BIRD 10-K & 10-Q changes, risk factors and insider trading

•We may be unable to successfully execute on our strategic transformation plan or our long-term growth strategy, including efforts to maintain or grow our current revenue and profit levels, reduce our costs, or accurately forecast demand and supply for our products.

•Our effortsreliance toon transitionthird-party ourdistributors for international go-to-market strategy from a direct model to a distributor model may not be successful andsales may negatively impact our operating results and brand value.

•Our business is subject to the risk of manufacturer concentration.concentration and our suppliers’ and manufacturers’ ability to provide materials for, and to produce, our products.

•Our business depends on our ability to maintain a strong community of engaged customers, including through the use of social media. We may be unable to maintain and enhance our reputation and brand if we experience negative publicity related to our marketing efforts or use of social media,publicity, or otherwise fail to meet our customers’ expectations.

Risks Related to Our Financial Condition, Business, Brand, Products, and Industry

We may be unable to successfully execute on our strategic transformation plan or our long-term growth strategy, including efforts to maintain or grow our current revenue and profit levels, reduce our costs, or accurately forecast demand and supply for our products.

Successfully executing our long-term growth and profitability strategy and maintaining our revenue and profit levels or growing them in the future will depend on many factors, including our ability to:

•continue growth within our existing customer base and increase closet share by focusing on our core franchise products;

Our success depends in large part upon widespread adoption of our products by our customers. In order to attract new customers and continue to expand our customer base, we must appeal to and attract customers who identify with our comfortable and sustainable footwear and apparel products. If the number of people who are willing to purchase our products does not continue to increase, if we fail to deliver a high quality shopping experience, if our third-party arrangements are not successful, if we make products that our customers do not buy in sufficient quantities, or if our current or potential future customers are not convinced that our products are superior to alternatives, then our ability to retain existing customers, acquire new customers, and grow our business may be harmed.

We have made significant investments in enhancing our brand and attracting new customers, and we expect to continue to make significant investments to promote our products, including in connection with our strategic transformation plan for our focused product strategy. Such campaigns can be expensive and may not result in new customers or increased sales of our products. Further, as our brand becomes more widely known, we may not attract new customers or increase our net revenue at the same rates as we have in the past.revenue. If we are unable to acquire new customers who purchase products in numbers sufficient to grow our business, we may not be able to generate the scale necessary to drive beneficial network effects with our suppliers, our net revenue may decrease, and our business, financial condition, and results of operations may be materially adversely affected.

We were founded in May 2015 and first sold our products in 2016. As a result of our relatively limited operating history as well as our evolving business strategies, including our recent strategic transformation plan, our ability to accurately forecast our future results of operations is limited and subject to a number of uncertainties, including our ability to plan for and model future growth. Our historical revenue growth has been inconsistent, was derived from a more concentrated number of geographies, and should not be considered indicative of our future performance. Further, in future periods, our revenue growth could slow or our revenue could decline for a number of reasons, including changes in our business operations and strategy (such as our transition to a distributor model in a given territory), a decline in demand for our products, an increase in competition, a decrease in the growth of our overall market, our entry into new geographies where our prior operating history is less relevant or predictive, or our failure, for any reason, to continue to capitalize on growth opportunities. In addition, we regularly release new products and it is difficult to predict the commercial success of newly released products. For example, we have, and may in the future, recognize non-cash inventory write-downs in our consolidated statement of operations and comprehensive loss, primarily relating to products which we are unable to sell through as planned. In 2023 and 2024, we entered into asset purchase agreements for the sale of certain net assets used in connection with the operations of our businesses in South Korea, Canada, New Zealand and China, respectively, resulting in losses based on the difference between the net book value of assets and liabilities sold against the consideration received; we may experience similar losses in connection with future transitions to a distributor model. We have also encountered, and will continue to encounter, risks and uncertainties frequently experienced by growing companies in rapidly changing industries, such as the risks and uncertainties described herein. If our assumptions regarding these risks and uncertainties (which we use to plan our business) are incorrect or change due to (i) changes in our market or the geographies where we operate and where we sell our products or (ii) changes to our business models, or if we do not address these risks successfully, our operating and financial results could differ materially from our expectations, and our business could suffer. The impact of one or more of the foregoing and other factors may cause our results of operations to vary significantly. As such, period-over-period comparisons of our results of operations may not be meaningful and should not be relied upon as an indication of future performance.

