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

On January 23, 2024, to refinance existing obligations, wePurple LLC, Purple Inc. and Intellibed (collectively, the “Loan Parties”) entered into a Second Amendment to Term Loan Agreement (the “Second Amendment”) and an Amendedamended and Restatedrestated Creditcredit Agreementagreement (the “Amended and Restated Credit Agreement”), which amended and restated the then existing term loan agreement (“Term Loan Agreement”), with Coliseum Capital Partners, L.P.Partners (“CCP”), Blackwell Partners LLC – Series A (“Blackwell”), Harvest Small Cap Partners Master, Ltd.(“Harvest Master”), Harvest Small Cap Partners, L.P. (“Harvest Partners”), and HSCP Strategic IV, L.P.other lenders (“HSCP” and together with CCP, Blackwell, Harvest Master, and Harvest Partners,collectively, the “Lenders”). and Delaware Trust Company, as administrative agent. Upon entry into the Amended and Restated Credit Agreement, we received a term loan in the amount of $61.0 million. The Amended and Restated Credit Agreement imposes various affirmative and negative covenants, including covenants regarding dispositions of property, investments, forming or acquiring subsidiaries, business combinations or acquisitions, incurrence of additional indebtedness, paying dividends or making distributions and transactions with affiliates, among other customary covenants.

These restrictions may prevent us from taking actions that we believe would be in the best interests of the business and complicate our ability to execute our business strategy or compete with less restricted companies. If we fail to comply with the covenants under the Amended and Restated Credit Agreement, we may need to seek future amendments or waivers and/or alternative liquidity sources, such as subordinated debt, which may not be favorable or available. Before taking any action requiring a waiver under the Amended and Restated Credit Agreement, we must first obtain approval from the Lenders, which may cause us to incur additional costs and may not be granted. Non-compliance could lead to defaults, which could materially adversely affect our financial condition and results of operations, including possible acceleration of our debtdebt, and, as well as other cross-defaulting debt obligations. Additionally, defaults could significantly impair our ability to secure alternative financing and limit our business strategies. Our compliance with these covenants will depend on successfully implementing our business strategy,strategies, as breaches could lead to defaults and acceleration of our debt, potentially forcing us into bankruptcy or liquidation.

In addition, on March 12, 2025, wethe Loan Parties, entered into anthe First Amendment to the Amended and Restated Credit Agreement (the “2025 AmendmentAmendment,” and the Amended and Restated Credit Agreement as so amended, the “Amended A&R Credit Agreement) with CCP and Blackwell Partners LLC – Series A (“Blackwell”) (collectively the “2025 Lenders”), pursuant to which the 2025 Lenders agreed to provide us with an incremental term loan of $19.0 million.million pursuant to Section 2.18 of the Amended and Restated Credit Agreement. On May 2, 2025, the Loan Parties entered into a Second Amendment to the Amended and Restated Credit Agreement (the “ Second 2025Amendment”), $20.0 million pursuant to Section 2.18 of the Amended A&R Credit Agreement. On March 24, 2026, the Loan Parties entered into a Third Amendment to the Amended and Restated Credit Agreement (the “Third Amendment”), which revised the maturity date under the Amended and Restated Credit Agreement from December 31, 2026, to April 30, 2027, and waived certain requirements and events of default relating to the going concern qualification in our December 31, 2025 financial statements. The 2025 Amendment also amended the Amended A&R and Restated Credit Agreement to (i) provide for an additional term loan from the 2025 Term Loan Lenders (as defined in the 2025 Amendment) in an aggregate amount not to exceed $20.0 million, subject to the approval of the Required Lenders in their discretion, (ii) provide for the payment of substantial make-whole payments in the event we prepay the loans prior to their maturity, and (iii) provide that the incremental term loan will be senior in right of repayment to the initial term loan.

Under the Amended and Restated Credit Agreement, we have mandatory prepayment obligations, including upon certain asset dispositions, equity issuances, debt incurrences and extraordinary receipts of cash. As amended by the 2025 Amendment, we may be required to make substantial “make-whole” payments to the Lenders. If required to prepay or pay such make-whole payments, we may lack the liquidity to do so, resulting in default. Prepayments, including make-whole payments, would also divert resources from operating expenses, potentially harming relationships with suppliers, hindering growth strategies, and jeopardizing our business continuity. In addition, such payments could result in holders of our Class A Stockcommon stock not receiving any consideration in a sale of our business, or if we were to liquidate, dissolve, or wind-up, either either voluntarily or involuntarily.

We have experienced recurring operating losses and negative cash flows and may continue to generate operating losses and consume significant cash resources in the future. For the years ended December 31, 2024,2025, and 2023,2024, we had negative cash flow from operating activities of $18.0$33.8 million and $54.7$17.9 million, respectively. As of December 31, 2024,2025, we had unrestricted cash and cash equivalents of $29.0$24.3 million and borrowings of $70.7$111.3 million under our Amended and Restated Credit Agreement (as defined below),Agreement, which pursuant to the Third Amendment will become due on December 31,April 2026.30, 2027.

On March 12, 2025, we borrowed an additional $19.0 million under the Amended and Restated Credit Agreement pursuant to the 2025 Amendment. On May 2, 2025, we borrowed an additional $20 million under the Amended and Restated Credit Agreement, pursuant to the Second 2025 Amendment. Pursuant to the Third Amendment (as definedthese below), whichamounts will also become due on DecemberApril 31,30, 2026.2027. The 2025 Amendment (as defined below) also added certain make-whole payments payments with respect to our borrowings under the Amended and Restated Credit Agreement, which would require substantial payments in connection with certain pre-payments or refinancing of our outstanding borrowings.

In connection with the preparation of our 20242025 financial statements, we undertook a going concern assessment and concluded the Companywe will have sufficient liquidity for its operations for at least one year from the date thesethose consolidated financial statements arewere issued. However, However, there can be no assurance that we will be able to maintain the liquidity necessary to fund our long-term operations and growth strategies, strategies, or repay our debt obligations when due. As a result, we may need to secure additional sources of liquidity to fund our long-term operating operating activities and capital expenditures. However, there can be no assurance that we will be able to obtain additional financing as needed on terms favorable to us, or at all. If we fail to meet liquidity and capital requirements, we may need to scale back or halt our growth plans, risking slower growth, losing suppliers, failing to meet customer demands, and losing employees. We may also need to restructure restructure our obligations or pursue other measures to address any liquidity deficiency. In addition, future equity or debt financings are likely to be dilutive to our existing stockholders, including through the issuance of common stock purchase warrants.

Under the Amended and Restated Credit Agreement, we can request additional loans, but the Lenders may deny requests, limiting our access to future funds and adversely affecting our liquidity, financial condition and results of operations. As a condition to providing future funds, the Lenders may require other revisions to the Amended and Restated Credit Agreement, such as increasing prepayment or make-whole payments or including additional restrictive covenants, which could adversely affect our business and financial condition.

Coliseum Capital Management, LLC (“Coliseum”) is our largest stockholder and Lender, and exercises substantial control over our Board of Directors (“Board”) composition, management team members and strategies.

As reported by Coliseum in its Schedule 13D/A filed on JanuaryMay 23,6, 2024,2025, Coliseum Capital Management LLC (“Coliseum”) beneficially owns 58.561.1 million shares of Common Stock (which includes 46.9 million shares of Common Stock currently owned and 11.614.2 million shares of Common Stock that could be acquired upon exercise of its Warrantswarrants). Coliseum will only have the right to exercise its Warrantswarrants to the extent that it (together with its affiliates) would not beneficially own in excess of 49.9% of the shares of Common Stock outstanding immediately after such exercise (the “Beneficial Ownership Cap”). In addition, as of December 31, 2025, Coliseum holds $81.8 million of our debt, which represents 64.6% of all our debt.

