenses on a consolidated basis, consistent with the Company’s operations.

The Company does not regularly provide the CODM with more detailed segment expense information beyond what is included in the consolidated statements of comprehensive loss).

The significant expense categories which are used to manage operations are those reflected in our consolidated statements of comprehensive loss.

The significant expense categories which are used to manage operations are those reflected in the Company's consolidated statements of comprehensive loss.

Refer to the consolidated statements of comprehensive loss included in the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

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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.

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

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

As of December 31, 2024, the Company did not hold any investments.

For debt securities with an amortized cost basis in excess of estimated fair value, the Company determines what amount of that deficit, if any, is caused by expected credit losses.

The portion of the deficit attributable to expected credit losses is recorded as an allowance for credit losses with an offsetting entry to interest and other income (expense), net in the Company's consolidated statements of comprehensive loss.

The portion of the loss related to non-credit factors (if any) is generally recorded as a component of comprehensive loss.

As of December 31, 2025 and 2024, the Company did not hold any investments.

Concentrations

Financial instruments that potentially subject the Company to credit risk consist principally of cash, cash equivalents, short-term investments and accounts receivable.

Financial instruments that potentially subject the Company to credit risk consist principally of cash, cash equivalents and accounts receivable.

The Company places its cash with high credit quality financial institutions, which typically exceed federally insured limits.

The Company invests its excess cash primarily in highly rated money market funds and short-term debt instruments, diversifies its investments and, by policy, invests only in highly rated securities to minimize credit risk.

The Company invests its excess cash primarily in highly rated money market funds, diversifies its investments and, by policy, invests only in highly rated securities to minimize credit risk.

The Company’s customers that accounted for 10% or more of total accounts receivable, net, were as follows:

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Accounts Receivable

Sales made to consumers through the Company’s Honest.com website are conducted with credit cards, and the Company records its credit card sales in transit as accounts receivable at selling price less applicable deductions.

The Company may extend credit in the normal course of business to its third-party ecommerce customers and retailers and performs credit evaluations on a case-by-case basis.

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

The Company will consider, among other factors, write-offs of uncollectible accounts receivable that have a contractual maturity of one year or less if the invoice is six months or older.

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

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

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 $ 0.2 million and $ 0.4 million, respectively, as of December 31, 2025 and 2024.

The Company may extend credit in the normal course of business to its third-party ecommerce customers and retailers and performs credit evaluations on a case-by-case basis.

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

The Company will consider, among other factors, write-offs of uncollectible accounts receivable that have a contractual maturity of one year or less if the invoice is six months or older.

Effective December 31, 2025, the Company will no longer sell direct-to-consumer through the Company’s website as part of Powering Honest Growth.

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

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Leasehold improvements Lesser of the estimated useful life or the remaining lease term

Effective January 1, 2022, the Company accounts for leases in accordance with ASC 842.

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.

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The Company determines if a contract is or contains a lease at inception.

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

The Company’s leases have remaining lease terms of less than one to less than 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 elected the practical expedient to not separate lease and non-lease components, as such non-lease components are included in the calculation of the ROU asset and lease liability

and included in the lease expense over the term of the lease.

As most of the Company's leases do not contain an implicit interest rate, the Company uses judgement to determine an incremental borrowing rate to use at lease commencement.

The Company elected the practical expedient to not separate lease and non-lease components, as such non-lease components are included in the calculation of the ROU asset and lease liability and included in the lease expense over the term of the lease.

As the Company's leases do not contain an implicit interest rate, the Company uses judgment to determine an incremental borrowing rate to use at lease commencement.

Operating lease ROU assets and lease liabilities are recorded at the lease commencement date with expense recognized on a straight-line basis over the lease term.

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Such events or changes in circumstances may include a significant decrease in the market price of a long-lived asset, a significant change in the extent or manner in which an asset is used, a significant change in legal factors or in the business climate, a significant deterioration in the amount of revenue or cash flows expected to be generated from a group of assets, a current expectation that, more likely than not a long-lived asset will be sold or otherwise disposed of significantly before the end of its previously estimated useful life, or any other significant adverse change that would indicate that the carrying value of an asset or group of assets may not be recoverable.

The Company performs impairment testing at the asset

group level that represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities.

The Company performs impairment testing at the asset group level that represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities.

If events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable and the expected undiscounted future cash flows attributable to the asset group are less than the carrying amount of the asset group, an impairment loss equal to the excess of the asset’s carrying value over its fair value is recorded.

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.

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The Company records foreign currency gains or losses in interest and other income (expense), 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, 2024, 2023 and 2022, realized and unrealized foreign currency losses, net were $ 0.2 million, $ 0.03 million and $ 0.2 million, respectively.

During the years ended December 31, 2025, 2024 and 2023, realized and unrealized foreign currency losses, net were immaterial.

Contingent Liabilities

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Stock-Based Compensation

Restricted Stock Units

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

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Thereafter, stock-based compensation expense is recognized when the event occurs even if the market condition was not or is not achieved, provided the employee continues to satisfy the service condition.

The Company has not granted stock options since the IPO, and for the stock options that were granted pre-IPO the below assumptions were used.

The Company has not granted stock options since the initial public offering ("IPO"), and for the stock options that were granted pre-IPO the below assumptions were used.

The Monte Carlo simulation model is used to estimate the fair value of stock options that have market vesting conditions.

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• Expected term - For stock options with only service vesting conditions the expected term is determined using the simplified method, which estimates the expected term using the contractual life of the option and the vesting period.

For stock options with performance or market conditions, the term is estimated in consideration of the time period expected to achieve the performance or market condition, the contractual term of the award, and estimates of future exercise behavior.

options with performance or market conditions, the term is estimated in consideration of the time period expected to achieve the performance or market condition, the contractual term of the award, and estimates of future exercise behavior.

