What changed in this filing

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Item 1A. Risk Factors

2025-09-10 compared with 2024-09-20 · 389 added, 490 removed, 1024 unchanged (46% of the section changed)

Risk Factors.

An investment

in our securities involves a high degree of risk.

You should carefully consider all of the risks described below, together with the other

information contained in this annual report before making a decision to invest in our securities.

If any of the following events occur,

our business, financial condition and operating results may be materially adversely affected.

In that event, the trading price of our

securities could decline, and you could lose all or part of your investment.

investment in our securities involves a high degree of risk.

You should carefully consider all of the risks described below, together

with the other information contained in this annual report before making a decision to invest in our securities.

If any of the following

events occur, our business, financial condition and operating results may be materially adversely affected.

In that event, the trading

price of our securities could decline, and you could lose all or part of your investment.

Factor Summary

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risk contained below:

Alliance fails to respond to or capitalize on the rapid technological development in the

music, video, gaming, and entertainment industry, including changes in entertainment delivery

formats, its business could be harmed.

Alliance does not successfully optimize and operate its fulfillment network, its business

could be harmed.

● Disruptions

in Alliance’s supply chain have increased product expenditures and could result in

an adverse impact on results of operations.

could cause Alliance’s product costs and operating and administrative expenses to grow

more rapidly than net sales, which could result in lower gross margins and lower net earnings.

in the economy, market trends and other conditions affecting the profitability and financial

stability of Alliance’s customers could negatively impact Alliance’s sales growth

and results of operations.

Alliance fails to respond to or capitalize on the rapid technological development in the music, video, gaming, and entertainment

industry, including changes in entertainment delivery formats, its business could be harmed.

Alliance does not successfully optimize and operate its fulfillment network, its business could be harmed.

in Alliance’s supply chain have increased product expenditures and could result in an adverse impact on results of operations.

could cause Alliance’s product costs and operating and administrative expenses to grow more rapidly than net sales, which could

result in lower gross margins and lower net earnings.

in the economy, market trends and other conditions affecting the profitability and financial stability of Alliance’s customers

could negatively impact Alliance’s sales growth and results of operations.

expansion places a strain on our management, operational, financial, and other resources.

expansion into new products, services, technologies, and geographic regions subjects us to

additional business, legal, financial, and competitive risks;

business will suffer if we are not successful in developing and expanding our partner brands

across our consumer base.

interests change rapidly and acceptance of products and entertainment offerings are influenced

by outside factors;

expansion into new products, services, technologies, and geographic regions subjects us to additional business, legal, financial,

and competitive risks;

business will suffer if we are not successful in developing and expanding our partner brands across our consumer base.

interests change rapidly and acceptance of products and entertainment offerings are influenced by outside factors;

we are unable to navigate through global supply chain challenges, our business may be harmed;

we are unable to adapt our business to the continued shift to ecommerce, our business may

business, including our costs and supply chain, is subject to risks associated with sourcing,

manufacturing, warehousing, distribution and logistics, and the loss of any of our key suppliers

or service providers could negatively impact our business;

we are unable to adapt our business to the continued shift to ecommerce, our business may be harmed;

business, including our costs and supply chain, is subject to risks associated with sourcing, manufacturing, warehousing, distribution

and logistics, and the loss of any of our key suppliers or service providers could negatively impact our business;

face significant inventory risk;

rely on third-party suppliers, labels, studios, publishers, suppliers, retail and ecommerce

partners and other vendors, and they may not continue to produce products or provide services

that are consistent with our standards or applicable regulatory requirements, which could

harm our brand, cause consumer dissatisfaction, and require us to find alternative suppliers

of our products or services;

rely on third-party suppliers, labels, studios, publishers, suppliers, retail and ecommerce partners and other vendors, and they

may not continue to produce products or provide services that are consistent with our standards or applicable regulatory requirements,

which could harm our brand, cause consumer dissatisfaction, and require us to find alternative suppliers of our products or services;

existing and any future indebtedness could adversely affect its ability to operate its business;

and events of default under Alliance’s Credit Facility could limit our ability to undertake

certain types of transactions and adversely affect our liquidity;

indebtedness may limit our availability of cash, cause us to divert cash to fund debt service

payments or make it more difficult to take certain other actions;

we were unable to obtain or service our other external financings, or if the restrictions

imposed by such financing were too burdensome, our business would be harmed;

has engaged in transactions with related parties, and such transactions present possible

conflicts of interest that could have an adverse effect on our business and results of operations;

has identified material weaknesses in its internal controls over financial reporting.