In the past, Coliseum has made an unsolicited bid to acquire the remaining outstanding shares of our Common Stock and has taken other related actions, which resulted in Coliseum and the Company entering into a cooperation agreement (the “Cooperation Agreement”). Under the terms of the Cooperation Agreement, our current Chair of the Board, Mr. Gray, and some of our other current directors were appointed or nominated to serve on our Board. There can be no assurance that Coliseum will not make another unsolicited bid to acquire the remaining outstanding shares of our Common Stock or attempt to nominate additional or replacement members to the Board. Such future actions by Coliseum may require us to devote significant additional resources and time that would otherwise be directed at our business and operations or may demotivate current executives and discourage other executives from joining the Company. In addition, such actions could cause the price of our Common Stock to change based on investors’ perceptions of Coliseum’s actions and Coliseum’s influence over the Company and our Board.

We have engaged in numerous related-party transactions with significant stockholders, directors, and their affiliated entities. For example, under the Amended and Restated Credit Agreement, as amended by the 2025 Amendment, the Second 2025 Amendment, and the Third Amendment, the Lenders, which include Coliseum, have loaned to us an aggregate of $80.0$100.0 million and we have issued Warrants to Coliseum and the other Lenders to purchase an aggregate of 26.232.8 million shares of our common stock at $1.50 per share. Coliseum, our largest stockholder, has appointed or nominated a total of five directors to serve on our Board, each of whom continues to serve on our Board, including, Adam Gray, who continues to serve as Chairman. Any future transactions with the Lenders or any other related parties may give rise to conflicts of interest or otherwise adversely affect our business.

Our preliminaryexploration exploration of potential strategic alternatives may not be successful, which may adversely affect our ability to compete with larger, including combined, competitors.

We regularly engage in dialogue with market participants regarding potential business combinations, partnerships and other strategic alternatives. Based on certain recent preliminary inquiries, the Board has formed a special committee of independent directors and we have engaged a financial advisor to support them in evaluating any indications of interest and exploring other potential strategic alternatives. There can be no assurance that any of such preliminary exploratory activities will result in our engaging in a strategic alternative transaction, or even if we do so, that any such strategic alternative transaction will result in favorable terms and conditions for us or our shareholders. If we are unsuccessful in engaging in a favorable strategic alternative, then our ability to grow our business and compete with larger, including combined, competitors may be adversely affected. As a result, we may face liquidity challenges in the long-term and our ability to achieve consistent profitability may be adversely affected.

Our success may depend on our ability to timely anticipate and respond to changing consumer trends. Those changes and resulting changes in our product mix and distribution strategy could adversely affect our business and results of operations. For example, as retail stores reopened following the COVID-19 pandemic, consumers shifted away from online retail purchases towards brick-and-mortar shopping. Our gross profit margins for sales through wholesale customers are lower than those in our DTC channel, so that shift adversely affected our gross profit margins.channel. If we fail to identify and respond to emerging trends, consumer acceptance of the products we manufacture and sell and our image with current or potential customers may be harmed, which could reduce our net sales. If we misjudge market trends, we may significantly overstock inventory and be forced to take significant inventory markdowns, which would have a negative impact on our gross profit and cash flow. Conversely, shortages of inventory or increases in time for fulfillment of our products that prove popular could also reduce our sales.

The sleep products industry is highly competitive and fragmented, with competition from manufacturers (including those sourcing from low-cost countries), traditional retailers, and online direct-to-consumer brands. Competition centers on price, quality, brand recognition, availability, and performance across various distribution channels. This competitive environment exposes us to risks of losing market share, significant customers, margins, and new customer acquisition. We have introduced new products in the luxury mattress market but have limited experience in this sector. If we fail to compete effectively with other manufacturers and retailers of our products, our sales, profitability, cash flow, and financial condition may be materially adversely affected.

Many of our significant competitors, including established manufacturers, retailers, and new entrants, offer products directly competing with ours. This increasing competition from both domestic and international sources, including competitors that source from low-cost locations such as China and Vietnam,locations, could adversely affect our business, financial condition and results of operations. Competitors are expanding their distribution channels, with many offering direct-to-consumer sales online. Major retailers like Mattress Firm, Amazon, and Walmart also sell competing products. Additionally, foreign retailers may vertically integrate by acquiring U.S. mattress manufacturers or other retailers. Many of our competitors have greater financial resources, technical expertise, larger customer bases, established industry relationships, and more mature distribution channels. They may aggressively pursue market share with new or existing products, and we cannot guarantee we will have the resources or expertise to compete successfully. Additionally, competitors with better e-commerce platforms could hurt our sales. We have limited ability to predict competitors’ actions, such as new product launches, pricing strategies, or marketing campaigns, which could impact our market share and product margins. Competitors may also secure better terms from vendors, adopt more aggressive pricing, and invest more in technology and marketing. With many competitors offering a wide range of products, it may be difficult for us to differentiate through value, style, or functionality. Additionally, our products are often heavier, and some markets may not support affordable delivery, limiting our reach. The retail sleep product industry has low barriers to entry, allowing new or existing retailers to increase competition. This could delay or prevent us from gaining market share and negatively impact our growth and future results of operations.

The Sleep products industry has experienced significant consolidation in recent years, including vertical integrations, with competitors acquiring brands to expand distribution networks, leverage economies of scale to gain market share and lower prices, gain greater bargaining power with suppliers, enhance brand recognition, advance research and development, and extend marketing and retail distribution channels. For example, the industry leader has recently made an offer to purchase one of our important suppliers. Consolidation among retailers may result in fewer sales channels or more restrictive terms for standalone brands. If we are unable to adapt to these industry shifts, our growth, results of operations, and market share could be adversely impacted.

We rely on external suppliers for key raw materials like polyurethane foam, oil, spring units, and our Hyper-Elastic Polymer® ingredients. Any supply issues, quality concerns, or price fluctuations could raise costs and hinder our ability to meet customer demand. Oil price increases from conflicts in the Middle East or elsewhere could increase the cost of freight or raw materials. These issues or concerns may be magnified to the extent we rely on a limited number of suppliers or a sole supplier. Competitive pressures may also limit our ability to pass on price increases, potentially leading to lost sales. Shortages of widely used components like foam and spring units, due to factors like increased demand, weather events, or supply chain issues, could impact our production and operations. If a supplier fails to deliver, we will need to find replacements, potentially on unfavorable terms. Any disruption in component supply could significantly interrupt production and raise costs.

Even with timely access to raw materials, supply chain constraints, inflation, increased duties and tariffs, and other factors will increase shipping, labor, and production costs. Rising costs for materials, transportation, and labor could impact our production efficiency, reduce gross margins, and negatively affect our results of operations. Shipping costs and delays have in the past risen and may again in the future rise due to regional conflicts, port closures, congestion, and shortages of containers and ships. Future disruptions, such as pandemics, geopolitical conflicts, conflicts, and increased duties and tariffs, could worsen delays and increase material costs. These issues may impact our ability to maintain inventory, inventory, meet demand, and affect our operations. Any significant supply chain interruptions or inability to source materials at acceptable prices prices could harm our business.

