What changed in this filing

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Item 9A. Controls and Procedures

2024-09-20 compared with 2023-10-19 · 1854 added, 1076 removed, 455 unchanged (87% of the section changed)

Controls and Procedures.

Disclosure Controls and Procedures

Our management, under the direction of and with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act) as of June 30, 2023.

Based on the evaluation of our disclosure controls and procedures, our management concluded that, as of June 30, 2023, our disclosure controls and procedures were not effective due to the material weaknesses described below.

These material weaknesses in our internal control over financial reporting relates to the fact that Alliance did not have the necessary business processes and related internal controls formally designed and implemented to provide reasonable assurance regarding the reliability of the financial reporting and the preparation of our financial statements in accordance with U.S.

Controls and Procedures

management, under the direction of and with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the

effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act)

as of June 30, 2024.

Based on the evaluation of our disclosure controls and procedures, our management concluded that, as of June 30,

2024, our disclosure controls and procedures were not effective due to the material weaknesses described below.

These material weaknesses

in our internal control over financial reporting relate to the fact that the Company did not have the necessary business processes and

related internal controls fully implemented to provide reasonable assurance regarding the reliability of the financial reporting and

the preparation of our financial statements in accordance with U.S.

generally accepted accounting principles, as described further below.

We have added and continue to evaluate the need for additional controls over the accounting and financial reporting requirements related to certain non-routine transactions, which are still being designed and

The material weaknesses will not be considered remediated until such time as management designs and implements effective controls that operate for a sufficient period of time and has concluded, through testing, that these controls are effective.

As discussed elsewhere in this annual report, we completed the Merger on February 10, 2023.

The design of internal control over financial reporting for the post-Merger Company has required and will continue to require significant time and resources from management and other personnel to complete ongoing integration efforts.

As a result, management was unable, without incurring unreasonable effort or expense, to conduct an assessment of our internal control over financial reporting as of June 30, 2023.

Accordingly, we are excluding management’s report on internal control over financial reporting in accordance with Section 215.02 of the SEC Division of Corporation Finance’s Regulation S-K Compliance & Disclosure Interpretations.

Although management did not conduct a formal assessment of internal control over financial reporting, in connection with the audits of our consolidated financial statements for the years ended June 30, 2023, and 2022, management has identified material weaknesses in internal control over financial reporting.

As previously disclosed, the Company disclosed a material weakness as of June 30, 2022, related to the accounting for the classification of the outstanding balance of the Credit Facility, net.

During the year ended June 30, 2023, Management continued to assess the design and implementation of controls over financial reporting as the Company transitioned to becoming publicly-traded.

As a result of such assessment, additional control deficiencies were identified within the overall control environment.

Material Weaknesses in Internal Control Over Financial Reporting

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual consolidated financial statements will not be prevented or detected on a timely basis.

The Company has added and continues to evaluate the need for additional controls over the accounting and financial reporting requirements

related to certain non-routine transactions, which has been implemented withing the reporting period but has yet to be effective for

most of the year.

The material weaknesses will be considered remediated when such time as management designs and implements effective

controls that operate for a sufficient period of time and has concluded, through testing, that these controls are effective.

Weaknesses in Internal Control Over Financial Reporting

material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is

a reasonable possibility that a material misstatement of a company’s annual consolidated financial statements will not be prevented

or detected on a timely basis.

As of June 30, 2024, the following material weaknesses existed:

Entity Level Controls

Management did not maintain appropriately designed entity-level controls impacting the (1) control environment, (2) risk assessment procedures, and (3) Board of Director’s oversight, including monitoring activities to prevent or detect material misstatements to the financial statements and assess whether the components of internal control were present and functioning.

These deficiencies were primarily attributed to an insufficient number of qualified resources to support and provide proper oversight and accountability over the performance of controls.

Control Activities

Management did not have adequate selection and development of effective control activities resulting in the following material weaknesses:

● Information Technology (IT) General Controls – Certain information technology general controls for security and administration of key IT systems were not designed properly or did not operate effectively.

Specifically, (i) periodic user access reviews of roles and permissions were not performed sufficiently throughout the period for certain key IT systems, and (ii) certain key IT systems were not logically restricted, resulting in improper segregation of duties for certain business processes.

● Financial Close Processes – Management did not design and maintain formal accounting policies, and effective control activities over certain routine aspects of financial reporting.

Specifically, management did not design and maintain effective controls over (i) the financial reporting process, including management review controls over areas of accounting such as revenue, inventory, accounts payable, income taxes and payroll, at an appropriate level of precision to detect a material misstatement and sufficient appropriate evidence was not maintained to support the execution and evaluation of the controls performed, (ii) the monthly financial close process, including the review of journal entries, account reconciliations, and analysis of recorded balances, and (iii) the completeness and accuracy of information used by control owners in the operation of certain controls.

● Disclosures and Internal Control Over Financial Reporting – The Company did not have the necessary business processes and related internal controls over financial reporting formally designed and implemented to address the accounting and financial reporting requirements related to certain routine and non-routine transactions.

Specifically, the controls failed to

detect required disclosures, and errors in the accounting for the classification of the outstanding balance of the revolving credit facility, net, as of June 30, 2022, as previously disclosed in the audited consolidated financial statements as of and for the year ended June 30, 2022, and as of September 30, 2022.

● Annual Impairment Analysis – Management did not design and implemented control activities that would allow the proper and timely identification, over the annual impairment analysis, of (i) triggering events and quantitative assessment approach used;

and (ii) assessing completeness and accuracy of information used in the segment and reporting unit determination.

Remediation Plan for Material Weaknesses

In response to the material weaknesses noted above, the Company’s management began to take actions to remediate the identified material weaknesses in internal control over financial reporting during the fiscal year ended June 30, 2023.

As part of management’s remediation plan, certain efforts were put into place and were underway prior to June 30, 2023.

Both new and revised controls that management started to implement in the second fiscal quarter of 2023 as part of the remediation plan require a period of seasoning to allow for a sufficient operating effectiveness testing sample.

Management plans to build on and continue such efforts going into the fiscal year ending June 30, 2024, in order to successfully remediate the identified material weaknesses.

The remediation actions include, but are not limited to, the following:

Entity Level Controls – In an effort to provide additional support, oversight and accountability over the performance of controls, the Company is evaluating enhancing its key financial reporting positions.

Management will continue to assess the composition of its resource needs, both internal and external, which may include adding additional accounting and compliance resources.

Management may also consider engaging third-party advisors when necessary to supplement its existing resources.

Information Technology General Controls – User access assessments for logical security (roles and privileges) will be performed and periodic user access reviews for key IT systems will be implemented.

All IT processes will be centrally managed and IT Management will consider transition certain hosting and administration responsibilities to third-parties.

Financial Close Process, Disclosures and Internal Control Over Financial Reporting, and Annual Impairment Analysis – Our remediation plan related to these material weaknesses include:

● Management will enhance the design of and implement controls around the rigor of the review process, and retention of sufficient appropriate evidence over revenue, inventory, accounts payable, payroll, income taxes, credit facility, journal entries, and other business processes.

● Developing monitoring controls and protocols that will allow us to timely assess the design and the operating effectiveness of controls over financial reporting and make necessary changes to the design of controls, if any.

● Engaging a professional third-party service provider to assist management with the design and implementation of internal controls.

● With the assistance from the third-party service provider, and under the supervision of the Chief Financial Officer, commencing the design and implementation of significant process transaction flows and key controls in the Company’s business processes, including revenue, inventory, income taxes, periodic impairment assessment, and IT environment.

● Adopting a process to identify and assess the Company’s disclosure controls and procedures, including the preparation and review of presentation and disclosure requirement checklists, and review of the completeness and accuracy of the underlying support of amounts contained in the financial statements.

Despite the existence of the material weaknesses, we believe the financial information presented herein is materially correct and in accordance with generally accepted accounting principles in the United States.

The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects.

As management continues to evaluate and work to improve our internal control over financial reporting, management may determine it is necessary to take additional measures to address the material weakness.

material weakness will not be considered remediated unless and until such time as management designs and implements effective controls that operate for a sufficient period of time and concludes, through testing, that these controls are effective.

Until the controls have been operating for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively, the material weakness described above will continue to exist.

Management will monitor the progress of the remediation plan and report regularly to the audit committee of the board of directors on the progress and results of the remediation plan, including the identification, status and resolution of internal control deficiencies.

We can provide no assurance that the measures we have taken and plan to take in the future will remediate the material weakness identified or that any additional material weakness or restatements of financial results will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting or circumvention of these controls.

In addition, even if we are successful in strengthening our controls and procedures, in the future these controls and procedures may not be adequate to prevent or identify irregularities or errors or to facilitate the fair presentation of our financial statements.

Management’s Report on Internal Controls Over Financial Reporting

As required by SEC rules and regulations implementing Section 404 of the Sarbanes-Oxley Act, our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act).

Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our consolidated financial statements for external reporting purposes in accordance with U.S.

Our internal control over financial reporting includes those policies and procedures that:

(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of our company,

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors, and

(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the consolidated financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect errors or misstatements in our consolidated financial statements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree or compliance with the policies or procedures may deteriorate.

This Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm due to our status as an emerging growth company under the JOBS Act.

Changes in Internal Control over Financial Reporting

Except as described above, there were no changes in our internal control over financial reporting during the most recent fiscal quarter that were identified in connection with management’s evaluation required by paragraph (d) of Rules 13d-15 and 15d-15 under the Exchange Act that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Level Controls

did not maintain appropriately designed entity-level controls impacting the (1) control environment, (2) risk assessment procedures,

and (3) Board of Director’s oversight, including monitoring activities to prevent or detect material misstatements to the financial

statements and assess whether the components of internal control were present and functioning.

These deficiencies were primarily attributed

to an insufficient number of qualified resources to support and provide proper oversight and accountability over the performance of controls.

did not have adequate selection and development of effective control activities resulting in the following material weaknesses:

● Information

Technology (IT) General Controls – Certain information technology general controls

for security and administration of key IT systems were not designed properly or did not operate

Specifically, (i) periodic user access reviews of roles and permissions were

not performed sufficiently throughout the period for certain key IT systems, and (ii) certain

key IT systems were not logically restricted, resulting in improper segregation of duties

for certain business processes.

Close Processes – Management did not design and maintain formal accounting policies,

and effective control activities over certain routine aspects of financial reporting.

Specifically,

management did not design and maintain effective controls over (i) the financial reporting

process, including management review controls over areas of accounting such as revenue, inventory,

accounts payable, income taxes and payroll, at an appropriate level of precision to detect

a material misstatement and sufficient appropriate evidence was not maintained to support

the execution and evaluation of the controls performed, (ii) the monthly financial close

process, including the review of journal entries, account reconciliations, and analysis of

recorded balances, and (iii) the completeness and accuracy of information used by control

owners in the operation of certain controls.

Plan for Material Weaknesses

As of June 30, 2024, the Company has implemented controls

that we are confident will remediate the identified material weaknesses.

While certain controls were fully operational only for a portion

of the fiscal year, some control implementations are still ongoing, with significant remediation efforts being finalized by year-end.

These efforts focused on enhancing financial oversight, improving the accuracy and compliance of financial operations, and strengthening

our internal controls over financial reporting (ICFR).

The Company continues to monitor the effectiveness of these controls to ensure

sustained compliance.

remediation actions included:

We enhanced support, oversight, and accountability for key financial reporting positions.

Management continues to assess

and address resource needs, including the potential addition of accounting and compliance personnel and engagement of third-party advisors,

as necessary.

Technology General Controls:

We implemented user access assessments and periodic reviews for key IT systems to ensure appropriate logical

IT processes are now centrally managed, and we are evaluating the transition of certain hosting and administrative responsibilities

to third-party providers.

Close Process and ICFR:

We enhanced controls over revenue, inventory, accounts payable, payroll, income taxes, journal entries, and

other business processes.

This included developing monitoring controls to timely assess and adjust our ICFR as needed.

Additionally,

we engaged a third-party service provider to assist in designing and implementing significant process transaction flows and key controls

across various business processes.

these material weaknesses, we believe that the financial information presented in this report is materially correct and in accordance

We are committed to ongoing monitoring and will continue reporting progress to the audit committee.

However, the full

remediation of these material weaknesses requires that the newly implemented controls operate effectively over time, and we cannot guarantee

that additional weaknesses will not be identified in the future.

Report on Internal Controls Over Financial Reporting

required by SEC rules and regulations implementing Section 404 of the Sarbanes-Oxley Act, our management is responsible for establishing

and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act).

control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the

preparation of our consolidated financial statements for external reporting purposes in accordance with U.S.

Our internal control

over financial reporting includes those policies and procedures that:

to the maintenance of records that, in reasonable detail, accurately and fairly reflect the

transactions and dispositions of the assets of our company,

reasonable assurance that transactions are recorded as necessary to permit preparation of

consolidated financial statements in accordance with GAAP, and that our receipts and expenditures

are being made only in accordance with authorizations of our management and directors, and

reasonable assurance regarding prevention or timely detection of unauthorized acquisition,

use or disposition of our assets that could have a material effect on the consolidated financial

of its inherent limitations, internal control over financial reporting may not prevent or detect errors or misstatements in our consolidated

financial statements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may

become inadequate because of changes in conditions, or that the degree or compliance with the policies or procedures may deteriorate.

Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm due to our status

as an emerging growth company under the JOBS Act, and due to our non-accelerated filer status.

in Internal Control over Financial Reporting

as described above, there were no changes in our internal control over financial reporting during the most recent fiscal quarter that

were identified in connection with management’s evaluation required by paragraph (d) of Rules 13d-15 and 15d-15 under the Exchange

Act that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Other Information.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Not applicable.

Directors, Executive Officers and Corporate Governance.

Our current directors and executive officers are as follows:

Bruce Ogilvie

Executive Chairman of the Board and AEC Director

Jeffrey Walker

Chief Executive Officer and AEC Director

Chief Financial Officer

Independent Director

current directors and executive officers are as follows:

Chairman of the Board and AEC Director

Executive Officer/Chief Financial Officer and AEC Director

Operating Officer

Accounting Officer

Compliance Officer

Tom Donaldson III

Independent Director

Chris Nagelson

Independent Director

Bruce Ogilvie.

Bruce Ogilvie has been Alliance’s Executive Chairman since 2023 and has been Executive Chairman of Legacy Alliance since 2013.

Prior to assuming his current role, in 1996 Bruce was selected by a bank group to turn around the 600-store chain, Wherehouse Records.

Bruce Ogilvie has been Alliance’s Executive Chairman since 2023 and has been Executive Chairman of Legacy Alliance

Prior to assuming his current role, in 1996 Bruce was selected by a bank group to turn around the 600-store chain, Wherehouse

Under Bruce’s leadership Wherehouse emerged from bankruptcy within nine months and was sold to Cerberus Capital.

Following his success with Wherehouse Records, Bruce bought a one-third interest in Super D in 2001 and assumed the role as CEO, joining with founders Jeff Walker and David Hurwitz.

his success with Wherehouse Records, Bruce bought a one-third interest in Super D in 2001 and assumed the role as CEO, joining with founders

Jeff Walker and David Hurwitz.

Bruce became the Chairman in 2013 after the merger of Super D and Alliance.

Ogilvie has spent his entire career in the entertainment distribution industry starting with the founding of Abbey Road Distributors in 1980.

Over the next 14 years, Bruce led Abbey Road’s growth to over $94 million in sales and successfully sold the business in 1994.

In 1995, Bruce was awarded E&Y’s Distribution Entrepreneur of the Year Award for his work with Abbey Road.

Jeffrey Walker.

Jeffrey Walker has been Alliance’s Chief Executive Officer since February 2023 and was Legacy Alliance’s Chief Executive Officer since 2013.

Walker has also been a director of Alliance since February 2023 and a director of Legacy Alliance since 2013.

Ogilvie has spent his

entire career in the entertainment distribution industry starting with the founding of Abbey Road Distributors in 1980.

Over the next

14 years, Bruce led Abbey Road’s growth to over $94 million in sales and successfully sold the business in 1994.

In 1995, Bruce

was awarded E&Y’s Distribution Entrepreneur of the Year Award for his work with Abbey Road.

Jeffrey Walker has been Alliance’s Chief Executive Officer since February 2023 and was Legacy Alliance’s

Chief Executive Officer since 2013.

Walker has also been a director of Alliance since February 2023 and a director of Legacy Alliance

In 1990, Jeff co-founded the CD Listening Bar, Inc., a retail music store.

A few years later, Jeff started wholesaling CDs from the back of the store, beginning the journey to create Super D, a music wholesaler founded in 1995.

In 2001, Jeff and co-founder David Hurwitz sold a third of Super D to Bruce Ogilvie.

Over the next decade, Bruce and Jeff continued to grow Super D’s presence in the music wholesaling space, with the acquisition of Alliance in 2013.

In 2015, Jeff was awarded E&Y’s Distribution Entrepreneur of the Year award in Orange County.

Walker received a bachelor’s degree in economics from University of California — Irvine.

John Kutch has been Alliance’s Chief Executive Officer since February 2023 and Legacy Alliance’s Chief Financial Officer since February 2018.

Kutch was a director of Legacy Alliance from February 2018 until February 2023.

From October 2014 to March 2017, John was Vice President of Finance — US Operations for Metalsa, a metals supplier to the automotive manufacturing industry.

For the ten years prior, he was employed by Amazon as a Senior Manager — Senior Regional Controller.

John received a bachelor’s degree from Washington State University majoring in Management Information Systems, and a Master of Business Administration from Carnegie Mellon University — Tepper School of Business.

Thomas Finke has been a director of Alliance since the closing of the Business Combination in February 2023 and was Chairman of Adara from its inception in August 2020, and CEO of Adara since June 2022, in each case, until the consummation of the Business Combination, in each case until the Business Combination.

A few years later, Jeff started wholesaling CDs

from the back of the store, beginning the journey to create Super D, a music wholesaler founded in 1995.

In 2001, Jeff and co-founder

David Hurwitz sold a third of Super D to Bruce Ogilvie.

Over the next decade, Bruce and Jeff continued to grow Super D’s presence

in the music wholesaling space, with the acquisition of Alliance in 2013.

In 2015, Jeff was awarded E&Y’s Distribution Entrepreneur

of the Year award in Orange County.

Walker received a bachelor’s degree in economics from the University of California –

Warwick Goldby.

Warwick Goldby joined Alliance in November 2016 and previously served as Senior Vice President of Distribution Operations until his promotion

to Chief Operations Officer in May 2024.

Prior to serving as Senior Vice President of Distribution Operations, Mr.

Goldby has held several

positions with increasing responsibilities in the operations department at Alliance.

Goldby graduated from the University of Natal,

South Africa, with a bachelor’s degree in Commerce.

Amanda Gnecco .

Amanda Gnecco joined Alliance in August 2018 and previously served as Senior Vice President, Accounting and Finance until her promotion

to Chief Accounting Officer in May 2024.

As Senior Vice President, Accounting and Finance, Ms.

Gnecco, together with Mr.

Black, has been

responsible for overseeing Alliance’s financial operations and financial and SEC reporting.

Gnecco received a Master of Science

in Accounting from the Keller Graduate School of Management and a B.S.

in Accounting from Midwestern State University.

Robert Black.

Robert Black joined Alliance in September 2019 and previously served

as Senior Vice President, Accounting and Finance until his promotion to Chief Compliance Officer.

In May 2024 As Senior Vice President,

Accounting and Finance, Mr.

Black, together with Ms.

Gnecco, has been responsible for overseeing Alliance ’ s

financial operations and financial and SEC reporting.

Prior to joining Alliance, Mr.

Black served as Senior Finance Manager at Amazon.com,

from March 2017 through August 2019.

Black earned an M.B.A.

from the University of Notre Dame Mendoza College of Business and

at Ferris State University in Industrial Relations and Machine Tool Technology.

Thomas Finke has been a director of Alliance since the closing of the Business Combination in February 2023 and was

Chairman of Adara from its inception in August 2020, and CEO of Adara since June 2022, in each case, until the consummation of the Business

Combination, Mr.

Finke has served as a director of Invesco Ltd.

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From September 2016 to November 2020, Mr.

Finke was the Chairman and Chief Executive Officer of Barings LLC, a global financial services firm and a subsidiary of Massachusetts Mutual Life Insurance Company (“MassMutual Life”).

From December 2008 until September 2016, he was the Chairman and CEO of Babson Capital Management LLC (“Babson Capital”), also a subsidiary of MassMutual Life.

Finke led the merger of Babson Capital, Barings Asset Management Limited, and two other MassMutual Life subsidiaries to create Barings LLC.

Finke was the Chairman and Chief Executive Officer of Barings LLC, a global financial services

firm and a subsidiary of Massachusetts Mutual Life Insurance Company (“MassMutual Life”).

From December 2008 until September

2016, he was the Chairman and CEO of Babson Capital Management LLC (“Babson Capital”), also a subsidiary of MassMutual Life.

Finke led the merger of Babson Capital, Barings Asset Management Limited, and two other MassMutual Life subsidiaries to

create Barings LLC.

From December 2008 to May 2011, Mr.

Finke also served as the Executive Vice President and Chief Investment Officer for the MassMutual Life.

Finke also served as the Executive Vice President and Chief Investment Officer

for the MassMutual Life.

He was appointed President of Babson Capital in August 2007.

Prior to joining Babson Capital, Mr.

Finke was a Managing Director and Co-Founder of First Union Institutional Management LLC (“IDM”), an asset manager and subsidiary of First Union Corporation, from September 1998 until June 2002.

a Managing Director and Co-Founder of First Union Institutional Management LLC (“IDM”), an asset manager and subsidiary of

First Union Corporation, from September 1998 until June 2002.

He was appointed President of IDM in March of 2001.

Finke served on the boards of Barings Business Development Corp.

BBDC), a business development company that primarily makes debt investments in middle market companies, since August 2018;

Barings Global Short Duration High Yield Fund

BGH), a closed end fund that primarily invests in US and European high yield bonds, since October 2012;

and Barings Capital Funds Trust since May 2013, until his retirement from Barings LLC in 2020.

Finke received a Master of Business Administration degree from Duke University’s Fuqua School of Business and holds a bachelor’s degree from the University of Virginia’s McIntire School of Commerce.

Finke is a Trustee of Davidson College, member of the Fuqua School of Business Board of Visitors, Chairman of the Board of Charlotte Center City Partners, and a member of the Investment Committee of the Roman Catholic Diocese of Charlotte.

We believe Mr.

Finke is qualified to serve as a member of Alliance’s board of directors based on his experience as chief executive officer, his role on several public and private boards of directors as well as his experience in investing in finance companies.

Finke served on

the boards of Barings Business Development Corp.

BBDC), a business development company that primarily makes debt investments in

middle market companies, since August 2018;

Barings Global Short Duration High Yield Fund (NYSE:

BGH), a closed end fund that primarily

invests in US and European high yield bonds, since October 2012;

and Barings Capital Funds Trust since May 2013, until his retirement

from Barings LLC in 2020.

Finke received a Master of Business Administration degree from Duke University’s Fuqua School of Business and holds a bachelor’s

degree from the University of Virginia’s McIntire School of Commerce.

Finke is a Trustee of Davidson College, member of the

Fuqua School of Business Board of Visitors, Chairman of the Board of Charlotte Center City Partners, and a member of the Investment Committee

of the Roman Catholic Diocese of Charlotte.

Finke is qualified to serve as a member of Alliance’s board of directors based on his experience as chief executive

officer, his role on several public and private boards of directors as well as his experience in investing in finance companies.

Teri Wielenga has served as a director of Alliance since February 2023.

Teri is a senior global finance executive, board director, and advisor with more than 30 years of experience at complex, highly regulated Fortune 500 companies and a Big Four accounting firm.

Since June 2017, she has led global tax policy and strategy for Gilead Sciences (Nasdaq:

GILD), a multinational biopharmaceutical company with $25 billion in annual revenue.

She currently serves as board director, secretary, treasurer for The Gilead Foundation, and also currently serves as audit committee chair for the Arc Research Institute.

Between 2001 and 2015 Teri managed rapid global growth as the Senior Vice President of Tax for Allergan (NYSE:

AGN), a multinational biopharmaceutical and medical aesthetics company with $7 billion in annual revenue, prior to the $70 billion acquisition of Allergan by Actavis in 2015.

She also previously served as board director, chief financial officer of the Allergan Foundation and served as a board director for multiple Allergan subsidiaries in Ireland, Japan, and Bermuda.

In addition to her work as a senior finance executive with public companies, Teri has advised a variety of pharmaceutical start-ups, pre-IPO ventures, and privately held companies.

Teri is recognized as a global tax specialist and has taught advanced accounting and business taxation for MBA programs at Chapman University and Loyola Marymount University.

Teri is a senior global finance executive,

board director, and advisor with more than 30 years of experience at complex, highly regulated Fortune 500 companies and a Big Four accounting

She is retired from Gilead Sciences (Nasdaq:

GILD) where she served as Vice President, Head of Global Tax Policy and Strategy,

and served as board director, secretary, and treasurer for The Gilead Foundation., She currently serves as audit committee chair for

the Arc Research Institute.

Teri managed rapid global growth as the Senior Vice President of Tax for Allergan (NYSE:

She also previously

served as board director and chief financial officer of the Allergan Foundation and served as a board director for multiple Allergan

subsidiaries in Ireland, Japan, and Bermuda.

addition to her work as a senior finance executive with public companies, Teri has advised a variety of pharmaceutical start-ups, pre-IPO

ventures, and privately held companies.

is recognized as a global tax specialist and has taught advanced accounting and business taxation for MBA programs at Chapman University

and Loyola Marymount University.

She is a Certified Public Accountant.

She earned her M.S.

in Taxation from Golden Gate University in San Francisco and her B.A.

in Taxation from Golden Gate University in

San Francisco and her B.A.

in Business Economics from the University of California, Santa Barbara.

We believe Ms.

Wielenga is qualified to serve as a member of Alliance’s board of directors based on her experience as a senior global finance executive and, her governance experience with public, private, and non-profit boards of directors.

Chris Nagelson.

Wielenga is qualified to serve as a member of Alliance’s board of directors based on her experience as a senior global

finance executive and, her governance experience with public, private, and non-profit boards of directors.

Chris Nagelson has served as a director of Alliance since February 2023.

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in Bentonville, AR.

During that period, he was responsible for providing the strategic direction for the department that delivered market share growth as well as supported the overall corporate strategy.

Chris also identified and established key performance indicators to improve team efficiencies and sales strategies and led a broad, cross-functional team in strategic executive-level planning.

From June 1997 to February 2005, Chris was the Divisional Merchandise Manager for American Eagle Outfitters, Inc., based in Pittsburgh, PA.

During that period, he was responsible for providing the strategic

direction for the department that delivered market share growth as well as supported the overall corporate strategy.

Chris also identified

and established key performance indicators to improve team efficiencies and sales strategies and led a broad, cross- functional team

in strategic executive-level planning.

From June 1997 to February 2005, Chris was the Divisional Merchandise Manager for American Eagle

Outfitters, Inc., based in Pittsburgh, PA.

Nagelson received a Bachelor of Arts degree from the University of Arkansas, where he majored in advertising and public relations.

We believe Mr.

Nagelson is qualified to serve as a member of Alliance’s board of directors based on his extensive experience as a senior executive at a global merchandise and sales corporation.

Nagelson is qualified to serve as a member of Alliance’s board of directors based on his extensive experience as a

senior executive at a global merchandise and sales corporation.

Tom Donaldson III.

Tom Donaldson has served as a director of Alliance since the Business Combination and as a director of Adara from its inception in August 2022 until the Business Combination in August 2020.

Donaldson founded and has been the Managing Partner of Blystone & Donaldson since October 2018, a Charlotte, NC-based investment firm that focuses on middle-market companies.

From January 2016 to December 2018, Mr.

Donaldson served as an executive at Investors Management Corporation where he focused on investment decisions, managing risk and developing relationships with companies of interest.

From around September 2013 to December 2015, he served as a Partner of Morehead Capital Management, LLC before it was merged into Investors Management Corporation in January 2016.

From around June 2003 to August 2013, he practiced law as an associate and then a Partner at McGuireWoods LLP where he represented private funds and their portfolio companies in corporate governance, structuring and financing transactions and operating businesses in a wide variety of industries.

Tom Donaldson has served as a director of Alliance since the Business Combination and as a director of Adara

from its inception in August 2022 until the Business Combination in August 2020.

Donaldson founded and has been the Managing Partner

of Blystone & Donaldson since October 2018, a Charlotte, NC-based investment firm that focuses on middle-market companies.

2016 to December 2018, Mr.

Donaldson served as an executive at Investors Management Corporation where he focused on investment decisions,

managing risk and developing relationships with companies of interest.

From around September 2013 to December 2015, he served as a Partner

of Morehead Capital Management, LLC before it was merged into Investors Management Corporation in January 2016.