Because weour business model has evolved significantly in recent years, including our transition to a distributor model in certain territories and reductions to our retail footprint, historical results may have a limited historypredictive operatingvalue ourfor business, it is difficult to evaluateevaluating our current business and future prospects,prospects. includingThis our ability to plan for and model future growth. Our limited operating experience,evolution, combined with the rapidly evolving nature of the marketmarkets in which we sell our products, substantial uncertainty concerning how these markets may develop, and other economic factors beyond our control, reduces our ability to accurately forecast quarterly or annual revenue. Failure to manage our future growth effectively could have an adverse effect on our business, financial condition, and operating results.

Fluctuations in our results of operations may be particularly pronounced in the current economic environment due to the uncertainty caused by consumer spending patterns, inflationary pressures, liquidity concerns at, and failures of, banks and other financial institutions, overall economic conditions, and geopolitical events, such as wars in Iran, Ukraine and Israel. Fluctuations in our results of operations may cause those results to fall below our financial guidance or other projections, or the expectationsMiddle of analysts or investors.East.

On June 30, 2025, we entered into a secured $50.0 million revolving credit agreement with Second Avenue Capital Partners LLC (the “Credit Agreement”). Our Credit Agreement is an asset-backed loan agreement subject to a borrowing base formula, which may restrict the amount available to borrow based on the value of our eligible assets. The Credit Agreement imposes significant operating and financial restrictions.restrictions, including these borrowing base limitations. These covenants may limit our ability and the ability of our subsidiaries, under certain circumstances, to, among other things:

Our effortsreliance toon transitionthird-party ourdistributors for international go-to-market strategy from a direct to a distributor model may not be successful andsales may negatively impact our operating results and brand value.

We have transitioned our international go-to-market strategy from a direct model to a distributor model in all markets, except the United Kingdom. In September 2023, we entered into agreements with unaffiliated distributors in Canada and South Korea to acquire certain assets related to our operations in these regions. In 2024, we entered into agreements with unaffiliated distributors in Japan, Australasia, and China to acquire certain assets related to our operations in these regions. In July 2025, we transitioned our direct to a consumer European business to a third-party distributor. These distributors now manage our existing stores and sell our products through various channels, including retail stores and eCommerce platforms, under our brand names within their respective territories. Since we have relatively limited experience with third-party distribution arrangements,arrangements and limited control over the distributors, we cannot guarantee their success. While this model currentlyprovides representsoperational aflexibility, smallit portionalso ofcreates reliance on third parties whose performance is outside our business,direct we plan to expand its use to additional countries over time.control.

IfIn weconnection arewith unableour transition to execute these distributor arrangements effectively or protect our brand reputation, our operating results could suffer materially. Additionally, as part of a transition from a direct to athe distributor model in certain2023, countries,2024, and 2025, we may incurincurred expenses and charges, including but not limited to, thosecharges associated with employees, inventory, leasesleases, and long-lived assets,assets. thatWhile we do not anticipate significant additional transition-related charges, our ongoing reliance on distributors subjects us to the risks described above, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

Our products may be considered discretionary items for consumers. Factors affecting the level of consumer spending for such discretionary items include general economic conditions and other factors such as interest rates, inflation, consumer confidence in future economic conditions, fears of recession and trade wars, the availability and cost of consumer credit, future pandemics or public health crises, international trade relations, domestic and international geopolitical turmoil, geopolitical events, lower corporate earnings, reductions in business confidence and activity, levels of unemployment, and tax rates. As global economic conditions continue to be volatile or economic uncertainty remains, and with increasing inflation and interest rates and liquidity concerns, and failures of banks and other financial institutions,rates, trends in consumer discretionary spending also remain unpredictable and subject to reductions as a result of significant increases in unemployment, financial market instability, uncertainties about the future, and other factors. Unfavorable economic conditions have led and, in the future, may lead consumers to delay or reduce purchases of our products. Consumer demand for our products may also decline as a result of store closures, an economic downturn, or economic uncertainty in our key markets, particularly in North America, Europe, and Asia. Our sensitivity to economic cycles and any related fluctuation in consumer demand may have a material adverse effect on our business, results of operations, and financial condition.