We collect and store personal information from customers and suppliers, including customer payment details. We may share this information with third parties. Cyberattacks targeting sensitive data are a known threat, and hackers may attempt to breach our systems or those of third parties. Employees, contractors, or business partners could also intentionally or unintentionally compromise security. For example, we previously experienced an unauthorized intrusion involving a former contractor’s credentials, though no personal information was accessed. Future breaches could occur if there are weaknesses in our internal controls over financial reporting related to information technology systems. We and third-party partners have experienced and, in the future, may experience various cyber-attacks, including phishing, malware, and ransomware attacks. In 2022, we experienced a spear-phishing attack that led to a $140,000 loss due to unauthorized changes to a vendor’s bank account. We expect continued exposure to similar threats. Additionally, increasing use of artificial intelligence by us and our third-party partners may increase these risks. A breach releasing sensitive data could harm our reputation, result in financial losses, and increase our security costs. Successful ransomware attacks could disrupt our operations, and while our insurance may cover some losses, it may not be sufficient for all liabilities. We are subject to evolving data privacy and breach laws, both at the state level (e.g., the California Consumer Privacy Act), the federal level, and internationally as we expand. These laws’ rapid changes and potential inconsistencies increase compliance costs and non-compliance risks. While we aim to comply, failure to do so could result in fines, administrative actions, and reputational damage.

Disruptions to our manufacturing operations, whether from the Restructuring Plan, a pandemic, natural disasters, lease issues, or equipment failures, could increase costs, delay production and shipping, and negatively impact our business, operations, and financial condition. Workplace injuries, industrial accidents, or violence could also lead to production suspensions and delays, affecting customer satisfaction, results of operations, financial financial condition including our cash flow. The Restructuringconsolidation Plan, which consolidatedof our manufacturing operations into one plant, may heighten the risk of disruption, particularly from regional economic downturns, hurricanes, pandemics, utility shortages, or other events affecting our our Georgia plant, potentially harming our business.

We rely on effective marketing messages and efficient advertising to drive consumer awareness and sales. We continually adjust our strategies, including messaging, budget, and channels. However, we may struggle to adapt to changing consumer preferences, competition, and advertising efficiency. We rely on internet-based advertising through media and e-commerce platforms. If these platforms become less effective, lose users, or fail to target our audience, our advertising may lose effectiveness and adversely affect our business. Advertising costs on social media platforms such as FacebookMeta have risenin the past and may in the future rise significantly, reducingwhich efficiency,could andreduce we expect costs to keep increasing.efficiency. We rely on relationships with media partners, search engines, social media influencers, and e-commerce platforms to drive traffic and attract customers. If we can’t maintain or develop these relationships on favorable terms, or if our reputation suffers, our ability to grow could be impacted. If we can’t manage these costs or generate expected sales, our business could be adversely affected.

Our expansion into wholesale distribution and new sales channels, new products, market segments and geographic regions subjects us to additional business, legal, financial, and competitive risks.

MostIn ofaddition our sales are throughto DTC channels, but we havecontinue expandedto expand into wholesale distribution. However, weWe cannot guarantee success with wholesale partners. We may struggle to generate additional sales through wholesale channels, and extending credit terms to wholesale partners could expose us to the risk of unpaid or late invoices. Providing fixtures to wholesale partners could also pose challenges in recovery or reuse. Wholesale Wholesale customers may not purchase at expected volumes, and gross profit from wholesale sales are lower than DTC. If these issues arise, they they could harm our reputation, limit growth, and negatively impact our results of operations.

WeOperating may struggle to open additional Purple showrooms beyond those already established. Operating showrooms involves risks such as inventory shrinkage, increased expenses, lease obligations, distribution challenges, and employee management. If we fail to operate these stores profitably or if we close unprofitable stores, it could harm our reputation, limit growth, and negatively impact our business. Expanding into new product offerings through e-commerce, wholesale, and Purple showrooms presents challenges, including potential service disruptions, quality issues, and customer claims. Expanding sales channels may also require new products to avoid conflicts between channels. New products may introduce warranty and return risks. Expanding into new markets or regions could expose us to additional regulations, leading to increased compliance and distribution costs.

We rely on commercial agreements and strategic relationships with suppliers, service providers, and wholesale partners. Disruptions in these relationships or strategic decisions by partners could negatively affect our business. For example, (i) the industry leader has acquired one of our wholesale partners, which could disrupt our relationship or prevent us from continuing to sell our products in favorable placements alongside the competitor’s products or at all in the wholesale partner’s stores, (ii) the industry leader owns a manufacturing company with which we have a manufacturing relationship, and that competitor could disrupt that relationship to harm our manufacturing efforts, (iii) the industry leader is attempting to purchase one of our key suppliers, and (iv) the industry leader is attempting to get the U.S. Government to place import restrictions on an important international supplier. We may also struggle to maintain or develop these relationships and may not be able to secure new ones on favorable terms, We sell products through wholesale partnerships and may seek to expand these relationships. However, these wholesale partnerships may not not be profitable and could incur additional costs compared to our DTC operations. In addition, an expansion of these relationships may concentrate our business with one customer resulting in greater reliance on that customer, which could adversely affect our ability to grow our business and compete in our industry. Wholesale relationships may be terminated or modified, or wholesale partners may reduce orders or fail to meet their obligations, resulting in lost sales and adversely affecting our financial performance, results of operations and financial condition. Disputes with partners or the termination or amendment of agreements could could lead to expenses, delayed payments, liabilities, and distractions from our strategic objectives. If we cannot renew or replace agreements agreements on favorable terms, it could harm our business. Wholesale partners may also compete against us in key channels, harming our business. Maintaining these relationships may require significant resources and could limit our sales channels, adversely affecting other areas of our business.

We offer consumer financing through third-party finance companies, with a significant portion of our sales financed in 2024.2025. Macroeconomic factors and changes in credit lending criteria may reduce available credit, and we may face higher costs to maintain lending approvals. Additionally, federal regulations are placing moreplace restrictions on consumer credit programs, including promotional credit offers. Some of our agreements with third-party finance companies, which offer financing to our customers, may be terminated by them with 30 days’ notice. They control financing offers and credit standards and may provide better terms to our competitors or in channels outside our focus. Reduced credit availability from economic changes, regulatory shifts, terminated agreements, or competitors offering better terms could negatively impact our results of operations and financial condition.

We have in the past accumulated and may again in the future accumulate excess raw material inventory, which is vulnerable to shrinkage, theft, obsolescence, or otherwise becoming unsellable, and excess finished product inventory. Excess inventory uses valuable warehouse space. If our efforts to manage inventory are unsuccessful, excess stock and related inefficiencies could negatively impact our results of operations. On the other hand, failing to maintain adequate inventory levels could lead to supply shortages, harming our ability to meet consumer demand and negatively affecting operations. Lead times for products and components, especially those sourced internationally, can vary. Risks from legal, economic, political, or health issues, as well as disruptions in global trade, including due to tariffs or trade wars, could impact production and result in inadequate inventory levels. Sourcing challenges, particularly from China,challenges due to trade tensions, tariffs or other geopolitical factors, will also increase costs and disrupt supply. Any shortages or delays in meeting demand could harm customer satisfaction, results of operations and financial condition.

We rely on key suppliers, some of which are our only source or one of few sources for certain products, materials, or services. While alternative suppliers may be available, disruptions or cost increases in the supply of materials could negatively affect our results of operations and financial condition. Additionally, changes in a supplier’s financial condition could delay their product delivery to us. Shipping delays from port closures, congestion, and shortages of containers or ships could disrupt manufacturing, supply of materials, and inventory management. These delays may hinder our ability to meet product demand and deliver on time, negatively impacting our business and results of operations.

The U.S. Consumer Product Safety Commission (CPSC) and other jurisdictions have fire retardancy standards for the mattress industry, withand some statesjurisdictions and Congressmay consideringconsider stricter regulations. These standards require fire retardant materials, quality assurance programs, random product testing, and and documentation retention, which can be costly. If testing or inspections show our products don’t meet flammability standards, we we could face production halts, recalls, fines, or penalties, negatively impacting our operations and financial condition. New legislation on fire retardancy, bed bug prevention, or mattress recycling could lead to recalls or higher operating costs. Non-compliance may result in penalties, business restrictions, or negative publicity. Conflicting regulations could raise costs, change manufacturing processes, and harm product performance, negatively affecting our business.