From around June 2003

to August 2013, he practiced law as an associate and then a Partner at McGuireWoods LLP where he represented private funds and their

portfolio companies in corporate governance, structuring and financing transactions and operating businesses in a wide variety of industries.

Donaldson received his Master of Business Administration degree and Juris Doctor degree from Villanova University.

He earned his undergraduate degree in Political

Science from North Carolina State University.

He earned his

undergraduate degree in Political Science from North Carolina State University.

We believe Mr.

Donaldson is qualified to serve on our board of directors based on his breath and depth of experience in varied investment, financing and legal roles.

Director Independence

An “independent director” is defined generally as a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationship which in the opinion of the company’s board of directors, would interfere with the director’s exercise of independent judgment in carrying out the responsibilities of a director.

Our board of directors has determined that Messrs.

Donaldson is qualified to serve on our

board of directors based on his breath and depth of experience in varied investment, financing and legal roles.

“independent director” is defined generally as a person other than an officer or employee of the company or its subsidiaries

or any other individual having a relationship which in the opinion of the company’s board of directors, would interfere with the

director’s exercise of independent judgment in carrying out the responsibilities of a director.

Our board of directors has determined

Donaldson, Finke, and Nagelson and Ms.

Wielenga are “independent directors” as defined in the Nasdaq listing standards and applicable SEC rules.

Our independent directors will have regularly scheduled meetings at which only independent directors are present.

Committees of the Board of Directors

Our board of directors has three standing committees:

Wielenga are “independent directors” as defined in the Nasdaq listing

standards and applicable SEC rules.

Our independent directors will have regularly scheduled meetings at which only independent directors

of the Board of Directors

board of directors has three standing committees:

an audit committee, a compensation committee and a nominating committee.

Subject to phase-in rules and a limited exception, the Nasdaq listing rules and Rule 10A-3 of the Exchange Act require that the audit committee of a listed company be comprised solely of independent directors, and the Nasdaq listing rules require that the compensation committee of a listed company be comprised solely of independent directors.

Each of the audit committee, the compensation committee and the nominating committee may have as one of its members a “non-independent director” under exceptional and limited circumstances pursuant to the exemptions under Rules 5605(c)(2)(B), 5605(d)(2)(B) and 5605(e)(3) of the Nasdaq listing rules.

Audit Committee

phase-in rules and a limited exception, the Nasdaq listing rules and Rule 10A-3 of the Exchange Act require that the audit committee

of a listed company be comprised solely of independent directors, and the Nasdaq listing rules require that the compensation committee

of a listed company be comprised solely of independent directors.

Each of the audit committee, the compensation committee and the nominating

committee may have as one of its members a “non-independent director” under exceptional and limited circumstances pursuant

to the exemptions under Rules 5605(c)(2)(B), 5605(d)(2)(B) and 5605(e)(3) of the Nasdaq listing rules.

Wielenga and Messrs.

Donaldson and Finke serve as members of our audit committee, and Ms.

Nagelson and Finke serve as members of our audit committee, and Ms.

Wielenga chairs the audit committee.

Under the Nasdaq listing standards and applicable SEC rules, the audit committee is required to have at least three members, all of whom must be independent, except that the audit committee may have as one of its members a “non-independent director” under exceptional and limited circumstances pursuant to the exemption under Rule 5605(c)(2)(B) of the Nasdaq listing rules.

Each member of the audit committee meets the independent director standard under the Nasdaq listing standards and under Rule 10-A-3(b)(1) of the Exchange Act.

Each member of the audit committee is financially literate, and our board of directors has determined that Mr.

Donaldson qualifies as an “audit committee financial expert” as defined in applicable SEC rules.

We have adopted an audit committee charter, which details the principal functions of the audit committee, including:

● the appointment, compensation, retention, replacement, and oversight of the work of the independent registered public accounting firm engaged by us;

● pre-approving all audit and permitted non-audit services to be provided by the independent registered public accounting firm engaged by us, and establishing pre-approval policies and procedures;

● setting clear hiring policies for employees or former employees of the independent registered public accounting firm, including but not limited to, as required by applicable laws and regulations;

● setting clear policies for audit partner rotation in compliance with applicable laws and regulations;

● obtaining and reviewing a report, at least annually, from the independent registered public accounting firm describing (i) the independent registered public accounting firm’s internal quality-control procedures, (ii) any material issues raised by the most recent internal quality-control review, or peer review, of the audit firm, or by any inquiry or investigation by governmental or professional authorities within the preceding five years respecting one or more independent audits carried out by the firm and any steps taken to deal with such issues and (iii) all relationships between the independent registered public accounting firm and us to assess the independent registered public accounting firm’s independence;

● review adequacy and effectiveness of internal control policies and procedures, including establishing special audit procedures in response to any material control deficiencies;

● reviewing and approving any related party transaction required to be disclosed pursuant to Item 404 of Regulation S-K promulgated by the SEC prior to us entering into such transaction address any conflicts of interest;

● reviewing with management, the independent registered public accounting firm, and our legal advisors, as appropriate, any legal, regulatory or compliance matters, including any correspondence with regulators or government agencies and any employee complaints or published reports that raise material issues regarding our financial statements or accounting policies and any significant changes in accounting standards or rules promulgated by the Financial Accounting Standards Board, the SEC or other regulatory authorities;

● periodically review risk management policies;

● review, approve and monitor code of ethics for senior officers.

Nasdaq listing standards and applicable SEC rules, the audit committee is required to have at least three members, all of whom must be

independent, except that the audit committee may have as one of its members a “non-independent director” under exceptional

and limited circumstances pursuant to the exemption under Rule 5605(c)(2)(B) of the Nasdaq listing rules.

Each member of the audit committee

meets the independent director standard under the Nasdaq listing standards and under Rule 10-A-3(b)(1) of the Exchange Act.

member of the audit committee is financially literate, and our board of directors has determined that Mr.

Donaldson qualifies as an “audit

committee financial expert” as defined in applicable SEC rules.

have adopted an audit committee charter, which details the principal functions of the audit committee, including:

appointment, compensation, retention, replacement, and oversight of the work of the independent

registered public accounting firm engaged by us;

● pre-approving

all audit and permitted non-audit services to be provided by the independent registered public

accounting firm engaged by us, and establishing pre-approval policies and procedures;

clear hiring policies for employees or former employees of the independent registered public

accounting firm, including but not limited to, as required by applicable laws and regulations;

clear policies for audit partner rotation in compliance with applicable laws and regulations;

and reviewing a report, at least annually, from the independent registered public accounting

firm describing (i) the independent registered public accounting firm’s internal quality-control

procedures, (ii) any material issues raised by the most recent internal quality-control review,

or peer review, of the audit firm, or by any inquiry or investigation by governmental or

professional authorities within the preceding five years respecting one or more independent

audits carried out by the firm and any steps taken to deal with such issues and (iii) all

relationships between the independent registered public accounting firm and us to assess

the independent registered public accounting firm’s independence;

the adequacy and effectiveness of internal control policies and procedures, including establishing

special audit procedures in response to any material control deficiencies;

and approving any related party transaction required to be disclosed pursuant to Item 404

of Regulation S-K promulgated by the SEC prior to us entering into such transaction address

any conflicts of interest;

with management, the independent registered public accounting firm, and our legal advisors,

as appropriate, any legal, regulatory or compliance matters, including any correspondence

with regulators or government agencies and any employee complaints or published reports that

raise material issues regarding our financial statements or accounting policies and any significant

changes in accounting standards or rules promulgated by the Financial Accounting Standards

Board, the SEC or other regulatory authorities;

● periodically

review risk management policies;

approve and monitor code of ethics for senior officers.

Donaldson, Finke, Nagelson and Ms.

Wielenga serve as members of our compensation committee, and Mr.

Donaldson chairs our

compensation committee.

Donaldson, Finke and Nagelson serve as members of our compensation committee, and Mr.

Donaldson chairs our compensation committee.

Under the Nasdaq listing standards and applicable SEC rules, the compensation committee is required to have at least two members, all of whom must be independent, except that the compensation committee may, if it is comprised of at least three members, have as one of its members a “non-independent director” under exceptional and limited circumstances pursuant to the exemption under Rule 5605(d)(2)(B) of the Nasdaq listing rules.

We have adopted a compensation committee charter, which detail the principal functions of the compensation committee, including:

● reviewing and approving on an annual basis the corporate goals and objectives relevant to our Chief Executive Office’s compensation, if any is paid by us, evaluating our Chief Executive Officer’s performance in light of such goals and objectives and determining and approving the remuneration (if any) of our Chief Executive Officer based on such evaluation;

● reviewing and approving on an annual basis the compensation, if any is paid by us, of all of our other officers;

● reviewing on an annual basis our executive compensation policies and plans;

● implementing and administering our incentive compensation equity-based remuneration plans;

● assisting management in complying with our proxy statement and annual report disclosure requirements;

● approving all special perquisites, special cash payments and other special compensation and benefit arrangements for our officers and employees;

● if required, producing a report on executive compensation to be included in our annual proxy statement;

● reviewing, evaluating and recommending changes, if appropriate, to the remuneration for directors.

● The charter also provides that the compensation committee may, in its sole discretion, retain or obtain the advice of a compensation consultant, legal counsel or other adviser and will be directly responsible for the appointment, compensation and oversight of the work of any such adviser.

However, before engaging or receiving advice from a compensation consultant, external legal counsel or any other adviser, the compensation committee will consider the independence of each such adviser, including the factors required by the SEC and any national securities exchange on which the Company is listed.

Under the Nasdaq listing standards and applicable SEC rules, the compensation committee is required to have

at least two members, all of whom must be independent, except that the compensation committee may, if it is comprised of at least

three members, have as one of its members a “non-independent director” under exceptional and limited circumstances

pursuant to the exemption under Rule 5605(d)(2)(B) of the Nasdaq listing rules.

have adopted a compensation committee charter, which detail the principal functions of the compensation committee, including:

and approving on an annual basis the corporate goals and objectives relevant to our Chief

Executive Office’s compensation, if any is paid by us, evaluating our Chief Executive

Officer’s performance in light of such goals and objectives and determining and approving

the remuneration (if any) of our Chief Executive Officer based on such evaluation;

and approving on an annual basis the compensation, if any is paid by us, of all of our other

on an annual basis our executive compensation policies and plans;

● implementing

and administering our incentive compensation equity-based remuneration plans;

management in complying with our proxy statement and annual report disclosure requirements;

all special perquisites, special cash payments and other special compensation and benefit

arrangements for our officers and employees;

required, producing a report on executive compensation to be included in our annual proxy

evaluating and recommending changes, if appropriate, to the remuneration for directors.

charter also provides that the compensation committee may, in its sole discretion, retain

or obtain the advice of a compensation consultant, legal counsel or other adviser and will

be directly responsible for the appointment, compensation and oversight of the work of any

such adviser.

However, before engaging or receiving advice from a compensation consultant,

external legal counsel or any other adviser, the compensation committee will consider the

independence of each such adviser, including the factors required by the SEC and any national

securities exchange on which the Company is listed.

Finke, Donaldson, Nagelson and Wielenga serve as members of the nominating committee, and Mr.

Finke serves as chair of the

nominating committee.

Finke, Donaldson and Nagelson serve as members of the nominating committee, and Mr.

Finke serves as chair of the nominating committee.

Under the Nasdaq listing standards, all of the directors on the nominating committee must be independent, except that the nominating committee may, if it is comprised of at least three members, have as one of its members a “non-independent director” under exceptional and limited circumstances pursuant to the exemption under Rule 5605(e)(3) of the Nasdaq listing rules.

The Nominating Committee Charter, which details the purpose and responsibilities of the nominating committee, includes:

● identifying, screening and reviewing individuals qualified to serve as directors, consistent with criteria approved by the board, and recommending to the board of directors candidates for nomination for election at the annual general meeting or to fill vacancies on the board of directors;

● developing and recommending to the board of directors and overseeing implementation of our corporate governance guidelines;

● coordinating and overseeing the annual self-evaluation of the board of directors, its committees, individual directors and management in the governance of the company;

● reviewing on a regular basis our overall corporate governance and recommending improvements as and when necessary.

The charter will also provide that the nominating committee may, in its sole discretion, retain or obtain the advice of, and terminate, any search firm to be used to identify director candidates, and will be directly responsible for approving the search firm’s fees and other retention terms.

We have not formally established any specific, minimum qualifications that must be met or skills that are necessary for directors to possess.

In general, in identifying and evaluating nominees for director, the board of directors will consider educational background, diversity of professional experience, knowledge of our business, integrity, professional reputation, independence, wisdom, and the ability to represent the best interests of our shareholders.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our officers, directors and persons who beneficially own more than ten percent of our common stock to file reports of ownership and changes in ownership with the SEC.

These reporting persons are also required to furnish us with copies of all Section 16(a) forms they file.

Based solely upon a review of such forms, we believe that since the Merger on February 10, 2023 there have been no delinquent filers.

Code of Ethics

We have adopted a Code of Ethics applicable to our directors, officers and employees, including our principal executive officer and principal financial and accounting officer.

Under the Nasdaq listing standards, all of the directors on the nominating committee must be independent,

except that the nominating committee may, if it is comprised of at least three members, have as one of its members a

“non-independent director” under exceptional and limited circumstances pursuant to the exemption under Rule 5605(e)(3)

of the Nasdaq listing rules.

Nominating Committee Charter, which details the purpose and responsibilities of the nominating committee, includes:

● identifying,

screening and reviewing individuals qualified to serve as directors, consistent with criteria

approved by the board, and recommending to the board of directors candidates for nomination

for election at the annual general meeting or to fill vacancies on the board of directors;

and recommending to the board of directors and overseeing implementation of our corporate

governance guidelines;

● coordinating

and overseeing the annual self-evaluation of the board of directors, its committees, individual

directors and management in the governance of the company;

on a regular basis our overall corporate governance and recommending improvements as and

when necessary.

charter will also provide that the nominating committee may, in its sole discretion, retain or obtain the advice of, and terminate, any

search firm to be used to identify director candidates, and will be directly responsible for approving the search firm’s fees and

other retention terms.

have not formally established any specific, minimum qualifications that must be met or skills that are necessary for directors to possess.

In general, in identifying and evaluating nominees for director, the board of directors will consider educational background, diversity

of professional experience, knowledge of our business, integrity, professional reputation, independence, wisdom, and the ability to represent

the best interests of our shareholders.

16(a) Beneficial Ownership Reporting Compliance

16(a) of the Exchange Act requires our officers, directors and persons who beneficially own more than ten percent of our common stock

to file reports of ownership and changes in ownership with the SEC.

These reporting persons are also required to furnish us with copies

of all Section 16(a) forms they file.

Based solely upon a review of such forms, we believe that during the fiscal year ended June 30,

2024, there have been no delinquent filers.

have adopted a Code of Ethics applicable to our directors, officers and employees, including our principal executive officer and principal

financial and accounting officer.

A copy of the Code of Ethics will be provided without charge upon request from us.

We intend to disclose any amendments to or waivers of certain provisions of our Code of Ethics in a Current Report on Form 8-K.

We intend to disclose

any amendments to or waivers of certain provisions of our Code of Ethics in a Current Report on Form 8-K.

The Code of Ethics has been filed as an exhibit to our Annual Report on

Form 10-K for the fiscal year ended December 31, 2022.

Trading Policy

have adopted an insider trading policy (the “Trading Policy”) that is designed to promote compliance with federal securities

laws, rules, and regulations, as well as the rules and regulations of the NASDAQ Stock Market.

The Trading Policy provides Alliance’s

standards on trading and causing the trading of our securities or securities of other publicly traded companies while in possession of

confidential information.

It prohibits trading in certain circumstances and applies to all of our directors, officers, and employees,

as well as independent contractors or consultants who have access to material nonpublic information of Alliance.

Additionally, our Trading

Policy imposes special additional trading restrictions applicable to all of our directors and executive officers.

The Trading Policy

is annexed to this Annual Report as an exhibit and the full text of the Trading Policy is available on our website at www.aent.com.

Executive Compensation.

For the fiscal year ended June 30, 2023, Alliance’s named executive officers were Bruce Ogilvie, Executive Chairman, Jeffrey Walker, Chief Executive Officer, John Kutch, Chief Finance Officer, and Bruce Means, President Distribution Solutions.

This section provides an overview of Alliance’s executive compensation programs, including a narrative description of the material factors necessary to understand the information disclosed in the summary compensation table below.

the fiscal year ended June 30, 2024, Alliance’s named executive officers were Bruce Ogilvie, Executive Chairman, Jeffrey Walker,

Chief Executive Officer and Chief Financial Officer.

section provides an overview of Alliance’s executive compensation programs, including a narrative description of the material factors

necessary to understand the information disclosed in the summary compensation table below.

and 2023 Summary Compensation Table

The following table shows information regarding the compensation of Alliance’s named executive officers for services performed during the fiscal years ended June 30, 2023 and 2022.

Name and Position

All Other Compensation

Total Compensation

Bruce Ogilvie (1)

Executive Chairman

Jeffrey Walker (2)

Chief Executive Offer

John Kutch (3)

Chief Financial Officer

Paul Eibeler (4)

Board Chairman, COKeM

Ben Means (5)

President, Distribution Solutions

(1) Included in all other compensation expenses is $18,300 for car and phone allowance in FY23 and FY22.

Also included is $16,500 in 401K and health benefits in FY23 and $16,900 in FY22

Included in all other compensation expenses is $24,000 for car and phone allowance in FY23 and $23,900 in FY22.

Also included is $13,900 in 401K and health benefits in FY23 and $14,200 in FY22

Included in all other compensation expenses is $11,400 for 401K and health benefits in FY23 and $11,700 in FY22.

Included in all other compensation expenses is $11,600 for 401K and health benefits in FY23 and $9,900 in FY22.

Included in all other compensation expenses is $14,300 for 401K and health benefits in FY23 and $12,900 in FY22.

Employment Agreements for Named Executive Officers

following table shows information regarding the compensation of Alliance’s named executive officers for services performed during

the fiscal years ended June 30, 2024, and 2023.

Other Compensation

Executive Offer/Chief Financial Officer

in all other compensation expenses is $22,912 for car and phone allowance in FY24 and FY23.

Also included is $16,151 in 401K and

health benefits in FY24 and $16,500 in FY23.

in all other compensation expenses is $19,500 for car and phone allowance in FY24 and $24,000 in FY23.

Also included is $16,151 in

401K and health benefits in FY23 and $13,900 in FY23.

Neither of the named executive officers had any outstanding

equity awards at June 30, 2024.

Agreements for Named Executive Officers

Salaries and Bonuses

On February 10, 2023, Bruce Ogilvie, Alliance’s Chairman, and Jeffrey Walker, Alliance’s Chief Executive Officer, entered into employment agreements for initial three-year terms, which will automatically renew thereafter for successive one-year terms.

Following the Business Combination, the two Named Executive Officers are entitled to base salary and a target bonus of a certain percentage of his base salary as follows:

Base Salary ($)

Bonus Percentage(%)

Bruce Ogilvie

Jeffrey Walker

Equity Incentive Plan Awards

In addition to the salaries and bonus targets set forth above, each of the two Named Executive Officers are eligible to participate in and receive awards under the 2023 Plan.

Each of the two Named Executive Officers also has the right to receive or participate in all employee benefit programs and perquisites generally established by the Company from time to time for employees similarly situated to the Named Executive Officer, subject to the general eligibility requirements and other terms of such programs and perquisites, and subject to the Company’s right to

amend, terminate or take other similar action with respect to any such programs and perquisites.

Each also receives $2,000 per month for an automobile lease and be entitled to first class air travel where available.

February 10, 2023, Bruce Ogilvie, Alliance’s Chairman, and Jeffrey Walker, Alliance’s Chief Executive Officer, entered into

employment agreements for initial three-year terms, which will automatically renew thereafter for successive one-year terms.

the Business Combination, the two Named Executive Officers are entitled to base salary and a target bonus of a certain percentage of

his base salary as follows:

Percentage(%)

Incentive Plan Awards

addition to the salaries and bonus targets set forth above, each of the two Named Executive Officers are eligible to participate in and

receive awards under the 2023 Plan.

of the two Named Executive Officers also has the right to receive or participate in all employee benefit programs and perquisites generally

established by the Company from time to time for employees similarly situated to the Named Executive Officer, subject to the general

eligibility requirements and other terms of such programs and perquisites, and subject to the Company’s right to amend, terminate

or take other similar action with respect to any such programs and perquisites.

Each also receives $2,000 per month for an automobile

lease and is entitled to first class air travel where available.

Severance Benefits

Pursuant to their employment agreements, in the event of a termination of such Named Executive Officer’s employment for any reason, the executive would generally be entitled to receive earned but unpaid salary, accrued but unpaid annual bonus, any owed accrued expenses, as well as amounts payable under any benefit plans, programs or arrangements that such Named Executive Officer participates in or benefits therefrom.

In the event that a Named Executive Officer’s employment is terminated due to his death, in addition to the foregoing, he would be entitled to a pro-rated portion of his annual bonus, as determined by the Board.

In the event that a Named Executive Officer’s employment is terminated either without “cause” (as defined in the applicable employment agreement) or by the Named Executive Officer for “good reason” (as defined in the applicable employment agreement), subject to his execution and non-revocation of a general release of claims and continued compliance with his restrictive covenant obligations, as described below, such Named Executive Officer would be entitled to payment of an amount (i) equal to the executive’s base salary immediately prior to the termination date (or, if for “good reason” was attributable to the Company’s failure to pay the minimum amount of Base Salary provided herein, such minimum amount) for the period of time from the day after the Termination Date through the last day of the employment term or for a period of twelve (12) months, whichever is greater (the “Severance Period”);

(ii) in addition to payment of any unpaid bonuses from a prior fiscal year, a pro-rata portion of the bonus based on the amount of days executive worked for the fiscal year in which the termination occurs, and (iii) payment for such Named Executive Officer’s insurance premiums incurred for participation in COBRA coverage pursuant group health plan through the earliest to occur of (A) the last day of the Severance Period, (B) the date the executive ceases to be eligible for COBRA or (C) such time as Executive is eligible for group health insurance benefits from another employer.

Provision of the severance benefits is conditioned on (i) the Named Executive Officer’s continued compliance in all material respects with executive’s continuing obligations to the Company, including, without limitation, the terms of the employment agreement that survive termination of executive’s employment with the Company, and (ii) the Named Executive Officer’s signing (without revoking if such right is provided under applicable law) a separation agreement and general release in a form of that provided to Executive by the Company on or about the termination date.

The Named Executive Officer must so execute the separation agreement within 60 days following the termination date.

to their employment agreements, in the event of a termination of such Named Executive Officer’s employment for any reason, the

executive would generally be entitled to receive earned but unpaid salary, accrued but unpaid annual bonus, any owed accrued expenses,

as well as amounts payable under any benefit plans, programs or arrangements that such Named Executive Officer participates in or benefits

In the event that a Named Executive Officer’s employment is terminated due to his death, in addition to the foregoing,

he would be entitled to a pro-rated portion of his annual bonus, as determined by the Board.

the event that a Named Executive Officer’s employment is terminated either without “cause” (as defined in the

applicable employment agreement) or by the Named Executive Officer for “good reason” (as defined in the applicable

employment agreement), subject to his execution and non-revocation of a general release of claims and continued compliance with his

restrictive covenant obligations, as described below, such Named Executive Officer would be entitled to payment of an amount (i)

equal to the executive’s base salary immediately prior to the termination date (or, if for “good reason” was

attributable to the Company’s failure to pay the minimum amount of Base Salary provided herein, such minimum amount) for the

period of time from the day after the Termination Date through the last day of the employment term or for a period of twelve (12)

months, whichever is greater (the “Severance Period”);

(ii) in addition to payment of any unpaid bonuses from a prior

fiscal year, a pro-rata portion of the bonus based on the amount of days executive worked for the fiscal year in which the

termination occurs, and (iii) payment for such Named Executive Officer’s insurance premiums incurred for participation in

COBRA coverage pursuant group health plan through the earliest to occur of (A) the last day of the Severance Period, (B) the date

the executive ceases to be eligible for COBRA or (C) such time as Executive is eligible for group health insurance benefits from

another employer.

of the severance benefits is conditioned on (i) the Named Executive Officer’s continued compliance in all material respects with

executive’s continuing obligations to the Company, including, without limitation, the terms of the employment agreement that survive

termination of executive’s employment with the Company, and (ii) the Named Executive Officer’s signing (without revoking

if such right is provided under applicable law) a separation agreement and general release in a form of that provided to Executive by

the Company on or about the termination date.

The Named Executive Officer must so execute the separation agreement within 60 days following

the termination date.

Director Compensation

Alliance currently has no formal arrangements under which directors receive compensation for their service on Alliance’s board of directors or its committees.

However, we expect to implement a compensation program for our non-employee directors.

Our board of directors adopted and approved the 2023 Omnibus Equity and Incentive Plan, or 2023 Plan, which was subsequently adopted by Alliance’s stockholders.

The 2023 Plan became effective on February 10, 2023 and is a comprehensive incentive compensation plan under which we can grant equity-based and other incentive awards to based officers, employees and directors of, and consultants and advisers to, Alliance and its subsidiaries.

The purpose of the 2023 Plan is to help us attract, motivate and retain such persons with awards designed for the U.S.

has established a formal arrangement to compensate its non-employee directors.

Under this arrangement, each independent director receives an annual fee of $50,000 for their service on the board of directors and its committees.

board of directors adopted and approved the 2023 Omnibus Equity and Incentive Plan, or 2023 Plan, which was subsequently adopted by Alliance’s

stockholders.

The 2023 Plan became effective on February 10, 2023, and is a comprehensive incentive compensation plan under which we

can grant equity-based and other incentive awards to based officers, employees and directors of, and consultants and advisers to, Alliance

and its subsidiaries.

The purpose of the 2023 Plan is to help us attract, motivate and retain such persons with awards designed for the

market and thereby enhance shareholder value.

Grant of Awards;

Shares Available for Awards.

The 2023 Plan provides for the grant of awards which are distribution equivalent rights, incentive share options, non-qualified share options, performance shares, performance units, restricted common stock, restricted share units, share appreciation rights (“SARs”), tandem share appreciation rights, unrestricted common stock or any combination of the foregoing, to key management employees and non-employee directors of, and non-employee consultants of, Alliance or any of its subsidiaries (each a “participant”) (however, solely Alliance employees or employees of Alliance subsidiaries are eligible for awards which are incentive share options).

We have reserved a total of 600,000 shares of common stock for issuance as or under awards to be made under the 2023 Plan.

To the extent that an award lapses, expires, is canceled, is terminated unexercised or ceases to be exercisable for any reason, or the rights of its holder terminate, any common stock subject to such award shall again be available for the grant of a new award.

The 2023 Plan shall continue in effect, unless sooner terminated, until the tenth (10th) anniversary of the date on which it is adopted by the Board of Directors (except as to awards outstanding on that date).

The Board of Directors in its discretion may terminate the 2023 Plan at any time with respect to any shares for which awards have not theretofore

been granted;

provided, however, that the 2023 Plan’s termination shall not materially and adversely impair the rights of a holder, without the consent of the holder, with respect to any award previously granted.

The number of shares of common stock for which awards which are options or SARs may be granted to a participant under the 2023 Plan during any calendar year is limited to a number of shares equal to three percent (3%) of the total number of shares of common stock of the Company outstanding on the last day of the prior calendar year.

Future new hires, non-employee directors and additional non-employee consultants are eligible to participate in the 2023 Plan as well.

The number of awards to be granted to officers, non-employee directors, employees and non-employee consultants cannot be determined at this time as the grant of awards is dependent upon various factors such as hiring requirements and job performance.

The 2023 Plan provides for the grant of awards which are distribution equivalent rights,

incentive share options, non-qualified share options, performance shares, performance units, restricted common stock, restricted share

units, share appreciation rights (“SARs”), tandem share appreciation rights, unrestricted common stock or any combination

of the foregoing, to key management employees and non-employee directors of, and non-employee consultants of, Alliance or any of its

subsidiaries (each a “participant”) (however, solely Alliance employees or employees of Alliance subsidiaries are eligible

for awards which are incentive share options).

We have reserved a total of 600,000 shares of common stock for issuance as or under awards

to be made under the 2023 Plan.

To the extent that an award lapses, expires, is canceled, is terminated unexercised or ceases to be exercisable

for any reason, or the rights of its holder terminate, any common stock subject to such award shall again be available for the grant

of a new award.

The 2023 Plan shall continue in effect, unless sooner terminated, until the tenth (10th) anniversary of the date on which

it is adopted by the Board of Directors (except as to awards outstanding on that date).

The Board of Directors in its discretion may

terminate the 2023 Plan at any time with respect to any shares for which awards have not theretofore been granted;

provided, however,

that the 2023 Plan’s termination shall not materially and adversely impair the rights of a holder, without the consent of the holder,

with respect to any award previously granted.

The number of shares of common stock for which awards which are options or SARs may be

granted to a participant under the 2023 Plan during any calendar year is limited to a number of shares equal to three percent (3%) of

the total number of shares of common stock of the Company outstanding on the last day of the prior calendar year.