We incurred full year net losses of $93.3 million and $152.5 million in 2024 and 2023, respectively, and had an accumulated deficit of $484.5 million as of December 31, 2024. We expect to continue to incur significant losses in the future. We will need to generate and sustain increased revenue levels in future periods to achieve profitability, and even if we achieve profitability, we may not be able to maintain or increase our level of profitability. Although the strategic transformation plan announced in March 2023 includes cost and cash optimization efforts, ourOur operating expenses may increase substantially in the future as we continue to, among other things:

•incur significant accounting, legal, and other expenses as a public company that we did not incur as a private company.

ClimateShifting changefocus and increasedsentiment focusamong bycertain governments, organizations, customers, and investors on sustainability issues, including those related to climate change and socially responsible activities, may adversely affect our reputation, business, and financial results.

Investor advocacy groups, certain institutional investors, investment funds, other market participants, stockholders, and stakeholders have focused increasingly on the environmental, social, and governance, or ESG, and related sustainability practices of companies. These parties have placed increased importance on the implications of the social cost of their investments. In addition to our status as a PBC and certified B Corporation, or B Corp, we are focused on being an ESG leader in our industry. If our ESG practices do not meet investor or other stakeholder expectations and standards (which are continually evolving and may emphasize different priorities than the ones we choose to focus on), or if our ESG practices, including our periodic reporting, change or otherwise do not live up to our own values or ESG- and sustainability-related goals, then our brand, reputation, and employee retention may be negatively impacted. It is possible that stakeholders may not be satisfied with our ESG practices or the speed of their adoption. WeConversely, couldas alsocertain incursegments additionalof costsmarket sentiment shift away from ESG priorities, our continued focus on and requirepublic additional resourcescommitment to monitor, report, and comply with various ESG practices andmay regulationsitself andpresent risks, including the potential loss of investors or customers who view ESG commitments as contrary to achievemaximizing ourfinancial sustainabilityreturns, goals. Also, our failure,reputational or perceivedpolitical failure,risks to manage reputational threats and meet expectationsassociated with respectbeing toperceived sociallyas responsiblean activitiesESG-focused and sustainability commitments could negatively impact our brand credibility, employee retention,company, and the willingnessrisk ofthat our customersstock andownership suppliersbase tobecomes domore businessconcentrated withamong us.ESG-focused investors whose sentiment or investment mandates may change over time.

Our success depends on our ability to identify, originate, and define product trends within the footwear industry, as well as to anticipate, gauge, and react to changing consumer preferences in a timely manner. However, lead times for many of our products may make it more difficult for us to respond rapidly to new or changing product trends or consumer preferences. For example, our lead times may be longer due to our preference for ocean shipping and other more sustainable supply chain practices to reduce carbon emissions, which may take longer and be more expensive than less sustainable alternatives. If we are unable to introduce new products in a timely manner, or our new products are not accepted by consumers, our competitors may introduce similar products in a more timely fashion, which could hurt our goal to be viewed as a leader in comfortable and sustainable footwear and apparel. All of our products are subject to changing consumer preferences regarding footwear and apparel, generally, and sustainable footwear and apparel, specifically, that cannot be predicted with certainty. Our new products may not receive consumer acceptance as consumer preferences could shift rapidly to different types of styles and our future success depends in part on our ability to anticipate and respond to these changes. For example, in the past,2025, we didrefreshed notcertain successfullyfoundational anticipateproduct customerfranchises, demandincluding our original runner, and preferences in designing and launching certainsales of ourthese apparelupdated products andhave asbeen aslower result,to werebuild athan our overall apparel strategy and discontinue certain product lines.anticipated. If we fail to anticipate accurately and respond to trends and shifts in consumer preferences, we could experience lower sales, excess inventories, or lower profit margins, any of which could have an adverse effect on our results of operations and financial condition.