We may be involved in legal proceedings arising in the ordinary course of business, including commercial, product liability, employment andemployment, intellectual property claims, claims.and claims brought by shareholders. Litigation is unpredictable, and it is possible that the outcome of future claims asserted, or adverse publicity resulting from litigation, could adversely affect our business, reputation, results of operations or financial condition.

Before the Business Combination, we entered into an Amended and Restated Confidential Assignment and License Back Agreement with EdiZONE, controlled by our founders, pursuant to which EdiZONE transferred intellectual property to us and licensed back certain intellectual property to meet pre-existing third-party obligations. EdiZONE agreed not to modify, extend, or enter new third-party licenses, with all rights reverting to us as these licenses expire. One of EdiZONE’s prior licenses grants exclusivity to a third party of an earlier technology that could prevent us from selling a mattress made from that earlier technology in the European Union.Union or in the medical industry. This risk could be mitigated by redesigning our Hyper-Elastic Polymer material using existing or new technologies. However, there is no guarantee that any of our future sales in the European Union or in the medical industry won’t be challenged by EdiZONE’s licensee, and any such redesigned mattresses may not succeed. If challenged, we are required to indemnify EdiZONE. We have the right to enforce our intellectual property against licensees who violate their agreements or infringe on our intellectual property. We must indemnify EdiZONE and cover enforcement costs. However, there is no guarantee that such enforcement efforts would succeed, which could negatively impact our business.

Our Commoncommon Stockstock is currently listed on NASDAQ, which has listing criteria. We cannot assure that our Commoncommon Stockstock will continue to be listed on NASDAQ in the future. To continue listing our Commoncommon Stockstock on NASDAQ, we must maintain certain governance, financial, distribution and stock price levels. Generally, Generally, we must maintain a minimum amount in stockholders’ equity, a minimum number of holders of our Commoncommon Stock,stock, and a $1.00 minimum minimum per share bid price for our Commoncommon Stock.stock. If we fail to maintain a $1.00 minimum per share bid price for a period of 30 consecutive business business days, we have 180 calendar days to maintain our Commoncommon Stockstock at a $1.00 minimum per share bid price for 10 consecutive trading days. If we do not regain compliance within 180 calendar days, NASDAQ may grant a second compliance period of 180 calendar days or it may determine to delist our Commoncommon Stock,stock, at which point we would have an opportunity to appeal the delisting determination to a hearings panel. On November 11,5, 2024,2025, we received written notice from NASDAQ that we were not in compliance with Nasdaq minimum share price rule, since the closing price of our Common Stock had been below $1.00 per share for 30 consecutive business days. However,We have 180 calendar days, or until May 4, 2026, to regain compliance with the Nasdaq minimum share price rule. To regain compliance, the bid price of our Common Stock must close at $1.00 or more for a minimum of ten consecutive business days. While we regainedintend suchto complianceactively monitor the bid price of onour FebruaryCommon 3,Stock 2025.and Itwill isconsider possibleavailable options to regain compliance, there can be no guarantee that we maywill againbe failable to regain compliance or otherwise comply with suchNASDAQ’s minimumother bidcontinued pricelisting requirement in the future if our stock price again falls below $1.00 for an extended period. Currently, our stock price has been below $1.00 since February 19, 2025.requirements.

As reported by Coliseum in its Schedule 13D/A filed on JanuaryMay 23,6, 2024,2025, Coliseum beneficially owns 58.561.1 million shares of Common Stock (which includes 46.9 million shares shares of Common Stock currently owned and 11.614.2 million shares of Common Stock that could be acquired upon exercise of its Warrantswarrants). The existence of such a large stockholder may limit the potential for third party offers to acquire the Company.

In connection with the issuance of Warrantswarrants pursuant to the Amended and Restated Credit Agreement and the 2025 Amendment, the Companywe entered into a Second Amended and Restated Registration Rights Agreement (the “Registration Rights Agreement”) with CCP, Blackwell, Coliseum Capital Co-Invest III, L.P. (“C-3”), Harvest Master, Harvest Partners, and HSCP (the “Holders”), providing for the registration of the Warrants,warrants, the shares of Common Stock issuable upon the exercise of the Warrants, warrants, and the Class A Common Stock held by the Holders as of such date (the “Registrable Securities”). The market price of our Common Stock could decline as a result of sales by a few large stockholders, such as Coliseum or the Holders, or the perception that these sales could occur, including as a result of the registration statement. These sales might also make it more difficult for us to sell equity securities at a time and price that we deem appropriate.

We have previously sold and may in the future sell additional shares of our Commoncommon Stockstock or convertible securities at prices that are lower than the prices paid by existing stockholders, and investors purchasing shares or other securities could have rights superior to existing stockholders, which could result in substantial dilution of existing stockholders. For example, in February 2023 we issued 13.4 million shares of Common Stock pursuant to a public offering, on January 23, 2024, we issued to the Lenders under the Amended and Restated Credit Agreement the 2024 Warrantswarrants to purchase 20.0 million shares of our Commoncommon Stockstock at a price of $1.50 per share (the “2024 Warrants”), subject to adjustments, and on March 12, 2025, we issued to the 2025 Lenders under the 2025 Amendment the 2025 Warrants to purchase 6.2 million shares of our common stock at a price of $1.50 per share, subject to adjustments,adjustments. andIn addition, on MarchMay 12,2, 2025, we issued to the 2025 Lenders under the Second 2025 Amendment additional warrants (the “2025 Additional Warrants”) to purchase 6.2 6.6 million shares of our Commoncommon Stockstock at a price of $1.50 per share, subject to adjustments and on May 2, 2025, we issued to Somnigroup International, Inc. as partial consideration for their entering into various agreements with Somnigroup International, Inc. entities, warrants to purchase 8.0 million shares of our common stock at a price of $1.50 per share, subject to adjustments. The exercise of the Warrants warrants will dilute the value of Class A common stock and stockholder voting power. In addition, the Warrantswarrants include full-ratchet anti-dilution protections, subject to certain conditions, which could result in the Warrants warrants becoming exercisable for a significantly greater number of shares if we engage in a dilutive financing.

We are required to maintain internal controls over financial reporting and disclosure, as mandated by the Sarbanes-Oxley Act and SEC rules. However, even with these controls, management cannot guarantee that they will prevent all errors or fraud. All control systems have inherent limitations, such as human error, circumvention, or collusion, and cannot provide absolute assurance of detection or prevention. Controls may also become inadequate over time due to changes, new fraudulent schemes, or deteriorating compliance, increasing the risk of undetected misstatements. The accuracy of our financial reporting relies on effective internal controls, which can only provide reasonable assurance and may not detect all misstatements. We have in the past identified material weaknesses in our controls. Any failure in internal controls or disclosure procedures could undermine the accuracy and timeliness of our disclosures, potentially eroding investor confidence, requiring significant resources to fix, and exposing us to legal or regulatory actions. For example, we identified a material weakness in our warranty reserve accounting during the preparation of our September 30, 2023, financial statements. However, as of June 30, 2024, we concluded that the material weakness has been remediated and that our internal controls over financial reporting are effective.