While we have developed and implemented a

remediation plan to address these material weaknesses, the remediation measures have not yet proven effective;

management has limited experience in operating a public company;

might not be able to obtain or maintain the listing of our Class A common stock on the Nasdaq

Capital Market;

and events of default under Alliance’s Credit Facility could limit our ability to undertake certain types of transactions and

adversely affect our liquidity;

indebtedness may limit our availability of cash, cause us to divert cash to fund debt service payments or make it more difficult

to take certain other actions;

we were unable to obtain or service our other external financings, or if the restrictions imposed by such financing were too burdensome,

our business would be harmed;

has engaged in transactions with related parties, and such transactions present possible conflicts of interest that could have an

adverse effect on our business and results of operations;

might not be able to obtain or maintain the listing of our Class A common stock on the Nasdaq Capital Market;

are subject to risks arising from international trade policies, including the imposition of new or increased tariffs on imported

Risks Related to

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changes in entertainment delivery formats, our business could be harmed.

music, video, gaming, and entertainment industry continues to experience frequent change driven by technological development, including

developments with respect to the formats through which music, films, television programming, games, and other content are delivered to

With rapid technological changes and dramatically expanded digital content offerings, the scale and scope of these changes

have accelerated in recent years.

For example, consumers are increasingly accessing television, film, and other episodic content on streaming

and digital content networks, such as Netflix, Amazon Prime Video, Hulu, Disney+ and Apple TV+.

Additionally, consumers access music

content through Apple Music, Pandora, Amazon Music, Spotify, and other providers.

Video game services can be accessed through Xbox Game

Pass, PlayStation Now, GeForce, Steam, Stadia, xCloud, Shadow, Luna, and Switch Online.

music, video, gaming, entertainment and collectible industries continue to experience frequent change driven by technological

development, including developments with respect to the formats through which music, films, television programming, games, and other

content are delivered to consumers.

With rapid technological changes and dramatically expanded digital content offerings, the scale

and scope of these changes have accelerated in recent years.

For example, consumers are increasingly accessing television, film, and

other episodic content on streaming and digital content networks, such as Netflix, Amazon Prime Video, Hulu, Disney+ and Apple TV+.

Additionally, consumers access music content through Apple Music, Pandora, Amazon Music, Spotify, and other providers.

services can be accessed through Xbox Game Pass, PlayStation Now, GeForce, Steam, Stadia, xCloud, Shadow, Luna, and Switch

entertainment offerings have gone direct to streaming channels and have not produced a physical content format.

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forecast product demand would result in unexpected costs and other harm to our business and reputation.

face competition.

If we are unable to compete effectively with existing or new competitors, our revenues, market share and profitability

could decline.

We face competition.

If we are unable to compete effectively with existing or new competitors,

our revenues, market share and profitability could decline

businesses are rapidly evolving and competitive, and we have many competitors in different industries, including physical, e-commerce,

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We compete in the U.S.

and internationally with a wide array of

large and small distributors, and sellers of vinyl records, CD’s, DVD’s, video games and other entertainment and consumer

and internationally with a wide array

of large and small distributors, and sellers of vinyl records, CD’s, DVD’s, video games and other entertainment and consumer

In addition, we compete with companies who are focused on building their brands across multiple product and consumer categories,

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For example, macroeconomic events,

including inflation, interest rates, geopolitical issues, and uncertainty regarding the U.S.

elections in the Fall of 2024 have led to

economic uncertainty globally.

Alliance serves several industries and markets in which the demand for its products and services is sensitive

to the production activity, capital spending and demand for products and services of Alliance’s customers.

Many of these customers

operate in markets that are subject to cyclical fluctuations resulting from market uncertainty, trade and tariff policies, costs of goods

sold, currency exchange rates, central bank interest rate fluctuations, economic downturns, recessions, foreign competition, offshoring

of production, oil and natural gas prices, geopolitical developments, labor shortages, inflation, natural or human induced disasters,

extreme weather, outbreaks of pandemic disease such as the COVID 19 pandemic, inflation, deflation, and a variety of other factors beyond

Alliance’s control.

Any of these factors could cause customers to idle or close stores, delay purchases, reduce wholesale purchasing

levels, or experience reductions in the demand for their own retail and wholesale products or services.

including inflation, interest rates, and geopolitical issues , have led to economic uncertainty globally.