We receive a significant number of visits to our digital platform via social media or other channels used by our existing and prospective customers. As eCommerce and social media continue to rapidly evolve, we must continue to establish relationships with these channels and may be unable to develop or maintain these relationships on acceptable economic and other terms. In addition, we currently receive a significant number of visits to our website and mobile app via search engine results. Search engines frequently change the algorithms that determine the ranking and display of results of a user’s search, which could reduce the number of visits to our website, in turn reducing new customer acquisition and adversely affecting our results of operations. If we are unable to cost-effectively drive traffic to our digital platform, our ability to acquire new customers and our financial condition would suffer. Email marketing efforts are also important to our marketing efforts. If we are unable to successfully deliver emails to our customers or if customers do not engage with our emails, whether out of choice, because those emails are marked as low priority or spam, or for other reasons, our business could be adversely affected. Our marketing initiatives have become increasingly expensive and may continue to increase in cost, and generating a meaningful return on those initiatives may be difficult or unpredictable. Even if we successfully increase net revenue as a result of our marketing efforts, it may not offset the additional marketing expenses we incur.

We generate our revenue via sales of footwear and apparel products, primarily through our direct business, a digitally-led vertical retail distribution strategy. We generally market directly to consumers via our localized digital platform and our physical footprint of 33 stores as of December 31, 2024.platform. In addition to our direct business, we selectively partner with third parties, including distributors and retailers, to sell our products through their channels, which helps us reach more consumers and increase brand awareness.

The ability to communicate our mission of making better things in a better way is integral to our success in engaging new customers and introducing them to our products and brand. Allbirds is still relatively unknown to consumers worldwide, underscoring a large opportunity to scale our customer base and drive future growth. Our continued focus on elevating our product offerings combined with our differentiated brand approach and authenticity is critical to attracting new customers and increasing closet share. Further, we must continue to emphasize our commitment to people, the planet, and our stockholders in order to further increase our reach and highlight the integrity of our brand. We believe our brand strength will enable us to continue to grow brand awareness, allowing us to deepen relationships with consumers and expand our access to global markets.

In addition to seeking to acquire new customers, we continuously seek ways to engage with our base of existing customers. We aim to grow our closet share within our existing customer base by focusing and developing on our core franchises.franchises Weand believe we must continue to both innovate withintroducing new products andwe focusbelieve onwill coreresonate products in order to drive consumer engagement and increasewith our closet share.customers. While we continue to do this, we must constantly evaluate and improve our strategy to anticipate current and future consumer preferences and demands. At the same time, it is critical that we maintain our commitment to offering comfortable and sustainable products. Our product strategy is focused on our core franchise products. Our growth within our existing customer base will depend in part on our success focusing our product strategy to appeal to our existing customers.

We generate net revenue primarily from sales of our footwear and apparel products. We sell products directly through our own digital channels (including our websites, our discontinued mobile app, and marketplace platforms), our leased retail stores, and third-party retailers and distributors. As of December 31, 2024,2025, the majority of our sales are through our direct channels. Revenue is recognized when we satisfy our performance obligation by transferring control of the promised goods to the customer, net of allowances for returns, discounts, and any taxes collected from customers. This occurs either upon shipment or upon receipt, depending on the terms of sale. We expect overall sales in 2025 to be in line with 2024, primarily driven by demand for new products in the fourth quarter of the year, offset by the impacts of our international distributor transitions, retail store closures, and sales trends in our direct business in the first three quarters of the year.

Gross profit represents net revenue less the cost of revenue. Gross margin is gross profit expressed as a percentage of net revenue. Our gross margin may fluctuate from period to period based on a number of factors, including business outcomes, the mix of products we sell in different geographies and channels, price increases, promotional activities, the innovation initiatives we undertake in each product category, cost drivers (including commodity prices, transportation rates, manufacturing costs), and inventory write-downs or write-offs, among other factors. We expect gross margin improvement in 2025.

Marketing expense consists of advertising costs incurred to acquire new customers, retain existing customers, and build our brand awareness. We expect marketing expense to increase in 2025 as we are prioritizing our marketing spend to align with our product strategy.

Impairment expense consists of non-cash impairment charges relating to equity investments and long-lived assets,assets which include(including property and equipment and operating lease right-of-use assets.assets) and equity investments.

Restructuring expense consists of professional service fees, severance and other employee-related benefits, professional service fees, and other miscellaneous costs associated with exit and disposal activities.

