Seasonality of Business and Product Mix

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

opportunities identified using AIMEE (Artificial Intelligence Marketplace

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

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

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

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

fulfillment, online advertising and selling expenses. These costs primarily

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

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

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

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

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

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

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

to its competition. Products in the milk phase that have achieved

profitability should benefit from pricing power and we expect their

profitability to increase accordingly. To date, none of our products have

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

Research and Development Expenses-Research and development expenses include compensation and employee benefits for technology development employees, travel-related costs and fees paid to outside consultants related to the development of our intellectual property.

Comparison of the Three Months Ended June 30, 2021 and 2022

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

Sales and distribution expenses $ 1,569 $ 2,882 Research and development expenses

Home office products accounted for $3.3 million in net revenue for the three months ended June 30, 2022 compared to $2.7 million in net revenue for the corresponding period in 2021, an increase of $0.6 million primarily due to growth in our existing products and new products obtained through M&A businesses.

Cost of Goods Sold and Gross Profit

Sales and distribution expenses $ 39,310 $ 31,866 $ (7,444 ) -18.9 %

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

General and administrative expenses $ 9,990 $ 9,571 $ (419 ) -4.2 %

Change in fair value of contingent earn-out liabilities

Change in fair value of contingent earn-out liabilities $ (23,349 ) $ (1,691 ) $ 21,658

Loss on extinguishment of debt

Loss on extinguishment of debt $ 29,772 $ - $

Change in fair market value of warrant liability

Change in fair value of derivative liability

Comparison of the Six Months Ended June 30, 2021 and 2022

Sales and distribution expenses $ 2,524 $ 3,229 Research and development expenses

Heating, cooling and air quality $ 32,980 $ 29,656 Kitchen appliances

Home office products accounted for $7.0 million in net revenue for the six months ended June 30, 2022 compared to $3.5 million in net revenue for the corresponding period in 2021, an increase of $3.5 million primarily due to growth in our existing products and new products obtained through M&A businesses.

Cost of Goods Sold and Gross Profit

Sales and distribution expenses $ 64,379 $ 54,840 $ (9,539 ) -14.8 %

Research and development expenses $ 4,452 $ 2,877 $ (1,575 ) -35.4 %

The decrease in research and development expenses was primarily attributable to a decrease of stock-based compensation expense of approximately $1.2 million.

General and administrative expenses $ 20,965 $ 19,112 $ (1,853 ) -8.8 %

capitalization. During the three months ended the company did not have an interim triggering event and as such did not record any additional impairment of goodwill for the three months ended June 30, 2022

Change in fair value of contingent earn-out liabilities

Gain on extinguishment of seller note

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

Loss on initial issuance of equity

Change in fair market value of warrant liability

Change in fair value of derivative liability

Loss on extinguishment of debt

Cash Flows for the Six Months Ended June 30, 2021 and 2022

The following table provides information regarding our cash flows for the six months ended June 30, 2021 and 2022, respectively:

(602 ) Net change in cash and restricted cash for period $ 33,966 $ (1,260 )

Net Cash Used in Operating Activities

For the six months ended June 30, 2022, net cash used in investing activities was less than $0.1 million.

Net Cash Provided by Financing Activities

As of June 30, 2022, we had approximately $34.0 million outstanding on the MidCap Credit Facility and $1.9 million of availability on the MidCap Credit Facility.

• our capital expenditures or future requirements for capital expenditures or

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

expense or principal payments, associated with indebtedness;

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

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

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

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

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

• general and administrative expense necessary to operate our business;

• research and development expenses necessary for the development, operation

and support of our software platform;

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

Adjusted EBITDA and Contribution Margin Summary

Critical Accounting Policies and Use of Estimates

Subsequent Measurement of Goodwill- We operate under one business component which is the same as our reporting unit based on the guidance in ASC Topic 350-20.

Goodwill was $120.0 million and $90.9 million, at December 31, 2021 and June 30, 2022, respectively.

We believe that the assumptions and estimates made are reasonable and appropriate, and changes in the assumptions and estimates could have a material impact on our reported financial results.

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