• Risk-free interest rate - The risk-free interest rate is based on the U.S.

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Revenue Recognition

The Company sells its products direct-to-consumer through the Company’s website, retail and third-party ecommerce customers, who resell the Company’s products through traditional brick and mortar retailers, who may also resell the Company’s products through their own online platforms.

The Company sells its products through retail and third-party ecommerce customers, who resell the Company’s products through traditional brick and mortar retailers, who may also resell the Company’s products through their own online platforms, and, until December 31, 2025, the Company sold its products direct-to-consumer through the Company’s website.

Effective December 31, 2025, the Company no longer sells direct-to-consumer through the Company’s website and no longer offers gift card purchases on its website.

The Company accounts for revenue contracts with customers by applying the following steps in accordance with ASC No.

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The Company accrues the cost of shipping and handling and recognizes revenue and costs at the point in time that control of the goods transfers to the customer.

In addition, the Company adopted the practical expedient to exclude from the transaction price all amounts collected from direct-to-consumer customers for sales and other taxes."

Retail and Third-Party Ecommerce

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Revenue is recognized when control of the promised goods is transferred to those customers at time of shipment or delivery, depending on the contract terms.

After the completion of the performance obligation, the Company has the right to consideration as outlined in the contract.

After the completion of the performance

obligation, the Company has the right to consideration as outlined in the contract.

Payment terms vary among the retail and third-party ecommerce customers although terms generally include a requirement of payment within 30 to 45 days of product shipment.

Direct-to-Consumer

For direct sales to the consumer through the Company’s website, the Company’s performance obligation consists of the sale of finished goods to the consumer.

Consumers may purchase products at any time or enter into subscription arrangements.

Consumers place orders online in accordance with the Company’s standard terms and conditions and authorize payment when the order is placed.

Credit cards are charged at the time of shipment.

For subscription arrangements, consumers sign up to receive products on a periodic basis.

Subscriptions are cancellable at any time without penalty, and no amounts are collected from the consumer until products are shipped.

Revenue is recognized when transfer of control to the consumer takes place, which is when the product is delivered to the carrier.

Sales taxes collected from consumers are accounted for on a net basis and are excluded from revenue.

Consumers may purchase gift cards, which are recorded as deferred revenue at the time of purchase.

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

Effective December 31, 2025, the Company no longer sells direct-to-consumer through the Company’s website as part of Powering Honest Growth.

For direct sales to the consumer through the Company’s website prior to December 31, 2025, the Company’s performance obligation consisted of the sale of finished goods to the consumer.

Consumers may have purchased products at any time or entered into subscription arrangements.

Consumers placed orders online in accordance with the Company’s standard terms and conditions and authorized payment when the order was placed.

Credit cards were charged at the time of shipment.

For subscription arrangements, consumers signed up to receive products on a periodic basis.

Subscriptions were cancellable at any time without penalty, and no amounts were collected from the consumer until products was shipped.

Revenue was recognized when transfer of control to the consumer took place, which was when the product was delivered to the carrier.

Sales taxes collected from consumers were accounted for on a net basis and are excluded from revenue.

Previously, consumers may have purchased gift cards, which were recorded as deferred revenue at the time of purchase.

The Company recognized revenue when these gift cards were redeemed for products and the revenue recognition criteria as described above were met.

For the years ended December 31, 2025, 2024 and 2023, revenue recognized from the use of gift cards was $ 1.3 million, $ 0.6 million and $ 0.6 million, respectively.

As of December 31, 2024 and 2023, deferred revenue related to gift card purchases was $ 1.1 million and $ 1.0 million, respectively.

Sales Returns and Allowances

For direct-to-consumer, retail, and third-party ecommerce sales, the Company records estimated sales returns in the same period that the related revenue is recorded.

The Company uses the expected value method to estimate returns, taking into consideration assumptions of demand based on historical data and historical returns rates.

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.

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

For direct-to-consumer, retail and third-party ecommerce sales, the Company offers credits in the form of discounts, which are recorded as reductions in revenue and are allocated to products on a relative basis based on their respective standalone selling price.

Effective December 31, 2025, the Company no longer offers gift card purchases on its website.

As such, as of December 31, 2025, the Company accrued for the reimbursement of gift cards to consumers and wrote-off $ 1.1 million of deferred revenue related to direct-to-consumer gift card purchases.

As of December 31, 2025, the Company did not have any deferred revenue outstanding.

As of December 31, 2024, deferred revenue related to gift card purchases was $ 1.1 million.

Sales Incentive Programs

For retail and third-party ecommerce sales, the Company routinely commits to one-time or ongoing sales incentive programs with its customers that may require the Company to estimate and accrue the expected costs of such programs, including trade promotion activities and contractual allowances.

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As of December 31, 2025 and 2024 , $ 8.7 million and $ 12.6 million, respectively, of the ending allowance balances were recorded as a reduction to accounts receivable.

The Company's current retail and third-party ecommerce customers typically do not have the right of return;

therefore, no estimate is made for sale returns.

Prior to December 31, 2025, the Company recorded returns as incurred for direct-to-consumer customers, as the amount has historically been immaterial.

Any sales returns allowance is recorded as a reduction of revenue.

part of exiting Honest.com as a fulfillment center, all direct-to-consumer sales were final as of December 31, 2025, with no right of return.

For retail and third-party ecommerce sales (and prior to December 31, 2025, for direct-to-consumer sales), the Company offers credits in the form of discounts, which are recorded as reductions in revenue and are allocated to products on a relative basis based on their respective standalone selling price.