Future new hires, non-

employee directors and additional non-employee consultants are eligible to participate in the 2023 Plan as well.

The number of awards

to be granted to officers, non-employee directors, employees and non-employee consultants cannot be determined at this time as the grant

of awards is dependent upon various factors such as hiring requirements and job performance.

The term of each share option shall be as specified in the option agreement;

provided, however, that except for share options which are incentive share options (“ISOs”), granted to an employee who owns or is deemed to own (by reason of the attribution rules applicable under Code Section 424(d)) more than 10% of the combined voting power of all classes of our common stock or the capital stock of our subsidiaries (a “ten percent shareholder”), no option shall be exercisable after the expiration of ten years from the date of its grant (five (5) years for an employee who is a ten percent shareholder).

The price at which a share may be purchased upon exercise of a share option shall be determined by the Plan Committee;

provided, however, that such option price (i) shall not be less than the fair market value of a share on the date such share option is granted, and (ii) shall be subject to adjustment as provided in the 2023 Plan.

The Plan Committee or the board of directors shall determine the time or times at which or the circumstances under which a share option may be exercised in whole or in part, the time or times at which options shall cease to be or become exercisable following termination of the share option holder’s employment or upon other conditions, the methods by which such exercise price may be paid or deemed to be paid, the form of such payment, and the methods by or forms in which common stock will be delivered or deemed to be delivered to participants who exercise share options.

Options which are ISOs shall comply in all respects with Section 422 of the Code.

In the case of ISOs granted to a ten percent shareholder, the per share exercise price under such ISO (to the extent required by the Code at the time of grant) shall be no less than 110% of the fair market value of a share on the date such ISO is granted.

provided, however, that except for share options which are

incentive share options (“ISOs”), granted to an employee who owns or is deemed to own (by reason of the attribution rules

applicable under Code Section 424(d)) more than 10% of the combined voting power of all classes of our common stock or the capital stock

of our subsidiaries (a “ten percent shareholder”), no option shall be exercisable after the expiration of ten years from

the date of its grant (five (5) years for an employee who is a ten percent shareholder).

price at which a share may be purchased upon exercise of a share option shall be determined by the Plan Committee;

however, that such option price (i) shall not be less than the fair market value of a share on the date such share option is

granted, and (ii) shall be subject to adjustment as provided in the 2023 Plan.

The Plan Committee or the board of directors shall

determine the time or times at which or the circumstances under which a share option may be exercised in whole or in part, the time

or times at which options shall cease to be or become exercisable following termination of the share option holder’s

employment or upon other conditions, the methods by which such exercise price may be paid or deemed to be paid, the form of such

payment, and the methods by or forms in which common stock will be delivered or deemed to be delivered to participants who exercise

share options.

which are ISOs shall comply in all respects with Section 422 of the Code.

In the case of ISOs granted to a ten percent shareholder, the

per share exercise price under such ISO (to the extent required by the Code at the time of grant) shall be no less than 110% of the fair

market value of a share on the date such ISO is granted.

ISOs may only be granted to employees of Alliance or one of its subsidiaries.

In addition, the aggregate fair market value of the shares subject to an ISO (determined at the time of grant) which are exercisable for the first time by an employee during any calendar year may not exceed $100,000.

An Option which specifies that it is not intended to qualify as ISOs or any Option that fails to meet the requirement of an ISO at any point in time will automatically be treated as a nonqualified option (“NQSO”) under the terms of the Plan.

Restricted Share Awards.

A restricted share award is a grant or sale of common stock to the participant, subject to such restrictions on transferability, risk of forfeiture and other restrictions, if any, as the Plan Committee or the board of directors may impose, which restrictions may lapse separately or in combination at such times, under such circumstances (including based on achievement of performance goals and/or future service requirements), in such installments or otherwise, as the Plan Committee or the board of directors may determine at the date of grant or purchase or thereafter.

Except to the extent restricted under the terms of the 2023 Plan and any agreement relating to the restricted share award, a participant who is granted or has purchased restricted shares shall have all of the rights of a shareholder, including the right to vote the restricted shares and the right to receive dividends thereon (subject to any mandatory reinvestment or other requirement imposed by the Plan Committee or the Board of Directors or in the award agreement).

During the restricted period applicable to the restricted shares, subject to certain exceptions, the restricted shares may not be sold, transferred, pledged, hypothecated, or otherwise disposed of by the participant.

Unrestricted Share Awards.

In addition, the aggregate fair market value of the shares subject to an ISO (determined at the time of grant) which are exercisable

for the first time by an employee during any calendar year may not exceed $100,000.

An Option which specifies that it is not intended

to qualify as ISOs or any Option that fails to meet the requirement of an ISO at any point in time will automatically be treated as a

nonqualified option (“NQSO”) under the terms of the Plan.

Share Awards.

A restricted share award is a grant or sale of common stock to the participant, subject to such restrictions on transferability,

risk of forfeiture and other restrictions, if any, as the Plan Committee or the board of directors may impose, which restrictions may

lapse separately or in combination at such times, under such circumstances (including based on achievement of performance goals and/or

future service requirements), in such installments or otherwise, as the Plan Committee or the board of directors may determine at the

date of grant or purchase or thereafter.

Except to the extent restricted under the terms of the 2023 Plan and any agreement relating

to the restricted share award, a participant who is granted or has purchased restricted shares shall have all of the rights of a shareholder,

including the right to vote the restricted shares and the right to receive dividends thereon (subject to any mandatory reinvestment or

other requirement imposed by the Plan Committee or the Board of Directors or in the award agreement).

During the restricted period applicable

to the restricted shares, subject to certain exceptions, the restricted shares may not be sold, transferred, pledged, hypothecated, or

otherwise disposed of by the participant.

Share Awards.

An unrestricted share award is the award of common stock which is not subject to transfer restrictions.

Pursuant to the terms of the applicable unrestricted share award agreement, a holder may be awarded (or sold) common stock which are not subject to transfer restrictions, in consideration for past services rendered thereby to us or an affiliate or for other valid consideration.

Restricted Share Unit Awards.

A restricted share unit award provides for a cash payment to be made to the holder upon the satisfaction of predetermined individual service-related vesting requirements, based on the number of units awarded to the holder.

The Plan Committee shall set forth in the applicable restricted share unit award agreement the individual service-based or performance-based vesting requirement which the holder would be required to satisfy before the holder would become entitled to payment and the number of units awarded to the Holder.

The vesting restrictions under any restricted share unit award shall constitute a “substantial risk of forfeiture” under Section 409A of the Code.

At the time of such an award, the Plan Committee may, in its sole discretion, prescribe additional terms and conditions or restrictions.

The holder of a restricted share unit shall be entitled to receive a cash payment equal to the fair market value of a share, or one (1) share, as determined in the sole discretion of the Plan Committee and as

set forth in the restricted share unit award agreement, for each restricted share unit subject to such restricted share unit award, if and to the extent the applicable vesting requirement is satisfied.

Such payment shall be made no later than by the fifteenth (15th) day of the third (3rd) calendar month next following the end of the calendar year in which the restricted share unit first becomes vested.

Performance Unit Awards.

A performance unit award provides for a cash payment to be made to the holder upon the satisfaction of predetermined individual and/or Alliance performance goals or objectives, based on the number of units awarded to the holder.

The Plan Committee shall set forth in the applicable performance unit award agreement the performance goals and objectives (and the period of time to which such goals and objectives shall apply) which the holder and/or Alliance would be required to satisfy before the holder would become entitled to payment, the number of units awarded to the holder and the dollar value assigned to each such unit.

The vesting restrictions under any performance under award shall constitute a “substantial risk of forfeiture” under Section 409A of the Code.

At the time of such an award, the Plan Committee may, in its sole discretion, prescribe additional terms and conditions or restrictions.

The holder of a performance unit shall be entitled to receive a cash payment equal to the dollar value assigned to such unit under the applicable performance unit award agreement if the holder and/or Alliance satisfy (or partially satisfy, if applicable under the applicable performance unit award agreement) the performance goals and objectives set forth in such performance unit award agreement.

If achieved, such payment shall be made no later than by the 15th day of the third calendar month following the end of Alliance’s fiscal year to which such performance goals and objectives relate.

Performance Share Awards.

A performance share award provides for distribution of common stock to the holder upon the satisfaction of predetermined individual and/or Alliance goals or objectives.

The Plan Committee shall set forth in the applicable performance share award agreement the performance goals and objectives (and the period of time to which such goals and objectives shall apply) which the holder and/or Alliance would be required to satisfy before the holder would become entitled to the receipt of common stock pursuant to such holder’s performance share award and the number of shares of common stock subject to such performance share award.

The vesting restrictions under any performance under award shall constitute a “substantial risk of forfeiture” under Section 409A of the Code and, if such goals and objectives are achieved, the distribution of such common stock shall be made no later than by the 15th day of the 3rd calendar month next following the end of our fiscal year to which such goals and objectives relate.

At the time of such an award, the Plan Committee may, in its sole discretion, prescribe additional terms and conditions or restrictions.

The holder of a performance share award shall have no rights as an Alliance shareholder until such time, if any, as the holder actually receives common stock pursuant to the performance share award.

Distribution Equivalent Rights.

A distribution equivalent right entitles the holder to receive bookkeeping credits, cash payment and/or share distributions equal in amount to the distributions that would be made to the holder had the holder held a specified number of common stock during the period the holder held the distribution equivalent rights.

The Plan Committee shall set forth in the applicable distribution equivalent rights award agreement the terms and conditions, if any, including whether the holder is to receive credits currently in cash, is to have such credits reinvested (at fair market value determined as of the date of reinvestment) in additional common stock or is to be entitled to choose among such alternatives.

Such receipt shall be subject to a “substantial risk of forfeiture” under Section 409A of the Code and, if such award becomes vested, the distribution of such cash or common stock shall be made no later than by the 15th day of the third calendar month next following the end of the Company’s fiscal year in which the holder’s interest in the award vests.

Distribution equivalent rights awards may be settled in cash or in common stock, as set forth in the applicable distribution equivalent rights award agreement.

A distribution equivalent rights award may, but need not be, awarded in tandem with another award other than an Option or SAR award, whereby, if so awarded, such distribution equivalent rights award shall terminate or be forfeited by the holder, as applicable, under the same conditions as under such other award.

The distribution equivalent rights award agreement for a distribution equivalent rights award may provide for the crediting of interest on a distribution rights award to be settled in cash at a future date (but in no event later than by the 15th day of the third calendar month next following the end of the Company’s fiscal year in which such interest was credited), at a rate set forth in the applicable distribution equivalent rights award agreement, on the amount of cash payable thereunder.

Share Appreciation Rights.

A SAR provides the participant to whom it is granted the right to receive, upon its exercise, the excess of (A) the fair market value of the number of shares of common stock subject to the SAR on the date of exercise, over (B) the product of the number of shares of common stock subject to the SAR multiplied by the base value under the SAR, as determined by the Plan Committee or the board of directors.

the terms of the applicable unrestricted share award agreement, a holder may be awarded (or sold) common stock which are not subject

to transfer restrictions, in consideration for past services rendered thereby to us or an affiliate or for other valid consideration.

Share Unit Awards.

A restricted share unit award provides for a cash payment to be made to the holder upon the satisfaction of predetermined

individual service-related vesting requirements, based on the number of units awarded to the holder.

The Plan Committee shall set forth

in the applicable restricted share unit award agreement the individual service-based or performance-based vesting requirement which the

holder would be required to satisfy before the holder would become entitled to payment and the number of units awarded to the Holder.

The vesting restrictions under any restricted share unit award shall constitute a “substantial risk of forfeiture” under

Section 409A of the Code.

At the time of such an award, the Plan Committee may, in its sole discretion, prescribe additional terms and

conditions or restrictions.

The holder of a restricted share unit shall be entitled to receive a cash payment equal to the fair market

value of a share, or one (1) share, as determined in the sole discretion of the Plan Committee and as set forth in the restricted share

unit award agreement, for each restricted share unit subject to such restricted share unit award, if and to the extent the applicable

vesting requirement is satisfied.

Such payment shall be made no later than by the fifteenth (15th) day of the third (3rd) calendar month

next following the end of the calendar year in which the restricted share unit first becomes vested.

A performance unit award provides for a cash payment to be made to the holder upon the satisfaction of predetermined

individual and/or Alliance performance goals or objectives, based on the number of units awarded to the holder.

The Plan Committee shall

set forth in the applicable performance unit award agreement the performance goals and objectives (and the period of time to which such

goals and objectives shall apply) which the holder and/or Alliance would be required to satisfy before the holder would become entitled

to payment, the number of units awarded to the holder and the dollar value assigned to each such unit.

The vesting restrictions under

any performance under award shall constitute a “substantial risk of forfeiture” under Section 409A of the Code.

of such an award, the Plan Committee may, in its sole discretion, prescribe additional terms and conditions or restrictions.

of a performance unit shall be entitled to receive a cash payment equal to the dollar value assigned to such unit under the applicable

performance unit award agreement if the holder and/or Alliance satisfy (or partially satisfy, if applicable under the applicable performance

unit award agreement) the performance goals and objectives set forth in such performance unit award agreement.

achieved, such payment shall be made no later than by the 15th day of the third calendar month following the end of Alliance’s

fiscal year to which such performance goals and objectives relate.

Share Awards.

A performance share award provides for distribution of common stock to the holder upon the satisfaction of predetermined

individual and/or Alliance goals or objectives.

The Plan Committee shall set forth in the applicable performance share award agreement

the performance goals and objectives (and the period of time to which such goals and objectives shall apply) which the holder and/or

Alliance would be required to satisfy before the holder would become entitled to the receipt of common stock pursuant to such holder’s

performance share award and the number of shares of common stock subject to such performance share award.

The vesting restrictions under

any performance under award shall constitute a “substantial risk of forfeiture” under Section 409A of the Code and, if such

goals and objectives are achieved, the distribution of such common stock shall be made no later than by the 15th day of the 3rd calendar

month next following the end of our fiscal year to which such goals and objectives relate.

At the time of such an award, the Plan Committee

may, in its sole discretion, prescribe additional terms and conditions or restrictions.

The holder of a performance share award shall

have no rights as an Alliance shareholder until such time, if any, as the holder actually receives common stock pursuant to the performance

Equivalent Rights.

A distribution equivalent right entitles the holder to receive bookkeeping credits, cash payment and/or share

distributions equal in amount to the distributions that would be made to the holder had the holder held a specified number of common

stock during the period the holder held the distribution equivalent rights.

The Plan Committee shall set forth in the applicable distribution

equivalent rights award agreement the terms and conditions, if any, including whether the holder is to receive credits currently in cash,

is to have such credits reinvested (at fair market value determined as of the date of reinvestment) in additional common stock or is

to be entitled to choose among such alternatives.

Such receipt shall be subject to a “substantial risk of forfeiture” under

Section 409A of the Code and, if such award becomes vested, the distribution of such cash or common stock shall be made no later than

by the 15th day of the third calendar month next following the end of the Company’s fiscal year in which the holder’s interest

in the award vests.

Distribution equivalent rights awards may be settled in cash or in common stock, as set forth in the applicable distribution

equivalent rights award agreement.

A distribution equivalent rights award may, but need not be, awarded in tandem with another award

other than an Option or SAR award, whereby, if so awarded, such distribution equivalent rights award shall terminate or be forfeited

by the holder, as applicable, under the same conditions as under such other award.

The distribution equivalent rights award agreement

for a distribution equivalent rights award may provide for the crediting of interest on a distribution rights award to be settled in

cash at a future date (but in no event later than by the 15th day of the third calendar month next following the end of the Company’s

fiscal year in which such interest was credited), at a rate set forth in the applicable distribution equivalent rights award agreement,

on the amount of cash payable thereunder.

Appreciation Rights.

A SAR provides the participant to whom it is granted the right to receive, upon its exercise, the excess of

(A) the fair market value of the number of shares of common stock subject to the SAR on the date of exercise, over (B) the product of

the number of shares of common stock subject to the SAR multiplied by the base value under the SAR, as determined by the Plan Committee

or the board of directors.

The base value of a SAR shall not be less than the fair market value of a share on the date of the grant.

If the Plan Committee grants a share appreciation right which is intended to be a tandem SAR, additional restrictions apply.

Amendment and Termination .

The 2023 Plan shall continue in effect, unless sooner terminated pursuant to its terms, until February 10, 2033, the tenth anniversary of the date on which it is adopted by the Board of Directors (except as to awards outstanding on that date).

As of June 30, 2023, a total of 463,800 awards have been granted under the 2023 Plan.

and Termination .

The 2023 Plan shall continue in effect, unless sooner terminated pursuant to its terms, until February 10, 2033,

the tenth anniversary of the date on which it is adopted by the Board of Directors (except as to awards outstanding on that date).

of June 30, 2024, a total of 463,800 awards have been granted under the 2023 Plan.

Bonus Incentive Plan

In fiscal year 2025, the Company

updated its cash Bonus Incentive Plan (the “Plan”) designed to align leadership compensation with the Company’s financial

performance, specifically its growth in earnings before interest, taxes, depreciation, and amortization (“EBITDA”).

is structured as follows:

The Plan applies to executives

and leaders as determined by the Compensation Committee of the Board of Directors.

The bonus payout under the Plan is directly linked

to the Company’s EBITDA growth year-over-year.

The Plan uses the percentage increase in the Company’s EBITDA for the current

fiscal year as compared to the prior fiscal year as the performance metric.

A full payout of the cash bonus

will occur if the Company’s EBITDA for the current fiscal year increases by 10% or more compared to the prior year’s EBITDA.

For EBITDA growth below 10%, the bonus payout is pro rata down to 1% of the bonus amount based on the percentage increase in EBITDA.

10% or greater EBITDA increase:

100% bonus payout.

9% EBITDA increase:

90% bonus payout.

8% EBITDA increase:

80% bonus payout.

This pattern continues, with a 10% reduction in payout

for every 1% decrease in EBITDA growth.

No bonus will be paid if EBITDA growth is less than 1%.

Bonuses earned under the Plan,

if any, will be paid in the first quarter of the following fiscal year, after the Company’s financial results for the relevant year

are finalized and audited.

The Compensation Committee retains the discretion to adjust the final bonus payouts in the event of extraordinary

or non-recurring items that materially affect the Company’s reported EBITDA.

The Company will accrue bonuses based on its estimated

performance to the Plan’s EBITDA targets throughout the fiscal year.

Board has adopted a clawback policy which allows us to recover performance-based compensation, whether cash or equity, from a current

or former executive officer in the event of an Accounting Restatement.

The clawback policy defines an Accounting Restatement as an accounting

restatement of our financial statements due to our material noncompliance with any financial reporting requirement under the securities

Under such policy, we may recoup incentive-based compensation previously received by an executive officer that exceeds the amount

of incentive-based compensation that otherwise would have been received had it been determined based on the restated amounts in the Accounting

Board has the sole discretion to determine the form and timing of the recovery, which may include repayment, forfeiture and/or an adjustment

to future performance-based compensation payouts or awards.

The remedies under the clawback policy are in addition to, and not in lieu

of, any legal and equitable claims available to the Company.

The clawback policy is annexed to this Annual Report as an exhibit.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information included under the heading “ Equity Plans ” in Item 12 of Part III of this annual report is hereby incorporated by reference into this Item 12 of Part II of this annual report.

The following table sets forth information regarding the beneficial ownership of our Class A common stock as of the date of this annual report, by:

● each person known by us to be the beneficial owner of more than 5% of our outstanding shares of Class A common stock;

● each of our executive officers and directors;

● all our executive officers and directors as a group.

Beneficial ownership is determined according to the rules of the SEC, which generally provide that a person has beneficial ownership of a security if he, she or it possesses sole or shared voting or investment power over that security, including options and warrants that are currently exercisable or exercisable within 60 days.

Except as described in the footnotes below and subject to applicable community property laws and similar laws, we believe that each person listed below has sole voting and investment power with respect to such shares.

The beneficial ownership percentages set forth in the table below are based on 50,965,970 shares of Class A common stock issued and outstanding as of September 27, 2023 (including 463,800 shares of unvested restricted stock).

Number of Shares of

Name of Beneficial

information included under the heading “ Equity Plans ” in Item 11 and Part III of this annual report is hereby incorporated

by reference into this Item 12 of Part II of this annual report.

following table sets forth information regarding the beneficial ownership of our Class A common stock as of the date of this annual report,

person known by us to be the beneficial owner of more than 5% of our outstanding shares of Class A common stock;

of our executive officers and directors;

our executive officers and directors as a group.

ownership is determined according to the rules of the SEC, which generally provide that a person has beneficial ownership of a security

if he, she or it possesses sole or shared voting or investment power over that security, including options and warrants that are currently

exercisable or exercisable within 60 days.

Except as described in the footnotes below and subject to applicable community property laws

and similar laws, we believe that each person listed below has sole voting and investment power with respect to such shares.

beneficial ownership percentages set forth in the table below are based on 50,957,370 shares of Class A common stock issued and outstanding

as of September 19, 2024.

Class A Common Stock

Percentage of Outstanding Class

Beneficially Owned

A Common Stock

Bruce Ogilvie (2)(3)

Jeffrey Walker (2)

Thomas Finke (4)

of Outstanding Class

of Beneficial Owner (1)

Ogilvie (2)(3)

Tom Donaldson III (5)

Chris Nagelson (6)

John Kutch (7)

Directors and executive officers as a group (7 individuals)

Ogilvie Legacy Trust dated September 14, 2021 (8)

(1) Unless otherwise indicated, the business address of each of the directors and executive officers of Alliance is c/o Alliance Entertainment Holding Corporation, 8201 Peters Road, Suite 1000, Plantation, Florida 33324.

(2) Excludes Class E common stock.

(3) The shares are beneficially owned by the Bruce Ogilvie, Jr.

and executive officers as a group (9 individuals)

Legacy Trust dated September 14, 2021 (6)

otherwise indicated, the business address of Alliance’s directors and executive officers is c/o Alliance Entertainment Holding

Corporation, 8201 Peters Road, Suite 1000, Plantation, Florida 33324.

Class E common stock.

shares are beneficially owned by the Bruce Ogilvie, Jr.

Trust dated January 20, 1994, having Mr.

2 unchanged sentences

Ogilvie disclaims individual ownership of such shares except for his individual pecuniary interest in such trusts.

(4) Includes 637,333 shares issuable upon exercise of private warrants.

323,864 of the listed shares, including 250,000 shares issuable upon exercise of private warrants, are held directly by the Thomas M.

637,333 shares issuable upon exercise of private warrants.

321,028 of the listed shares, including 250,000 shares issuable upon exercise

of private warrants, are held directly by the Thomas M.

Finke Family Trust dtd 12/14/2012, of which Mr.

Finke’s spouse is the trustee and Mr.

Finke’s spouse is the

trustee and Mr.

Finke’s spouse and children are the beneficiaries.

Finke disclaims beneficial ownership of such shares except to the extent of his pecuniary interest therein.

(5) Such shares are held directly by B&D Series 2020, LLC, of which Mr.

Finke disclaims beneficial ownership of such shares

except to the extent of his pecuniary interest therein.

(i) 40,000 shares held directly, (ii) 2,468,362 shares, including 1,837,335 shares issuable upon exercise of private warrants, held

directly by B&D Series 2020, LLC, of which Mr.

Donaldson is the manager and (iii) 83,300 shares held by Blystone & Donaldson,

LLC, of which Mr.

Donaldson is the manager.

Donaldson disclaims beneficial ownership of such shares except to the extent of his pecuniary interest therein.

Includes 1,837,335 shares issuable upon exercise of private warrants.

(6) Includes 5,000 shares underlying a restricted stock award which vests on October 4, 2023.

(7) Includes 12,500 shares underlying a restricted stock award which vests on October 4, 2023.

Donaldson disclaims beneficial ownership of such shares except to the extent of his

pecuniary interest therein

Ogilvie’s two adult children are trustees of the Ogilvie Legacy Trust dated September 14, 2021.

Ogilvie disclaims beneficial ownership of the shares held by such trust.

Ogilvie disclaims beneficial

ownership of the shares held by such trust.

Certain Relationships and Related Transactions.

Initial Stockholder Shares

In August 2020, the Sponsor purchased an aggregate of 2,875,000 Initial Stockholder Shares for an aggregate purchase price of $25,000 in cash, or approximately $0.009 per share.

Prior to the IPO, Sponsor transferred 50,000 Initial Stockholder Shares to the underwriter for the IPO and to affiliated of the underwriter.

In connection with the Business Combination the Adara Initial Stockholders forfeited 1,375,000 of these Initial Stockholder Shares.

At the closing of the Business Combination, each of the remaining 1,500,000 Initial Stockholder Shares converted into one share of Class A common stock.

Sponsor Service Agreement

From February 8, 2021 through May 2022, we paid an affiliate of the Sponsor, a total of $10,000 per month for office space, utilities and secretarial and administrative support.

Registration Rights Agreement

The holders of the Initial Stockholder Shares and private warrants (and in each case holders of their underlying securities, as applicable) have registration rights to require us to register a sale of any of our securities held by them pursuant to a registration rights agreement that was signed on February 8, 2021.

This agreement provided that these holders are entitled to make up to three demands, excluding short form registration demands, that we register such securities for sale under the Securities Act.

In addition, these holders were granted “piggy-back” registration rights to include their securities in other registration statements filed by us.

In connection with the closing of the Business Combination, the Adara Initial Stockholders and the Legacy Alliance stockholders entered into the Registration Rights Agreement, which amended and restated the former registration rights agreement.

Pursuant to the Registration Rights Agreement, Alliance filed a resale registration statement and it was declared effective in accordance with the terms of the registration statement.

In certain circumstances, the Adara Initial Stockholders and the Legacy Alliance stockholders may each demand up to two registrations, which may be underwritten offerings, and all of the registration rights holders will be entitled to piggyback registration rights.

Private Warrants

Simultaneously with the IPO, the Sponsor purchased an aggregate of 4,120,000 private warrants at a price of $1.00 per private warrant ($4,120,000 in the aggregate) in a private placement.

Each private warrant entitles the holder to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment.

The private warrants will be non-redeemable and exercisable on a cashless basis so long as they are held by the Sponsor or its permitted transferees.

Promissory Note and Affiliate Loans

Prior to the closing of the IPO, the Sponsor loaned us an aggregate of $600,000, which was used to fund a portion of the expenses of the IPO.

These loans were non-interest bearing, unsecured and were due at the earlier of March 31, 2021 or the closing of the IPO.

The loan was repaid upon the closing of the IPO out of the offering proceeds.

On June 22, 2022, each of Blystone & Donaldson, LLC, an affiliate of W.

Tom Donaldson III, a director of Adara prior to the Business Combination and a director of Alliance, and Thomas Finke, Chief Executive Officer and a director of Adara, prior to the Business Combination and a director of Alliance, agreed to loan us up to $250,000 to fund operating expenses, including expenses related to the Business Combination pursuant to the Promissory Notes.

The Promissory Notes were deemed payable upon the earlier of the closing of the Business Combination and February 10, 2023 and were non-interest bearing.

At the closing, the amounts

outstanding under the promissory notes were $250,000 to Blystone & Donaldson, LLC and $221,598 to Mr.

In addition, Alliance had an additional payable of $53,710 owed to Blystone & Donaldson, LLC for advances of expenses paid on Alliance’s behalf.

Blystone & Donaldson, LLC and Mr.

Finke agreed to convert the amounts owed to them into payables and that such amounts would be payable after certain other payables assumed by Alliance in connection with the Business Combination.

Sponsor Support Agreement

On June 22, 2022, Adara, Legacy Alliance and the Alliance Initial Stockholders entered into the Sponsor Support Agreement pursuant to which the Alliance Initial Stockholders agreed to vote all of their Initial Stockholder Shares and shares of Class A common stock in favor of the approval and adoption of the Business Combination and related matters subject to a stockholder vote at the stockholder meeting at which the Business Combination proposal was voted upon by the Alliance stockholders.

Alliance Indemnification Agreements

In connection with the IPO, Alliance entered into agreements with its officers and directors to provide contractual indemnification in addition to the indemnification provided for in its certificate of incorporation.

Alliance also purchased a policy of directors’ and officers’ liability insurance that insures its officers and directors against the cost of defense, settlement or payment of a judgment in some circumstances and insures Alliance against its obligations to indemnify its officers and directors.

Alliance Related Party Transactions

Captive Insurance Policies

Bruce Ogilvie, Executive Chairman, a director and a principal stockholder of Alliance, and Jeff Walker, Chief Executive Officer, a director and a principal stockholder of Alliance, established two insurance companies;

Guard Yourself Insurance Company, Ltd.

and Super O Insurance Company, Ltd., replaced effective April 1, 2018, with the current new insurance companies, Airlie Protection Ins.

and Protection for You Ins.

These insurance companies additionally insure the general assets, liabilities and claims of Alliance through March 30, 2022, and were not renewed for future periods.