Interest (Expense) Income

Interest expense is primarily associated with our credit agreement with Second Avenue Capital Partners, which we refer to as our Credit Agreement. Interest income primarily consists of interest income generated from our cash and cash equivalents, offset by interest expense associated with our credit agreement with JPMorgan Chase Bank, N.A, which we refer to as our Credit Agreement.equivalents. We expect interest income and expense to fluctuate based on our future bank balances, credit line utilization, and the interest rate environment.

Other Income (Expense)

Other income (expense) consists of gains or losses on lease terminations and modifications, gains or losses on foreign currency, gains or losses on sales of property and equipment, and changes in the fair value of our equity investments.

Net revenue decreased by $64.3$37.3 million, or 25.3%,19.7%, for the year ended December 31, 20242025 as compared to the year ended December 31, 2023.2024. Our net revenueThe decrease was primarily driven by lowera unitdecrease sales withinin our U.S. direct business,business of $23.1 million, driven by declines in our retail and e-commerce businesses resulting from store closures. Net revenue also declined in our international distributorbusiness transitionsby and$11.9 retailmillion, storeprimarily closures.due to our transition to third-party distributors.

Cost of revenue decreased by $41.1$18.8 million, or 27.5%,17.3%, for the year ended December 31, 20242025 as compared to the year ended December 31, 2023.2024. The decrease was primarily driven by lowerdecreases in product costs of approximately $12.5 million, freight costs of approximately $2.7 million, and distribution center expenses of $2.5 million, which were all driven by fewer unit sales in our U.S. direct businessbusiness, the shift to international distributors, and lowerU.S. freightretail andstore dutyclosures. costsThe perdecreases unit.were partially offset by approximately $1.0 million of increased duties costs.

Gross profit decreased by $23.2$18.5 million, or 22.2%,22.8%, in the year ended December 31, 20242025 as compared to the year ended December 31, 2023.2024. The decrease in gross profit was primarily driven by the decreasedecreases in net revenue and associated cost of revenue.

Gross margin improveddeclined to 42.7%41.0% from 41.0%42.7% for the year ended December 31, 20242025 as compared to the year ended December 31, 2023,2024, primarily due to lowera freighthigher mix of digital and dutyinternational costs,distributor fewersales, inventoryas adjustmentswell as increased duties and a higherlower average selling priceprices in our directU.S. business.

Selling, general, and administrative expense decreased by $40.7$40.9 million, or 23.4%,30.7%, for the year ended December 31, 20242025 as compared to the year ended December 31, 2023.2024. The decrease was primarily driven by a $11.4$18.3 million decrease in personnel and related expenses, ana $8.6$10.0 million decrease in rent and utilities, a $4.4 million decrease in depreciation and amortization, and a $7.9$3.7 million decrease in stock-based compensation, and a $6.2 million decrease in rent and utilities, as well as reductions in other types of operating expenses.

Marketing expense decreasedincreased by $7.4$3.6 million, or 15.1%,8.6%, for the year ended December 31, 20242025 as compared to the year ended December 31, 2023.2024. The decreaseincrease was primarily driven by decreasedan digitalinvestment advertisingin spendupper forfunnel performancemarketing marketing.initiatives in the first quarter of the year.

Impairment expense decreasedincreased by $25.6$2.4 million for the year ended December 31, 20242025 as compared to the year ended December 31, 2023,2024, primarily as a result of prior yeara non-cash impairment of property and equipment and operating lease right-of-use assets associated with certain of our retail stores of $27.4$3.5 million, partially offset by the prior year impairment of an equity investment of $1.8 million.

Restructuring expense decreased by $5.0$1.2 million for the year ended December 31, 20242025 as compared to the year ended December 31, 2023, and consisted2024, primarily resulting from fewer costs incurred in 2025 as part of our Marchstrategic 2023initiatives. In 2025, restructuring expenses related to severance and other employee-related benefits were incurred as a result of strategic transformationactions plan.taken in the fourth quarter. In the prior year, restructuring expenses related to severance and other employee-related benefits, and professional service fees.

OtherInterest (Expense) Income

OtherInterest (expense) income increasedchanged by $3.5$4.6 million, from income to expense, for the year ended December 31, 2024 resulting in income in 20242025 as compared to expense in the year ended December 31, 2023.2024. The increasechange was primarily duedriven by a decrease in interest income of approximately $3.5 million on our money market funds and an increase in interest expense relating to fluctuationsour inCredit foreign currency.Agreement.