Alliance serves

several industries and markets in which the demand for its products and services is sensitive to the production activity, capital spending

and demand for products and services of Alliance’s customers.

Many of these customers operate in markets that are subject to cyclical

fluctuations resulting from market uncertainty, trade and tariff policies, costs of goods sold, currency exchange rates, central bank

interest rate fluctuations, economic downturns, recessions, foreign competition, offshoring of production, oil and natural gas prices,

geopolitical developments, labor shortages, inflation, natural or human induced disasters, extreme weather, outbreaks of pandemic disease

such as the COVID 19 pandemic, inflation, deflation, and a variety of other factors beyond Alliance’s control.

Any of these factors

could cause customers to idle or close stores, delay purchases, reduce wholesale purchasing levels, or experience reductions in the demand

for their own retail and wholesale products or services.

of these events could also reduce the volume of products and services these customers purchase from Alliance or impair the ability of

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be delayed or reduced in their realization.

and investments have been a component of our growth and the development of our business, such as our acquisition of COKeM in September

Acquisitions can broaden and diversify our brand holdings and product offerings and allow us to build additional capabilities and

competencies of the company.

and investments have been a component of our growth and the development of our business, such as our acquisition of Hand Made by Robots

in December 2024 and COKeM in September 2020.

Acquisitions can broaden and diversify our brand holdings and product offerings and allow

us to build additional capabilities and competencies of the company.

cannot be certain that the products and offerings of companies we may acquire, or acquire an interest in, will achieve or maintain popularity

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competitive risks.

may have limited or no experience in our newer market segments, and our customers may not adopt our offerings.

These offerings may present

new and difficult technology challenges, and we may be subject to claims if customers of these offerings experience service disruptions

or failures or other quality issues.

In addition, profitability, if any, in our newer activities may be lower than in our older activities,

and we may not be successful enough in these newer activities to recoup our investments in them.

If any of this were to occur, it could

damage our reputation, limit our growth, and negatively affect our operating results.

may have limited or no experience in our newer market segments, including collectibles, and our customers may not adopt our

These offerings may present new and difficult technology challenges, and we may be subject to claims if customers of

these offerings experience service disruptions or failures or other quality issues.

In addition, profitability, if any, in our newer

activities may be lower than in our older activities, and we may not be successful enough in these newer activities to recoup our

investments in them.

If any of this were to occur, it could damage our reputation, limit our growth, and negatively affect our

operating results.

may experience significant fluctuations in our operating results and growth rate.

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the following:

ability to retain and increase sales to existing customers, attract new customers, and satisfy

our customers’ demands;

ability to retain and increase sales to existing customers, attract new customers, and satisfy our customers’ demands;

ability to retain and expand our network of customers;

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introduction of competitive stores, websites, products, services, price decreases, or improvements;

in usage or adoption rates of the Internet, e-commerce, electronic devices, and web services,

including outside the U.S.;

in usage or adoption rates of the Internet, e-commerce, electronic devices, and web services, including outside the U.S.;

effectiveness, and costs of expansion and upgrades of our systems and infrastructure;

success of our geographic, service, and product line expansions;

extent to which we finance, and the terms of any such financing for, our current operations

and future growth;

outcomes of legal proceedings and claims, which may include significant monetary damages

or injunctive relief and could have a material adverse impact on our operating results;

extent to which we finance, and the terms of any such financing for, our current operations and future growth;

outcomes of legal proceedings and claims, which may include significant monetary damages or injunctive relief and could have a material

adverse impact on our operating results;

in the mix of products and services we sell;

in our level of merchandise and vendor returns;

extent to which we offer free shipping, continue to reduce prices worldwide, and provide

additional benefits to our customers;

extent to which we offer free shipping, continue to reduce prices worldwide, and provide additional benefits to our customers;

affecting our reputation or brand image;

extent to which we invest in technology and content, fulfillment, and other expense categories;

in the prices of fuel and gasoline, as well as increases in the prices of other energy products

and commodities like paper and packing supplies;

extent to which our equity-method investees record significant operating and non-operating

extent to which operators of the networks between our customers and our stores successfully

charge fees to grant our customers unimpaired and unconstrained access to our online services;

in the prices of fuel and gasoline, as well as increases in the prices of other energy products and commodities like paper and packing

extent to which our equity-method investees record significant operating and non-operating items;

extent to which operators of the networks between our customers and our stores successfully charge fees to grant our customers unimpaired

and unconstrained access to our online services;

ability to collect amounts owed to us when they become due;

extent to which use of our services is affected by spyware, viruses, phishing and other spam

emails, denial of service attacks, data theft, computer intrusions, outages, and similar

extent to which use of our services is affected by spyware, viruses, phishing and other spam emails, denial of service attacks, data

theft, computer intrusions, outages, and similar events;

attacks and armed hostilities;