Under Section 382 and related provisions of the Internal Revenue Code of 1986, as amended (the “Code”), if a corporation undergoes an “ownership change”, the corporation’s ability to use its pre-change net operating loss carryforwards (“NOLs”) and other pre-change tax attributes to offset its post-change income may be limited. Generally, an ownership change is defined as a change in its equity ownership by certain stockholders over a three-year period of greater than 50 percentage points (by value). If finalized, Treasury Regulations currently proposed under Section 382 of the Code may further limit our ability to utilize our pre-change NOLs or other tax attributes if we undergo a future ownership change. Thus, our ability to utilize carryforwards of our net operating losses, including net operating losses acquired from the Intellibed acquisition, and other tax attributes to reduce future tax liabilities may be substantially restricted. As of December 31,In 2024, we completed a study to assess whether an ownership change has occurred, as defined by IRC Section 382, or whether there have been ownership changes since since the Company’s formation. The results of this study indicate that we experienced one ownership change on December 31, 2021. We may also experience ownership changes in the future as a result of subsequent shifts in our stock ownership. As a result, if we generate taxable taxable income, our ability to use our pre-change NOL and tax credits carryforwards to reduce U.S. federal and state taxable income may be subject to further limitations, which could result in increased future tax liabilities to us. Moreover, our federal NOLs from years prior to 2018 can be carried forward for a maximum of 20 years from the year in which the NOL was incurred, and our state NOLs are subject to carryforward limitations that vary from state to state; as a result, all or a portion of those carryforwards could expire before being available to reduce future income tax liabilities.

We are an omni-channel company that began as a digitally-native vertical vertical brand founded on comfort product innovation with premium offerings.offerings, and have since expanded into brick & mortar stores as a true omni-channel brand. We design and manufactureoffer a variety of innovative, branded and premium comfort products, including mattresses, pillows, cushions, bases, frames, sheets, duvets, duvet coverssheets and other products.more. Our products are the result of over 30 yearsdecades of innovation and investment in proprietary and patented comfort technologies and the development of our own manufacturing processes. Our proprietary Hyper-Elastic Polymer gel technology underpins many of our comfort products and provides a range of benefits that differentiate our offeringsproducts from otherour competitors’competitors. products.Specially Weengineered marketto relieve pressure, maintain an ideal body temperature, and sellprovide instantly adaptive support, Purple’s patented technology has been tested rigorously within medical and consumer applications for over 30 years. Originally designed for use in hospital beds and wheelchairs, we adapted this unique pressure-relieving material for our productsmattresses, via our DTC channel, which includes Purple.com (our direct-to-consumer e-commerce), Purple showrooms, our customer contact centerpillows and onlineother marketplaces,cushion and our wholesale channel through retail brick-and-mortar and online wholesale partners.products.

Our business consists of Purple Inc. and its consolidated subsidiary, Purple LLC. Purple Inc. was incorporated in Delaware on May 19, 2015 as a special purpose acquisition company under the name of GPAC. On February 2, 2018, we consummated a transaction structured similar to a reverse recapitalization (the “Business Combination”) pursuant to which Purple Inc. acquired an equity interest in Purple LLC as holder of all Class A units and became its sole managing member. As the sole managing member of Purple LLC, Purple Inc., through its officers and directors, is responsible for all operational and administrative decision making and control of the day-to-day business affairs of Purple LLC without the approval of any other member. At December 31, 2024,2025, Purple Inc. had a 99.8%99.85% economic ownership interest in Purple LLC while other Class B unit holders had the remaining 0.2%.0.15%.

During 2024,2025, we continued to build on our Path to Premium Sleep strategy. As a result, we exited 2025 with a lower cost structure and improved margins, which we believe position us to scale as demand improves. We have been realizing efficiencies with our media investments by targeting specific segments most likely to purchase Purple and by focusing more effort on those consumers currently in the market for a sleep product. We are concentrating efforts on driving gross margin improvement through various methods such as selective pricing actions, continued mix shift towards our Restore and Rejuvenate collections, and by driving cost savings through supply chain initiatives and manufacturing efficiency. efficiency. We have also delivered direct material cost savings from our supplier diversification efforts, improved scrap and yield results from continuous improvements, and our outbound freight costs reflect cost improvements along with improved delivery reliability. Moreover,While our revenues were down overall from 2024, we believeare consolidationencouraged by our performance in the second half of 2025 as our fourth quarter 2025 revenue increased 9.1% compared to last year, reflecting the continued execution of our manufacturingstrategic footprintpriorities. pursuantWholesale torevenue ourgrew Restructuring39.8% Plan is an important step to advance our grid innovation and build momentum to achieve positive operating cash flow and market share growth overin the long- term. The fourth quarter compared 2024to waslast significant foryear uswith asour weexpanded achievedMattress profitabilityFirm placements and positivean cashexpansion flow.with Thisour wasCostco program, showroom revenue increased 4.5% reflecting the direct resultstrength of our disciplinedupdated execution,selling operationalmodel improvements and costpremium savingpositioning initiativesand throughoute-commerce was down 15.3%, reflecting a continuation of trends from earlier in the year. OtherGross keymargin highlights duringfor the fourth quarter was 41.9% as we have realized the benefits of 2024the includedcontinued significant improvementsimprovement in Purplelowering showroommaterial profitabilitycosts from ongoing sourcing initiatives, plant efficiencies, restructuring benefits and theactions successfulto launch ofreduce our productcost of warranty returns. Operating expenses continue to decline with 2.9% reduction in Costcothe retailfourth locations.quarter 2025 compared to last year as we have improved efficiency, implemented numerous cost reduction efforts and closely managed our expenses with disciplined cost controls.

In August 2024, we initiated the Restructuring Plan to strategically realign our operational focus to achieve efficiencies in our operations that are expected to improve profitability and provide for reinvesting in technology and marketing initiatives. The Restructuring Plan includesincluded the permanent closure of both Utah manufacturing facilities to consolidate mattress production in our Georgia plant, and a headcount reduction at our Utah headquarters to drive additional operating efficiencies. Closure of the two Utah manufacturing facilities is projected to bewas completed in the second quarter of 2025 while consolidation into the Georgia facility was finalized in December 2024. The reduction in workforce at our Utah headquarters was completed in August 2024. The Restructuring Plan is now complete. During 2024,2025, we recognized $36.4$12.4 million in costs relating to the Restructuring Plan, Plan.,of which included $4.3 million of employee-related costs, $11.3 million of accelerated depreciation, $9.3$9.5 million related to write-downsthe write-off of inventoryequipment that was determined to have no future use and long-lived$2.9 assets to be disposed of or equipmentmillion in progress that will not be put in service, $11.0 million of impairment charges associated with entering into a subleaseemployee-related for one of the Utah manufacturing facilities to be closed and impairment of an intangible asset, and $0.5 million of other related costs. We expect to record additional restructuring and other relatedcash charges in the amount of $4.6 million through the second quarter of 2025. These charges include certain estimates that are provisional and include management judgments and assumptions that could change materially as we complete the execution of our plans. Actual results may differ from these estimates, and the completion of our plan could result in additional restructuring, impairment or other related charges not reflected.charges.

In addition, we planimplemented to implement additional cost savings measures in 2025 and 2026 beyond those implemented pursuant to our 2024 Restructuring Plan.