Contract Assets

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Cost of Revenue

Cost of revenue includes the purchase price of merchandise sold to customers, inbound and outbound shipping and handling costs, freight and duties, shipping and packaging supplies, credit card processing fees and warehouse fulfillment costs incurred in operating and staffing warehouses, including rent.

Cost of revenue includes the purchase price of merchandise sold to customers, inbound and outbound shipping and handling costs, freight, duties and tariffs, shipping and packaging supplies, credit card processing fees and warehouse fulfillment costs incurred in operating and staffing warehouses, including rent.

Cost of revenue also includes depreciation and amortization for warehouse fulfillment facilities and equipment, allocated overhead and direct and indirect labor for warehouse personnel, inventory reserves and destruction costs.

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facility costs, including insurance, utilities and rent relating to our headquarters;

third-party service fees related to our supplier services agreement for Honest baby clothing, the Company's baby apparel business;

third-party service fees related to our supplier services agreement for Honest baby clothing, the Company's apparel products;

and, depreciation and amortization expenses.

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As of December 31, 2025 and 2024 , the current portion of deferred advertising costs was $ 0.7 million and $ 0.6 million, respectively, which is included in prepaid expenses and other current assets.

As of December 31, 2024 and 2023 , there was an immaterial amount of deferred advertising costs that was considered noncurrent.

As of December 31, 2025, there was no deferred advertising costs that was considered noncurrent.

As of December 31, 2024, there was an immaterial amount of deferred advertising costs that was considered noncurrent.

Advertising expense was $ 48.4 million, $ 41.7 million and $ 33.8 million for the years ended December 31, 2025, 2024 and 2023, respectively.

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As a result, the Company’s financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective date for new or revised accounting standards that are applicable to public companies.

Recently Adopted Accounting Pronouncements

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 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 adoption of ASU No.

2023-07 did not have a material impact on the Company’s consolidated financial statements or disclosures.

Recently Issued Accounting Pronouncements – Not Yet Adopted

Recently Adopted Accounting Pronouncements - Adopted

In December 2023, the FASB issued ASU No.

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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 is currently evaluating the impact that ASU No.

2023-09 will have on its consolidated financial statements or related disclosures.

For public business entities, the amendments in this update are effective for annual periods

beginning after December 15, 2024.

The adoption of ASU No.

2023-09 did not have a material impact on the Company's consolidated financial statements or disclosures and the Company adopted this standard on a retrospective basis.

Recently Issued Accounting Pronouncements – Not Yet Adopted

In November 2024, the FASB issued ASU No.

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2024-03 will have on its consolidated financial statements or related disclosures.

The Company previously presented its revenue by sales channel of Digital and Retail and by product category of Diapers and Wipes, Skin and Personal Care and Household and Wellness.

In determining the appropriate categories to use to disaggregate revenue in accordance with the requirements of Accounting Standards Codification Topic 606, Revenue from Contracts with Customers, the Company considered the information regularly reviewed by its CODM for evaluating its financial performance and making resource allocation decisions and the guidance to disaggregate revenue from contracts with customers into categories that depict how the nature, amount, timing, and uncertainty of revenue and cash flows.

In 2023, the Company executed a broad-based Transformation Initiative with Brand Maximization as one of the Pillars designed to leverage the strength of the Honest brand.

As part of its strategy to build the Honest brand, the Company’s CODM is evaluating the Company’s financial performance and making resource allocation decisions across the Company’s products as one brand of a portfolio of multiple products.

As a result, in the first quarter of 2024, the Company removed the disaggregation of revenue by product category to align with changes made to the Company’s long-term strategy and began disaggregating revenue by (i) direct-to-consumer and (ii) retail and third-party ecommerce customers.

The change had no effect on the Company's results of operations or timing of revenue recognition.

Presentation of disaggregated revenue by direct-to-consumer and retail and third-party ecommerce customers in prior periods have been modified to conform to the current period presentation.

In July 2025, the FASB issued ASU No.

2025-05, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses for Accounts Receivable and Contract Assets .

This update creates a practical expedient for estimating expected credit losses on current accounts receivable and current contract assets arising from transactions under ASC 606 by assuming that current conditions at the balance sheet date will remain unchanged over the life of the asset.

For public business entities, the amendments in this update are effective for annual periods beginning after December 15, 2025, and interim periods within those annual reporting periods.

Early adoption permitted in both interim and annual reporting periods in which financial statements have not yet been issued or made available for issuance.

The adoption of ASU No.

2025-05 is not expected to have a material impact on the Company's consolidated financial statements or related disclosures.

In September 2025, the FASB issued ASU No.

2025-06, Intangibles - Goodwill and Other Internal-Use Software (Subtopic 350-40):

Targeted Improvements to the Accounting for Internal-Use Software .

This update is to modernize the accounting for software costs that are accounted for under Subtopic 350-40, Intangibles-Goodwill and Other-Internal-Use Software.

The amendments in this update are effective for all entities for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods.

Early adoption is permitted as of the beginning of an annual reporting period.

The adoption of ASU No.

2025-06 is not expected to have a material impact on the Company's consolidated financial statements or related disclosures.

Retail and Third-Party Ecommerce

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Direct-to-Consumer

For direct sales to the consumer through the Company's website, Honest.com, the Company's performance obligation consists of the sale of finished goods to the consumer.

Consumers may purchase products at any time or enter into subscription arrangements.

Consumers place orders online in accordance with the Company's standard terms and conditions and authorize payment when the order is placed.

Credit cards are charged at the time of shipment and payments are typically processed within two to three business days.

For subscription arrangements, consumers sign up to receive products on a periodic basis.

Subscriptions are cancellable at any time without penalty, and no amounts are collected from the consumer until products are shipped.