The entities are known as captive insurance companies.

New policies covered the period of March 31, 2021, to March 30, 2022, and incurred an annual expense of $2.4 million.

Premium payments are allowed based on the Loan Agreement dated February 21, 2017.

The Company is not a guarantor and does not have exposure in the event of a loss.

Total captive policy expense for the fiscal years ended June 30, 2023 and 2022, was $0 and $1.6 million, respectively.

Total claims filed for the year ended June 30, 2022 was $1.2 million.

There were no receivables from the captive as of June 30, 2023 or 2022.

Interest-Charge Domestic International Sales Corporation (IC-DISC)

The Company has an affiliate, My Worldwide Market Place, Inc.

Stockholder Shares

August 2020, the Sponsor purchased an aggregate of 2,875,000 shares (the “Initial Stockholder Shares”) for an aggregate purchase

price of $25,000 in cash, or approximately $0.009 per share.

Prior to the IPO, Sponsor transferred 50,000 Initial Stockholder Shares

to the underwriter for the IPO and to affiliates of the underwriter.

In connection with the Business Combination the Adara Initial Stockholders

forfeited 1,375,000 of these Initial Stockholder Shares.

At the closing of the Business Combination, each of the remaining 1,500,000

Initial Stockholder Shares converted into one share of Class A common stock.

Rights Agreement

holders of the Initial Stockholder Shares and private warrants (and in each case holders of their underlying securities, as applicable)

have registration rights to require us to register a sale of any of our securities held by them pursuant to a registration rights agreement

that was signed on February 8, 2021.

This agreement provided that these holders are entitled to make up to three demands, excluding short

form registration demands, that we register such securities for sale under the Securities Act.

In addition, these holders were granted

“piggy-back” registration rights to include their securities in other registration statements filed by us.

connection with the closing of the Business Combination, the Adara Initial Stockholders and the Legacy Alliance stockholders entered

into the Registration Rights Agreement, which amended and restated the former registration rights agreement.

Pursuant to the Registration

Rights Agreement, Alliance filed a resale registration statement and it was declared effective in accordance with the terms of the registration

In certain circumstances, the Adara Initial Stockholders and the Legacy Alliance stockholders may each demand up to two registrations,

which may be underwritten offerings, and all of the registration rights holders will be entitled to piggyback registration rights.

Simultaneously

with the IPO, the Sponsor purchased an aggregate of 4,120,000 private warrants at a price of $1.00 per private warrant ($4,120,000 in

the aggregate) in a private placement.

Each private warrant entitles the holder to purchase one share of Class A common stock at a price

of $11.50 per share, subject to adjustment.

The private warrants will be non-redeemable and exercisable on a cashless basis so long as

they are held by the Sponsor or its permitted transferees.

Note and Affiliate Loans

to the IPO’s closing, the Sponsor provided us with aggregate loans totaling $600,000 to cover IPO-related expenses.

were non-interest bearing, unsecured, and due on the earlier of March 31, 2021, or the IPO’s closing.

The loan was fully repaid

from the offering proceeds at the IPO closing.

June 22, 2022, Blystone & Donaldson, LLC, an affiliate of W.

Tom Donaldson III, a director of Alliance, and Thomas Finke, then Chief

Executive Officer and a director of Adara prior to the Business Combination, agreed to loan us up to $250,000 to fund operating expenses,

including those related to the Business Combination.

These loans were documented through non-interest-bearing Promissory Notes, payable

on the earlier of the closing of the Business Combination or February 10, 2023.

the closing of the Business Combination, the amounts outstanding under the Promissory Notes were $250,000 to Blystone & Donaldson,

LLC and $221,598 to Mr.

Additionally, we had an outstanding payable of $53,710 to Blystone & Donaldson, LLC for advances made

on our behalf.

to the Business Combination, Blystone & Donaldson, LLC and Mr.

Finke agreed to convert the amounts owed into payable

obligations, with terms indicating that these amounts would be settled after certain other payables assumed by Alliance in

connection with the Business Combination.

During fiscal year 2024, we repaid the $250,000, $221,598, and $53,710 owed to Blystone

& Donaldson, LLC, Mr.

Finke, and Mr.

Donaldson, respectively.

of June 30, 2024, there have been no new promissory notes or significant changes to the terms of the previously disclosed related party

We continue to monitor and manage these obligations in accordance with the terms agreed upon and as reflected in our financial

Support Agreement

June 22, 2022, Adara, Legacy Alliance and the Alliance Initial Stockholders entered into the Sponsor Support Agreement pursuant to which

the Alliance Initial Stockholders agreed to vote all of their Initial Stockholder Shares and shares of Class A common stock in favor

of the approval and adoption of the Business Combination and related matters subject to a stockholder vote at the stockholder meeting

at which the Business Combination proposal was voted upon by the Alliance stockholders.

Indemnification Agreements

connection with the IPO, Alliance entered into agreements with its officers and directors to provide contractual indemnification in addition

to the indemnification provided for in its certificate of incorporation.

Alliance also purchased a policy of directors’ and officers’

liability insurance that insures its officers and directors against the cost of defense, settlement or payment of a judgment in some

circumstances and insures Alliance against its obligations to indemnify its officers and directors.

Related Party Transactions

Interest-Charge

Domestic International Sales Corporation (IC-DISC)

Company has an affiliate, My Worldwide Market Place, Inc.

which is an IC-DISC and was established February 12, 2013.

The IC-DISC is owned by the Company Stockholders.

Effective December 31, 2022, IC-DISC was discontinued as a result there will be no future accruals or commissions paid out.

The IC-DISC is organized to manage sales to certain qualified customers and receive commissions from the Company for this activity.

The commissions expenses were $2.8 and $9.9 million for the year ended June 30, 2023, and 2022 respectively.

Determined under formulas and rules defined in the law and regulations of the US tax code.

Under these regulations, the commission is deductible by the Company and results in a specified profit to the IC-DISC.

The IC-DISC is owned

by the Company Stockholders.

Effective December 31, 2022, IC-DISC was discontinued as a result there will be no future accruals or commissions

IC-DISC is organized to manage sales to certain qualified customers and receive commissions from the Company for this activity.

The commissions

expenses were $0 and $2.8 million for the year ended June 30, 2024, and 2023 respectively.

Determined under formulas and rules defined

in the law and regulations of the US tax code.

Under these regulations, the commission is deductible by the Company and results in a

specified profit to the IC-DISC.

This net profit is not subject to Federal income tax.

The IC-DISC, which is managed on a calendar year, distributes the profit to its Stockholders, who are taxed on the income as a dividend.

For twelve months ended December 31, 2022, the owners of the IC-DISC elected to forgive the distribution.

The commission was not paid out but rolled into Equity of Alliance Entertainment for the period ended June 30, 2023.

GameFly Holdings, LLC

During the years ended June 30, 2023, 2022, Alliance has made sales of new release movies, video games, and video game consoles to GameFly Holdings LLC in the amount of $16.8 million and $7.5 million, respectively.

GameFly, a customer of Alliance, is equally owned by Bruce Ogilvie and Jeff Walker, the two shareholders of Alliance.

Alliance believes the amounts that GameFly paid for New Release, movies, video games, and video game consoles are at fair market value.

GameFly does fulfillment services of

fast selling new releases by providing 3PL services at market rates.

The IC-DISC, which is managed on a calendar year,

distributes the profit to its Stockholders, who are taxed on the income as a dividend.

For twelve months ended December 31, 2022, the

owners of the IC-DISC elected to forgive the distribution.

The commission was not paid out but rolled into Equity of Alliance Entertainment

for the period ending June 30, 2023.

Holdings, LLC

the years ended June 30, 2024, 2023, Alliance has made sales of new release movies, video games, and video game consoles to GameFly Holdings

LLC in the amount of $8.4 million and $16.8 million, respectively.

GameFly, a customer of Alliance, is equally owned by Bruce Ogilvie

and Jeff Walker, the two shareholders of Alliance.

Alliance believes the amounts that GameFly paid for New Release, movies, video games,

and video game consoles are at fair market value.

GameFly does fulfillment services of fast selling new releases by providing 3PL services

at market rates.

The agreement between Alliance and GameFly can be terminated by either party at any time.

GameFly is free to purchase from any competitor of Alliance.

On February 1, 2023, Alliance entered into a Distribution Agreement (the “Agreement”) with GameFly, which is effective from February 1, 2023, through March 31, 2028, at which time the Agreement continues indefinitely until either party provides the other party with six-month advance notice to terminate the Agreement.

During the year ended June 30, 2023 Alliance had distribution revenue in the amount of $0.22 million.

MVP Logistics, LLC

During the year ended June 30, 2023, and 2022 Alliance incurred costs with MVP Logistics, LLC, in the amount of $8.3 million, and $11.4 million, respectively, for freight shipping fees, transportation costs, warehouse distribution, and 3PL management services (for Arcades) at the Redlands, California and South Gates, California distribution facilities.

MVP Logistics is an independent contractor, which is 33.3% owned by Joe Rehak, the SVP of Operations of COKeM International Limited, which was acquired by Alliance in September 2020, and the remaining 66.6% by unaffiliated third parties.

GameFly is free to purchase

from any competitor of Alliance.

February 1, 2023, Alliance entered into a Distribution Agreement (the “Agreement”) with GameFly, which is effective from

February 1, 2023, through March 31, 2028.

At that time, the Agreement continues indefinitely until either party provides the other party

with six-month advance notice to terminate it.

During the year ended June 30, 2024, and 2023, Alliance had distribution revenue in the

amount of $0.25 and $0.22 million respectively.

Logistics, LLC

Logistics is an independent contractor, which, prior to August 31, 2023, was partially owned by Joe Rehak, the SVP of Operations of COKeM

International Limited, which Alliance acquired in September 2020.

Subsequent to August 31, 2023, Mr.

Rehak no longer has an equity stake

in MVP Logistics and retired from COKeM in January 2024.

Alliance believes the amounts payable to MVP Logistics are at fair market value.

The MVP 3PL Logistics agreement for Redlands and Southgate, California is for a one-year term ending March 10, 2023, with one-year automatic renewals unless cancelled by either party.

Ogilvie Loans

(i) borrowed $7,595,520 from Ogilvie on June 6, 2023 (the “June 2023 Ogilvie Loan”) and repaid the June 6 Ogilvie Loan on June 28, 2023 (such repayment, together with the June 2023 Ogilvie Loan, the “June 2023 Ogilvie Loan Transactions”);

(ii) entered into a $17,000,000 line of credit with Ogilvie on July 3, 2023 (the “Ogilvie 2023 Line of Credit”), (iii) borrowed $10,000,000 under the Ogilvie 2023 Line of Credit on July 3, 2023 and an additional $5,000,000 under the Ogilvie 2023 Line of Credit on July 10, 2023 (collectively, such loans the “July 2023 Ogilvie Loans”) and repaid the July 2023 Ogilvie Loans on July 26, 2023 (such repayment, together with the July 2023 Ogilvie Loans, the “July 2023 Ogilvie Loan Transactions”), and (iv) borrowed $17,000,000 under the Ogilvie 2023 Line of Credit on August 10, 2023 (such loan the “August 2023 Ogilvie Loan” and collectively with the June 2023 Ogilvie Loan and the July 2023 Ogilvie Loans, the “2023 Ogilvie Loans”) and repaid $7,000,000 of the August 2023 Ogilvie Loan on August 28, 2023 (such repayment, together with the August 2023 Ogilvie Loan, the “August 2023 Ogilvie Loan Transactions” and collectively with the June 2023 Ogilvie Loan Transactions and the July 2024 Ogilvie Loan Transactions, the “2023 Ogilvie Loan Transactions”).

Alliance agreed to pay interest on the Loan at the rate of BSBY plus 3% per annum calculated daily.

The expected interest cost to be paid to Mr.

Ogilvie if BSBY remains at 5.16% and paid on June 30, 2023, would be approximately $41,000.

This amount is subject to change based upon BSBY daily rate fluctuation.

Policies and Procedures for Related Person Transactions

Our board of directors adopted a related person transaction policy setting forth the policies and procedures for the identification, review and approval or ratification of related person transactions.

This policy covers, with certain exceptions set forth in Item 404 of Regulation S-K under the Securities Act, any transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships, in which we and a related person were or will be participants and the amount involved exceeds $120,000, including purchases of goods or services by or from the related person or entities in which the related person has a material interest, indebtedness and guarantees of indebtedness.

In reviewing and approving any such transactions, our audit committee will consider all relevant facts and circumstances as appropriate, such as the purpose of the transaction, the availability of other sources of comparable products or services, whether the transaction is on terms comparable to those that could be obtained in an arm’s length transaction, management’s recommendation with respect to the proposed related person transaction, and the extent of the related person’s interest in the transaction.

Director Independence

Our board of directors has determined that Messrs.

the year ended June 30, 2024, and 2023 Alliance incurred costs with MVP Logistics, LLC, in the amount of $1.0 million, and $8.3 million,

respectively, for freight shipping fees, transportation costs, warehouse distribution, and 3PL management services (for Arcades) at the

Santa Fe Springs, California and South Gate, California distribution facilities.

July 3, 2023, the Company entered into a $17 million line of credit (the “Ogilvie Loan”) with Bruce Ogilvie, a principal

Initial borrowings amounted to $10 million on that date, followed by an additional $5 million on July 10, 2023.

were repaid on July 26, 2023.

Subsequently, on August 10, 2023, the Company accessed the Ogilvie Loan for the full $17 million, repaying

$7 million on August 28, 2023.

Further transactions occurred on September 14th, with a borrowing of $7 million, repaid on September 28,

On October 10, 2023, an additional $7 million was borrowed and repaid on October 18th, 2023.

As of June 30, 2024, the outstanding

balance on the Ogilvie Loan stood at $10 million.

Ogilvie Loan matures on December 22, 2026, and bears interest at the rate of the 30-day SOFR plus 5.5%.

Interest expenses for the fiscal

year ended June 30, 2024, and 2023 were $10.0 million and $0, respectively.

The interest rate at June 30, 2024, was 8.6%.

Capital Partners, LLC

the fiscal year ending June 30, 2024, Alliance Entertainment Holding Corporation (the “Company”) entered into a financial

advisory agreement with B&D Capital Partners, LLC (“BDCP”).

Donaldson, a director of the company, is managing partner

and a principal equity holder of Blystone & Donaldson, the parent company of BDPC.

The agreement, dated July 28, 2023, engaged BDCP

as a non-exclusive financial advisor to assist the Company in issuing privately held debt securities and related transactions.

owned by Blystone & Donaldson, LLC, and Mr.

Donaldson, an independent director of the Company, is a principal of BDCP.

the terms of the agreement, BDCP provided financial advisory services, including the review of confidential information, identification

and engagement of potential transaction parties, and assistance with investor presentations.

the fiscal year, the Company paid BDCP approximately $1.8 million for these services, which included an advisory fee of 1.5% of the gross

proceeds from transactions involving White Oak Commercial Finance, LLC.

and Procedures for Related Person Transactions

board of directors adopted a related person transaction policy setting forth the policies and procedures for the identification, review

and approval or ratification of related person transactions.

This policy covers, with certain exceptions set forth in Item 404 of Regulation

S-K under the Securities Act, any transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships,

in which we and a related person were or will be participants and the amount involved exceeds $120,000, including purchases of goods

or services by or from the related person or entities in which the related person has a material interest, indebtedness and guarantees

of indebtedness.

In reviewing and approving any such transactions, our audit committee will consider all relevant facts and circumstances

as appropriate, such as the purpose of the transaction, the availability of other sources of comparable products or services, whether

the transaction is on terms comparable to those that could be obtained in an arm’s length transaction, management’s recommendation

with respect to the proposed related person transaction, and the extent of the related person’s interest in the transaction.

“independent director” is defined generally as a person other than an officer or employee of the company or its subsidiaries

or any other individual having a relationship which in the opinion of the company’s board of directors, would interfere with the

director’s exercise of independent judgment in carrying out the responsibilities of a director.

Our board of directors has determined

Donaldson, Finke, and Nagelson and Ms.

Wielenga are “independent directors” as defined in the Nasdaq listing standards and applicable SEC rules.

Our independent directors will have regularly scheduled meetings at which only independent directors are present.

Wielenga are “independent directors” as defined in the Nasdaq listing

standards and applicable SEC rules.

Our independent directors will have regularly scheduled meetings at which only independent directors

Principal Accountant Fees and Services.

For the years ended June 30, 2023, and 2022, fees for our independent registered public accounting firm were $1,157,560 and $1,044,058 respectively, for the services BDO performed in connection with SEC filings and registrations, offerings, quarterly reviews and the audit of our June 30, 2023, and 2022 financial statements.

For the years ended June 30, 2023, and 2022, fees for our tax accounting firm for the preparation of our corporate tax returns were approximately $100,000 and $108,000, respectively.

Pre-Approval Policy

Our audit committee was formed upon the consummation of the Merger.

As a result, the audit committee did not pre-approve all the foregoing services, although any services rendered prior to the formation of our audit committee were approved by our board of directors.

Since the formation of our audit committee, and on a going-forward basis, the audit committee has and will pre-approve all auditing services and permitted non-audit services to be performed for us by our auditors, including the fees and terms thereof (subject to the de minimis exceptions for non-audit services described in the Exchange Act which are approved by the audit committee prior to the completion of the audit).

For the years ended June 30, 2024, and 2023, fees for our independent registered public accounting firm were $778,400 and $1,318,110,

respectively, for the services BDO performed in connection with SEC filings and registrations, offerings, quarterly reviews, and the

audit of our June 30, 2024, and 2023 financial statements.

For the years ended June 30, 2024, and 2023, our tax accounting firm’s fees for preparing our corporate tax returns were

approximately $246,822, and $100,000, respectively.

audit committee was formed upon the consummation of the Merger.

As a result, the audit committee did not pre-approve all the foregoing

services, although any services rendered prior to the formation of our audit committee were approved by our board of directors.

the formation of our audit committee, and on a going-forward basis, the audit committee has and will pre-approve all auditing services

and permitted non-audit services to be performed for us by our auditors, including the fees and terms thereof (subject to the de minimis

exceptions for non-audit services described in the Exchange Act which are approved by the audit committee prior to the completion of

Exhibits, Financial Statement Schedules.

(a) The following documents are filed as part of this Form 10-K:

(1) Financial Statements:

As part of this annual report, the consolidated financial statements are listed in the accompanying index to financial statements on page F-2.

Financial Statement Schedules:

All financial statement schedules have been omitted because they are not applicable, not required or the information required is shown in the financial statements or the notes thereto.

We hereby file as part of this annual report the exhibits listed in the attached Exhibit Index.

Exhibits which are incorporated herein by reference can be inspected and copied at the public reference facilities maintained by the SEC, 100 F Street, N.E., Room 1580, Washington, D.C.

Copies of such material can also be obtained from the Public Reference Section of the SEC, 100 F Street, N.E., Washington, D.C.

following documents are filed as part of this Form 10-K:

part of this annual report, the consolidated financial statements are listed in the accompanying index to financial statements on

Statement Schedules:

financial statement schedules have been omitted because they are not applicable, not required or the information

is shown in the financial statements or the notes thereto.

hereby file as part of this annual report the exhibits listed in the attached Exhibit Index.

Exhibits which are incorporated herein by

reference can be inspected and copied at the public reference facilities maintained by the SEC, 100 F Street, N.E., Room 1580, Washington,

Copies of such material can also be obtained from the Public Reference Section of the SEC, 100 F Street, N.E., Washington,

20549, at prescribed rates or on the SEC website at www.sec.gov.

15 unchanged sentences

Description of the Registrant’s Securities

October 19, 2023

Form of Lock-Up Agreement (included in Exhibit 2.1).

1 unchanged sentence

Alliance Entertainment Holding Corporation 2023 Omnibus Equity Incentive Plan.

Form of Indemnity Agreement.

October 19, 2023

Loan and Security Agreement, dated as of February 21, 2017, by and among Alliance Entertainment Holding Corporation, Project Panther Acquisition Corporation, AEC Direct, LLC, Alliance Entertainment, LLC and Directtou, LLC, as Borrowers, Bank of

October 18, 2022

America, N.A., as Agent and Bank of America, N.A.

as Sole Lead Arranger and Sole Bookrunner

Amendment Number Nine to Loan and Security Agreement, dated as of January 24, 2022, by and among Alliance Entertainment Holding Corporation, Project Panther Acquisition Corporation, AEC Direct, LLC, Alliance Entertainment, LLC, Directtou, LLC, Mecca Electronics Industries, Inc., Mill Creek Entertainment, LLC, Aeris Marketing, LLC and CokeM International, Ltd., as Borrowers, and Bank of America, N.A., as Agent.

October 18, 2022

Amendment Number Ten to Loan and Security Agreement, dated as of May 4, 2022, by and among Alliance Entertainment Holding Corporation, Project Panther Acquisition Corporation, AEC Direct, LLC, Alliance Entertainment, LLC, Directtou, LLC, Mecca Electronics Industries, Inc., Mill Creek Entertainment, LLC, Aeris Marketing, LLC and CokeM International, Ltd., as Borrowers, and Bank of America, N.A., as Agent.

October 18, 2022

Amendment Number Eleven to Loan and Security Agreement, dated as of June 30, 2022, by and among Alliance Entertainment Holding Corporation, Project Panther Acquisition Corporation, AEC Direct, LLC, Alliance Entertainment, LLC, Directtou, LLC, Mecca Electronics Industries, Inc., Mill Creek Entertainment, LLC, and CokeM International, Ltd., as Borrowers, and Bank of America, N.A., as Agent.

Form of Indemnity Agreement.

October 18, 2022

27 unchanged sentences

February 13, 2023

Amendment Number Twelve to Loan and Security Agreement and Waiver, dated as of April 21, 2023, by and among AENT Corporation, Project Panther Acquisition Corporation, AEC Direct, LLC, Alliance Entertainment, LLC, Directtou, LLC, Mecca Electronics Industries, Inc., Mill Creek Entertainment, LLC, and COKeM International, Ltd., as Borrowers, and Bank of America, N.A., as Agent.

April 27, 2023

Amendment Number Thirteen to Loan and Security Agreement and Waiver, dated as of September 13, 2023, by and among AENT Corporation, Project Panther Acquisition Corporation, AEC Direct, LLC, Alliance Entertainment, LLC, Directtou, LLC, Mecca Electronics Industries, Inc., Mill Creek Entertainment, LLC, and COKeM International, Ltd., as Borrowers, and Bank of America, N.A., as Agent.

September 14, 2023

Loan and Security Agreement, dated as of December 31, 2023 by and among Alliance Entertainment Holding Corporation, as Parent and Guarantor, each of its subsidiaries from time to time party thereto, as Borrowers and Guarantors, the Lenders from time to time parties thereto, and White Oak Commercial Finance LLC, as Administration Agent and Collateral Agent

December 26, 2023

Gamefly Distribution Agreement

Code of Ethics.

1 unchanged sentence

Securities and Exchange Commission dated February 10, 2023.

February 13, 2023

Insider Trading Policy

List of Subsidiaries.

March 30, 2023

Consent of BDO USA, P.C.

Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Certification of Principal Executive Officer Pursuant to 18 U.S.C.

Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Certification of Principal Financial Officer Pursuant to 18 U.S.C.

Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Certification

of Principal Executive Officer and Principal Financial Offic er

Pursuant to 18 U.S.C.

Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Audit Committee Charter of Alliance Entertainment Holding Corporation.

February 10, 2023

Compensation Committee Charter of Alliance Entertainment Holding Corporation.

February 10, 2023

Nominating and Corporate Governance Committee Charter of Alliance Entertainment Holding Corporation.

February 10, 2023

Inline XBRL Instance Document

Inline XBRL Taxonomy Extension Schema Document

Inline XBRL Taxonomy Extension Calculation Linkbase Document

Inline XBRL Taxonomy Extension Definition Linkbase Document

Inline XBRL Taxonomy Extension Label Linkbase Document

Inline XBRL Taxonomy Extension Presentation Linkbase Document

Cover Page Interactive Data File (Embedded within the Inline XBRL document and included in Exhibit)

Filed herewith.

Certain of the exhibits and schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601(a)(5).

The Company agrees to furnish a copy of all omitted exhibits and schedules to the SEC upon its request.

Indicates a management contract or compensatory plan, contract or arrangement.

Clawback Policy

XBRL Instance Document

XBRL Taxonomy Extension Schema Document

XBRL Taxonomy Extension Calculation Linkbase Document

XBRL Taxonomy Extension Definition Linkbase Document

XBRL Taxonomy Extension Label Linkbase Document

XBRL Taxonomy Extension Presentation Linkbase Document

Page Interactive Data File (Embedded within the Inline XBRL document and included in Exhibit)

of the exhibits and schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601(a)(5).

The Company agrees

to furnish a copy of all omitted exhibits and schedules to the SEC upon its request.

a management contract or compensatory plan, contract or arrangement.

Form 10-K Summary.

Pursuant to the requirements of the Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this annual report to be signed on its behalf by the undersigned, thereunto duly authorized, in Irvine, California, on the 18th day of October, 2023.

to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this annual

report to be signed on its behalf by the undersigned, thereunto duly authorized, in Irvine, California, on the 19th day of September

Alliance Entertainment Holding Corporation

/s/ Jeffrey Walker

Jeffrey Walker

Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this annual report has been signed below by the following persons in the capacities and on the dates indicated.

/s/ Jeffrey Walker

Chief Executive Officer and Director

October 18, 2023

Executive Officer/Chief Financial Officer

to the requirements of the Securities Exchange Act of 1934, as amended, this annual report has been signed below by the following persons

in the capacities and on the dates indicated.

Jeffrey Walker

(Principal Executive Officer)

/s/ Bruce Ogilvie

Chief Executive Officer/Chief Financial Officer and Director

September 19,

Jeffrey Walker

(Principal Executive Officer, Principal Financial )

Bruce Ogilvie

Executive Chairman of the Board of Directors

October 18, 2023

September 19,

Bruce Ogilvie

/s/ John Kutch

Chief Financial Officer

October 18, 2023

(Principal Financial and Accounting Officer)

/ s/ Amanda Gnecco

Accounting Officer (Principal Accounting Officer)

Amanda Gnecco

Tom Donaldson III

October 18, 2023

September 19,

Tom Donaldson III

/s/ Thomas Finke

October 18, 2023

/s/ Chris Nagelson

October 18, 2023

September 19,

Chris Nagelson

/s/ Terilea J.

October 18, 2023

ALLIANCE ENTERTAINMENT HOLDING CORP.

September 19,

Chris Nagelson

September 19,

ENTERTAINMENT HOLDING CORPORATION.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm (PCAOB ID # 243 )

Financial Statements:

Consolidated Balance Sheets as of June 30, 2024 and 2023

3 unchanged sentences

Notes to Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Shareholders and Board of Directors

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

and Board of Directors

Alliance Entertainment Holding Corporation

Plantation, Florida

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Alliance Entertainment Holding Corporation (the “Company”) as of June 30, 2023 and 2022, the related consolidated statements of operations and comprehensive (loss) income, changes in stockholders’ equity, and cash flows for each of the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at June 30, 2023 and 2022, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Going Concern Uncertainty

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 1 to the consolidated financial statements, the Company has suffered losses from operations for the year ended June 30, 2023, and has a working capital deficiency that raise substantial doubt about its ability to continue as a going concern.

Management’s plans in regard to these matters are also described in Note 1.

The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

on the Consolidated Financial Statements

have audited the accompanying consolidated balance sheets of Alliance Entertainment Holding Corporation (the “Company”)

as of June 30, 2024, and 2023, the related consolidated statements of operations and comprehensive income (loss),

stockholders’ equity, and cash flows for each of the years then ended, and the related notes (collectively referred to as the

“consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all

material respects, the financial position of the Company at June 30, 2024 and 2023, and the results of its operations and its cash

flows for each of the years then ended , in conformity with accounting principles generally accepted in the

United States of America.

consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion

on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public

Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company

in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission

and the PCAOB.

conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain

reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing

an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether

due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence

regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles

used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

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

/s/ BDO USA, P.C.

We have served as the Company’s auditor since 2021.

Miami, Florida

October 18, 2023

ALLIANCE ENTERTAINMENT HOLDING CORP.

BDO USA, P.C .

have served as the Company’s auditor since 2021.