Income tax provision increaseddecreased by $1.5 million, or 460.2%,79.0%, for the year ended December 31, 20242025 compared to the year ended December 31, 2023,2024, primarily due to the mix of taxable income in foreign jurisdictions that resulted in differences in the effective tax rates and a change in the valuation allowance.

Adjusted EBITDA is defined as net loss before stock-based compensation expense, depreciation and amortization expense, impairment expense, restructuring expense (consisting of professional fees, severancepersonnel payments,and related expenses, and other related charges resulting from our August 2022 and March 2023strategic initiatives), non-cash gains or losses on the sales of businesses relating to our March 2023strategic initiatives, other income or expense (consisting of non-cash changes in the fair value of our equity investments, non-cash gains or losses on foreign currency, non-cash gains or losses on sales of property and equipment, and non-cash gains or losses on modifications or terminations of leases), interest income or expense, and income tax provision or benefit.

Adjusted EBITDA margin declined from (30.936.9)% to (36.939.0)% in the year ended December 31, 20242025 compared to the year ended December 31, 2023.2024. The change was primarily driven by the decline in revenue year over year.year, partially offset by the same factors as noted in the adjusted EBITDA discussion above.

You should carefully consider the risk factors set forth below and those risk factors associated with our existinghistorical footwear business contained in our Annual Report on Form 10-K for the year ended December 31, 2025 and our subsequent U.S. Securities and Exchange Commission (the “"SEC”") filings. You should carefully consider the risks and uncertainties described below, together with all of the other information in this Quarterly Report on Form 10-Q, including our condensed consolidated financial statements and related notes included in Part I, Item 1, and the section titled “Management’s"Management's Discussion and Analysis of Financial Condition and Results of Operations”" included in Part I, Item 2. The occurrence of any of the events or developments described below could materially and adversely affect our business, financial condition, results of operations, and growth prospects. In such an event, the market price of our Class A common stock could decline, and you may lose all or part of your investment. The specific risk considerations described below are not the only ones facing us. Additional risks and uncertainties not presently known to us or that we currently believe are not material may also impair our business, financial condition, results of operations, and growth prospects.

Risk Factors Relating to Our Anticipated ElectronicsAI Infrastructure Business

We have nolimited operating history in the anticipated ElectronicsAI Infrastructure Business, and our new business plan may not be successful.

WeOur arebusiness pursuing an Electronics Infrastructure Businessis focused on the acquisition and monetization of graphics processing units, related high-performance computing infrastructure and other related assets. While certain members of our boardBoard and management team have relevant experience, we have noonly a limited operating history in this business as a company. As a result, investors will have limited basis on which to evaluate our prospects in this new business. We may be unable to retain existing employees or attract new employees with the expertise necessary to operate the anticipated ElectronicsAI Infrastructure Business.

Our anticipated ElectronicsAI Infrastructure Business is subject to all of the risks, uncertainties and difficulties frequently encountered by start-up companies and companies entering a new and rapidly evolving market, many of which are beyond our control. We may fail to identify attractive opportunities, acquire suitable ElectronicsAI Assets,Infrastructure, develop a viable operating model, generate revenue, achieve profitability or create stockholder value. If we are unable to execute this business plan successfully, our business, financial condition, results of operations and prospects could be materially and adversely affected, and the value of our Class A common stock could decline substantially.

Our ElectronicsAI Infrastructure Business is highly speculative, uncertain, unproven and subject to change, and we may be unable to implement it successfully or at all.

Our anticipated ElectronicsAI Infrastructure Business is at a veryan early stage of development. We arehave investigatingcommenced potentialinitial opportunities in the computing infrastructure market,operations, but our plans remain preliminary and may change materially.change. The anticipated ElectronicsAI Infrastructure Business is uncertain, unproven, and subject to significant risks. Because our strategy is evolving, we are required to make significant assumptions regarding market conditions, customer demand, competition, asset pricing, financing availability, utilization, operating costs, monetization opportunities, technological developments and other factors. These assumptions, among many others, may prove to be incorrect. Even if we are able to acquire Electronicsadditional AssetsAI Infrastructure and beginexpand operations, we may be unable to establish profitable or sustainable business lines. If our assumptions are incorrect or if our strategy changes materially, our business, financial condition, results of operations and the market price of our Class A common stock could be materially adversely affected.