Revenue is recognized when transfer of control to the consumer takes place, which is when the product is delivered to the carrier.

Sales taxes collected from consumers are accounted for on a net basis and are excluded from revenue.

Effective December 31, 2025, the Company will no longer sell direct-to-consumer through the Company’s website as part of Powering Honest Growth.

For direct sales to the consumer through the Company's website, Honest.com, the Company's performance obligation consisted of the sale of finished goods to the consumer.

Consumers may have purchased products at any time or entered into subscription arrangements.

Consumers placed orders online in accordance with the Company's standard terms and conditions and authorized payment when the order was placed.

Credit cards were charged at the time of shipment and payments were typically processed within two to three business days.

For subscription arrangements, consumers signed up to receive products on a periodic basis.

Subscriptions were cancellable at any time without penalty, and no amounts were collected from the consumer until products were shipped.

Revenue was recognized when transfer of control to the consumer took place, which is when the product was delivered to the carrier.

Sales taxes collected from consumers were accounted for on a net basis and were excluded from revenue.

Revenue generated from Honest.com was 10 %, 13 % and 17 %, respectively, of the Company's total revenue during the years ended December 31, 2025, 2024 and 2023.

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For the years ended December 31, 2025, 2024 and 2023, the Company did no t recognize any revenue or associated cost of revenue related to these marketing and transportation credits.

For the year ended December 31, 2022, the Company recognized $ 3.2 million of revenue and $ 1.7 million of associated cost of revenue related to these marketing and transportation credits.

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

The Company assesses the recoverability of the marketing and

transportation credits periodically.

Factors considered in evaluating the recoverability include management’s history of credit usage and future plans with respect to advertising, freight and other services for which these credits can be used.

Any impairment losses are charged to marketing expense in the consolidated statements of comprehensive loss as they become determinable.

For the years ended December 31, 2024, 2023 and 2022, the Company recorded no impairment losses related to these credits and used an aggregate of $ 1.6 million, $ 0.3 million and $ 1.4 million of credits, respectively.

For the years ended December 31, 2025, 2024 and 2023, the Company used an aggregate of $ 0.7 million, $ 1.6 million and $ 0.3 million of credits, respectively.

For the year ended December 31, 2025, the Company recorded an impairment of $ 0.5 million related to these credits.

For the years ended December 31, 2024 and 2023, the Company recorded no impairment losses related to these credits.

Intangible Assets, Net

35 unchanged sentences

$ 7,477 $ 11,394

(1) In connection with Powering Honest Growth, machinery and equipment write-offs were $ 2.5 million related to exiting Honest.com fulfillment.

These charges are included in cost of revenue in the accompanying consolidated statements of comprehensive loss.

(2) The Company recorded accelerated depreciation of $ 0.4 million, which represents the remaining net book value of affected fixed assets depreciated over their revised estimated service periods.

These charges are included in cost of revenue in the accompanying consolidated statements of comprehensive loss.

Total depreciation and amortization expense for property and equipment consisted of the following:

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Cost of revenues $ 1,178 $ 1,048 $ 931

Research and development 225 223 195

Selling, general and administrative 1,464 1,495 1,515

Research and development 188 225 223

Total depreciation and amortization expense (1)

$ 2,830 $ 2,768 $ 2,669

_______________

(1) Refer to footnotes in the above table for more information.

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

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Total cash equivalents $ 55,280 $ — $ — $ 55,280

Short-term investments

Corporate bonds — — — —

Commercial paper — — — —

Certificates of deposit — — — —

Total short-term investments — — — —

Total $ 5,589 $ — $ — $ 5,589

The carrying amounts for the Company’s cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate fair value due to their short maturities.

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Accrued inventory purchases 8,387 13,095

Accrued returns 102 269

Accrued marketing 1,181 255

Accrued rent (2)

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If it is probable that a loss will result and the amount or range of the loss can be reasonably estimated, the Company records a liability for the loss and discloses the possible loss in the consolidated financial statements .

On September 17, 2019, the Nevada Department of Taxation (the “Department”) issued a Deficiency Notice against the Company to initiate administrative legal proceedings before the Department for the alleged non-compliance with employee retention requirements provided in exchange for tax benefits in establishing the Company’s Las Vegas distribution center in a December 2016 Abatement Agreement the Company had executed with the State of Nevada via its Governor’s Office of Economic Development.

The Company has denied the allegations.

An administrative hearing was held in the matter on January 15, 2021.

On June 9, 2021, the court upheld the Department's Deficiency Notice against the Company in its entirety.

The loss resulting from this matter was $ 0.7 million including penalties and interest, for which the Company has paid $ 0.6 million as of December 31, 2021.

During the year ended December 31, 2021, the Company recorded interest expense of $ 0.1 million in interest and other expense, net on the consolidated statements of comprehensive loss.

The Company filed its Notice of Appeal on July 1, 2021 and its opening brief on January 28, 2022.

The Department filed its answering brief on March 4, 2022 and the Company filed its reply brief on March 23, 2022.

The Nevada Tax Commission heard the appeal on May 2, 2022.

The Nevada Tax Commission upheld the Company's appeal and overturned the Department's Deficiency Notice.

The Company submitted a refund request for the taxes and interest paid, following the Department's June 9, 2021 decision, which 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 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.

22, 2021, CAPA filed a complaint in California Superior Court in the County of San Francisco (“the Court”) for the alleged Prop 65 violations contained in its 60-Day Notice of Violation.

On October 22, 2021, CAPA filed a complaint in California Superior Court in the County of San Francisco (“the Court”) for the alleged Prop 65 violations contained in its 60-Day Notice of Violation.