ENTERTAINMENT HOLDING CORPORATION

CONSOLIDATED BALANCE SHEETS

($ in thousands) except share information

June 30, 2023

June 30, 2022

in thousands, except per share amounts)

Current Assets

Cash and Cash Equivalents

Trade Receivables, Net

Related Party Receivable

Inventory, Net

15 unchanged sentences

Revolving Credit Facility, Net

Income Taxes Payable

Total Current Liabilities

Revolving Credit Facility, Net

Finance Lease Obligation, Non- Current

Operating Lease Obligations, Non-Current

Shareholder Loan (subordinated), Non-Current

Warrant Liability

Deferred Tax Liability

Total Liabilities

1 unchanged sentence

Stockholders’ Equity

Preferred Stock Par Value $ 0.0001 per share, authorized 1,000,000 shares, 0 shares Issued and Outstanding

Preferred Stock:

Par Value $ 0.0001 per share, Authorized 1,000,000 shares, Issued and Outstanding 0 shares as of June 30, 2024 and June 30, 2023

Common Stock:

Par Value $ 0.0001 per share, Authorized 550,000,000 shares at June 30, 2024, and at June 30, 2023;

Issued and Outstanding 49,167,170 Shares as of June 30, 2023, and 47,500,000 at June 30, 2022

Issued and Outstanding 50,957,370 Shares at June 30, 2024, and 49,167,170 at June 30, 2023

Paid In Capital

Treasury Stock

Accumulated Other Comprehensive Loss

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Total Liabilities and Stockholders’ Equity

The accompanying notes are an integral part of the consolidated financial statements.

ALLIANCE ENTERTAINMENT HOLDING CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

accompanying notes are an integral part of the consolidated financial statements.

ENTERTAINMENT HOLDING CORPORATION

STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

in thousands except share and per share amounts)

June 30, 2023

June 30, 2022

Cost of Revenues (excluding depreciation and amortization)

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Restructuring Cost

Loss (Gain) on Disposal of Fixed Assets

Total Operating Expenses

Operating (Loss) Income

Operating Income (Loss)

Other Expenses

2 unchanged sentences

Total Other Expenses

(Loss) Income Before Income Tax (Benefit) Expense

Income Tax (Benefit) Expense

Net (Loss) Income

Other Comprehensive (Loss) Income

Income (Loss) Before Income Tax Benefit

Income Tax Benefit

Net Income (Loss)

Other Comprehensive Income (Loss)

Foreign Currency Translation

Total Comprehensive (Loss) Income

Net (Loss) Income per Share – Basic and Diluted

Weighted Average Common Shares Outstanding – Basic and Diluted

The accompanying notes are an integral part of the consolidated financial statements.

ALLIANCE ENTERTAINMENT HOLDING CORP.

Total Comprehensive Income (Loss)

Net Income (Loss) per Share – Basic and Diluted

Weighted Average Common Shares Outstanding – Basic

Weighted Average Common Shares Outstanding – Diluted

accompanying notes are an integral part of the consolidated financial statements.

ENTERTAINMENT HOLDING CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

YEARS ENDED JUNE 30, 2023 AND 2022

Comprehensive

ENDED JUNE 30, 2024 AND 2023

Common Stock Shares

Cost of Treasury

Accumulated Other Comprehensive

($ in thousands)

(Loss) Income

Balances at June 30, 2022

Currency Translation Adjustment

Balances at June 30, 2022

Capital Contribution

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Currency Translation Adjustment

Stock-based Compensation Expense

Stock-based Compensation

Balances at June 30, 2023

The accompanying notes are an integral part of the consolidated financial statements.

ALLIANCE ENTERTAINMENT HOLDING CORP.

Issuance of common stock, net of transaction costs of $ 1.9 million

Currency Translation Adjustment

Stock-based Compensation

Net Income (Loss)

Balances at June 30, 2024

accompanying notes are an integral part of the consolidated financial statements.

ENTERTAINMENT HOLDING CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

in thousands)

June 30, 2023

June 30, 2022

Cash Flows from Operating Activities:

Net (Loss) Income

Adjustments to Reconcile Net (Loss) Income to

Net Income (Loss)

Adjustments to Reconcile Net Income (Loss) to

Net Cash Provided by (Used in) Operating Activities:

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Stock-based Compensation Expense

Gain on Disposal of Fixed Assets

Changes in Assets and Liabilities, Net of Acquisitions

Loss (Gain) on Disposal of Fixed Assets

Changes in Assets and Liabilities

Trade Receivables

5 unchanged sentences

Accrued Expenses

Net Cash Provided by (Used in) Operating Activities

Net Cash Provided by Operating Activities

Cash Flows from Investing Activities:

1 unchanged sentence

Capital Expenditures

Cash Inflow from Asset Disposal

Net Cash Used in Investing Activities

1 unchanged sentence

Payments on Financing Leases

Payments on Seller Notes

Payments on Revolving Credit Facility

2 unchanged sentences

Borrowings on Revolving Credit Facility

Payments on related party loans

Borrowings on related party loans

Proceeds from Financing advancements

Net Cash (Used in) Provided by Financing Activities

Net Decrease in Cash and Cash Equivalents

Net Effect of Currency Translation on Cash and Cash Equivalents

Payments on Shareholder Note (Subordinated), Current

Proceeds from Shareholder Note (Subordinated), Non-Current

Issuance of common stock, net of transaction costs

Deferred Financing Costs

Net Cash Used in Financing Activities

Net Increase (Decrease) in Cash

Net Effect of Currency Translation on Cash

Cash, Beginning of the Period

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Reverse recapitalization

The accompanying notes are an integral part of the consolidated financial statements.

accompanying notes are an integral part of the consolidated financial statements.

Organization and Summary of Significant Accounting Policies

Alliance Entertainment Holding Corporation (“Alliance”) was formed on August 9, 2010.

The Company provides full-service distribution of pre-recorded music, video movies, video games and related accessories, and merchandising to retailers and other independent customers primarily in the United States.

It provides product and commerce solutions to “brick-and-mortar”, e-commerce retailers, and consumer direct websites, while maintaining trading relationships with manufacturers of pre-recorded music, video movies, video games and related accessories.

The Company also provides third party logistics (3PL) products and services to customers.

On July 1, 2022, the Company added Think3Fold Ltd.

Entertainment Holding Corporation (“Alliance”) was formed on August 9, 2010.

The Company provides full-service distribution

of pre-recorded music, video movies, video games and related accessories, and merchandising to retailers and other independent customers

primarily in the United States.

It provides product and commerce solutions to “brick-and-mortar”, e-commerce retailers, and

consumer direct websites, while maintaining trading relationships with manufacturers of pre-recorded music, video movies, video games

and related accessories.

July 1, 2022, the Company added Think3Fold Ltd.

to its portfolio.

Consolidated financial statements are presented for Alliance Entertainment Holding Corporation and business operations are conducted through seven subsidiaries.

The Company’s corporate offices are headquartered in Plantation, FL, with primary warehouse facilities located in Shepherdsville, KY and Shakopee, MN.

On February 10, 2023, Alliance, Adara Acquisition Corp.

(“Adara”) and a Merger Sub consummated the closing of the transactions contemplated by a Business Combination Agreement.

Pursuant to the terms of the Business Combination Agreement, a business combination of Legacy Alliance (Alliance Entertainment Holding Corporation pre-Merger, as defined below) and Adara was affected by the merger of Merger Sub with and into Alliance (the “Merger”), with Alliance surviving the Merger as a wholly- owned subsidiary of Adara.

Consolidated financial statements are presented for Alliance Entertainment

Holding Corporation and business operations are conducted through seven subsidiaries.

The Company’s corporate offices are headquartered

in Plantation, FL, with primary warehouse facilities located in Shepherdsville, KY and Shakopee, MN.

February 10, 2023, Alliance, Adara Acquisition Corp.

(“Adara”) and a Merger Sub consummated the closing of the transactions

contemplated by a Business Combination Agreement.

Pursuant to the terms of the Business Combination Agreement, a business combination

of Legacy Alliance (Alliance Entertainment Holding Corporation pre-Merger, as defined below) and Adara was affected by the merger of

Merger Sub with and into Alliance (the “Merger”), with Alliance surviving the Merger as a wholly- owned subsidiary of Adara.

Following the consummation of the Merger on the closing date, Adara changed its name from Adara Acquisition Corp.

to Alliance Entertainment Holding Corporation (the “Company”).

At the closing of the Merger, each of the then issued and outstanding shares of Alliance common stock were cancelled and automatically converted into the right to receive the number of shares of Adara common stock equal to the exchange ratio (determined in accordance with the Business Combination Agreement).

The Company’s 900 shares of previously outstanding common stock were exchanged for 47,500,000 shares of Class A Common Stock.

The Merger was accounted for as a recapitalization of Legacy Alliance and the change in equity structure has been retroactively reflected in the financial statements for all periods presented.

In addition, pursuant to the Business Combination Agreement, 60,000,000 shares of Class E common stock of Adara to the Legacy Alliance stockholders were placed in an escrow account to be released to such Legacy Alliance stockholders and converted into Class A common stock upon the occurrence of certain triggering events.

A summary of the significant accounting policies consistently applied in the preparation of the consolidated financial statements:

Basis of Presentation

The consolidated financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (U.S.

The consolidated financial statements include the accounts of Alliance Entertainment Holding Corporation and its wholly owned subsidiaries.

to Alliance Entertainment

Holding Corporation (the “Company”).

the closing of the Merger, each of the then issued and outstanding shares of Alliance common stock were cancelled and automatically converted

into the right to receive the number of shares of Adara common stock equal to the exchange ratio (determined in accordance with the Business

Combination Agreement).

The Company’s 900 shares of previously outstanding common stock were exchanged for 47,500,000 shares of

Class A Common Stock.

The Merger was accounted for as a recapitalization of Legacy Alliance and the change in equity structure has been

retroactively reflected in the financial statements for all periods presented.

In addition, pursuant to the Business Combination Agreement,

60,000,000 shares of Class E common stock of Adara to the Legacy Alliance stockholders were placed in an escrow account to be released

to such Legacy Alliance stockholders and converted into Class A common stock upon the occurrence of certain triggering events.

summary of the significant accounting policies consistently applied in the preparation of the consolidated financial statements:

of Presentation

consolidated financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally

accepted in the United States of America (U.S.

The consolidated financial statements include the accounts of Alliance Entertainment

Holding Corporation and its wholly owned subsidiaries.

Significant intercompany transactions have been eliminated in consolidation.

Liquidity and Going Concern

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern.

The going concern basis of presentation assumes that the Company will continue in operation one year after the date these financial statements are issued and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business.

Pursuant to the requirements of the Financial Accounting Standards Board’s (the “FASB”) Accounting Standards Codification (“ASC”) Topic 205-40, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, management must evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year from the date these financial statements are issued.

This evaluation does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented or are not within control of the Company as of the date the financial statements are issued.

When substantial doubt about the Company’s ability to continue as a going concern exists, management evaluates whether the mitigating effect of its plans sufficiently alleviates the substantial doubt.

The mitigating effect of management’s plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued, and (2) it is probable that the plans, when

implemented, will mitigate the relevant conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued.

The Company’s principal source of liquidity is its borrowing capacity under the revolving credit facility (the “Revolver”) with Bank of America, which matures on December 31, 2023, and cash generated from operations.

The Company has suffered losses from operations for the year ended June 30, 2023, and has a working capital deficiency.

Management is in active discussions with lenders to renew the Revolver prior to its maturity.

These conditions raise substantial doubt regarding the Company’s ability to continue as a going concern for a period of at least one year from the date of issuance of these consolidated financial statements.

Management is currently evaluating cost reduction opportunities, process efficiencies, and its overall growth and diversification strategy.

If the Company is unable to get an extension of its Revolver and implement sufficient mitigation efforts, the Company may be forced to limit its business activities or be unable to continue as a going concern, which would have a material adverse effect on its results of operations and financial condition.

Revenue Recognition

The Company enters into contracts with its customers for the purchase of products in the ordinary course of business.

A contract with commercial substance exists once the Company receives and accepts a purchase order under a sales contract.

Payment terms on invoiced amounts generally range from 0 to 90 days.

Revenue from the sale and distribution of pre-recorded music, video, games, accessories, and other related products are recognized when the performance obligations under the terms of a contract with its customer are satisfied, which occurs with the transfer of control of the product.

For the majority of the Company’s products, control is transferred, and revenue is recognized when the product is shipped from the Company’s distribution center to the Company’s customers, which primarily consist of retailers.

For most of the Company’s distribution contracts, the Company is considered to be the principal to these transactions and the revenue is recognized on a gross basis, since the Company is the primary obligor for fulfilling the promise to its customers on these arrangements, has inventory risk, and has latitude in establishing prices.

Additionally, the Company ships some of its products to retailers on a consignment basis.

the fiscal year ended June 30, 2023, Alliance disclosed substantial doubt regarding its ability to continue as a going concern, citing

operational losses, a working capital deficit, and the approaching December 31, 2023, maturity date of the Revolver with Bank of America

(the “Revolver”).

December 21, 2023, the Company secured a new three-year $ 120 million credit facility, replacing the Revolver (see Note 8).

Additionally,

the Company has implemented certain strategic initiatives to reduce expenses and focus on the sale of higher margin products.

of the new credit facility, combined with these initiatives and the Company’s financial performance for the year ended June 30,

2024, the Company has concluded that it has sufficient cash to fund its operations and obligations (from its cash on hand, operations,

working capital and availability on the credit facility) for at least twelve months from the issuance of these consolidated financial

Company enters into contracts with its customers for the purchase of products in the ordinary course of business.

A contract with commercial

substance exists once the Company receives and accepts a purchase order under a sales contract.

Payment terms on invoiced amounts generally

range from 0 to 90 days.

Revenue from the sale and distribution of pre-recorded music, video, games, accessories, and other related products

are recognized when the performance obligations under the terms of a contract with its customer are satisfied, which occurs with the

transfer of control of the product.

For the majority of the Company’s products, control is transferred, and revenue is recognized

when the product is shipped from the Company’s distribution center to the Company’s customers, which primarily consist of

For most of the Company’s distribution contracts, the Company is considered to be the principal to these transactions

and the revenue is recognized on a gross basis, since the Company is the primary obligor for fulfilling the promise to its customers

on these arrangements, has inventory risk, and has latitude in establishing prices.

Additionally, the Company ships some of its products

to retailers on a consignment basis.

The Company retains ownership of its products stored at these retailers.

As the Company’s products are sold by the retailer, ownership is transferred from the Company to the retailer.

At that time, the Company invoices the retailer and recognizes revenue for these consignment transactions.

If a contract contains more than one performance obligation, the transaction price is allocated to each performance obligation based on relative standalone selling price.

Shipping and handling activities are treated as a fulfillment activity rather than a promised service, and therefore, are not considered a performance obligation.

Sales, use, value-added, and other excise taxes the Company collects concurrent with revenue producing activities are excluded from revenue.

As the Company’s

products are sold by the retailer, ownership is transferred from the Company to the retailer.

At that time, the Company invoices the

retailer and recognizes revenue for these consignment transactions.

If a contract contains more than one performance obligation, the

transaction price is allocated to each performance obligation based on relative standalone selling price.

Shipping and handling activities

are treated as a fulfillment activity rather than a promised service, and therefore, are not considered a performance obligation.

use, value-added, and other excise taxes the Company collects concurrent with revenue producing activities are excluded from revenue.

Incidental items that are immaterial in the context of the contract are recognized as expense when incurred.

The Company applies ASC 606, Revenue from Contracts with Customers , (ASC 606) utilizing the following allowable exemptions or practical expedients:

● Portfolio approach practical expedient relative to the estimation of variable consideration.

● Shipping and handling practical expedient to account for shipping and handling activities that occur after control of the related good transfers as fulfillment activities.

● Costs of obtaining a contract practical expedient to recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset is one year or less.

● Sales taxes practical expedient to exclude sales taxes and other similar taxes from the transaction price.

● Significant financing component practical expedient

Revenue is recognized at the transaction price which the Company expects to be entitled to receive.

When determining the transaction price, the Company estimates variable consideration by applying the portfolio approach practical expedient under ASC 606.

The primary sources of variable consideration for the Company are rebate programs, incentive programs and product returns.

The rebate and incentives are recorded as a reduction to revenue at the time of the initial sale or when offered.

The Company estimates variable consideration related to products sold under its rebate and incentive programs using the expected value method, which is based on sales terms with customers, historical experience, inventory levels, volume purchases, and known changes in relevant trends in the future.

There are no material instances where variable consideration is constrained and not recorded at the initial time of sale.

Substantially all of the Company’s sales are domestic and are made to customers under agreements permitting certain limited rights of return based upon the prior months’ sales and vendor return rights.

Except for video games and vinyl sales, which are not returnable, generally it is the Company’s policy not to accept product returns that cannot be returned to the Company’s vendors.

Company applies ASC 606, Revenue from Contracts with Customers , (ASC 606) utilizing the following allowable exemptions or practical

approach practical expedient relative to the estimation of variable consideration.

and handling practical expedient to account for shipping and handling activities that occur after control of the related good

transfers as fulfillment activities.

of obtaining a contract practical expedient to recognize the incremental costs of obtaining a contract as an expense when incurred if

the amortization period of the asset is one year or less.

taxes practical expedient to exclude sales taxes and other similar taxes from the transaction price.

Significant financing component

practical expedient

is recognized at the transaction price which the Company expects to be entitled to receive.

When determining the transaction price, the

Company estimates variable consideration by applying the portfolio approach practical expedient under ASC 606.

The primary sources of

variable consideration for the Company are rebate programs, incentive programs and product returns.

The rebate and incentives are recorded

as a reduction to revenue at the time of the initial sale or when offered.

The Company estimates variable consideration related to products

sold under its rebate and incentive programs using the expected value method, which is based on sales terms with customers, historical

experience, inventory levels, volume purchases, and known changes in relevant trends in the future.

There are no material instances where

variable consideration is constrained and not recorded at the initial time of sale.

Substantially

all of the Company’s sales are domestic and are made to customers under agreements permitting certain limited rights of return

based upon the prior months’ sales and vendor return rights.

Except for video games and vinyl sales, which are not returnable,

generally it is the Company’s policy not to accept product returns that cannot be returned to the Company’s vendors.

Revenue from product sales is recognized net of estimated returns.

Sales in the pre-recorded music and video movies industry generally give certain customers the right to return products.

In addition, the Company’s suppliers generally permit the Company to return products that are in the supplier’s current product listing, except for video games and vinyl.

Based on historical returns, review of current catalog list and the change of mass merchant’s floor space and store locations carrying the Company’s products, management provides for estimated net returns at the time of sale and other specific reserves when appropriate.

Sales in the pre-recorded music and video movies industry

generally give certain customers the right to return products.

In addition, the Company’s suppliers generally permit

the Company to return products that are in the supplier’s current product listing, except for video games and vinyl.

on historical returns, review of current catalog list and the change of mass merchant’s floor space and store locations carrying

the Company’s products, management provides for estimated net returns at the time of sale and other specific reserves when appropriate.

This is typically done using a twelve-month average return rate by product.

The Company has determined that the nature, amount, timing, and uncertainty of revenue and cash flows are most significantly affected by the overall economic health of the consumer product industry in the United States.

Cash and Cash Equivalents

Cash equivalents include all investments with original maturities of three months or less when purchased.

The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits.

Company has determined that the nature, amount, timing, and uncertainty of revenue and cash flows are most significantly affected by

the overall economic health of the consumer product industry in the United States.

includes all investments with original maturities of three months or less when purchased.

The Company maintains its cash in bank deposit

accounts which, at times, may exceed federally insured limits.

The Company has not experienced any losses in such accounts.

Trade Receivables, Net

The Company grants credit to customers on credit terms in the ordinary course of business.

Credit is extended based on an evaluation of a customer’s financial condition and collateral is generally not required.

Trade receivables are carried at original invoice amount less estimates made for allowances for uncollectible accounts based on a periodic review of all outstanding amounts.

Management measures all expected losses based on a forward-looking expected loss model which reflects probable losses based on historical experience, current conditions, and reasonable and supportable forecasts.

Trade receivables are written off against the allowance when they are deemed uncollectible.

Recoveries of trade receivables previously written off are recorded as a credit to the allowance for uncollectible accounts when received.

Inventory and Inventory Reserves

Inventory is stated at the lower of cost, using the weighted average cost method, or net realizable value.

Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.

Excess or obsolete inventory reserves that reduce the cost basis of the assets are established when inventory is estimated to not be sellable or returnable to suppliers based on product demand and product life cycle.

Property and Equipment, Net

Property and equipment are recorded at cost less accumulated depreciation.

Depreciation and amortization are calculated using the straight-line method over the estimated useful life of the asset.

Costs of major additions and improvements are capitalized while repair and maintenance costs are charged to expense as incurred.

When items are disposed of, the cost and accumulated depreciation are eliminated from the accounts, and any gain or loss is reflected in the consolidated statements of operations.

Depreciation and Amortization

Depreciation is provided in amounts sufficient to allocate the cost of depreciable assets to operations over their estimated useful lives using the straight-line method.

Receivables, Net

Company grants credit to customers on credit terms in the ordinary course of business.

Credit is extended based on an evaluation of a

customer’s financial condition, and collateral is generally not required.

Trade receivables are carried at the original invoice

amount less estimates made for allowances for uncollectable accounts based on a periodic review of all outstanding amounts.

measures all expected losses based on a forward-looking expected loss model, which reflects probable losses based on historical experience,

current conditions, and reasonable and supportable forecasts.

Trade receivables are written off against the allowance when they are deemed

uncollectable.

Recoveries of trade receivables previously written off are recorded as a credit to the allowance for uncollectable accounts

when received.

and Inventory Reserves

is stated at the lower of cost, using the weighted average cost method, or net realizable value.

Net realizable value is the estimated

selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.

or obsolete inventory reserves that reduce the cost basis of the assets are established when inventory is estimated to not be sellable

or returnable to suppliers based on product demand and product life cycle.

and Equipment, Net

and equipment are recorded at cost less accumulated depreciation.

Depreciation and amortization are calculated using the straight-line

method over the asset’s estimated useful life.

Costs of major additions and improvements are capitalized, while repair and maintenance

costs are charged to expense as incurred.

When items are disposed of, the cost and accumulated depreciation are eliminated from the accounts,

and any gain or loss is reflected in the consolidated statements of operations.

and Amortization

is provided in amounts sufficient to allocate the cost of depreciable assets to operations over their estimated useful lives using the

straight-line method.

The estimated useful lives are as follows:

Schedule of Estimated Useful Lives

Leasehold Improvements

4 unchanged sentences

Computer Equipment

Leasehold improvements and equipment under capitalized leases are amortized over the shorter of the useful life of the asset or the life of the lease.

Goodwill and Definite-Lived Intangible Assets, Net

Goodwill is assessed using either a qualitative assessment or quantitative approach to determine whether it is more likely than not that the fair value of the reporting unit is less than the carrying amount.

The qualitative assessment evaluates factors including macroeconomic conditions, industry-specific and company-specific considerations, legal and regulatory environments, and historical performance.

If the Company determines that it is more likely than not that the fair value of a reporting unit is less than its carrying value, a quantitative assessment is performed.

improvements and equipment under capitalized leases are amortized over the shorter of the useful life of the asset or the life of the

and Definite-Lived Intangible Assets, Net

is assessed using either a qualitative assessment or quantitative approach to determine whether it is more likely than not that the fair

value of the reporting unit is less than the carrying amount.

The qualitative assessment evaluates factors including macroeconomic conditions,

industry-specific and company-specific considerations, legal and regulatory environments, and historical performance.

If the Company

determines that it is more likely than not that the fair value of a reporting unit is less than its carrying value, a quantitative assessment

is performed.

Otherwise, no further assessment is required.

The quantitative approach compares the estimated fair value of the reporting units to it carrying amount, including goodwill.

Impairment is indicated if the estimated fair value of the reporting unit is less than the carrying amount of the reporting unit, and an impairment charge is recognized for the differential.

The Company completes its annual goodwill impairment test as of June 30 each year.

For the years ended June 30, 2023 and 2022, the Company did not record any impairment.

Definite-Lived intangible assets are stated at cost, less accumulated amortization.

Amortization of customer relationships and lists is recorded using an accelerated method over the useful lives of the related assets, which range from 10 to 15 years.

Covenants not to compete, trade name and favorable leases are amortized using the straight-line method over the estimated useful lives of the related assets, which range from 5 to 15 years .

Impairment of Long-Lived Assets

Recoverability of long-lived assets, including property and equipment and certain identifiable intangible assets are evaluated whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable.

Factors considered important which could trigger an impairment review include but are not limited to significant underperformance relative to historical or projected future operating results, significant changes in the manner of use of the assets or the strategy for the overall business, significant decrease in the market value of the assets and significant negative industry or economic trends.

In the event the carrying amount of the long-lived assets may not be recoverable based upon the existence of one or more of the indicators, the assets are assessed for impairment based on the estimated future undiscounted cash flows expected to result from the use of the asset and its eventual deposition.

If the carrying amount of an asset exceeds the sum of the estimated future undiscounted cash flow, an impairment loss is recorded for the excess of the asset’s carrying amount over its fair value.

The quantitative approach compares the estimated fair value of the reporting

units to it carrying amount, including goodwill.

Impairment is indicated if the estimated fair value of the reporting unit is less than

the carrying amount of the reporting unit, and an impairment charge is recognized for the differential.

Company completes its annual goodwill impairment tests in the fourth quarter, or whenever there are indicators that the fair value of

the reporting unit might be less than the carrying amount.

For the years ended June 30, 2024 and 2023, the Company did not record any

Definite-Lived

intangible assets are stated at cost, less accumulated amortization.

Amortization of customer relationships and lists is recorded using

an accelerated method over the useful lives of the related assets, which range from 10 to 15 years.

Covenants not to compete, trade name

and favorable leases are amortized using the straight-line method over the estimated useful lives of the related assets, which range

from 5 to 15 years.

of Long-Lived Assets

Recoverability

of long-lived assets, including property and equipment and certain identifiable intangible assets are evaluated whenever events or circumstances

indicate that the carrying amount of an asset may not be recoverable.

Factors considered important which could trigger an impairment

review include but are not limited to significant underperformance relative to historical or projected future operating results, significant

changes in the manner of use of the assets or the strategy for the overall business, significant decrease in the market value of the

assets and significant negative industry or economic trends.

In the event the carrying amount of the long-lived assets may not be recoverable

based upon the existence of one or more of the indicators, the assets are assessed for impairment based on the estimated future undiscounted

cash flows expected to result from the use of the asset and its eventual deposition.

If the carrying amount of an asset exceeds the sum

of the estimated future undiscounted cash flow, an impairment loss is recorded for the excess of the asset’s carrying amount over

its fair value.

There was no impairment during the years ended June 30, 2024 and 2023.

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period.

Actual results could differ from those estimates.

Significant estimates inherent in the preparation of the accompanying consolidated financial statements include management’s estimates of sales returns, warrants fair value, rebates, inventory valuation, and inventory recoverability.

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

Fair Value of Financial Instruments

The Company complies with ASC 820, Fair Value Measurements and Disclosures, which defines fair value, establishes a framework for measuring fair value in accordance with U.S.

preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of

America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure

of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period.

results could differ from those estimates.

estimates inherent in the preparation of the accompanying consolidated financial statements include management’s estimates of

sales returns, warrants fair value, rebates, goodwill impairment, and inventory valuation.

On an ongoing basis, management evaluates

its estimates compared to historical experience and trends, which form the basis for making judgments about the carrying value of

assets and liabilities.

Value of Financial Instruments

Company complies with ASC 820, Fair Value Measurements and Disclosures, which defines fair value, establishes a framework for measuring

fair value in accordance with U.S.

generally accepted accounting principles and expands disclosure requirements about fair value measurements.

1 unchanged sentence

Valuation based on quoted market prices in active markets for identical assets or liabilities.

Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment.

Examples include publicly traded equity securities and publicly traded mutual funds that are actively traded on a major exchange or over-the-counter market.

Valuation based on quoted market prices of investments that are not actively traded or for which certain significant inputs are not observable, either directly or indirectly.

Examples include municipal bonds, where fair value is estimated using recently executed transactions, bid asked prices and pricing models that factor in, where applicable, interest rates, bond spreads and volatility.

Valuation based on inputs that are unobservable and reflect management’s best estimate of what market participants would use as fair value.

Since valuations are based on quoted

prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree

Examples include publicly traded equity securities and publicly traded mutual funds that are actively traded on a major

exchange or over-the-counter market.

Valuation based on quoted market prices of investments that are not actively traded or for which certain significant inputs are not

observable, either directly or indirectly.

Examples include municipal bonds, where fair value is estimated using recently executed transactions,

bid asked prices and pricing models that factor in, where applicable, interest rates, bond spreads and volatility.

Valuation based on inputs that are unobservable and reflect management’s best estimate of what market participants would use

as fair value.

Examples include limited partnerships and private equity investments.

The estimated fair value of cash, trade receivables, accounts payable, accrued expenses and other current liabilities are based on Level 1 inputs as the fair values approximate carrying amounts as of June 30, 2023, and 2022, based on the short-term nature and maturity of these instruments.

The estimated fair values of debt and the credit facility is based on Level 2 inputs, which consist of interest rates that are currently available to the Company for issuance of debt with similar terms and remaining maturities.

As of June 30, 2023 and 2022 the estimated fair value of the Company’s short and long-term debt approximates it carrying value due to market interest rates charged on such debt or their short-term maturities.

The estimated fair value of the tangible and intangible assets acquired, and the liabilities assumed in connection with the acquisition of Think3Fold were measured using Level 2 and Level 3 inputs.