Following closing of the Asset Sale, we willWe have sold all of the assets ofassociated thewith our historical footwear business we historically operated and weare will benow operating a businessnew business, our AI Infrastructure Business, that differs from our primary historical footwear business.

The Asset Sale involvesinvolved the sale of the assets relating to our existinghistorical footwear business and a significant amount of our historical operating assets. As a result,result followingof the closing of the Asset Sale, we will no longer operate the business with which investors have historically associated the Company. Instead, we will beare operating new assets in a different business.

We will need to expand orand build substantial parts of our business, including strategy, personnel, processes, controls, systems, counterparties, customer relationships, vendor relationships, branding and market positioning. We may not be successful in doing so. Companies attempting a transition of this magnitude often encounter unforeseen costs, delays, execution issues and strategic failures. If our continuing business does not develop successfully, we may fail to generate meaningful revenue, incur substantial losses, need to raise additional capital on unfavorable terms, need to declare bankruptcy, or pursue additional strategic alternatives. Any such outcome could materially and adversely affect our stockholders.

We may fail to transition successfully from a consumer products company to aan computingAI infrastructure company.

The successful operation of aan computingAI infrastructure business requires capabilities that differ substantially from those required to operate a consumer footwear and apparel business. These capabilities may include, among other things, expertise in sourcing and evaluating specialized computing equipment, structuring leases and sale/lease-back transactions, understanding enterprise and institutional customer needs, managing technology asset life cycles, evaluating utilization and residual value risk, negotiating technical services and hosting arrangements, complying with industry-specific laws and regulations and managing specialized technical and operational risks.

Our disclosures regarding our anticipated business necessarily involve substantial estimates and assumptions and may become inaccurate or incomplete as circumstances evolve.

Because our anticipated ElectronicsAI Infrastructure Business is at an early stage, our public disclosures regarding the business, opportunities, risks, economics, financing needs, market demand, asset acquisition plans, monetization strategies and expected results necessarily depend on estimates, expectations and assumptions that may prove to be incomplete, inaccurate or subject to rapid change. In many cases, we may have only limited operating experience or third-party information on which to base such judgments. As a result, subsequent developments may differ materially from what is described in our public filings. If investors, regulators, counterparties or other stakeholders believe that our disclosures were incomplete, insufficiently qualified, overly optimistic or otherwise misleading, we could face reputational harm, litigation, regulatory scrutiny, stock price volatility and other adverse consequences. Any such developments could materially adversely affect our business and financial condition.

The anticipated ElectronicsAI Infrastructure Business may never generate meaningful revenue, achieve profitability or produce positive cash flow.

Our anticipated ElectronicsAI Infrastructure Business may requirerequires substantial upfront capital expenditures, ongoing operating expenditures and significant management attention before it generates any material revenue, if at all. There can be no assurance that we will be able to generate customer demand, establish commercially reasonable pricing, maintain satisfactory utilization rates, structure profitable monetization arrangements or achieve sufficient scale to cover our costs.

Even if we generate revenue, our costs may be greater than we expect, including costs associated with acquiring ElectronicsAI Assets,Infrastructure, financing, maintenance, logistics, hosting, insurance, professional services, regulatory compliance, public company obligations, personnel and litigation. As a result, we may continue to incur losses for an extended period or indefinitely, and we may never achieve profitability or positive cash flow. If that occurs, the value of our business and our Class A common stock could decline materially.

We will face intense competition from larger, more experienced and significantly better-capitalized companies, and we may be unable to compete effectively.

The computingAI infrastructure market is intensely competitive and evolving rapidly. We expect to compete, directly or indirectly, with a range of participants, including large technology companies, cloud service providers, infrastructure operators, data center operators, equipment owners and lessors, investment firms, financial sponsors and other market participants with substantially greater financial, technical, operational and managerial resources than we have.