The Company filed its answer and notice of related cases against Prestige Consumer Healthcare, Inc., Burt's Bees, Inc., and Hain Celestial Group, Inc.

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On January 23, 2025, the Court granted the Company's motion for summary judgment.

The Company intends to vigorously defend itself in this matter.

The matter’s outcome and materiality are uncertain at this time.

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

On April 8, 2025, CAPA served its Notice of Appeal in the matter.

On August 4, 2025, the Court dismissed CAPA's appeal.

Following the dismissal of CAPA's appeal, the Company does not believe that a loss is probable or estimable in this matter.

On September 15, 2021, Cody Dixon filed a putative class action complaint in the U.S.

District Court for the Central District of California alleging federal securities law violations by the Company, certain current officers and directors, and certain underwriters in connection with the Company’s IPO.

A second putative class action complaint containing similar allegations against the Company and certain current officers and directors was filed by Stephen Gambino on October 8, 2021 in the U.S.

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.

These related complaints were transferred to the same court and a Lead Plaintiff was 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.

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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 October 16, 2023, those additional defendants filed a motion to dismiss the amended consolidated 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.

On February 14, 2024, the Lead Plaintiff filed a further amended Second Amended Complaint against the additional defendants.

The additional defendants filed a motion to dismiss the further amended Second Amended Complaint, which was denied by the court on April 22, 2024.

On February 14, 2024, the Lead Plaintiff filed a second amended consolidated complaint against the additional defendants.

The additional defendants filed a motion to dismiss the second amended consolidated complaint, which was denied by the court on April 22, 2024.

On January 21, 2025, the parties filed a joint stipulation stating that they had reached an agreement in principle to fully settle all pending claims in the action and asking the court to stay the case so the parties could have additional time to negotiate the terms of a formal stipulation of settlement and related documentation.

The court entered an order staying the case on the same day.

Lead Plaintiff must file a motion for preliminary approval of the settlement by March 12, 2025.

On April 14, 2025, the court preliminarily approved the parties’ settlement.

Under the terms of the settlement, in exchange for the release and dismissal with prejudice of all claims against the defendants in the second amended consolidated complaint, we agreed to pay $ 20,000,000 to resolve the dispute, to be fully funded by the Company’s insurance carriers.

The settlement does not constitute an admission of fault or wrongdoing by the Company, the named individual defendants, or the underwriters.

The Company recorded the settlement amount of $ 20,000,000 within accrued expenses and a corresponding insurance recovery of $ 20,000,000 within prepaids and other current assets related to the legal settlement on the consolidated balance sheet as of March 31, 2025.

The determination that the recorded insurance recovery receivable was probable of collection was based on the terms of the applicable insurance policies, settlement agreement, and communications with the insurers.

On July 28, 2025, the court held a hearing on the plaintiffs' motion for final approval of the class settlement.

The settlement was fully funded by the insurance carriers into plaintiff’s escrow in May 2025 and on July 30, 2025, the court entered a final order approving the settlement and judgment disposing of the Securities Litigation Case.

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

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Each of these federal and state court derivative cases have been stayed.

On December 18, 2025, the parties

to the derivative cases reached an agreement in principle to settle the matters.

The settlement remains subject to preliminary and

final approval by the court and certain other conditions and contingencies out of our control.

The Company recorded the settlement amount of $ 1.2 million within accrued expenses and a corresponding insurance recovery of $ 1.2 million within prepaids and other current assets related to the legal settlement on the consolidated balance sheet as of December 31, 2025.

On November 5, 2025, the Company filed a complaint in the U.S.

District Court for the Central District of California (the "Court") alleging that Butterblu, LLC (“Butterblu”) breached the supplier services agreement, as amended, that the Company and Butterblu had entered into as of August 15, 2022 (the "Supplier Services Agreement") pursuant to which Butterblu provides certain design, manufacturing, sales and marketing services to the Company in connection with the Company's apparel products.

The Company voluntarily dismissed the complaint on November 21, 2025 related to a temporary extension of the Supplier Services Agreement.

Following the conclusion of the temporary extension of the Supplier Services Agreement in December 2025, the Company filed an updated complaint on January 2, 2026.

The Company has requested monetary damages and declaratory relief as determined by the Court.

On February 11, 2026, Butterblu filed a complaint against the Company in the California Superior Court for the County of Los Angeles alleging breach of contract, breach of implied contract, breach of implied covenant of good faith and fair dealing, quantum meruit, promissory estoppel, intentional interference with contract, and intentional interference with prospective economic relations related to the parties' obligations under the Supplier Services Agreement.

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

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.

District Court for the Northern District of California alleging violations of California’s Unfair Competition Law, False Advertising Law, Consumers Legal Remedies Act, breach of warranty, and unjust enrichment related to plant-based claims on certain of the Company’s wipes products and seeking declaratory relief, injunctive relief, monetary damages, punitive damages and statutory penalties, and attorneys’ fees and costs.

The Company filed its motion to dismiss on October 17, 2022.

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

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 Court granted the plaintiffs' Stipulation of Dismissal on July 2, 2024.

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

As of December 31, 2025 and 2024, 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.

Indemnifications

such agreements, services to be provided by the Company, or from intellectual property infringement claims made by third parties.

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 number of future payments the Company could be required to make under these indemnification provisions may not be subject to maximum loss clauses.

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4,252,490 $ 5.45 2.0 $ —

The intrinsic value of options exercised during the years ended December 31, 2024, 2023 and 2022 were $ 12.6 million , immaterial and $ 0.1 million, respectively.

The intrinsic value of options exercised during the years ended December 31, 2025, 2024 and 2023 were immaterial , $ 12.6 million and $ 0.1 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.