On January 23, 2024, Purple LLC, Purple Inc. and Intellibed (collectively, the “Loan Parties”) entered into the Amended and Restated Credit Agreement, which amended and restated the then existing term loan agreement (“Term Loan Agreement”), with CCP and other lenders (collectively, the “Lenders”) and Delaware Trust Company, as administrative agent. The Lenders agreed to assume our obligations under the Term Loan Agreement and agreed to refinance our existing obligations. Pursuant to the Amended and Restated Credit Agreement, we borrowed $61.0 million from the Lenders (the “Related Party Loan”) that was used to repay the $25.0 million of term loans outstanding, the $5.0 million of revolving debt outstanding, loan fees, premiums and expenses incurred in connection with this transaction and provided net proceeds to us (after payments of outstanding debt, unpaid accrued interest, and expenses) of approximately $27.0 million. Interest on the new loan is payable each month andand, under the Third Amendment executed in March 2026 (see below), the principal outstanding matures and is due on DecemberApril 31,30, 2026.2027. To reduce cash obligations, we have elected for interest to be capitalized and added to the principal amount of the loan. The loan bears interest at a rate equal to (i) the secured overnight financing rate plus 0.10%, with a floor of 3.5% per annum, plus (ii) 8.25% per annum (or, because Purple LLC has elected to pay interest in kind to reduce its cash obligations, 10.25% per annum). Any prepayments of principal on or after August 7, 2024 but before August 7, 2025 are subject to a prepayment penalty of 1.25%, and any prepayments of principal on or after August 7, 2025 are subject to a prepayment penalty of 2.50%. We may request an additional term loan from the Lenders in an aggregate amount not to exceed $19.0 million on terms requested by us to the extent agreed to by the Lenders at their discretion. The Amended and Restated Credit Agreement also removed restrictions and requirements typically associated with an asset-based loan. In connection with our execution of the Amended and Restated Credit Agreement, all obligations under the previously outstanding term loans and revolving credit facility were paid in full and the respective related agreements (collectively, the “2023 Credit Agreement”) were terminated.

In connection with the 2025 Amendment, we issued to the 2025 Lenders the 2025 Warrants to purchase 6.2 million shares of our ClassCommon AStock. Each 2025 Warrant entitles the registered holder to purchase one share of our Common Stock .at Thea 2025price Warrantsof have$1.50 the sameper termsshare, assubject theto 2024adjustment Warrants,with excepta thatfloor theyof $0.6979 and expire on March 12, 20352035. The 2025 Warrants contain certain provisions that do not meet the criteria for equity classification and certaintherefore adjustmentswere torecorded as liabilities. The liability for the exercise2025 priceWarrants arewas subjectrecorded to at a floorfair value of $0.6979.$5.4 million on the date of issuance with the offset included in debt issuance costs.

In connection with the issuance of the Warrants, we entered into the Registration Rights Agreement with holders of the Warrants (the “Holders”), providing for the registration of Registrable Securities,Securities (as defined in the Registration Rights Agreement), subject to customary terms and conditions. We are responsible for the payment of the Holders’ expenses in connection with any offering or sale of Registrable Securities by the Holders, including underwriting discounts or selling commissions, placement agent or broker fees or similar discounts, commissions or fees relating to the sale of certain Registrable Securities.

On June 27, 2024, our Board of Directors (“Board”) adoptedadopted, and we entered intointo, a limited-duration stockholder rights agreement (the “NOL Rights Plan”) with a stated expiration date of June 30, 2025. Our Board approved the NOL Rights Plan to protect stockholder value by attempting to safeguard our ability to use our June 30, 20242024, estimated $238 million of net operating losses (the “Current NOLs”) to reduce potential future federal income tax obligations from becoming substantially limited by future ownership of our commonCommon stock.Stock. Upon adopting the NOL Rights Plan, 0.3 million shares of our authorized shares of preferred stock were designated as Series C Preferred Shares. Pursuant to the NOL Rights Plan, our Board authorized and declared a dividend of one right for each outstanding share of commonCommon stockStock to stockholders of record at the close of business on July 26, 2024. Upon a stockholder acquiring greater than a 4.9% ownership percentage threshold (or, if a stockholder has beneficial ownership of in excess of 4.9%, then the ownership percentage that is one-half of one percentage point greater than their current beneficial ownership percentage), the rights will become exercisable to significantly dilute any stockholder who violates the ownership limitations of the NOL Rights Plan. The NOL Rights Plan was ratified at a special meeting of our stockholders on October 15, 2024 (the “Special Meeting”). TheOn May 6, 2025, the Board accelerated the termination of the NOL Rights Plan willand automaticallythe expireNOL byProtective itsCharter termsAmendment, onto JuneMay 30,7, 2025.

In connection with the NOL Rights Plan, our Board adopted a NOL Protective Charter Amendment that adds an additional layer of protection to our Current NOLs until June 30, 2025 by voiding any transfer of common stockCommon Stock that results in a stockholder acquiring beyond a 4.9% ownership percentage threshold (or, if a stockholder has current beneficial ownership of in excess of 4.9%, then the ownership percentage that is one-half of one percentage point greater than their current beneficial ownership percentage). The NOL Protective Charter Amendment was approved by our stockholders at the Special Meeting. TheOn May 6, 2025, the Board accelerated the termination of the NOL Rights Plan and the NOL Protective Charter Amendment willto automaticallyMay expire by its terms on June 30,7, 2025.

We regularlyhave engageengaged in dialogue with marketmultiple parties participantsabout regardinga potentialbroad businessrange combinations,of partnershipsopportunities andto maximize shareholder value, including, but not limited to, a merger, sale or other strategic or alternatives.financial Basedtransaction. on certain recent preliminary inquiries, theThe Board has formed a special committee of independent directors and we have engaged a financial advisor to support support them in evaluating anya indicationsrange of interestoptions and exploring other potential strategic alternatives. If we are unsuccessful in engaging in a favorable strategic alternative, then our ability to grow our business and compete with larger, including combined, competitors may be adversely affected.

Net revenues decreased $22.7 $19.2 million, or 4.4%,3.9%, to $468.7 million in 2025 compared to $487.9 million in 2024 compared to $510.5 million in 2023.2024. This decrease was primarily driven by the industry-wide demand softness for home-related products coupled withand a reductionsoftness in advertisingthe spende-commerce tochannel, focuspartially onoffset moreby profitablegrowth marketing.in our Mattress Firm and Costco programs. From a sales channel perspective in 2024,2025, e-commerce DTC net revenues decreased $17.3$22.3 million, or 7.7%,7.9%, and wholesale net revenues increased $3.2 million, or 1.6%, as compared to 2024. Within DTC in 2025, e-commerce net revenues decreased $23.4 million, or 11.4%, while Purple showroom net revenues increased $4.3$1.1 million, or 5.8% and wholesale net revenues decreased $9.6 million, or 4.5%,1.5%, as compared to 2023.2024. The growth in our wholesale revenues was due primarily to our agreement with Mattress Firm as we expanded the number of stores and slots and the expansion of our Costco program. Purple showroom increase netin revenues was primarily due to an increase in average selling prices related to both strategic price adjustments and a sizeable shift in product mix to our higher priced Rejuvenate Products. Net revenues also benefited in 2024 from a full year’s impact of five new Purple showrooms that opened in 2023. In addition to demand softness, our wholesale channel net revenues were negatively impacted in 2024 by intentionally exiting our relationship with certain customers.products.

Other expense, net wasincreased by $5.9 $2.4 million, or 41.4% to $8.3 million in 20242025 compared to $7.5$5.9 million in 2023.2024. OtherThis expense,increase netwas due primarily to an $11.3 million increase in 2024 included interest expense of $17.5 million associated primarily with the Related Party Loan, offseta reduction of $11.6 million in part by other income of $11.5 million related to two twoinsurance payments received in 2024 for full settlement of a previously filed business interruption claim.claim, partially offset by an increase of $13.7 million in the gain on the change in fair value of the warrant liabilities and a $6.8 million reduction in all other expenses.

Net loss attributable to Purple Inc. was $97.9$51.4 million in 20242025 compared to a net loss of $120.8$97.9 million in 2023.2024. The $22.9$46.5 million decreaseimprovement in net loss was primarily due to a $9.3$41.7 million decrease in operating expenses and a $7.4 million increase in gross profitprofit, partially offset by a $2.6 million increase in all other expenses and a $12.2 million decrease in operating expenses. Excluding the impact of the $35.4 million in restructuring, impairment and other related charges recorded in 2024, gross profit would have increased $24.7 million and operating expenses would have decreased $32.2 million.offsets.