Many of these competitors have significantly longer operating histories, more established brands, deeper customer relationships, superior access to capital, better procurement terms, more sophisticated technical capabilities, more extensive infrastructure and greater tolerance for risk than we do. These competitors may be able to acquire ElectronicsAI AssetsInfrastructure at lower cost, offer more attractive pricing or commercial terms, absorb volatility more effectively, deploy assets more quickly and secure customers and strategic relationships more successfully than we can. Our limited resources relative to these competitors may materially impair our ability to compete, generate revenue and create stockholder value.

After the Asset Sale, ourOur available cash, remaining assets and organizational resources will be extremelyare limited. The anticipated ElectronicsAI Infrastructure Business will likely requirerequires significant capital, personnel, systems and third-party relationships. Larger and more established companies may have access to more favorable financing, stronger supplier relationships, greater technical expertise, lower cost structures and more diversified revenue streams.

Because our resources are expected to be substantially more limited than those of many competitors and counterparties in this market, we may be unable to pursue attractive opportunities, withstand pricing pressure, tolerate delays in monetization, absorb operational setbacks or respond effectively to changes in market conditions. If we are unable to compete effectively due to our comparatively limited resources, our business, financial condition and prospects could be materially adversely affected.

Our ability to execute the anticipated ElectronicsAI Infrastructure Business will depend on our ability to obtain substantial capital, and such capital may not be available on acceptable terms or at all.

The acquisition and monetization of ElectronicsAI AssetsInfrastructure maywill require substantial capital and the proceeds from the Facility may not be sufficient to fund our strategy, operations or liquidity needs,capital, and we may require additional debt or equity financing sooner than we currently expect.financing. We expect to continue to incur significant cash needs, including for personnel costs, public company costs, professional fees, transaction expenses, working capital, debt service and the costs of attempting to develop the anticipated ElectronicsAI Infrastructure Business. Our cash resources may be exhausted more quickly than we expect, and we may run out of cash before we are able to secure additional financing.

Capital markets conditions, our limited operating history in the anticipated ElectronicsAI Infrastructure Business, the speculative nature of our strategy, trading volatility in our Class A common stock, our financial condition, investor sentiment regarding our transition and other factors may make it difficult or impossible for us to obtain additional capital on terms that are acceptable to us, or at all. If financing is unavailable or available only on unfavorable terms, we may be forced to delay or abandon acquisitions, curtail operations, sell assets at unattractive prices, issue additional equity that is highly dilutive, incur restrictive indebtedness, drastically reduce expenses, cease operations, declare bankruptcy, or pursue other strategic alternatives. If we are unable to raise capital when needed, we may run out of cash. Any of these outcomes could materially adversely affect our business and stockholders.

Operating Expensecosts and expenses

Selling, general, and administrative expense (“"SG&A expense”") consists of personnel and related costs including salaries, benefits, bonuses, and stock-based compensation for our corporate and retail employees,compensation, third-party professional fees, information technology, payment processing fees, fixedadvertising and variablemarketing lease costs for corporate offices and retail stores, depreciation and amortization,expenses, software costs, legal fees, and other administrative costs associated with operating the business.

Interest (Expense) Income

Other IncomeExpense, Net

Income Tax Benefit (Provision)

Our provision for income taxes consists of U.S. federal and state income taxes and income taxes in certain foreign jurisdictions in which we conductpreviously conducted business. We record deferred tax assets and liabilities based on differences between the book and tax bases of assets and liabilities. The deferred tax assets and liabilities are calculated by applying enacted tax rates and laws to taxable years in which such differences are expected to reverse. Because we have a recent history of pre-tax book losses and are expected to be in a pre-tax book loss position in the near term, a valuation allowance was maintained against the deferred tax assets in all jurisdictions other than in the United Kingdom as of MarchJune 31,30, 2026.

Comparison of the Three Months Ended MarchJune 31,30, 2026 and 2025

Cost ofNet revenue decreasedincreased by $1.6$2.8 million, or 9.0%,million for the three months ended MarchJune 31,30, 2026 as compared to the same period in 2025.2025, Theas decreasethe wasCompany primarilydid attributablenot tooperate fewerthe unitAI salesInfrastructure Business, our ongoing operations, in our U.S. direct business, partially offset by the netprior impact of inventory adjustments and higher duty costs.period.