The total fair value of options vested during the years ended December 31, 2025, 2024 and 2023 were $ 0.0 million , $ 0.1 million and $ 0.7 million, respectively.

As of December 31, 2024, there was no unrecognized stock-based compensation expense related to unvested stock options.

As of December 31, 2023, there was $ 0.1 million 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.

As of December 31, 2025 and 2024, there was no unrecognized stock-based compensation expense related to unvested stock options.

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.

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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.

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 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.

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The maximum number of shares of the Company’s common stock that may be issued on the exercise of ISOs under its 2021 Plan is 75,100,000 shares.

The following table summarizes the RSU activity:

2023 Inducement Plan

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

The 2023 Inducement Plan reserved 4,000,000 shares of the Company’s common stock for issuance under the 2023 Inducement Plan to individuals who satisfy the standards for inducement grants under the relevant Nasdaq Stock Market rules.

As of December 31, 2025, there were 738,806 shares available for future grant under the Inducement Plan.

On July 1, 2025, the Company granted 202,880 RSUs to the Chief Financial Officer under the 2023 Inducement Plan.

On March 16, 2025, the Company granted 115,122 RSUs to the Senior Vice President of Supply Chain under the 2023 Inducement Plan.

On February 29, 2024, the Company granted 208,757 RSUs to the Chief People Officer under the 2023 Inducement Plan.

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

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

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

The following table summarizes the RSU activity under the 2021 Equity Incentive Plan and the 2023 Inducement Plan:

Number of Shares Weighted Average Grant Date Fair Value Per Share

2 unchanged sentences

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

Transfer from Employee to Non-Employee Director (1)

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

Granted 545,178 4,890,798 $ 2.81 $ 3.63

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Granted 345,077 2,629,375 $ 5.11 $ 5.04

( 775,804 ) ( 4,411,643 ) $ 2.15 $ 2.96

Vested ( 652,726 ) ( 2,874,632 ) $ 2.96 $ 3.01

Forfeited — ( 1,444,879 ) $ — $ 2.44

2 unchanged sentences

_______________

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

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

(2) The Company modified certain former executives' RSUs to accelerate vesting, resulting in stock-based compensation expense of $ 6.7 million and $ 3.1 million, respectively, during the years ended December 31, 2024 and 2023.

(1) The Company modified certain former executives' RSUs to accelerate vesting, resulting in stock-based compensation expense of $ 6.7 million during the year ended December 31, 2024.

As of December 31, 2025 and 2024, there was $ 18.7 million and $ 17.6 million, respectively, of unrecognized stock-based compensation expense related to unvested RSUs, which is expected to be recognized over a weighted-average period of 2.3 years and 2.6 years, respectively.

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In April 2021, the Company’s board of directors adopted the Company’s 2021 Employee Stock Purchase Plan (the “2021 ESPP”).

The Company authorized the issuance of 1,175,000 shares of common stock under the 2021 ESPP.

The Company initially authorized the issuance of 1,175,000 shares of common stock under the 2021 ESPP.

In addition, the number of shares available for issuance under the 2021 ESPP will be annually increased on January 1 of each year for a period of ten years , beginning on January 1, 2022 and continuing through January 1, 2031 by the lesser of (i) 1 % of the total number of shares of common stock outstanding on December 31 of the immediately preceding year;

and (ii) 3,525,000 shares, except before the date of any such increase, the Company’s board of directors may determine that such increase will be less than the amount set forth in clauses (i) and (ii).

and (ii) 3,525,000 shares, except before the date of any such increase, the Company’s board of directors may determine that such increase will be less than the amount set

forth in clauses (i) and (ii).

On January 1, 2025, 1,089,023 additional shares were reserved for issuance pursuant to this provision.

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The right to purchase shares of common stock is granted in May and November of each year for an offering period of approximately six months .

The first offering period under the 2021 ESPP commenced in May 2021 and the second offering in November 2021.

For the years ended December 31, 2025 and 2024 , employees who elected to participate in the 2021 ESPP purchased 47,582 and 95,830 shares of common stock, respectively, under the 2021 ESPP, resulting in cash proceeds to the Company of $ 0.2 million and $ 0.2 million, respectively.

The weighted average price at purchase was $ 1.70 and $ 1.39 per share, respectively.

The weighted average price at purchase was $ 3.19 and $ 1.70 per share for the years ended December 31, 2025 and 2024, respectively.

As of December 31, 2025 and 2024, the Company had 4,658,349 and 3,616,908 , respectively, remaining authorized shares available for purchase.

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Expected dividend yield — % — %

Weighted average grant-date fair value per share $ 0.56 — $ 2.56 $ 0.56 — $ 0.67

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.

As of December 31, 2024, there were 275,083 shares available for future grant under the Inducement Plan.

On February 29, 2024, the Company granted 208,757 RSUs to the Chief People Officer under the Inducement Plan.

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.