The estimated fair value of warrants, contingent shares and restricted stock awards is determined based on various valuation methodologies, including the Black-Scholes option pricing model and other appropriate valuation techniques.

These methodologies consider factors such as the exercise price, expected volatility, expected term, and risk-free interest rate.

Management evaluates all of the Company’s financial instruments, including warrants issued to purchase its Class A Common Stock, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and ASC 815-15.

The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is assessed at issuance of the financial instrument and re-assessed at the end of each reporting period.

As a result of the Merger, the Company initially had 5,750,000 Public Warrants, 4,120,000 Private Placement Warrants, and 50,000 Representative Warrants issued that are exercisable to purchase shares of Class A Common Stock.

The Public Warrants qualify for the derivative scope exception under ASC 815 and are therefore presented as a component of Stockholders’ Equity on the consolidated balance sheets without subsequent fair value re-measurement.

The Private Placement Warrants and Representative Warrants are recognized as derivative liabilities in accordance with ASC 815-40.

Accordingly, the Company recognizes the Private Placement Warrants and Representative Warrants as liabilities at fair value

in the consolidated balance sheets with the warrant liabilities subject to re-measurement at each balance sheet date until exercised, and any change in fair value recognized in the consolidated statements of operations.

The Company re-computes the fair value of the Private and the Representative Warrants at the issuance date and the end of each quarterly reporting period.

estimated fair value of cash, trade receivables, accounts payable, accrued expenses and other current liabilities are based on Level

1 inputs as the fair values approximate carrying amounts as of June 30, 2024, and 2023, based on the short-term nature and maturity of

these instruments.

estimated fair values of subordinated shareholder debt and the credit facility is based on Level 2 inputs, which consist of interest

rates that are currently available to the Company for issuance of debt with similar terms and remaining maturities.

As of June 30, 2024,

and 2023 the estimated fair value of the Company’s short and long-term debt approximates it carrying value due to market interest

rates charged on such debt or their short-term maturities.

estimated fair value of the tangible and intangible assets acquired, and the liabilities assumed in connection with the acquisition of

Think3Fold were measured using Level 2 and Level 3 inputs.

estimated fair value of warrants, and contingent shares is determined based on various valuation methodologies, including the Black-Scholes

option pricing model and other appropriate valuation techniques.

These methodologies consider factors such as the exercise price, expected

volatility, expected term, and risk-free interest rate.

evaluates all of the Company’s financial instruments, including warrants issued to purchase its Class A Common Stock, to determine

if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and ASC 815-15.

classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is assessed

at issuance of the financial instrument and re-assessed at the end of each reporting period.

a result of the Merger, the Company initially had 5,750,000 Public Warrants, 4,120,000 Private Placement Warrants, and 50,090 Representative

Warrants issued that are exercisable to purchase shares of Class A Common Stock.

The Public Warrants qualify for the derivative scope

exception under ASC 815 and are therefore presented as a component of Stockholders’ Equity on the consolidated balance sheets without

subsequent fair value re-measurement.

Private Placement Warrants and Representative Warrants are recognized as derivative liabilities in accordance with ASC 815-40.

the Company recognizes the Private Placement Warrants and Representative Warrants as liabilities at fair value in the consolidated balance

sheets with the warrant liabilities subject to re-measurement at each balance sheet date until exercised, and any change in fair value

recognized in the consolidated statements of operations.

Company re-computes the fair value of the Private and the Representative Warrants at the issuance date and the end of each quarterly

reporting period.

Such value computation includes subjective input assumptions that are consistently applied each period.

If the Company were to alter its assumptions or the numbers input based on such assumptions, the resulting fair value could be materially different.

If the Company

were to alter its assumptions or the numbers input based on such assumptions, the resulting fair value could be materially different.

Refer to Note 17, Warrants and Note 18, Fair Value for additional details of the Warrants and related valuation.

Earnings per Share

Basic Earnings Per Share is computed by dividing net income available to common shareholders by the weighted average shares outstanding during the period.

Diluted EPS takes into account the potential dilution that could occur if securities or other contracts to issue shares, such as stock options, warrants, and unvested restricted stock units, were exercised and converted into common shares and the impact would not be antidilutive.

Diluted EPS is computed by dividing net income available to common shareholders by the weighted average shares outstanding during the period, increased by the number of additional shares that would have been outstanding if the potential shares had been issued and were dilutive.

Contingently issuable shares are included in basic net loss per share only when there is no circumstance under which those shares would not be issued.

As a result of the Merger (see Note 15), the Company has retroactively adjusted the weighted average shares outstanding prior to February 10, 2023, to give effect to the Exchange Ratio used to determine the number of shares of Common Stock into which they were converted.

The following table sets forth the computation of basic and diluted net earnings (loss) per share of Common Stock for the years ended June 30, 2023, and 2022 respectively:

June 30, 2023

June 30, 2022

Net (loss) Income (in thousands)

Basic and diluted shares

Weighted-average Class A Common Stock outstanding (basic)

Weighted-average Class A Common Stock outstanding (diluted)

(Loss) Income per share for Class A Common Stock

Earnings Per Share is computed by dividing net income available to common shareholders by the weighted average shares outstanding during

Diluted EPS takes into account the potential dilution that could occur if securities or other contracts to issue shares,

such as stock options, warrants, and unvested restricted stock units, were exercised and converted into common shares and the impact

would not be antidilutive.

Diluted EPS is computed by dividing net income available to common shareholders by the weighted average shares

outstanding during the period, increased by the number of additional shares that would have been outstanding if the potential shares

had been issued and were dilutive.

Contingently issuable shares are included in basic net loss per share only when there is no circumstance

under which those shares would not be issued.

a result of the Merger (see Note 15), the Company has retroactively adjusted the weighted average shares outstanding prior to February

10, 2023, to give effect to the Exchange Ratio used to determine the number of shares of Common Stock into which they were converted.

following table sets forth the computation of basic and diluted net earnings (loss) per share of Common Stock for the years ended June

30, 2024, and 2023 respectively:

of Computation of Basic and Diluted Net Earnings (loss) Per Share of Common Stock

Income (Loss) (in thousands)

and diluted shares

Weighted-average

Class A Common Stock outstanding (basic)

Weighted-average

Class A Common Stock outstanding (diluted)

(Loss) per share for Class A Common Stock

Basic and Diluted

There are 60,000,000 shares of contingently issuable Common Stock that were not included in the computation of basic earnings (loss) per share since the contingencies for the issuance of these shares have not been met as of June 30, 2023.

There are also 9,920,000 warrants outstanding and 260,000 restricted shares that have been excluded from diluted earnings per share because they are anti-dilutive.

Advertising Costs

Advertising costs, which consist primarily of mailers, catalogs, online marketing and other promotions, are expensed in the period in which the advertisement or promotion occurs.

Additionally, the Company maintains cooperative advertising agreements with certain vendors to include their logos and product descriptions prominently in the catalogs and calendars.

The fee revenues charged to the vendors for the cooperative advertising arrangements are recorded as a reduction of advertising expense and any excess fees are recorded as a reduction of cost of goods sold.

Advertising costs, which are included as selling, general and administrative expenses, were $ 7.9 million and $ 6.5 million for the years ended June 30, 2023 and 2022, respectively.

Deferred Financing Costs

Deferred financing costs relating to the Company’s revolving credit facility are deferred and amortized ratably over the life of the debt using the straight-line method.

Deferred financing costs are included as an addition to interest expense on the consolidated statements of operations and comprehensive income and are included in Revolving Credit Facility, Net on the Consolidated Balance Sheets.

Shipping and Handling

The Company accounts for shipping and handling activities as fulfillment activities.

As such, the Company does not evaluate shipping and handling as promised services to its customers.

Shipping and handling costs are included in cost of revenues in the accompanying consolidated statements of operations and comprehensive income.

Foreign Currency Translation and Transactions

The financial position and results of operations of the Company’s foreign subsidiary is measured using the local currency as the functional currency.

Assets and liabilities of this subsidiary are translated into United States dollars at the exchange rate in effect at each period end.

60,000,000 shares of contingently issuable Common Stock that were not included in the computation of basic or diluted

earnings (loss) per share since the contingencies for the issuance of these shares have not been met as of June 30, 2024.

year ended June 30, 2024, there are 9,920,090

warrants outstanding that have been excluded from diluted earnings per share because they are anti-dilutive.

For the year ended June 30, 2023, there are also 9,920,090 warrants outstanding and 260,000 restricted shares that

have been excluded from diluted earnings per share because they are anti-dilutive.

costs, which consist primarily of mailers, catalogs, online marketing and other promotions, are expensed in the period in which the advertisement

or promotion occurs.

Additionally, the Company maintains cooperative advertising agreements with certain vendors to include their logos

and product descriptions prominently in the catalogs and calendars.

The fee revenues charged to the vendors for the cooperative advertising

arrangements are recorded as a reduction of advertising expense and any excess fees are recorded as a reduction of cost of goods sold.

Advertising costs, which are included as selling, general and administrative expenses, were $ 7.3 million and $ 7.9 million for the years

ended June 30, 2024 and 2023, respectively.

Financing Costs

financing costs relating to the Company’s revolving credit facility are deferred and amortized ratably over the life of the debt

using the straight-line method.

Deferred financing costs are included as an addition to interest expense on the consolidated statements

of operations and comprehensive income and are included in Revolving Credit Facility, Net on the Consolidated Balance Sheets.

Company accounts for shipping and handling activities as fulfillment activities.

As such, the Company does not evaluate shipping and

handling as promised services to its customers.

Shipping and handling costs are included in cost of revenues in the accompanying consolidated

statements of operations and comprehensive income.

Currency Translation and Transactions

financial position and results of operations of the Company’s foreign subsidiary is measured using the local currency as the functional

Assets and liabilities of this subsidiary are translated into United States dollars at the exchange rate in effect at each

Income statement accounts are translated at the average rate of exchange prevailing during the period.

Foreign currency translation (loss) income totaled ($ 11 ) and $ 7,000 for the years ended June 30, 2023, and 2022, respectively.

The Company does not typically hedge its foreign exchange rate position.

Realized gains or losses from foreign currency transactions are included in operations as incurred.

Business Combinations — Valuation of Acquired Assets and Liabilities Assumed

The Company allocates the purchase price for each business combination, or acquired business, based upon (i) the fair value of the consideration paid and (ii) the fair value of net assets acquired, and liabilities assumed.

The determination of the fair value of net assets acquired and liabilities assumed requires estimates and judgements of future cash flow expectations for the acquired business and the allocation of those cash flows to identifiable tangible and intangible assets.

Fair values are calculated by applying estimates related to Internal Rate of Return (IRR) and Weighted Average Cost of Capital (WACC) assumptions as well as incorporating expected cash flows into industry standard valuation techniques.

Goodwill is the amount by which the purchase price consideration exceeds the fair value of tangible and intangible assets acquired, less assumed liabilities.

Intangible assets, such as customer relations and trade names, when identified, are separately recognized and amortized over their estimated useful lives, if considered definite lived.

Acquisition costs are expensed as incurred and are included in the consolidated statements of operations and comprehensive income.

The Company is a lessee in multiple noncancelable operating and financing leases.

If the contract provides the Company with the right to substantially all the economic benefits and the right to direct the use of the identified asset, it is generally considered to be or contain a lease.

Right-of-Use (ROU) assets and lease liabilities are recognized at the lease commencement date based on the present value of the future lease payments over the expected lease term.

The ROU asset is also adjusted for any lease prepayments made, lease incentives received, and initial direct costs incurred.

The lease liability is initially and subsequently recognized based on the present value of its future lease payments.

Variable payments are included in the future lease payments when those variable payments depend on an index or a rate.

Increases (decreases) to variable lease payments due to subsequent changes in an index or rate are recorded as variable lease expense (income) in the future period in which they are incurred.

The discount rate used is the implicit rate in the lease contract, if it is readily determinable, or the Company’s incremental borrowing rate.

Foreign currency translation

(loss) income totaled ($ 2 ) thousand and ($ 11 ) thousand for the years ended June 30, 2024, and 2023, respectively.

Company does not typically hedge its foreign exchange rate position.

Realized gains or losses from foreign currency transactions are

included in operations as incurred.

Combinations — Valuation of Acquired Assets and Liabilities Assumed

Company allocates the purchase price for each business combination, or acquired business, based upon (i) the fair value of the consideration

paid and (ii) the fair value of net assets acquired, and liabilities assumed.

The determination of the fair value of net assets acquired

and liabilities assumed requires estimates and judgements of future cash flow expectations for the acquired business and the allocation

of those cash flows to identifiable tangible and intangible assets.

Fair values are calculated by applying estimates related to Internal

Rate of Return (IRR) and Weighted Average Cost of Capital (WACC) assumptions as well as incorporating expected cash flows into industry

standard valuation techniques.

Goodwill is the amount by which the purchase price consideration exceeds the fair value of tangible and

intangible assets acquired, less assumed liabilities.

assets, such as customer relationships and trade names, when identified, are separately recognized and amortized over their estimated

useful lives, if considered definite lived.

Acquisition costs are expensed as incurred and are included in the consolidated statements

of operations and comprehensive income.

Company is a lessee in multiple noncancelable operating and financing leases.

If the contract provides the Company with the right to

substantially all the economic benefits and the right to direct the use of the identified asset, it is generally considered to be or

contain a lease.

Right-of-Use (ROU) assets and lease liabilities are recognized at the lease commencement date based on the present value

of the future lease payments over the expected lease term.

The ROU asset is also adjusted for any lease prepayments made, lease incentives

received, and initial direct costs incurred.

lease liability is initially and subsequently recognized based on the present value of its future lease payments.

Variable payments are

included in the future lease payments when those variable payments depend on an index or a rate.

Increases (decreases) to variable lease

payments due to subsequent changes in an index or rate are recorded as variable lease expense (income) in the future period in which

they are incurred.

discount rate used is the implicit rate in the lease contract, if it is readily determinable, or the Company’s incremental borrowing

The Company uses the incremental borrowing rate based on the information available at the commencement date for all leases.

The Company’s incremental borrowing rate for a lease is the rate of interest it would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms and in a similar economic environment.

The ROU asset for operating leases is subsequently measured throughout the lease term at the amount of the remeasured lease liability (i.e., present value of the remaining lease payments), plus unamortized initial direct costs, plus (minus) any prepaid (accrued) lease payments, less the unamortized balance of lease incentives received, and any impairment recognized.

Company’s incremental borrowing rate for a lease is the rate of interest it would have to pay on a collateralized basis to borrow

an amount equal to the lease payments under similar terms and in a similar economic environment.

ROU asset for operating leases is subsequently measured throughout the lease term at the amount of the remeasured lease liability (i.e.,

present value of the remaining lease payments), plus unamortized initial direct costs, plus (minus) any prepaid (accrued) lease payments,

less the unamortized balance of lease incentives received, and any impairment recognized.

Operating leases with fluctuating lease payments:

For operating leases with lease payments that fluctuate over the lease term, the total lease costs are recognized on a straight-line basis over the lease term.

For operating leases with lease payments that fluctuate over the lease term, the total lease costs are recognized on a straight-line

basis over the lease term.

The ROU asset for finance leases is amortized on a straight-line basis over the lease term.

For all underlying classes of assets, the Company has elected to not recognize ROU assets and lease liabilities for short-term leases that have a lease term of 12 months or less at lease commencement and do not include an option to purchase the underlying asset that the Company is reasonably certain to exercise.

Leases containing termination clauses in which either party may terminate the lease without cause and the notice period is less than 12 months are generally deemed short-term leases with lease costs included in short-term lease expense.

all underlying classes of assets, the Company has elected to not recognize ROU assets and lease liabilities for short-term leases that

have a lease term of 12 months or less at lease commencement and do not include an option to purchase the underlying asset that the Company

is reasonably certain to exercise.

Leases containing termination clauses in which either party may terminate the lease without cause

and the notice period is less than 12 months are generally deemed short-term leases with lease costs included in short- term lease expense.

The Company recognizes short-term lease cost on a straight-line basis over the lease term.

Variable Interest Entity

The Company evaluates its ownership, contractual, and other interests in entities to determine if it has any variable interest in a variable interest entity (VIE).

These evaluations are complex, involve judgment, and the use of estimates and assumptions based on available historical information, among other factors.

If the Company determines that an entity in which it holds a contractual, or ownership, interest is a VIE and that the Company is the primary beneficiary, the Company consolidates such entity in its consolidated financial statements.

Interest Entity

Company evaluates its ownership, contractual, and other interests in entities to determine if it has any variable interest in a variable

interest entity (VIE).

These evaluations are complex, involve judgment, and the use of estimates and assumptions based on available historical

information, among other factors.

If the Company determines that an entity in which it holds a contractual, or ownership, interest is

a VIE and that the Company is the primary beneficiary, the Company consolidates such entity in its consolidated financial statements.

The primary beneficiary of a VIE is the party that meets both of the following criteria:

(i) has the power to make decisions that most significantly affect the economic performance of the VIE;

and (ii) has the obligation to absorb losses or the right to receive benefits that in either case could potentially be significant to the VIE.

Management performs ongoing reassessments of whether changes in the facts and circumstances regarding the Company’s involvement with a VIE will cause the consolidation conclusion to change.

Changes in consolidation status are applied prospectively.

The Company evaluated its transactions with a related party included in Note 12 and concluded that the arrangements do not result in variable interests and do not require consolidation of any of the related party entities.

(i) has the power to make decisions that most

significantly affect the economic performance of the VIE;

and (ii) has the obligation to absorb losses or the right to receive benefits

that in either case could potentially be significant to the VIE.

Management performs ongoing reassessments of whether changes in the

facts and circumstances regarding the Company’s involvement with a VIE will cause the consolidation conclusion to change.

in consolidation status are applied prospectively.

The Company evaluated its transactions with a related party included in Note 12 and

concluded that the arrangements do not result in variable interests and do not require consolidation of any of the related party entities.

Concentrations

of Concentration of Credit Risk

June 30, 2024

June 30, 2023

* Less than 10%

June 30, 2024

June 30, 2023

* Less than 10%

June 30, 2024

June 30, 2023

* Less than 10%

June 30, 2024

1 unchanged sentence

* Less than 10%

Operating segments are defined as components of an enterprise where discrete financial information is available and evaluated regularly by the chief operating decision maker or decision-making group, in deciding how to allocate resources and in assessing performance.

The Company’s chief operating decision makers manage the business, allocate resources, and assess performance on a consolidated basis.

segments are defined as components of an enterprise where discrete financial information is available and evaluated regularly by the

chief operating decision maker or decision-making group, in deciding how to allocate resources and in assessing performance.

The Company’s

chief operating decision makers (CEO and Executive Chairman) manage the business, allocate resources, and assess performance on a consolidated

Accordingly, the Company has one operating and reportable segment.

Accounting Pronouncements

Recently Issued Accounting Pronouncements

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40) to improve, simplify, and enhance the financial reporting requirements for convertible instruments and contracts in an entity’s own equity.

ASU 2020-06 is effective for public business entities that meet the definition of an SEC filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.

For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years.

The Company adopted this ASU using the modified retrospective method on July 1, 2022.

The adoption did not result in any cumulative adjustment to the opening balance of retained earnings.

Recently Issued but Not Yet Adopted Accounting Pronouncements

In October 2021, The FASB issued ASU No.

2021-08, Accounting for contract Assets and Contract Liabilities from contracts with customers (Topic 805) (“ASU 2021-08”).

ASU 2021-08 requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities (deferred revenue) from acquired contracts using the revenue recognition guidance in Topic 606.

At the acquisition date, the acquirer applies the revenue model as if it had originated the acquired contracts.

ASU 2021-08 is effective for annual periods beginning after December 15, 2022, including interim periods within those fiscal years.

Adoption of ASU 2021-08 should be applied prospectively.

Early adoption is also permitted, including adoption in an interim period.

If early adopted, the amendments are applied retrospectively to all business combinations for which the acquisition date occurred during the fiscal year of adoption.

The Company is currently evaluating the impact of ASU 2021-08 on its consolidated financial statements.

Pronouncements

Issued Accounting Pronouncements

October 2021, The FASB issued ASU No.

2021-08, Accounting for contract Assets and Contract Liabilities from contracts with customers

(Topic 805) (“ASU 2021-08”).

ASU 2021-08 requires an acquirer in a business combination to recognize and measure contract

assets and contract liabilities (deferred revenue) from acquired contracts using the revenue recognition guidance in Topic 606.

acquisition date, the acquirer applies the revenue model as if it had originated the acquired contracts.

ASU 2021-08 is effective for

annual periods beginning after December 15, 2022, including interim periods within those fiscal years.

The company adopted this ASU using

the prospective approach method in July 2023.

There have been no acquisitions since adoption and thus did not have a material impact

on the Company’s condensed consolidated financial statements.

Issued but Not Yet Adopted Accounting Pronouncements

Standard Update 2024-02, In 2024, Codification Improvements—Amendments to Remove References to the Concepts Statements.

The Financial

Accounting Standards Board (FASB) issued ASU 2024-02, which updates accounting standards for revenue recognition (ASC 606), lease accounting

(ASC 842), and impairment of long-lived assets (ASC 360).

The ASU provides enhanced guidance for estimating variable consideration, accounting

for contract modifications, determining lease terms, and simplifying impairment testing for long-lived assets.

It also introduces increased

disclosure requirements for financial instruments and derivatives.

ASU 2024-02 is effective for fiscal years beginning after December

15, 2024, with early adoption permitted.

The Company is currently evaluating the impact of this ASU on its financial statements.

Standard Update 2024-01 In 2024, Compensation—Stock Compensation (Topic 718):

Scope Application of Profits Interest and Similar

The Financial Accounting Standards Board (FASB) issued ASU 2024-01, which introduces updates to accounting standards related

to the classification and measurement of financial instruments under ASC 320.

The update primarily focuses on clarifying guidance for

equity securities, debt instruments, and other financial assets, particularly in the areas of fair value measurement and impairment recognition.

It aims to improve consistency and comparability in the reporting of financial instruments by refining the criteria for classifying securities

and enhancing the methodology for recognizing and measuring impairments.

ASU 2024- 01 also mandates additional disclosures to provide

greater transparency around the valuation techniques and assumptions used in determining the fair value of financial instruments.

update is effective for fiscal years beginning after December 15, 2024, with early adoption permitted.

The Company is currently evaluating

the impact of this ASU on its financial statements and disclosures.

Standard Update 2023-09, Improvements to Income Tax Disclosures (“ASU 2023-09”).

In December 2023, the FASB issued ASU 2023-09,

which requires more detailed income tax disclosures.

The guidance requires entities to disclose disaggregated information about their

effective tax rate reconciliation as well as expanded information on income taxes paid by jurisdiction.

The disclosure requirements will

be applied on a prospective basis, with the option to apply them retrospectively.

The standard is effective for fiscal years beginning

after December 15, 2024, with early adoption permitted.

We are evaluating the disclosure requirements related to the new standard.

Standard Update 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures (“ASU 2023-07”).

November 2023, the FASB issued ASU 2023-07, which is intended to improve reportable segment disclosure requirements, primarily through

additional disclosures about significant segment expenses.

The standard is effective for fiscal years beginning after December 15, 2023,

and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

The amendments should be applied

retrospectively to all prior periods presented in the financial statements.

We are evaluating the disclosure requirements related to

the new standard.

Trade Receivables, Net

Trade Receivables, Net consists of the following at:

Receivables, Net consists of the following at:

of Trade Receivables, Net

($ in thousands)

7 unchanged sentences

Trade Receivables, Net

Trade Receivables, Net as of July 1, 2021 were $ 111.3 million.

Inventory, Net

The Company completed an evaluation of the net realizable value of our inventory during the twelve months ended June 30, 2023.

As a result of this evaluation, the Company recorded a $ 10.8 million inventory write down to reflect it at its net realizable value, which is recorded in cost of revenue in the consolidated financial statements.

Inventory, Net (all finished goods) consists of the following at:

a result of the Company’s evaluation of the net realizable value of inventory during the twelve months ended June 30, 2023, the

Company recorded a $ 10.8 million inventory write-down to reflect it at its net realizable value, which is recorded in the cost of revenue

in the consolidated financial statements.

Net (all finished goods) consists of the following at:

of Inventory, Net

($ in thousands)

3 unchanged sentences

Other Current and Long-Term Assets

Other Current and Long-Term Assets consists of the following at:

Current and Long-Term Assets consists of the following at:

of Other Current and Long-term Assets

($ in thousands)

5 unchanged sentences

Prepaid Acquisitions

Prepaid Freight

Prepaid Catalogs

Prepaid Manufacturing Components

Prepaid Maintenance

Prepaid Inventory

Prepaid Shipping Supplies

4 unchanged sentences

Property and Equipment, Net

Property and Equipment, Net consists of the following at:

and Equipment, Net consists of the following at:

of Property and Equipment, Net

($ in thousands)

11 unchanged sentences

Total Property and Equipment, Net

Depreciation Expense for the year ended June 30, 2023, and 2022 was $ 2.2 million and $ 3.1 million respectively.

Expense for the year ended June 30, 2024, and 2023 was $ 1.9 million and $ 2.2 million respectively.

Goodwill and Intangibles, Net

($ in thousands)

June 30, 2023

Goodwill, as of June 30, 2023

Goodwill, Beginning

Additions from business acquisition

Goodwill, as of June 30, 2024

Intangibles, Net consists of the following at:

($in thousands)

June 30, 2023

June 30, 2022

Goodwill, Ending

Net consists of the following at:

of Intangible Assets, Net

ended June 2024

Ended June 2023

Customer Relationships

Trade Name – Alliance

Covenant Not to Compete

Mecca Customer Relationships

Customer List

Accumulated Amortization

Intangibles, Net

During the year ended June 30, 2023, and 2022, the Company recorded amortization expense of $ 4.4 million and $ 5.2 million, respectively.

Expected amortization over the next five years and thereafter, as of June 30, 2023, is as follows:

the years ended June 30, 2024, and 2023, the Company recorded amortization expense of $ 4.0 million and $ 4.4 million, respectively.

amortization over the next five years and thereafter, as of June 30, 2024, is as follows:

of Expected Amortization Over the Next Five Years and Thereafter

($ in thousands)

3 unchanged sentences

Accrued Expenses

Accrued Expenses consists of the following at:

Expenses consists of the following at:

of Accrued Expenses

($ in thousands)

6 unchanged sentences

Revolving Credit Facility

The Company has a Revolving Credit Facility with Bank of America (the “Credit Facility”).

The Credit Facility was increased from $ 175 million to $ 225 million on June 30, 2022, but was reduced to $ 175 million on June 30, 2023, in connection with Amendment No.

12, as defined below.

The Credit Facility carries a variable annual interest rate equal to the higher of the Prime rate, Federal Funds rate plus .5 % or Bank of America Libor rate plus 2 %, up to January 1, 2022, and SOFR plus a spread of 2.11 % thereafter.

The Company executed an amendment to its Credit Facility on January 24, 2022, (retroactive to January 1, 2022), to transition the interest rate benchmark from Libor to a Secured Overnight Financing Rate (SOFR).

The effective interest rate on the revolver using SOFR for the year ended June 30, 2023, was 6.00 % (SOFR plus a spread of 2.11 %).

The effective interest rate for the year ended June 30, 2022, was 3.61 %.

All assets (with certain capitalized lease exceptions) and interest in the assets of the Company are pledged as collateral under the Credit Facility.

The Credit Facility, which had its original maturity on September 29, 2023, was extended for 93-days in connection with Amendment No.

13, as defined below.

Management is in active discussions with lenders to renew the Credit Facility.

The Credit Facility contains certain financial covenants with which the Company is required to comply.

Failure to comply with the financial covenants contained in the Credit Facility could result in an event of default.

An event of default, if not cured or waived,

would permit acceleration of any outstanding indebtedness under the Credit Facility.

The Company obtained a waiver for non-compliance with one non-financial covenant related to its delivery of the monthly financial statements and compliance certificates for the periods pertaining to June 30, 2022, July 31, 2022, and August 31, 2022.

These non-compliances resulted in events of default under the Revolving Credit Facility and accordingly, the Credit Facility was classified as a current liability as of June 30, 2022.

On April 21, 2023, certain subsidiaries of the Company, as Borrowers thereunder (the “Borrowers”), entered into an Amendment Number Twelve and Waiver (“Amendment No.

12”) to the Credit Facility.

Amendment No.

12 provides for the waiver by Bank of America and the Required Lenders (as defined in the Credit Facility) of certain specified events of default under the Credit Facility, including the failure by the Borrowers to meet the Fixed Charge Coverage Ratio covenant requirement for the twelve trailing months ended November 30, 2022, December 31, 2022, January 31, 2023 and February 28, 2023 and certain other non-financial covenant breaches, and modifies the Credit Facility to, among other things, (i) suspend the Fixed Charge Coverage Ratio covenant requirement until the first calendar month end for which the Borrowers are in compliance with such requirement (the “Fixed Charge Coverage Compliance Date”), and (ii) add an additional covenant requiring the Borrowers to maintain specified minimum levels of EBITDA, which requirement will remain in effect until the Fixed Charge Coverage Compliance Date.