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economic and political conditions;

regulation and compliance requirements (such as regulation of our product and service offerings

and of competition), restrictive governmental actions (such as trade protection measures,

including export duties and quotas and custom duties and tariffs), nationalization, and restrictions

on foreign ownership;

● restrictions

on sales or distribution of certain products or services and uncertainty regarding liability

for products, services, and content, including uncertainty as a result of less Internet-

friendly legal systems, local laws, lack of legal precedent, and varying rules, regulations,

and practices regarding the physical and digital distribution of media products and enforcement

of intellectual property rights;

licensing or certification requirements, such as for imports, exports, web services, and

electronic devices;

● limitations

regulation and compliance requirements (such as regulation of our product and service offerings and of competition), restrictive

governmental actions (such as trade protection measures, including export duties and quotas and custom duties and tariffs), nationalization,

and restrictions on foreign ownership;

on sales or distribution of certain products or services and uncertainty regarding liability for products, services, and content,

including uncertainty as a result of less Internet- friendly legal systems, local laws, lack of legal precedent, and varying rules,

regulations, and practices regarding the physical and digital distribution of media products and enforcement of intellectual property

licensing or certification requirements, such as for imports, exports, web services, and electronic devices;

on the repatriation and investment of funds and foreign currency exchange restrictions;

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payable and longer receivable cycles and the resultant negative impact on cash flow;

and regulations regarding consumer and data protection, privacy, network security, encryption,

payments, and restrictions on pricing or discounts;

and regulations regarding consumer and data protection, privacy, network security, encryption, payments, and restrictions on pricing

or discounts;

levels of consumer spending and fewer opportunities for growth compared to the U.S.;

levels of credit card usage and increased payment risk;

in staffing, developing, and managing foreign operations as a result of distance, language,

and cultural differences.

in staffing, developing, and managing foreign operations as a result of distance, language, and cultural differences.

employee/employer relationships and the existence of works councils and labor unions;

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Foreign Corrupt Practices Act and other applicable U.S.

and foreign laws prohibiting

corrupt payments to government officials and other third parties;

and foreign laws prohibiting corrupt payments to government

officials and other third parties;

and policies of the U.S.

and other jurisdictions affecting trade, foreign investment, loans,

● geopolitical

and other jurisdictions affecting trade, foreign investment, loans, and taxes;

events, including war and terrorism.

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for consumers’ limited time, attention, and spending.

This challenge is more difficult with the ever-increasing utilization of technology,

social media, and digital media in entertainment offerings, and the increasing breadth of entertainment available to consumers.

consumer tastes and shifting interests, coupled with an ever-changing and expanding pipeline of entertainment and consumer properties

This challenge is more difficult with the ever-increasing utilization of

technology, social media, and digital media in entertainment offerings, and the increasing breadth of entertainment available to consumers.

Evolving consumer tastes and shifting interests, coupled with an ever-changing and expanding pipeline of entertainment and consumer properties

and products that compete for consumer interest and acceptance, create an environment in which some products and entertainment offerings

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As a result, our products and entertainment offerings can have short consumer life cycles.

acceptance of our or our partners’ entertainment offerings is also affected by outside factors, such as critical reviews, promotions,

the quality and acceptance of films and television programs, music, video games, and content released into the marketplace at or near

the same time, the availability of alternative forms of entertainment and leisure time activities, general economic conditions and public

tastes generally, all of which could change rapidly and most of which are beyond our control.

There can be no assurance that television

programs and films, video games, video movies we distribute will obtain favorable reviews or ratings, that films, video games, video

movies we distribute will be popular with consumers and perform well in our distribution channels.

acceptance of our or our partners’ entertainment offerings is also affected by outside factors, such as critical reviews,

promotions, the quality and acceptance of films and television programs, music, video games, collectibles and content released into

the marketplace at or near the same time, the availability of alternative forms of entertainment and leisure time activities,

general economic conditions and public tastes generally, all of which could change rapidly and most of which are beyond our control.