Grant-date fair value per share $ 0.95 $ 2.56 $ 0.56 — $ 2.56

Stock-Based Compensation Expense

Stock-based compensation expense related to RSU awards, 2021 ESPP purchases and stock options, as applicable, are as follows:

Stock-based compensation expense related to RSU awards under the 2021 Equity Incentive Plan and the 2023 Inducement Plan, 2021 ESPP purchases and stock options, as applicable, are as follows:

For the year ended December 31,

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Total 11,835,412 12,689,816 21,643,391

Loss from continuing operations before income tax was as follows:

For the year ended December 31,

2025 2024 2023

(In thousands)

Domestic $ ( 15,482 ) $ ( 6,049 ) $ ( 39,163 )

$ ( 15,482 ) $ ( 6,049 ) $ ( 39,163 )

The components of income tax provision consisted of the following:

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2025 2024 2023

(In thousands)

Income tax benefit at the federal statutory rate

$ ( 1,252 ) $ ( 8,203 ) $ ( 10,271 )

State income taxes, net of federal benefit

(In thousands, except percentages)

federal statutory rate

$ ( 3,199 ) 21.0 % $ ( 1,252 ) 21.0 % $ ( 8,203 ) 21.0 %

Permanent differences for equity compensation

State and local income taxes (net of federal income tax effect) (1)

204 ( 1.3 ) % 75 ( 1.3 ) % 75 ( 0.2 ) %

Nondeductible items

Nondeductible compensation 947 1,218 302

Change in valuation allowance

1,792 ( 11.8 ) % ( 3,314 ) 55.6 % 4,489 ( 11.5 ) %

Nontaxable or nondeductible items:

Share-based payment awards

( 62 ) 0.4 % 3,437 ( 57.6 ) % 3,151 ( 8.0 ) %

Nondeductible compensation under §162(m) 1,358 ( 8.9 ) % 947 ( 15.9 ) % 654 ( 1.7 ) %

Nondeductible parking

69 ( 0.5 ) % 71 ( 1.2 ) % — ( 0.2 ) %

42 ( 0.3 ) % 21 ( 0.4 ) % 81 ( 0.2 ) %

Changes in unrecognized tax benefits — — % — — % 61 — %

Other adjustments — — % 90 ( 1.5 ) % ( 233 ) 0.6 %

Income tax provision $ 75 $ 75 $ 110

Effective tax rate $ 204 ( 1.3 ) % $ 75 ( 1.3 ) % $ 75 ( 0.2 ) %

(1) State taxes in Texas and New York comprised the majority (greater than 50 percent) of the tax effect in this category.

The tax effects of temporary differences that gave rise to significant portions of deferred tax assets and liabilities were as follows:

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Net deferred taxes

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.

On July 4, 2025, the 2025 budget reconciliation bill, officially known as the One Big Beautiful Bill Act of 2025 (the “Act”), was enacted into law.

The Act includes a broad range of tax reforms such as deductions for domestic research and development expenditures and federal bonus depreciation.

The Company has evaluated the provisions of the Act and determined that, because it maintains a full valuation allowance against its deferred tax assets, the Act does not have a material impact on the Company’s condensed consolidated financial statements or effective tax rate.

The amounts of income taxes paid (net of refunds received) by jurisdiction are as follows:

For the year ended December 31,

2025 2024 2023

(In thousands)

Foreign — — —

For the applicable periods all tax cash payments were immaterial and are therefore not being separately disclosed.

Net Operating Loss Carryforwards

As of December 31, 2025, the Company had federal and state net operating loss carryforwards tax effect of $ 313.0 million and $ 274.0 million, respectively.

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As of December 31, 2025 and 2024 , these limitations did not cause any of the limited net operating losses to be permanently lost.

Valuation Allowance

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.

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Such objective evidence limits the ability to consider other subjective evidence such as its projections for future growth.

On the basis of this evaluation, at December 31, 2024 , a full valuation allowance has been recorded since it is more likely than not that the deferred tax assets will not be realized.

To the extent that a valuation allowance has been established and it is subsequently determined that it is more likely than not that the deferred tax assets will be recovered, the valuation allowance will be released.

At December 31, 2025 , based on all available evidence, a full valuation allowance has been recorded since it is more likely than not that the deferred tax assets will not be realized.

The following table summarizes the changes in the valuation allowance:

4 unchanged sentences

$ 94,859 $ 98,771 $ 94,103

Increase to valuation allowance

Changes to valuation allowance

2,326 ( 3,918 ) 4,654

Decrease due to adoption of ASC 842 — — ( 613 )

Other increases (decreases)

1 unchanged sentence

$ 97,185 $ 94,859 $ 98,771

Uncertain Tax Positions

The Company is subject to taxation in the U.S.

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The Company is subject to examination from federal tax authorities for years 2022, 2023 and 2024.

To the extent allowed by law, the federal and state tax authorities may have the right to examine prior periods where net operating losses or tax credits were generated and carried forward and make adjustments up to the amount of the net operating loss or credit carryforward.

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.

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

To the extent allowed by law, the federal and state tax authorities may have the right to

examine prior periods where net operating losses or tax credits were generated and carried forward and make adjustments up to the amount of the net operating loss or credit carryforward.

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.

1 unchanged sentence

The Company determines if a contract is or contains a lease at inception.

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

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.

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

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

The letters of credit totaled $ 1.5 million and $ 2.5 million as of December 31, 2025 and 2024, respectively, and expire within a set number of days after the expirations of the facilities leases.

In connection with the Company’s office facility lease, following the fourth year of the lease, the letter of credit balance can be reduced annually by a stated amount in the lease agreement, so long as the Company complies with certain covenants.

In connection with one of the Company’s office facility lease, following the fourth year of the lease, the letter of credit balance can be reduced annually by a stated amount in the lease agreement, so long as the Company complies with certain covenants.

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.

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Amortization $ — $ 8 $ 50

Short-term lease expense — — 7

Operating lease expense:

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Assets Financial Statement Line Item 2025 2024

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

Operating lease assets Operating lease right-of-use asset $ 11,351 $ 17,239

Total lease assets $ 11,351 $ 17,239

Finance lease liabilities Accrued expenses — 23

Operating lease liabilities Accrued expenses 9,042 8,541

Finance lease liabilities Other long-term liabilities — —

Operating lease liabilities Operating lease liabilities, net of current portion 4,919 13,197

3 unchanged sentences

Weighted-average remaining lease term (in years)

Finance leases — 0.6

Operating leases 1.8 2.5

Weighted-average discount rate

Finance leases — % 2.77 %

Operating leases 2.45 % 2.29 %

Cash paid for amounts included in the measurement of lease liabilities (in thousands)

Operating cash flows used in finance leases $ — $ 1

Operating cash flows used in operating leases $ 8,943 $ 8,105

Financing cash flows used in finance leases $ 1 $ 19

The Company did no t have any non-cash ROU assets obtained in exchange for lease liabilities during the year ended December 31, 2024 for either finance or operating leases.