Our revenue recognition accounting methodology contains uncertainties because it requires management to make assumptions and to apply judgment to estimate the amount and timing of future sales returns, uncollectible accounts and variable consideration. Our estimates of the amount and timing of sales returns, uncollectible accounts and variable consideration are based primarily on historical trends, product return rates and current contract terms. Accrued sales returns increaseddecreased from $5.4$6.5 million at December 31, 20232024 to $6.5$4.5 million as of December 31, 2024.2025. Our allowance for credit losses increaseddecreased from a$1.1 de minimis amountmillion at December 31, 20232024 to $1.1$0.4 million as of December 31, 2024.2025. We do not believe there is a reasonable likelihood that there will be any material changes in our accounting methodology, future estimates or assumptions used to measure our estimated liability for sales returns and exchanges, our allowance for credit losses or variable consideration. However, if actual results are not consistent with our estimates or assumptions, we may be exposed to losses or gains that could be material.

We provide a limited warranty on most of the products we sell. Our warranty liability assessment methodology includes estimates in both our DTC and wholesale channels. The estimated warranty costs associated with products sold through DTC channels are expensed at the time of sale and included in cost of revenues. The estimated warranty costs associated with products sold through the wholesale channel are recorded at the time of sale and included as an offset to net revenues. Estimates for DTC warranty costs are based primarily on historical trendswarranty claims, estimated warranty costs and the estimated warranty claim ratesrate. Estimates for wholesale warranty costs are based primarily on the historical warranty incurred.claim amounts and the estimated warranty claim rate. We regularly assess and may adjust the estimate of accrued warranty claims by updating claims rates for any current or expected trends and changes in projected claim costs. We expect the estimated warranty liability to continue to increase as we have not yet reached the full 10 years of history on our 10-year mattress warranty. We classify as non-current those estimated warranty costs expected to be paid out in greater than one year. As of December 31, 2024,2025, the current and non-current portions of our warranty liabilities were $7.1 million and $19.6 million, respectively, compared to $6.1 million and $26.1 million, respectively, compared to $9.8 million and $25.8 million, respectively, at December 31, 2023. 2024. We do not believe there is a reasonable likelihood that a material change in the estimates or assumptions we use to calculate our warranty liability will occur. However, if actual results are not consistent with our estimates or assumptions, we may be exposed to losses or gains that could be material.

The Company’s business, reputation, results of operations, financial condition and stock price can be materially and adversely affected by a number of factors, whether currently known or unknown, including those described below and in Part I, Item 1A of the 2025 Annual Report on Form 10-K filed with the SEC on March 31, 2026 under the heading “Risk Factors.” There have been no material changes from the risk factors previously disclosed in our 2025 Annual Report on Form 10-K filed with the SEC on March 31, 2026.2026, except as set forth below.

We caution and advise readers that these statements are only predictions and are subject to risks, uncertainties and assumptions that are difficult to predict, including those included in the “Risk Factors” section of this Quarterly Report and in our Annual Report on Form 10-K filed with the SEC on March 31, 2026 and our Quarterly Report on Form 10-Q filed with the SEC on April 28, 2026. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements and investors are cautioned not to place undue reliance on any such statements. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law.

We began as a digitally-native digitally native vertical brand founded on comfort product innovation with premium offerings, and have since expanded into brick & mortar stores as a true omni-channel brand. We offer a variety of innovative, branded and premium comfort products, including mattresses, pillows, cushions, bases, sheets and more. Our products are the result of decades of innovation and investment in proprietary and patented comfort technologies and the development of our own manufacturing processes. Our proprietary Hyper-Elastic Polymer gel technology underpins many of our comfort products and provides a range of benefits that differentiate our products from our competitors. Specially engineered to relieve pressure, maintain an ideal body temperature, and provide instantly adaptive support, Purple’s patented technology has been tested rigorously within medical and consumer applications for over 30 years. Originally designed for use in hospital beds and wheelchairs, we adapted this unique pressure-relieving material for our mattresses, pillows and other cushion products.

Our business consists of Purple Inc. and its consolidated subsidiary, Purple LLC. As the sole managing member of Purple LLC, Purple Inc., through its officers and directors, is responsible for all operational and administrative decision making and control of the day-to-day business affairs of Purple LLC without the approval of any other member. At MarchJune 31,30, 2026, Purple Inc. had a 99.85% economic ownership interest in Purple LLC while Class B unit holders had the remaining 0.15%.

Revenue for certain product arrangements is presented differently depending on the nature of the underlying manufacturing relationships and the application of ASC 606—Revenue from Contracts with Customers. Under the guidance, payments to third-party manufacturers, including manufacturers under common control with certain customers, are evaluated to determine whether they are economically linked to an underlying customer arrangement. For certain customer-specific or exclusive product programs where the manufacturer is under common control with the customer, the Companywe hashave concluded that payments to the manufacturer are economically linked to the customer relationship and therefore represent consideration payable to a customer. As a result, these payments are recorded as a reduction of revenue, and revenue is presented on a net basis. The CompanyWe recorded $4.9$0.5 million and $5.4 million in consideration paid as a reduction of revenue in the unaudited condensed consolidated statement of operations for the three months and six months ended MarchJune 31,30, 2026.2026, respectively. This presentation results in reported revenue being lower than the gross amount billed to the customer. While the net presentation affects reported revenue, it does not impact gross profit dollars for these arrangements. The distinction reflects the application of GAAP to different fact patterns rather than a difference in the underlying economics of the transactions.

On March 24, 2026, the Loan Parties entered into the Third Amendment with the Lenders, which revised the maturity date under the Amended A&R Credit Agreement from December 31, 2026, to April 30, 2027 and waived certain requirements and events of default relating to the going concern qualification in our December 31, 2025 financial statements. In connection with the Third Amendment, the Loan Parties agreed to pay to the Lenders an amendment fee in the aggregate amount of $1.6 million, equal to 1.25% pro rata based on each Lender’s outstanding principal amount (the “Amendment Fee”). Of the Amendment Fee, approximately $1.3 million iswas payable-in-kindpaid-in-kind by adding such amount to the 2025 Lenders’ outstanding principal amount. The remaining $0.3 million of the Amendment Fee was paid in cash to the other lenders. In connection with the Third Amendment, the Loan Parties also agreed to reimburse the 2025 Lenders for certain expenses in the amount of $0.3 million.

We continue to actively manage the impact of recent United States tariff policies. Importantly, all of our mattresses are manufactured in the United States, and about 15% of our cost of goods is tied to products sourced from overseas. This limited exposure is primarily concentrated in the textile side of the business, which includes sheets and mattress covers, but also includes the import of bases and foundations. Tariffs impacted us by approximately $1.0$0.9 million and $1.8 million during the three and six months ended MarchJune 31,30, 20262026, respectively, due to our mitigation efforts which have reduced the overall impact to our initial expectations. The tariff landscape remains fluid, and we are actively evaluating sourcing alternatives and pricing strategies on a case-by-case basis. We believe that our vertically integrated model and strong vendor relationships give us the flexibility to remain agile and responsive to changes in tariff policies, and we believe that we will be able to partially mitigate these impacts through a combination of supply chain repositioning, vendor collaborations, and selective pricing actions. On March 6, 2026, we filed a lawsuit in the U.S. Court of International Trade against the U.S. Customs and Border Protection (“CBP”), the CBP commissioner, and the United States of America seeking a full refund of the $5.3 million in tariffs imposed under the International Emergency Economic Powers Act that the Company has paid to the United States States. During the second quarter of 2026, we received $5.5 million in tariff refunds plus interest (See Note 132 – CommitmentsSummary andof Contingencies,Significant LegalAccounting ProceedingsPolicies, Refund of Tariffs).