Pursuant to Amendment No.

12, the Borrowers agreed to pay a waiver fee in the amount of approximately $ 180,000 .

On September 13, 2023, the Borrowers entered into Amendment Number Thirteen and Waiver (“Amendment No.

13”) to the Credit Facility.

Amendment No.

13 provides for the waiver by Bank of America and the Required Lenders (as defined in the Credit Facility) of certain specified events of default under the Credit Facility, as of June 30, 2023 and thereafter, including a favored Equipment Lease Guaranty with Fifth Third Bank and short-term loans known as Ogilvie Loan Transactions ranging from $ 7.6 million to $ 17.0 million during the months of June, July and August, 2023 (Note 12).

The parties acknowledge these are breaches of the covenants of the Credit Facility;

however, the Borrowers have requested, and the Required Lenders have agreed, to waive the Specified Events of Default and amend the Credit Facility Agreement to extend the Revolver Termination Date for a period of 93 days to December 31, 2023.

Availability under the Credit Facility is limited by the Company’s borrowing base calculation, as defined in the Credit Agreement.

In addition, there is a commitment fee of 0.25 % for unused credit line with fees for the twelve months ended June 30, 2023, and 2022 of $ 147,000 and $ 141,000 , respectively.

Availability at June 30, 2023, was approximately $ 2 million with an outstanding revolver balance of $ 133 million.

Availability at June 30, 2022, was $ 48 million with an outstanding revolver balance of $ 136 million.

December 21, 2023, the Company terminated its old credit facility with Bank of America, which was scheduled to mature on December

31, 2023 and established a new Credit Facility with White Oak Commercial Financing, LLC.

Bank of America Credit Facility has been fully terminated, resulting in an outstanding revolver balance of $ 0 million as of June 30,

Availability under the terminated Bank of America Credit Facility was limited by the Company’s borrowing base

calculation, as defined in the Credit Agreement.

In addition, there was a commitment fee of 0.25 % for unused credit line with fees

for the twelve months ended June 30, 2023, of $ 147,000 .

Availability at June 30, 2023, was approximately $ 2 million with an outstanding

revolver balance of $ 133 million.

As of June 30, 2023, the effective interest rate was 6.5 % (SOFR plus a spread of 2.11 %)

December 21, 2023, the Company entered into a new credit facility with White Oak Commercial Finance, LLC, which will mature on December

The facility a $ 120

million asset-based revolving credit facility (the “Revolving Credit Facility”).

Borrowings under this facility bear

interest at the 30-day SOFR rate, subject to a floor of 2.00 %,

plus a margin ranging from 4.50 %

depending on the Company’s utilization and consolidated fixed charge coverage ratio.

As of June 30, 2024, the effective

interest rate was 9.5 %,

reflecting changes in market conditions and facility utilization.

the Company reduces or terminates the commitments under the Revolving Credit Facility before its maturity, it will incur an early

termination fee of 2.0 %

if done before December 21, 2024, or 1.0 %

if done between December 21, 2024, and August 21, 2025.

Additionally, if the facility is reduced or terminated on or before June 21,

2025, the Company is required to pay a minimum interest amount of 10 %

of revolver minimum based on $ 100

million until December 2024.

under the Revolving Credit Facility is determined by the Company’s borrowing base calculation, as defined in the Credit Agreement.

The Company also incurs a commitment fee of 0.25 %

on unused credit line with fees for twelve months ended June 30, 2024 of $ 151

As of June 30, 2024, the Company had

approximately $ 44

million in available credit, with an outstanding

balance of $ 73 million.

maximum borrowings under the Revolving Credit Facility are determined by a formula based on eligible accounts receivable and inventory,

subject to lender discretion.

The facility includes standard representations and warranties, events of default, and financial reporting

requirements, including maintaining a fixed charge coverage ratio of at least 1.1 to 1.0 on a trailing twelve-month basis.

also imposes covenants restricting the Company’s ability to incur additional indebtedness, grant liens, pay dividends, make unpermitted

investments, or materially change its business operations.

The facility is secured by a first-priority security interest in the Company’s

and its subsidiaries’ cash, accounts receivable, and related assets.

Company was in compliance with its covenants as of June 30, 2024.

Revolving Credit Facility, net consists of the following at:

of Revolver Balance

($ in thousands)

4 unchanged sentences

Revolving Credit Facility, Net

Employee Benefits

Company Health Plans

The Company sponsors the Alliance Health & Benefits Plan (AHBP) consisting of the following plans:

self-insured medical (PPO and HDHP), dental (PPO and HMO), vision, life Insurance, and short & long-term disability.

The medical insurance is self-insured to a maximum company exposure of $ 225,000 per individual occurrence, at which time a stop loss policy covers the balance of covered claims.

The Company contributes various percentages to different levels of premium coverage.

As of June 30, 2023, the Company fully accrued for estimated run out exposure on a mature claim basis, as provided and calculated by our plan administrator.

The Dental insurance HMO is self-insured to a maximum per individual procedure based on a published schedule which measures exposure.

The PPO policy is fully insured.

the years ended June 30, 2024, and 2023, the Company had interest expenses of $ 11.2 million and $ 11.4 million, amortization of deferred

finance costs of $ 0.9 million and $ 0.2 million, and unused credit line fees of $ 0.1 million and $ 0.1 million, respectively.

Employee Benefits Company Health Plans

Company sponsors the Alliance Health & Benefits Plan (AHBP), consisting of the following plans:

self-insured medical (PPO and HDHP),

dental (PPO and HMO), vision, life Insurance, and short & long-term disability.

The medical insurance is self-insured to a maximum

company exposure of $ 225,000 per individual occurrence, at this time, a stop loss policy covers the balance of covered claims.

contributes various percentages to different levels of premium coverage.

As of June 30, 2024, the Company fully accrued for estimated

run-out exposure on a mature claim basis, as provided and calculated by our plan administrator.

Dental insurance HMO is self-insured to a maximum per individual procedure based on a published schedule that measures exposure.

PPO policy is fully insured.

The Company contributes various percentages to different levels of premium coverage.

As of June 30, 2023, the Company was fully accrued for estimated run out exposure on a mature claim basis, as provided and calculated by the plan administrator.

The vision plan, life insurance plan, and short and long-term disability plans are fully insured, sponsored by the Company and premiums are paid by the employer and employee based on various Board approved schedules.

At June 30, 2023 and June 30, 2022, the accrued estimated run out exposure totaled approximately $ 218,000 and $ 218,000 , respectively, for the medical and dental insurance plans.

Accrued estimated runout exposure is included in accrued expenses on the consolidated balance sheets.

The Company has the Alliance Entertainment 401(k) Plan (the Plan) covering all eligible employees of the Company.

All employees over the age of 18 are eligible to participate in the Plan at the beginning of the month following date of hire.

The Plan has automatic deferral at the beginning of the month following date of hire.

As of June 30, 2024,

the Company was fully accrued for estimated run-out exposure on a mature claim basis, as provided and calculated by the plan administrator.

The vision, life insurance, and short and long-term disability plans are fully insured and sponsored by the Company, and premiums are

paid by the employer and employee based on various Board approved schedules.

On June 30, 2024, and June 30, 2023, the accrued estimated

run-out exposure totaled approximately $ 218,000 and $ 218,000 , respectively, for the medical and dental insurance plans.

Accrued estimated

runout exposure is included in accrued expenses on the consolidated balance sheets.

Company has the Alliance Entertainment 401(k) Plan (the Plan) covering all eligible employees of the Company.

All employees over the

age of 18 are eligible to participate in the Plan at the beginning of the month following date of hire.

The Plan has automatic deferral

at the beginning of the month following the date of hire.

Employees are automatically enrolled in the Plan with a 3 % contribution;

however, they have the option to increase/decrease their deferrals or opt out of the Plan at any time.

The Company currently offers a match contribution of $ .50 of every dollar up to 4 % of contribution percentage.

they have the option to increase/decrease their deferrals or opt out of the Plan at any time.

The Company currently offers a match contribution

of $ .50 of every dollar up to 4 % of contribution percentage.

For the fiscal year ending June 30, 2024, and 2023 the company’s matching

expense was approximately $ 620,000 and $ 688,000 , respectively.

The Company conducts a retirement plan review on an annual basis.

The Company accounts for income taxes under an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company’s consolidated financial statements or tax returns as well as tax credits carry forward.

In estimating future tax consequences, the Company generally considers all expected future events other than enactments of changes in the tax laws or rates.

Valuation allowances are established as necessary to reduce deferred tax assets to an amount more likely than not to be realized.

The Company's policy on income statement classification of interest and penalties related to income tax obligations is to include such items as part of total interest expense and other expense, respectively.

As of June 30, 2023, and 2022, the Company did not have any material uncertain tax positions and thus has not recognized any interest or penalties in these consolidated financial statements.

The Federal income tax return remains open for examination by the U.S.

Company accounts for income taxes under an asset and liability approach that requires the recognition of deferred tax assets and liabilities

for the expected future tax consequences of events that have been recognized in the Company’s consolidated financial statements

or tax returns as well as tax credits carry forward.

In estimating future tax consequences, the Company generally considers all expected

future events other than enactments of changes in the tax laws or rates.

Valuation allowances are established as necessary to reduce

deferred tax assets to an amount more likely than not to be realized.

Company’s policy on income statement classification of interest and penalties related to income tax obligations is to include such

items as part of total interest expense and other expense, respectively.

As of June 30, 2024, and 2023, the Company did not have any

material uncertain tax positions and thus has not recognized any interest or penalties in these consolidated financial statements.

Federal income tax return remains open for examination by the U.S.

tax authorities for all years subsequent to 2019.

In addition, due to the Florida tax examination, tax years 2008-2016 also remains open.

Domestic income (loss) before income taxes and details of the income tax expense (benefit) are as follows:

Substantially all

the Company’s income is derived from U.S.

components of the provision for income taxes for the fiscal year-ended June 30, 2024, and 2023 are as follows:

of Income Tax Provision

($ in thousands)

Year Ended June 30

1 unchanged sentence

Income Tax (Benefit) Expense:

Total Current

Total Deferred

Income Tax (Benefit) Expense

The items accounting for the difference between income taxes computed at the U.S.

federal statutory income tax rate and the income tax expense (benefit) at the effective tax rate for each of the years are as follows:

Total Current Expense (Benefit)

Total Deferred Benefit

Income Tax Benefit

items accounting for the difference between income taxes computed at the U.S.

federal statutory income tax rate and the income tax expense

(benefit) at the effective tax rate for each of the years are as follows:

of Effective Income Tax Rate Reconciliation

Year Ended June 30

4 unchanged sentences

Foreign Derived Intangible Income

Deferred Tax True-Up

Equity Compensation

Immaterial income tax out-of-period adjustment

Income Tax (Benefit) Expense

Deferred income taxes reflect the net tax effects of temporary differences between the amount of assets and liabilities for accounting purposes and the amounts used for tax purposes.

The components of deferred taxes consist of the following (amounts in thousands):

Income Tax Benefit

income taxes reflect the net tax effects of temporary differences between the amount of assets and liabilities for accounting purposes

and the amounts used for tax purposes.

components of deferred taxes consist of the following (amounts in thousands):

of Components of Deferred Taxes

($in thousands)

9 unchanged sentences

Deferred Tax Liabilities:

Accruals Not Currently Deductible

Property and Equipment

2 unchanged sentences

Total Deferred Tax Liabilities

Net Deferred Tax Asset (Liability)

As of June 30, 2023, 2022 and 2021, the Company had recorded no unrecognized tax benefits and, therefore, no accrued interest or penalties for unrecognized tax positions.

Net Deferred Tax Asset

of June 30, 2024, 2023 and 2022, the Company had recorded no unrecognized tax benefits and, therefore, no accrued interest or penalties

for unrecognized tax positions.

In addition, the Company is under examination by the Florida tax authorities.

These proceedings may lead to adjustments or proposed adjustments to their taxes or provisions for uncertain tax provisions.

The Company believes that it would prevail under such examination and, accordingly, has not recorded a provision for uncertain tax positions.

The Company evaluates deferred tax assets each period for recoverability.

The Company records a valuation allowance for assets that do not meet the threshold of “more likely than not” to be realized in the future.

To make that determination, the Company evaluates the likelihood of realization based on the weight of all positive and negative evidence available.

As of June 30, 2023 and 2022, The Company has not recorded a valuation allowance.

The Company will reevaluate this determination quarterly and record a tax expense if and when future evidence requires a valuation allowance.

As of June 30, 2023, the Company had federal net operating loss carryforwards ("NOLs") of $ 46.4 million and state NOLs of $ 40.1 million.

These proceedings may lead

to adjustments or proposed adjustments to their taxes or provisions for uncertain tax provisions.

The Company believes that it would

prevail under such examination and, accordingly, has not recorded a provision for uncertain tax positions.

Company evaluates deferred tax assets each period for recoverability.

The Company records a valuation allowance for assets that do not

meet the threshold of “more likely than not” to be realized in the future.

To make that determination, the Company evaluates

the likelihood of realization based on the weight of all positive and negative evidence available.

As of June 30, 2024 and 2023, the

Company has not recorded a valuation allowance.

Company will reevaluate this determination quarterly and record a tax expense if and when future evidence requires a valuation allowance.

of June 30, 2024, the Company had federal net operating loss carryforwards (“NOLs”) of $ 31.6 million and state NOLs of $ 22.9

Of these carryforwards, approximately $ 22.9 million will expire, if not utilized, in various years through 2043.

The remaining carryforwards have no expiration.

The Internal Revenue Code of 1986, as amended, imposes restrictions on the utilization of net operating losses and certain credits in the event of an “ownership change” of a corporation.

Accordingly, a company’s ability to use net operating losses and certain credits may be limited as prescribed under.

The federal and state net operating loss and credit carryforwards may be subject to significant limitations under Sections 382 and 383 of the Internal Revenue Code (Code) and similar provisions of state law.

These Code sections limit the federal net operating loss and credit carryforwards that may be used in any year in the event of an “ownership change.” A Section 382 “ownership change” generally occurs if one or more shareholders or groups of shareholders, who own at least 5% of the Company’s stock, increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three year period.

The Company may experience one or more Section 382 “ownership changes”.

If so, the Company may lose some or all of the tax benefits of its NOLs and tax credits.

The remaining

carryforwards have no expiration.

Internal Revenue Code of 1986, as amended, imposes restrictions on the utilization of net operating losses and certain credits in the

event of an “ownership change” of a corporation.

Accordingly, a company’s ability to use net operating losses and certain

credits may be limited as prescribed .

Commitments and Contingencies

The Company enters into various agreements with suppliers for the products it distributes.

The Company had no long-term purchase commitments or arrangements with its suppliers as of June 30, 2023, and June 30, 2022.

Litigation, Claims and Assessments

We are exposed to claims, litigation and/or cyber-attacks of varying degrees arising in the ordinary course of business and use various methods to resolve these matters.

Company enters into various agreements with suppliers for the products it distributes.

The Company had no long-term purchase commitments

or arrangements with its suppliers as of June 30, 2024, and June 30, 2023.

Claims and Assessments

are exposed to claims and litigations of varying degrees arising in the ordinary course of business and use various methods to resolve

these matters.

When a loss is probable, we record an accrual based on the reasonably estimable loss or range of loss.

When no point of loss is more likely than another, we record the lowest amount in the estimated range of loss and, if material, disclose the estimated range of loss.

We do not record liabilities for reasonably possible loss contingencies but do disclose a range of reasonably possible losses if they are material and we are able to estimate such a range.

If we cannot provide a range of reasonably possible losses, we explain the factors that prevent us from determining such a range.

When no point of

loss is more likely than another, we record the lowest amount in the estimated range of loss and, if material, disclose the estimated

range of loss.

We do not record liabilities for reasonably possible loss contingencies but do disclose a range of reasonably possible

losses if they are material and we are able to estimate such a range.

If we cannot provide a range of reasonably possible losses, we

explain the factors that prevent us from determining such a range.

Historically, adjustments to our estimates have not been material.

We believe the recorded reserves in our consolidated financial statements are adequate in light of the probable and estimable liabilities.

We do not believe that any of these identified claims or litigation will be material to our results of operations, cash flows, or financial condition.

On March 31, 2023, a class action complaint, titled Matthew McKnight v.

We do not believe that any of these identified claims or litigation will be material to our results of operations, cash flows, or financial

March 31, 2023, a class action complaint, titled Matthew McKnight v.

Alliance Entertainment Holding Corp.

f/k/a Alliance Acquisition Corp., Alliance Sponsor LLC, Thomas Finke, Paul G.

f/k/a Adara Acquisition Corp.,

Adara Sponsor LLC, Thomas Finke, Paul G.

Porter, Beatriz Acevedo-Greiff, W.

Tom Donaldson III, Dylan Glenn, and Frank Quintero , was filed in the Delaware Court of Chancery against our pre-Business Combination board of directors and executive officers and the Sponsor, alleging breaches of fiduciary duties by purportedly failing to disclose certain information in connection with the Business Combination and by approving the Business Combination.

We intend to vigorously defend the lawsuit.

There can be no assurance, however, that we will be successful.

The Company has accrued $ 150,000 as of June 30, 2023, based on the expected loss.

Tom Donaldson III, Dylan Glenn, and Frank Quintero, was filed

in the Delaware Court of Chancery against our pre-Business Combination board of directors and executive officers and Adara Sponsor LLC,

alleging breaches of fiduciary duties by purportedly failing to disclose certain information in connection with the Business Combination

and by approving the Business Combination.

On August 8, 2024, the Company entered into a settlement agreement regarding pending

A settlement hearing is scheduled for November 25, 2024.

The Company has accrued $ 511,000 and $ 150,000 as of June 30, 2024,

and June 30, 2023, respectively, based on the expected loss.

June 6, 2024, Office Create Corporation filed a complaint against COKeM International Ltd.

(“COKeM”) in the United States

District Court for the District of Minnesota alleging contributory trademark infringement, contributory false designation of origin and

unjust enrichment relating to COKeM’s [alleged] distribution of a specific video game, Cooking Mama:

Plaintiff is seeking

damages of no less $ 20,913,200 , plus interest of 9 % accruing from October 3, 2022.

On August [29], 2024, COKeM filed a response denying

all allegations.

COKeM intends to vigorously defend the lawsuit.

At this time, we are unable to estimate potential losses, if any, related

to this lawsuit.

On August 8, 2024, a class action complaint, Feller v.

Alliance Entertainment, LLC and DirectToU, LLC , was

filed under the Video Privacy Protection Act (“VPPA”).

The complaint alleges that the Company violated the VPPA by disclosing

users' personally identifiable information, as well as information regarding videos they viewed on the Company’s website, to Facebook

through the use of Facebook Pixel.

The Company is evaluating the claims and intends to defend against the allegations vigorously.

time, the potential outcome or range of financial impact cannot be reasonably estimated.

Related Party Transactions

Interest-Charge Domestic International Sales Corporation (“IC-DISC”)

The Company had an affiliate, My Worldwide Market Place, Inc.

which was an IC-DISC and was established February 12, 2013.

The IC-DISC was owned by the same shareholders of the Company, pre-Merger.

Effective December 31, 2022, the IC-DISC was discontinued and there will be no future accruals or commissions paid out.

The IC-DISC was organized to manage sales to certain qualified customers and receive commissions from the Company for this activity.

The commissions expenses were $ 2.8 million and $ 9.9 million for the twelve months ended June 30, 2023, and 2022, respectively.

The commission was determined under formulas and rules defined in the law and regulations of the US tax code, and under these regulations, the commission was deductible by the Company and results in a specified profit to the IC-DISC.

This net profit was not subject to federal income tax.

The IC-DISC distributed the profit to its stockholders, who were taxed on the income as a dividend.

In December 2022, the owners of the IC-DISC elected to forgive the commissions earned for the twelve months ended December 31, 2022.

The forgiveness of $ 6.6 million was recorded as a deemed capital contribution by the Company Stockholders.

Captive Insurance Policies

Bruce Ogilvie, Executive Chairman and a principal stockholder of Alliance, and Jeff Walker, Chief Executive Officer, a director, and a principal stockholder of Alliance, established two insurance companies:

Airlie Protection Ins.

and Protection for You Ins.

These insurance companies insured the general assets, liabilities, and claims of Alliance through March 30, 2022, and were not renewed for future periods.

Premium payments were allowed based on the Loan Agreement dated February 21, 2017.

The Company was not a guarantor and did not have exposure in the event of a loss.

Total captive policy expenses for the year ended June 30, 2023, and 2022, were $ 0.0 million and $ 1.6 million, respectively.

Other Related Party Transactions

During the year ended June 30, 2023, two promissory notes of approximately $ 0.25 million were outstanding between Adara and two of its then shareholders to provide cash to pay operating costs.

The notes do not accrue interest and were payable no earlier than when the Merger closes or February 10, 2023.

On June 30, 2023, approximately $ 0.50 million was outstanding under the Promissory Note.

During the twelve-month periods ended June 30, 2023, and 2022, the Company had sales to a related party company owned by the Company’s shareholders of $ 16.8 million, and $ 7.5 million, respectively.

During the same periods, the Company had costs incurred with another related party company in the amount of $ 8.3 million and $ 11.4 million, respectively.

On February 1, 2023, Alliance entered into a Distribution Agreement (the “Agreement”) with GameFly Holdings, Inc., a customer of Alliance that is owned by the principal stockholders of Alliance, which is effective from February 1, 2023 through March 31, 2028, at which time the Agreement continues indefinitely until either party provides the other party with six month advance notice to terminate the Agreement.

During the year Alliance had distribution revenue in the amount of $ 0.22 million.

As described in Note 8, the Company borrowed approximately $ 7.6 million from Bruce Ogilvie on June 6, 2023, and repaid it in full on June 28, 2023.

On July 3, 2023, the Company entered into a $ 17 million line of credit with Bruce Ogilvie (the “Ogilvie 2023 Line of Credit”), whereas it borrowed $ 10 million on that date, and $ 5 million on July 10, 2023.

These borrowings were paid in full on July 26, 2023.

On August 10, 2023, the Company borrowed $ 17 million.

As of September 27, 2023, the amount outstanding under the Ogilvie 2023 Line of Credit amounts to $ 10 million.

The Company leases offices and warehouses, computer equipment and vehicles.

Certain operating leases may contain one or more options to renew.

The renewal terms can extend the lease term from one to 13 years .

The exercise of lease renewal options is at the Company’s sole discretion.

Renewal option periods are included in the measurement of the ROU asset and lease liability when the exercise is reasonably certain to occur.

The depreciable lives of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.

The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Payments due under the lease contracts include fixed payments plus, may include variable payments.

The Company’s office space leases require it to make variable payments for the Company’s proportionate share of the building’s property taxes, insurance, and common area maintenance.

These variable lease payments are not included in lease payments used to determine the lease liability and are recognized as variable costs when incurred.

Fixed payments may contain predetermined fixed rent escalations.

Operating leases are included in the following asset and liability accounts on the Company’s Balance Sheet:

Operating Lease Right-of-Use Assets, Current Portion of Operating Lease Obligations, and Noncurrent Operating Lease Obligations.

ROU assets and liabilities arising from finance leases are included in the following asset and liability accounts on the Company’s Consolidated Balance Sheet:

Property & Equipment - Net, Current Portion of Finance Lease Obligation, and Noncurrent Finance Lease Obligations.

Components of lease expense were as follows for the twelve months ended June 30, 2023, and 2022:

Interest-Charge

Domestic International Sales Corporation (“IC-DISC”)

Company has an affiliate, My Worldwide Market Place, Inc.

which is an IC-DISC and was established February 12, 2013.

The IC- DISC is

owned by the Company Stockholders.

Effective December 31, 2022, IC-DISC was discontinued as a result there will be no future accruals

or commissions paid out.

IC-DISC is organized to manage sales to certain qualified customers and receive commissions from the Company for this activity.

The commissions

expenses were $ 0 and $ 2.8 million for the year ended June 30, 2024, and 2023 respectively.

Determined under formulas and rules defined

in the law and regulations of the US tax code.

Under these regulations, the commission is deductible by the Company and results in a

specified profit to the IC-DISC.

This net profit is not subject to Federal income tax.

The IC-DISC, which is managed on a calendar year,

distributes the profit to its Stockholders, who are taxed on the income as a dividend.

For twelve months ended December 31, 2022, the

owners of the IC-DISC elected to forgive the distribution.

The forgiveness of the $ 6.6 million was recorded as a deemed capital contribution

by the Company Stockholders in the twelve months ended June 30, 2023.

Related Party Transactions

the fiscal year ending June 30, 2024, the Company repaid $ 0.50 million of outstanding promissory notes to two former Adara shareholders

to fund operating costs.

These interest-free notes were due for payment at the earlier of the Merger’s closing or February 10,

As of June 30, 2023, the total outstanding balance under these notes was approximately $ 0.50 million.

the twelve-month periods ended June 30, 2024, and 2023, the Company had sales to a related party company owned by the Company’s

shareholders of $ 8.4 million, and $ 16.8 million, respectively.

During the same periods, the Company had costs incurred with another related

party company in the amount of $ 1.0 million and $ 8.3 million, respectively.

February 1, 2023, Alliance entered into a Distribution Agreement (the “Agreement”) with GameFly Holdings, Inc., a Alliance

customer owned by the principal stockholders of Alliance, effective from February 1, 2023 through March 31, 2028.

At that time, the Agreement

continues indefinitely until either party provides the other party with six-month advance notice to terminate the Agreement.

year ending June 30, 2024, and 2023, Alliance had distribution revenue of $ 0.25 million and $ 0.22 million, respectively.

July 3, 2023, the Company entered into a $ 17 million line of credit (the “Ogilvie Loan”) with Bruce Ogilvie, a principal

Initial borrowings amounted to $ 10 million on that date, followed by an additional $ 5 million on July 10, 2023.

were repaid on July 26, 2023.

Subsequently, on August 10, 2023, the Company accessed the Ogilvie Loan for the full $ 17 million, repaying

$ 7 million on August 28, 2023.

Further transactions occurred on September 14th, with a borrowing of $ 7 million, repaid on September 28,

On October 10, 2023, an additional $ 7 million was borrowed and repaid on October 18th, 2023.

As of June 30, 2024, the outstanding

balance on the Ogilvie Loan was $ 10 million.

The Ogilvie Loan matures on December 22, 2026, and bears interest at the rate of the

30-day SOFR plus 5.5 %.

Interest expenses for the fiscal year ended June 30, 2024, and 2023 were $ 10.0 million and $ 0 , respectively.

interest rate at June 30, 2024, was 8.6 %.

the fiscal year ending June 30, 2024, the Company entered into a financial advisory agreement with B&D Capital Partners, LLC (“BDCP”),

a related party.

The agreement, dated July 28, 2023, engaged BDCP as a non-exclusive financial advisor to assist the Company in issuing

privately held debt securities and related transactions.

BDCP is owned by Blystone & Donaldson, LLC, and Mr.

Donaldson, an independent

director of the Company, is a principal of BDCP.

Under the terms of the agreement, BDCP provided financial advisory services, including

the review of confidential information, identification and engagement of potential transaction parties, and assistance with investor

presentations.

the fiscal year, the Company paid BDCP approximately $ 1.8 million for these services, which included an advisory fee of 1.5 % of the gross

proceeds from transactions involving White Oak Commercial Finance, LLC, recorded as deferred financing costs with the amortization being recorded as interest expense in the consolidated

statements of operations and comprehensive income (loss)

Company leases offices, warehouses, computer equipment, and vehicles.

Certain leases include options to renew, which may extend the lease

term from one to 13 years.

The decision to exercise renewal options is at the Company’s sole discretion and is included in the

lease term when it is reasonably certain that the option will be exercised.

improvements and assets are depreciated over the shorter of their useful life or the lease term unless the lease includes a purchase

option or title transfer that is reasonably certain to occur.

lease agreements do not include material residual value guarantees or restrictive covenants.

Lease payments generally include fixed payments,

with some leases requiring variable payments.

These variable payments typically cover the Company’s proportionate share of property

taxes, insurance, and common area maintenance and are recognized as incurred rather than being included in the lease liability.

the balance sheet, operating leases are reflected in “Operating Lease Right-of-Use Assets,” “Current Portion of Operating

Lease Obligations,” and “Noncurrent Operating Lease Obligations.” Finance leases are included under “Property

& Equipment - Net,” “Current Portion of Finance Lease Obligations,” and “Noncurrent Finance Lease Obligations.

On June 1, 2024, the

Company executed a modification to one of its existing lease agreements to extend the lease term for an additional seventy-four months.

As a result of this modification, the Company recognized an additional $ 21.9

million to its right-of-use (ROU) asset.

The extended lease term will

result in continued amortization of the ROU asset over the remaining lease period, with the associated lease liabilities being remeasured

in accordance with ASC 842, Leases .