Future minimum lease payments required under operating and finance leases as of December 31, 2024, were as follows (in thousands):

Operating Leases Finance Leases

2025 $ 8,950 —

During the year ended December 31, 2025, ROU assets obtained in exchange for new operating lease liabilities were $ 0.8 million .

During the year ended December 31, 2025, the Company did not have any finance leases.

Future minimum lease payments required under operating leases as of December 31, 2025, were as follows (in thousands):

Operating Leases

Thereafter 67

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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 the Company's business, deliver greater impact from brand-building investments, and improve executional excellence across the enterprise.

The restructuring element of the Transformation Initiative was substantially completed by December 31, 2023.

For the year ended December 31, 2024, the Company did not incur any restructuring costs related to the Transformation Initiative.

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.

Transformation 2.0:

Powering Honest Growth

In October 2025, the Company's Board of Directors approved Transformation 2.0:

Powering Honest Growth ("Powering Honest Growth") which builds upon the Company's original Transformation Pillars of Brand Maximization, Margin Enhancement and Operating Discipline.

Powering Honest Growth is aimed at improving simplicity, focus and profitability, which includes exiting certain lower margin, non-strategic categories and channels, including exiting Honest.com fulfillment and apparel, as well as exiting retail and online stores in Canada, optimizing our cost structure by rightsizing selling, general and administrative expenses and implementing supply chain efficiencies.

Restructuring costs are one of the elements of Powering Honest Growth and are included in Restructuring on the consolidated statements of comprehensive loss:

• Contract and External Obligation Costs — include expense to terminate contracts prior to expiration, litigation and professional fees, and other costs associated with external obligations arising from restructuring.

• Employee and Personnel-Related Costs — primarily severance and other post-employment benefit costs, calculated based on salary levels, prior service, statutory minimum benefits, and other personnel-related expenses incurred as a result of restructuring.

• Asset and Other Restructuring-Related Costs — consist primarily of technology taken out of service.

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

Costs associated with Powering Honest Growth, including restructuring costs, are expected to be approximately $ 30.0 million to $ 35.0 million to be recognized through the first quarter of 2027.

Of this range, the Company expects approximately $ 5.0 million to $ 8.0 million to be related to restructuring costs, primarily comprising contractual and external obligation costs, employee and personnel-related costs and asset and other restructuring-related costs, and approximately $ 25.0 million to $ 27.0 million to be related to other costs included in cost of revenue, primarily related to a discrete inventory write-down related to exiting apparel,

fixed asset impairments, and costs associated with the warehouse closure, some of which have already been incurred.

During the year ended December 31, 2025, we have recognized $ 24.0 million of total costs related to Powering Honest Growth.

See table below for additional details of total costs.

Costs associated with Powering Honest Growth for the year ended December 31, 2025 were as follows (in thousands):

For the year ended December 31, 2025

Cost of Revenue (1)

Restructuring Costs (2)

Employee-Related Costs Asset-Related Costs Contract Terminations Total

Charges for the year ended December 31, 2023

Total $ 23,996

______________

Changes in accrued expenses as of December 31, 2024 relating to the Transformation Initiative were:

(1) The Company recorded a discrete inventory write-down of $ 15.9 million, inclusive of overhead costs and tariffs, related to exiting apparel;

machinery and equipment write-offs of $ 2.5 million;

apparel purchase commitments of $ 1.1 million;

and accelerated depreciation of $ 0.4 million which is included in cost of revenue on the consolidated statements of comprehensive loss.

(2) Refer to the restructuring table below for additional details of the costs included in restructuring costs.

Charges incurred to restructuring costs for the year ended December 31, 2025 were:

Restructuring Costs

Employee-Related Costs (1)

Contract Terminations Inventory Reserves Total

Contract and External Obligation Costs

Employee and Personnel-Related Costs

Asset and Other Restructuring-Related Costs

Charges for the year ended December 31, 2025

$ 2,523 $ 884 $ 752 $ 4,159

Changes in accrued expenses as of December 31, 2025 were:

Restructuring-Related Costs (1)

Contract and External Obligation Costs

Employee and Personnel-Related Costs

Asset and Other Restructuring-Related Costs

Balance at December 31, 2024

$ — $ — $ — $ —

Charges 2,535 852 1,147 4,534

Cash payments — — — —

Non-cash asset write-offs — — ( 2,546 ) ( 2,546 )

Other adjustments — — — —

Balance at December 31, 2025

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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.

As of December 31, 2024, there were no accrued restructuring costs outstanding.

Subsequent Events

On February 20, 2026, the Company’s Board of Directors approved the Company’s first share repurchase program for up to $ 25 million of its outstanding common stock.

Under the program, share repurchases may be made at the Company’s discretion from time to time in open market transactions or privately negotiated transactions, or by other means, including through Rule 10b5-1 trading plans.

The timing and number of shares repurchased under the new program will depend on a variety of factors, including, without limitation, stock price, trading volume, and general business and market conditions.

The repurchase program does not obligate the Company to purchase any shares, has no expiration date and may be modified, suspended or terminated at any time.

The Company expects to fund repurchases with a combination of existing cash and cash equivalents and cash flows from operations.

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