Gross profit decreased $5.9increased $1.9 million, or 14.3%,4.5%, to $35.2$44.4 million for the three months ended MarchJune 31,30, 2026 compared to $41.0$42.5 million for the three months ended MarchJune 31,30, 2025. Our gross profit percentageincreased decreaseddue to 36.8%the $5.3 million benefit from tariff refunds, partially offset by lower sales. Our gross profit percentage increased to 45.2% of net revenues in the firstsecond quarter of 2026 from 39.4%40.5% in the first second quarter of 2025 primarily due to our strategic investment in Purple Royale floor models to support the Mattresstariff Firm rollout, as well as modest manufacturing overhead deleverage driven by lower production volumes and less favorable absorption of fixed costs.refund.

Operating expenses decreased $3.5$8.1 million, or 6.3%14.3% to $52.0 million for the three months ended March 31, 2026 compared to $55.5$48.7 million for the three months ended MarchJune 31,30, 2026 compared to $56.8 million for the three months ended June 30, 2025. This decrease was driven by a $3.3$4.1 million decrease in advertisingrestructuring spending,related costs from last year, a $2.8$4.0 million decrease in employee related expenses and $2.0$2.1 million decrease in restructuring relatedprofessional costsservices fromand lastall year,other operating expenses, partially offset by $4.6a $2.1 million increase in strategicadvertising alternative and other costs.spending.

Total other expense,income (expense), net increasedwas $9.0$1.0 million,million ornet 194.6%other to $13.7 millionincome for the three months ended MarchJune 31,30, 20262026, compared to $4.6$3.1 million net other expense for the three months ended MarchJune 31,30, 2025. The other expense, income, net infor the firstthree quartermonths ofended June 30, 2026 consists of interest expense of $8.2$7.4 million andgain afrom $7.0 million loss onthe change in the fair value of warrants, partially offset by $1.5$1.4 million in other income.income, partially offset by $7.8 million in interest expense. The other expense, net in the firstthree quartermonths ofended June 30, 2025 consists of interest expense of $4.8 $7.5 million, partially offset by $0.2$4.4 million in other income anddue to the gain on the change in the fair value of warrants.

Net loss attributable to Purple Inc. was $30.5$3.2 million for the three months ended MarchJune 31,30, 2026 compared to a net loss of $19.1$17.3 million for the three months ended March 31,June 30, 2025. The $11.4$14.1 million increasedecrease in net loss was primarily due to lowerhigher grossmargins, marginsreduced operating expenses and the increase in lossgain from change in fair value of the warrants, partially offset by reduced operating expenses.warrants.

There is no guarantee that we will be able to effectively execute on these initiatives, which are subject to risks, uncertainties, and assumptions that are difficult to predict, including the risks described in the “Risk Factors” section of this Quarterly Report and in our Annual Report on Form 10-K filed with the SEC on March 31, 2026 and elsewhereour herein.Quarterly Report on Form 10-Q filed with the SEC on April 28, 2026. Therefore, actual results may differ materially and adversely from those described above. In addition, we may, in the future, adapt these focuses in response to changes in the market or our business.

Operating Results for the Three Months Ended MarchJune 31,30, 2026 and 2025

Total cost of revenues decreased $2.6$8.7 million, or 4.1%,14.0%, to $60.5$53.9 million for the three months ended MarchJune 31,30, 2026, compared to $63.1$62.6 million for the three months ended MarchJune 31,30, 2025.2026. This decrease was due primarily to $4.9a $5.3 million benefit from our tariff rebates that we received during the quarter, $2.3 million in costslower associatedtariff withpayments aand manufacturer$1.1 that is affiliated with a customer recorded asmillion reduction ofin revenue.other This decrease was partially offset by less favorable absorption of fixed costs from lower production volumes.costs. Our gross profit percentage decreasedincreased to 36.8%45.2% of net revenues in the firstsecond quarter of 2026 from 39.4%40.5% in the firstsecond quarter of 2025, due to our strategic investment in Purple Royale floor modelsmainly to support the Mattress Firmtariff rollout, as well as modest manufacturing overhead deleverage driven by lower production volumes and less favorable absorption of fixed costs.refund.

Marketing and sales expense decreased $5.1$1.7 million, or 13.8%,4.8%, to $31.6 million for the three months ended March 31, 2026 compared to $36.6$33.7 million for the three months ended MarchJune 31,30, 2026 compared to $35.4 million for the three months ended June 30, 2025. This decrease primarily consisted of a $3.3$2.3 million decrease in advertisingvarious spend,marketing activities and professional services, a $1.3$1.2 million decrease in employee relatedemployee-related expenses due to head countheadcount reductions and $0.2$0.3 million decrease in all other marketing and sales expenses.expenses, partially offset by a $2.1 million increase in advertising spending.

Research and development expense wasincreased flat$0.3 million, or 14.1%, to prior year at $2.4$2.5 million for the three months ended MarchJune 31,30, 2026 compared to $2.2 million for the three months ended MarchJune 31,30, 2025. The increase is due to an increase in professional service expenses.

There were no restructuring, impairment and other related charges for the three months ended MarchJune 31,30, 2026 as all restructuring activities were completed in 2025. We incurred $2.0$4.1 million of restructuring, impairment and other related charges during the three months ended MarchJune 31,30, 2025.

Operating loss increaseddecreased $2.4 $9.9 million, or 16.3%,70.1%, to $16.8$4.3 million, for the three months ended MarchJune 31,30, 2026 compared to $14.5$14.2 million for the three months ended March 31,June 30, 2025. This increasedecrease in our operating loss is the result of a lowerhigher gross profit percentpercent, lower operating expenses and increasesno restructuring costs in strategic alternative costs, partially offset by reduced advertising spend and lower headcount costs.2026.

Interest expense totaled $8.2 million for the three months ended March 31, 2026 compared to $4.8$7.8 million for the three months ended MarchJune 31,30, 2026 compared to $7.5 million for the three months ended June 30, 2025. This increase was primarily due to additional interest incurred on a higher principal balance on the Related Party Loan as the Company elected the paid-in-kind option on monthly interest over the past 12 months.months along with additional debt issuance costs to amortize over the life of the loan.

Other income increasedwas to $1.5 million for the three months ended MarchJune 31,30, 2026 compared to $0.1a millionde minimis amount for the three months ended MarchJune 31,30, 2025. This increase was mainly due to $1.3$1.2 million received for sublease rent payments on facilities we are no longer using and have subleased to other parties.

Our Warrantswarrants contain certain provisions that did not meet the criteria for equity classification and therefore are recorded as liabilities with a re-measurement of fair value at each reporting date. We incurred a $7.0$7.4 million lossgain on the change in fair value of our warrant liabilities for the three months ended MarchJune 31,30, 2026 related to the increasedecrease in fair value from the previous reporting date.date, due mainly to the reduction in stock price. For the three months ended MarchJune 31, 30, 2025, we recognized a negligible$4.4 million gain related to the net decrease in fair value of the warrant liability.liability during that period.

We had a de minimis income tax expense for the three months ended MarchJune 31,30, 2026 and 2025. The income tax expense amounts in both the firstsecond quarter of 2026 and 2025 were related to various state taxes.

We calculate net loss attributable to noncontrolling interests on a quarterly basis using their weighted average ownership percentage. Net loss attributed to noncontrolling interests was negligible for the three months ended MarchJune 31,30, 2026 and 2025.