The Company will continue to amortize the ROU asset in line with the revised lease terms and

conditions, reflecting the financial impact of the extension in future periods.

of lease expense were as follows for the twelve months ended June 30, 2024, and 2023:

Schedule of Components of Lease Expense

June 30, 2024

June 30, 2023

Lease Cost ($ in thousands)

18 unchanged sentences

Weighted average discount rate - operating leases

Maturities of operating and finance lease liabilities as of June 30, 2023 are as follows:

of operating and finance lease liabilities as of June 30, 2024 are as follows:

Schedule of Maturities of Lease Liabilities

($ in thousands)

4 unchanged sentences

Business Acquisition

On July 1, 2022, Alliance purchased 100 % of the stock of Think3Fold, a collectibles distribution company for contingent consideration with a fair value of zero at the acquisition date.

The transaction expanded and diversified the Company’s portfolio of products and enabled scale and fixed cost leverage.

The results of operations of the acquired entity are included in the Consolidated Financial Statements from July 1, 2022, through June 30, 2023.

The Company recognized $ 694,000 of acquisition-related costs that were expensed in year ended June 30, 2023.

These costs are included in the consolidated statements of operations and comprehensive income within transaction costs.

Think3Fold revenue and earnings included in the Company’s consolidated statements of operations for the periods July 1, 2022, through June 30, 2023, are as follows:

July 1, 2022, Alliance purchased 100 % of the stock of Think3Fold, a collectables distribution company for contingent consideration with

a fair value of zero at the acquisition date.

The transaction expanded and diversified the Company’s portfolio of products and

enabled scale and fixed cost leverage.

acquired entity’s results of operations are included in the Consolidated Financial Statements from July 1, 2022, through June 30,

The Company recognized $ 694,000 of acquisition-related costs that were expensed in the year ended June 30, 2023.

These costs are

included in the consolidated statements of operations and comprehensive income within transaction costs.

revenue and earnings included in the Company’s consolidated statements of operations for the periods July 1, 2022, through June

30, 2023, are as follows:

of Consolidated Statements of Operations

($ in thousands)

June 30, 2023

The company has not presented pro forma financial information for the acquisition of Think3Fold in accordance with ASC 805, as historical financial information was not available in a reliable format and because the omission of such information is considered immaterial to the consolidated financial statements as a whole.

As part of the Think3Fold acquisition, a contingent consideration, or earn-out, arrangement was established.

The contingent consideration is contingent upon the achievement of certain predefined performance milestones from July 1, 2022, to June 30, 2025.

The fair value of the contingent consideration was zero at the acquisition date and as of June 30, 2023.

Any subsequent changes in the fair value of the contingent consideration will be accounted for as an adjustment to the statement of operations and comprehensive (loss) income.

The Think3Fold acquisition was treated for accounting purposes as a purchase of Think3Fold using the acquisition method of accounting in accordance with ASC 805, Business Combination.

Under the acquisition method of accounting, the aggregate consideration was allocated to the acquired assets and assumed liabilities, in each case, based on their respective fair value as of the closing date, with the excess of the consideration transferred over the fair value of the net assets acquired (or net liabilities assumed) being allocated to intangible assets and goodwill.

The purchase price allocation for this business acquisition was completed in the fourth quarter of the fiscal year ended June 30, 2023 and the following assets and liabilities are recognized based on the purchase price allocation and the fair value measurements.

During the twelve-month period ended June 30, 2023, the Company recorded a measurement period adjustment to reduce the fair value of the inventory acquired by $ 5.2 million, which resulted in a corresponding increase in goodwill.

Allocation of purchase price consideration ($ in thousands)

part of the Think3Fold acquisition, a contingent consideration, or earn-out, arrangement was established.

The contingent consideration

is contingent upon the achievement of certain predefined performance milestones from July 1, 2022, to June 30, 2025.

The fair value of

the contingent consideration was zero at the acquisition date and as of June 30, 2024, and 2023.

Any subsequent changes in the fair value

of the contingent consideration will be accounted for as an adjustment to the statement of operations and comprehensive (loss) income.

Think3Fold acquisition was treated for accounting purposes as a purchase of Think3Fold using the acquisition method of accounting in

accordance with ASC 805, Business Combinations.

Under this method, the aggregate consideration was allocated to the acquired assets and

assumed liabilities, in each case, based on their respective fair value as of the closing date, with the excess of the consideration

transferred over the fair value of the net assets acquired (or net liabilities assumed) being allocated to intangible assets and goodwill.

purchase price allocation for this business acquisition was completed in the fourth quarter of the fiscal year ending June 30, 2023.

Based on the purchase price allocation and the fair value measurements, the following assets and liabilities are recognized:

of purchase price consideration ($ in thousands)

of Acquisition Date Fair Value of Consideration Transferred

Cash Acquired

4 unchanged sentences

Total Consideration

Goodwill resulting from the Think3Fold acquisition is not deductible for tax purposes.

This non-deductibility arises from the intrinsic nature of the transaction and applicable tax regulations.

The recognized goodwill associated with the Think3Fold acquisition primarily comprises expected synergies, since the acquisition is expected to generate synergies in various aspects, including operational efficiencies and revenue growth.

These synergies are a significant component of recognized goodwill, as they are anticipated to enhance the overall value of the combined entity.

As disclosed in Note 1, on February 10, 2023, the Company completed the Merger with Alliance and a Merger Sub, resulting in the Company becoming a publicly traded company.

While Alliance was the legal acquirer in the Merger, for financial accounting and reporting purposes under U.S.

GAAP, Legacy Alliance was the accounting acquirer, and the Merger was accounted for as a “reverse recapitalization.” A reverse recapitalization (i.e., a capital transaction involving the exchange of stock by Alliance for Legacy Alliance’s stock) does not result in a new basis of accounting, and the consolidated financial statements of the combined entity represent the continuation of the consolidated financial statements of Legacy Alliance.

Accordingly, the consolidated assets, liabilities,

and results of operations of Legacy Alliance became the historical consolidated financial statements of the combined company, and Alliance’s assets, liabilities and results of operations were consolidated with Legacy Alliance beginning on the acquisition date.

Operations prior to the Merger are presented as those of Legacy Alliance in future reports.

The net assets of Alliance were recognized at historical cost (which was consistent with carrying value), with no goodwill or other intangible assets recorded.

At the closing of the Merger, each of the then issued and outstanding shares of Alliance common stock were cancelled and automatically converted into the right to receive the number of shares of Alliance common stock equal to the exchange ratio (determined in accordance with the Business Combination Agreement).

The Company’s 900 shares of previously outstanding common stock were exchanged for 47,500,000 shares of Class A Common Stock.

resulting from the Think3Fold acquisition is not deductible for tax purposes.

This non-deductibility arises from the intrinsic nature

of the transaction and applicable tax regulations.

The recognized goodwill associated with the Think3Fold acquisition primarily comprises

expected synergies, since the acquisition is expected to generate synergies in various aspects, including operational efficiencies and

revenue growth.

These synergies are a significant component of recognized goodwill, as they are anticipated to enhance the overall value

of the combined entity.

disclosed in Note 1, on February 10, 2023, the Company completed the Merger with Alliance and a Merger Sub, resulting in the Company

becoming a publicly traded company.

While Alliance was the legal acquirer in the Merger, for financial accounting and reporting purposes

GAAP, Legacy Alliance was the accounting acquirer, and the Merger was accounted for as a “reverse recapitalization.”

A reverse recapitalization (i.e., a capital transaction involving the exchange of stock by Alliance for Legacy Alliance’s stock)

does not result in a new basis of accounting, and the consolidated financial statements of the combined entity represent the continuation

of the consolidated financial statements of Legacy Alliance.

Accordingly, the consolidated assets, liabilities, and results of operations

of Legacy Alliance became the historical consolidated financial statements of the combined company, and Alliance’s assets, liabilities

and results of operations were consolidated with Legacy Alliance beginning on the acquisition date.

Operations prior to the Merger are

presented as those of Legacy Alliance in future reports.

The net assets of Alliance were recognized at historical cost (which was consistent

with carrying value), with no goodwill or other intangible assets recorded.

the closing of the Merger, each of the then issued and outstanding shares of Alliance common stock were cancelled and automatically converted

into the right to receive the number of shares of Alliance common stock equal to the exchange ratio (determined in accordance with the

Business Combination Agreement).

The Company’s 900 shares of previously outstanding common stock were exchanged for 47,500,000

shares of Class A Common Stock.

In addition, the treasury stock was cancelled.

This change in equity structure has been retroactively reflected in the financial statements for all periods presented.

The following table summarizes the shares of Class A outstanding following consummation of the Merger:

This change in equity structure has been retroactively

reflected in the financial statements for all periods presented.

following table summarizes the shares of Class A outstanding following consummation of the Merger:

of Consummation of Merger

Alliance Public Shares

2 unchanged sentences

Total Shares of Common Stock Outstanding after Merger

Up to 60 million additional Class E shares may be issued to the Legacy Alliance shareholders at no cost based on future performance of the company’s stock price, and 9.9 million warrants (Class A) that can be exercised for common shares at $ 11.50 per share (See Note 17).

The 60 million Class E shares are set aside in an escrow account as additional consideration contingent on triggering events occurring within 10 years after the Merger.

Upon reaching the following triggering events, the Class E shares will be released from the escrow account to the three major shareholders, and converted to Class A shares on a 1 :1 basis:

● If the stock price increases to $ 20 per share within 5 years , 20 million Class E shares will be released.

● If the stock price increases to $ 30 per share within 7 years , 20 million Class E shares will be released.

● If the stock price increases to $ 50 per share within 10 years , 20 million Class E shares will be released.

Each share of Class A and Class E common stock has one vote, and the common shares collectively will possess all voting power and will have the exclusive right to vote for the election of directors and on all other matters properly submitted to a vote of the stockholders.

Since the Class E shares are subject to vesting conditions and meet the contingent exercise and settlement provisions to be considered indexed to the Company’s stock, they are accounted for as equity instruments, and are reflected as a reduction of retained earnings, at their fair value on the date of the Merger.

The Company incurred total transaction costs of approximately $ 5.0 million, including legal, financial advisory and other professional fees related to the Merger, which was recorded as an expense as the offering costs exceeded the proceeds received in the Merger.

In connection with the Merger, the Company’s 2023 Omnibus Equity Incentive Plan (the “2023 Plan”) became effective.

The 2023 Plan is a comprehensive incentive compensation plan under which the Company can grant equity-based and other incentives awards to based officers, employees and directors of, and consultants and advisers to, Alliance and its subsidiaries.

The Company has reserved a total of 600,000 shares of common stock for issuance as or under awards to be made under the 2023 Plan.

The 2023 Plan shall continue in effect, unless sooner terminated, until the tenth anniversary of the date on which it is adopted by the Board of Directors (except as to awards outstanding on that date), and the Board of Directors in its discretion may terminate it at any time with respect to any shares for which awards have not theretofore been granted, provided certain conditions are met, in accordance with the 2023 Plan.

The price at which a share may be purchased upon exercise of a share option shall be determined by the Plan Committee;

to 60 million additional Class E shares may be issued to the Legacy Alliance shareholders at no cost based on future performance of the

company’s stock price, and 9.9 million warrants (Class A) that can be exercised for common shares at $ 11.50 per share (See Note

The 60 million Class E shares are set aside in an escrow account as additional consideration contingent on triggering events occurring

within 10 years after the Merger.

Upon reaching the following triggering events, the Class E shares will be released from the escrow

account to the three major shareholders, and converted to Class A shares on a 1:1 basis :

the stock price increases to $ 20 per share within 5 years, 20 million Class E shares will

the stock price increases to $ 30 per share within 7 years, 20 million Class E shares will

the stock price increases to $ 50 per share within 10 years, 20 million Class E shares will

share of Class A and Class E common stock has one vote, and the common shares collectively will possess all voting power and will have

the exclusive right to vote for the election of directors and on all other matters properly submitted to a vote of the stockholders.

Since the Class E shares are subject to vesting conditions and meet the contingent exercise and settlement provisions to be considered

indexed to the Company’s stock, they are accounted for as equity instruments, and are reflected as a reduction of retained earnings,

at their fair value on the date of the Merger.

Company incurred total transaction costs of approximately $ 5.0 million, including legal, financial advisory and other professional fees

related to the Merger, which was recorded as an expense as the offering costs exceeded the proceeds received in the Merger.

connection with the Merger, the Company’s 2023 Omnibus Equity Incentive Plan (the “2023 Plan”) became effective.

2023 Plan is a comprehensive incentive compensation plan under which the Company can grant equity-based and other incentives awards to

based officers, employees and directors of, and consultants and advisers to, Alliance and its subsidiaries.

The Company has reserved

a total of 600,000 shares of common stock for issuance as or under awards to be made under the 2023 Plan.

To the extent that an award

lapses, expires, is canceled, is terminated unexercised or ceases to be exercisable for any reason, or the rights of its holder terminate,

any common stock subject to such award shall again be available for the grant of a new award.

The 2023 Plan shall continue in effect,

unless sooner terminated, until the tenth anniversary of the date on which it is adopted by the Board of Directors (except as to awards

outstanding on that date).

The Board of Directors, in its discretion, may terminate it at any time with respect to any shares for which

awards have not theretofore been granted, provided certain conditions are met, in accordance with the 2023 Plan.

The price at which a

share may be purchased upon exercise of a share option shall be determined by the Plan Committee;

provided, however, that such option

price (i) shall not be less than the fair market value of a share on the date such share option is granted, and (ii) shall be subject

to adjustment as provided in the 2023 Plan.

As of June 30, 2024, 463,800 shares were awarded under the 2023 Plan.

Stock-Based Compensation :

As part of the merger with Adara on February 10, 2023, 600,000 shares were authorized for a one-time employee stock plan.

Total restricted stock awards of 463,800 shares were granted to employees on June 15, 2023, by approval of the compensation committee.

The shares fully vest on October 4, 2023.The company does not have an annual stock-based compensation plan.

part of the merger with Adara on February 10, 2023, 600,000 shares were authorized for a one-time employee stock plan.

The compensation

committee approved 463,800 shares of restricted stock awards to employees on June 15, 2023.

The shares fully vest on October 4, 2023.The

company does not have an annual stock-based compensation plan.

of Stock Based Compensation Plan

Number of RSAs

Outstanding as of February 10, 2023

Granted on June 15, 2023

Outstanding as of June 30, 2023

Outstanding June 30, 2024

In connection with awards granted, the Company recognized $ 216,000 in stock-based compensation during the year ended June 30, 2023.

As a result of the Merger, at June 30, 2023, there were 5,750,000 Public Warrants, 4,120,000 Private Placement Warrants and 50,000 Representatives Warrants issued and outstanding, each exercisable for one share of Class A Common Stock with an exercise price of $ 11.50 (the “Warrants”).

The Company will not be obligated to deliver any shares of Class A common stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act covering the issuance of the shares of Class A common stock underlying the Warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations with respect to registration.

Additionally, no warrant will be exercisable, and the Company will not be obligated to issue shares of Class A common stock upon exercise of a warrant unless Class A common stock issuable upon such warrant exercise has been registered, qualified, or deemed to be exempt under the securities laws of the state of residence of the registered holder of the Warrants.

The Company filed with the SEC on April 11, 2023, its registration statement covering the shares of Class A common stock issuable upon exercise of the Warrants, to cause such registration statement to become effective and to maintain a current prospectus relating to those shares of Class A common stock until the warrants expire or are redeemed, as specified in the warrant agreement.

The registration, as amended, became effective June 29, 2023.

connection with awards granted, the Company recognized $ 1.4 million and $ 0.2 million in stock-based compensation during the years ended

June 30, 2024, and 2023, respectively.

a result of the Merger, at June 30, 2024 and 2023, there were 5,750,000

Public Warrants, 4,120,000

The Public Warrants qualify for the derivative scope exception under ASC 815 and are therefore classified as equity on the consolidated balance sheets.

Private Placement Warrants and 50,090

Representatives Warrants issued and outstanding, each exercisable for one share of Class A Common Stock with an exercise price of

(the “Warrants”).

Company will not be obligated to deliver any shares of Class A common stock pursuant to the exercise of a warrant.

It will have no obligation

to settle such warrant exercise unless a registration statement under the Securities Act covering the issuance of the shares of Class

A common stock underlying the Warrants is then effective.

A prospectus relating thereto is current, subject to the Company satisfying

its obligations with respect to registration.

Additionally, no warrant will be exercisable, and the Company will not be obligated to

issue shares of Class A common stock upon exercise of a warrant unless Class A common stock issuable upon such warrant exercise has been

registered, qualified, or deemed to be exempt under the securities laws of the state of residence of the registered holder of the Warrants.

Company filed with the SEC on April 11, 2023, its registration statement covering the shares of Class A common stock issuable upon exercise

of the Warrants, to cause such registration statement to become effective and to maintain a current prospectus relating to those shares

of Class A common stock until the warrants expire or are redeemed, as specified in the warrant agreement.

The registration, as amended,

became effective June 29, 2023.

Public Warrants qualify for the derivative scope exception under ASC 815 and are therefore classified as equity on the consolidated balance

They may only be exercised for a whole number of shares.

The Public Warrants are currently exercisable at $ 11.50 per share and will expire five years after the completion of the Merger or earlier upon redemption or liquidation.

The Company may redeem for cash the outstanding Public Warrants:

● in whole and not in part.

● at a price of $ 0.01 per Public Warrant.

● upon not less than 30 days ’ prior written notice of redemption after the warrants become exercisable to each warrant holder;

● if, and only if, the reported last sale price of the Class A common stock equals or exceeds $ 18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations, and the like) for any 20 trading days within a 30 -trading day period commencing once the Public Warrants become exercisable and ending three business days before the Company sends the notice of redemption to the warrant holders.

If and when the Public Warrants become redeemable by the Company, the Company may exercise its redemption right.

Even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws.

If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement.

The exercise price and number of shares of Class A common stock issuable upon exercise of the Public Warrants may be adjusted in certain circumstances including in the event of a stock dividend, or recapitalization, reorganization, merger, or consolidation.

However, the Public Warrants will not be adjusted for issuances of Class A common stock at a price below its exercise price.

Additionally, in no event will the Company be required to net cash settle the Public Warrants.

Private Placement Warrants:

The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering but are classified as liabilities on the consolidated balance sheet as they are not considered indexed to the company’s own stock.

Additionally, the Private Placement Warrants are exercisable on a cashless basis and are non-redeemable, so long as they are held by the initial purchasers or their permitted transferees.

If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants as described above.

Representative Warrants

The Company issued Representative Warrants, for minimal consideration to ThinkEquity, a division of Fordham Financial Management, Inc.

(and/or its designees), in a private placement simultaneously with the closing of Alliance’s initial public offering, which are also classified as liabilities on the consolidated balance sheet.

The Representative Warrants are identical to the Private Warrants except that so long as the Representative Warrants are held by ThinkEquity (and/or its designees) or its permitted transferees, the Representative Warrants (i) will not be redeemable by the Company, (ii) may be exercised by the holders on a cashless basis, (iii) are entitled to registration rights and (iv) are not exercisable more than five years from the effective date of the Merger.

The Company complies with the provisions of ASC 820, Fair Value Measurements, for its financial and non-financial assets and liabilities.

ASC 820 defines fair value, establishes a framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis.

The Company accounts for certain assets and liabilities at fair value.

The hierarchy below lists three levels of fair value based on the extent to which inputs used in measuring fair value are observable in the market.

The company categorizes each of its fair value measurements in one of these three levels based on the lowest level input that is significant to the fair value measurement in its entirety.

These levels are:

Level 1 – Quoted prices are available in active markets for identical assets or liabilities at the reporting date.

Generally, this includes debt and equity securities that are traded in an active market.

Level 2 – Observable inputs other than Level 1 prices such as quote prices for similar assets or liabilities;

quoted prices in markets that are not active;

or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Generally, this includes debt and equity securities that are not traded in an active market.

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or other valuation techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

As of June 30, 2023, the Company has classified the Private Placement Warrants and the Representative Warrants as Level 3 fair value measurements.

The Public Warrants are currently exercisable at $ 11.50 per share and

will expire five years after the completion of the Merger or earlier upon redemption or liquidation.

The Company may redeem for cash

the outstanding Public Warrants:

whole and not in part.

a price of $ 0.01 per Public Warrant.

not less than 30 days’ prior written notice of redemption after the warrants become

exercisable to each warrant holder;

and only if, the reported last sale price of the Class A common stock equals or exceeds $ 18.00

per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations,

and the like) for any 20 trading days within a 30 -trading day period commencing once the

Public Warrants become exercisable and ending three business days before the Company sends

the notice of redemption to the warrant holders.

If and when the Public Warrants become redeemable

by the Company, the Company may exercise its redemption right.

if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws.

the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the

Public Warrants to do so on a “cashless basis,” as described in the warrant agreement.

The exercise price and number of shares

of Class A common stock issuable upon exercise of the Public Warrants may be adjusted in certain circumstances including in the event

of a stock dividend, or recapitalization, reorganization, merger, or consolidation.

However, the Public Warrants will not be adjusted

for issuances of Class A common stock at a price below its exercise price.

Additionally, in no event will the Company be required to

net cash settle the Public Warrants.

Placement Warrants:

Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering but are classified

as liabilities on the consolidated balance sheet as they are not considered indexed to the company’s own stock.

Additionally, the

Private Placement Warrants are exercisable on a cashless basis and are non-redeemable, so long as they are held by the initial purchasers

or their permitted transferees.

If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted

transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the

Public Warrants as described above.

Representative

Company issued Representative Warrants, for minimal consideration to ThinkEquity, a division of Fordham Financial Management, Inc.

its designees), in a private placement simultaneously with the closing of Alliance’s initial public offering, which are also classified

as liabilities on the consolidated balance sheet.

The Representative Warrants are identical to the Private Warrants except that so long

as the Representative Warrants are held by ThinkEquity (and/or its designees) or its permitted transferees, the Representative Warrants

(i) will not be redeemable by the Company, (ii) may be exercised by the holders on a cashless basis, (iii) are entitled to registration

rights and (iv) are not exercisable more than five years from the effective date of the Merger.

Company complies with the provisions of ASC 820, Fair Value Measurements, for its financial and non-financial assets and liabilities.

ASC 820 defines fair value, establishes a framework for measuring fair value and expands disclosure for each major asset and liability

category measured at fair value on either a recurring or nonrecurring basis.

Company accounts for certain assets and liabilities at fair value.

The hierarchy below lists three levels of fair value based on the

extent to which inputs used in measuring fair value are observable in the market.

The company categorizes each of its fair value measurements

in one of these three levels based on the lowest level input that is significant to the fair value measurement in its entirety.

June 30, 2024 and 2023, the Company has classified the Private Placement Warrants and the Representative Warrants as Level 3 fair value

measurements.

Management evaluates a variety of inputs and then estimates fair value based on those inputs.

As discussed below, the Company utilized the Lattice Model in valuing the Private Placement Warrants and Representative Warrants.

The fair value of cash and cash equivalents, other assets, line of credit, accounts payable and accrued expenses approximate their carrying value due to the short-term maturities of these items.

The fair value of the company’s line of credit, which is considered a Level 2 fair value measurement, approximates it carrying value because it has a variable interest rate.

The Company recomputes the fair value of the Private and the Representative Warrants at the issuance date and the end of each quarterly reporting period.

As discussed below, the Company

utilized the Black Scholes Model in valuing the Private Placement Warrants and Representative Warrants.

estimated fair value of cash, trade receivables, accounts payable, accrued expenses and other current liabilities are based on Level

1 inputs as the fair values approximate carrying amounts as of June 30, 2024, and 2023, based on the short-term nature and maturity of

these instruments.

estimated fair values of subordinated shareholder debt and the credit facility is based on Level 2 inputs, which consist of interest

rates that are currently available to the Company for issuance of debt with similar terms and remaining maturities.

As of June 30, 2024,

and 2023 the estimated fair value of the Company’s short and long-term debt approximates it carrying value due to market interest

rates charged on such debt or their short-term maturities.

Company recomputes the fair value of the Private and the Representative Warrants at the issuance date and the end of each quarterly reporting

Such value computation includes subjective input assumptions that are consistently applied each period.

If the Company were to alter its assumptions or the numbers input based on such assumptions, the resulting fair value could be materially different.

The Company utilized the following assumptions to estimate fair value of the Private Warrants and Representative Warrants as of:

If the Company were to

alter its assumptions or the numbers input based on such assumptions, the resulting fair value could be materially different.

Company utilized the following assumptions to estimate fair value of the Private Warrants and Representative Warrants as of:

of Estimate Fair Value of Private Warrants and Representative Warrants

Exercise price per share

3 unchanged sentences

Expected dividend yield

The significant assumptions using the Lattice model approach for valuation of the Private Placement Warrants and Representative Warrants were determined in the following manner:

(i) Risk-free interest rate:

Warrants and rights outstanding measurement input

significant assumptions using the Lattice model approach for valuation of the Private Placement Warrants and Representative Warrants

were determined in the following manner:

(i) Risk-free

interest rate:

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

Treasury rate with a term matching the time to expiration.

(ii) Expected term:

Treasury rate with a term

matching the time to expiration.

(ii) Expected

the expected term is estimated to be equivalent to the remaining contractual term.

(iii) Expected volatility:

expected stock volatility is based on daily observations of the Company’s historical stock value and implied by market price of the Public Warrants, adjusted by guideline public company volatility.

(iv) Expected dividend yield:

expected dividend yield is based on the Company’s anticipated dividend payments.

As the Company has never issued dividends, the expected dividend yield is 0 % and this assumption will be continued in future calculations unless the Company changes its dividend policy.

The table below presents the balances of assets and liabilities measured at fair value on a recurring basis by level within the hierarchy as follows:

(in thousands)

(iii) Expected

expected stock volatility is based on daily observations of the Company’s

historical stock value and implied by market price of the Public Warrants, adjusted by guideline

public company volatility.

(iv) Expected

dividend yield:

expected dividend yield is based on the Company’s anticipated dividend

As the Company has never issued dividends, the expected dividend yield is 0 %, and

this assumption will be continued in future calculations unless the Company changes its dividend

table below presents the balances of assets and liabilities measured at fair value on a recurring basis by level within the hierarchy

as follows (in thousands)

of Assets and Liabilities Measured at Fair Value on Recurring Basis

As of June 30, 2024

Private Placement and Representative Warrants

The table below presents the change in number and fair value of the Private and Representative Warrants since the Merger on February 10, 2023:

As of June 30, 2023

Private Placement and Representative Warrants

table below presents the change in the number and fair value of the Private and Representative Warrants since the Merger on June 30,

2024 (in thousands, except the number of shares)

of Change in Number and Fair Value of Private and Representative Warrants

Private Warrants

Representative Warrants

February 10, 2023

June 30, 2023

Change in value

June 30, 2024

Subsequent Events

On July 5, 2023, the Company sold an aggregate of 1,335,000 shares of the Company’s Class A Common Stock at a public offering price to the public of $ 3.00 per share (the “Offering”), pursuant to an Underwriting Agreement, dated as of June 29, 2023 (the “Underwriting Agreement”), by and between the Company and ThinkEquity, as representative of the underwriters of the Offering (the “Underwriters”).

In addition, pursuant to the Underwriting Agreement, the Company granted ThinkEquity a 45-day option to purchase up to 200,250 additional shares of Class A Common Stock to cover over-allotments in connection with the Offering.

The Class A Common Stock was offered and sold to the public pursuant to the Company’s registration statement on Form S-1, initially filed by the Company with the SEC under the Securities Act of 1933, as amended (the “Securities Act”), on April 12, 2023, as amended, which became effective on July 4, 2023.

The Company received gross proceeds of $ 4,005,000 , before deducting underwriting discounts and commissions of 7.5 % of the gross proceeds and estimated Offering expenses.

As described in Note 8, on September 13, 2023, certain subsidiaries of Alliance Entertainment Holding Corporation, a Delaware corporation (the “Company” or “Alliance”), as Borrowers thereunder (the “Borrowers”), entered into an Amendment Number Thirteen and Waiver (“Amendment No.

13”) to the Loan and Security Agreement (the “Credit Facility”) with Bank of America, N.A.

(the “Agent”), as agent for the Lenders thereunder.

Pursuant to Amendment No.

13, (i) the termination date of the Credit Facility was extended to December 31, 2023, (ii) the definitions of Subordinated Debt and Permitted Contingent Obligations were amended, (iii) the Borrowers are not permitted to create, incur, guarantee or offer to exit any new debt or liens, other than certain specified liens, or to make or declare any distribution, other than certain permitted distributions, (iv) loans and advances that were previously permitted, as well as previously permitted acquisitions, will be considered restricted investments and may not be made, (v) the Borrowers may not make any loans or advances of money to any persons, and (vi) the lenders waived certain events of default, including certain breaches of negative covenants.

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

What changed 10-K

Item 9A. Controls and Procedures