There can be no assurance that television programs and films, video games, video movies and collectibles we distribute will obtain

favorable reviews or ratings, that films, video games, video movies we distribute will be popular with consumers and perform well in

our distribution channels.

we devote time and resources to distributing and marketing products or entertainment that consumers do not accept or do not find interesting

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Related to Our Supply Chain and Sales Channels

we are unable to navigate through global supply chain challenges, our business may be harmed.

in 2021, and continuing through 2022, we faced global supply chain challenges with the production and delivery of some products being

delayed due to logistics, including labor, trucking and container shortages, port congestion and other shipping disruptions.

in the past experienced increases in material costs and shortages for some of our products or any periodic and unpredictable manufacturing

shut-downs, for example due to COVID-19.

While we have taken actions to lessen the impact of these supply chain challenges, such as by

alternative ports and air freight, such actions resulted in higher costs and there can be no assurance that the actions taken will continue

to be effective.

We have also increased prices in some cases to help offset increased costs.

We can provide no assurance that we will

be able to avoid supply chain challenges in the future, or if we face such challenges, that we will be able to increase prices in the

We also cannot be assured that price increases we have already taken will offset the entirety of additional costs we have incurred

and may incur in the future to mitigate the supply chain disruption.

Further, if we are unable to negotiate favorable carrier agreements,

deliver products on time or otherwise satisfy demand for our products, our business may be harmed.

we are unable to adapt our business to the continued shift to ecommerce, our business may be harmed.

or inefficiencies in our supply chain or logistics network could adversely affect our ability to fulfill customer demand and may increase

global supply chain conditions have generally stabilized compared to the disruptions experienced in 2021 and 2022, we continue to face

certain logistical and cost-related challenges, including fluctuating freight rates, labor shortages in transportation and warehousing,

and longer lead times for certain products sourced internationally.

we have implemented strategies to mitigate these risks—such as diversifying our supplier base, leveraging alternative shipping

methods, and negotiating improved carrier terms, there can be no assurance that these measures will be sufficient in the event of renewed

disruption, geopolitical instability, or macroeconomic pressures.

we are unable to effectively manage shipping logistics, maintain adequate inventory levels, or adjust pricing in response to cost increases,

we may not be able to meet customer demand or sustain our margins.

Any prolonged disruption or cost pressure in our supply chain could

have a material adverse effect on our business, financial condition, and results of operations.

we are unable to adapt our business to the continued shift to e-commerce, our business may be harmed.

fiscal year 2025, ecommerce sales represented approximately 45% of our top four customers overall sales as consumers increasingly purchased

our products online as compared to through in-store shopping due to the continued transition to ecommerce accelerated by the shutdown

and limited access to retail stores during the COVID-19 pandemic.

our products online as compared to through in-store shopping.

Ecommerce sales have resulted in retailers holding less inventory,

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or promotional policies or patterns of our major customers could have a significant impact on us.

the year ended June 30, 2024, our top five customers generated approximately 47% of net sales and our top customer accounted for approximately

18% (Including all channels, market segments and lines of business) of our total net sales and purchased a mix of products comprised

of approximately 67% music, 4% games, 24% movies, and 5% Consumer Products.

For the year ended June 30, 2023, our top customer accounted

for 23% of our total net sales including all channels, market segments and lines of business.

Due to our customer concentration, if our

top customer was to experience difficulties in fulfilling their obligations to us, cease doing business with us, significantly reduce

the amount of their purchases from us, favor competitors or new entrants, change their purchasing patterns, impose unexpected fees on

us, alter the manner in which they promote our products or the resources they devote to promoting and selling our products, or return

substantial amounts of our products, our business may be harmed.

the year ended June 30, 2025, our top three customers generated approximately 40% of our net sales, and our largest customer accounted

for approximately 15% of our total net sales.

For the year ended June 30,

2024, our top customer accounted for 18% of total net sales.

Due to our customer concentration, if our top customer was to experience difficulties in fulfilling their obligations

to us, cease doing business with us, significantly reduce the amount of their purchases from us, favor competitors or new entrants, change

their purchasing patterns, impose unexpected fees on us, alter the manner in which they promote our products or the resources they devote

to promoting and selling our products, or return substantial amounts of our products, our business may be harmed.

customers do not make binding long-term commitments to us regarding purchase volumes and make all purchases by delivering purchase orders.

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any relevant standards required by our consumers, which may require additional investment and time on behalf of suppliers and us.

any of our key suppliers becomes insolvent, ceases, or significantly reduces its operations or experiences financial distress, or if any

environmental, economic or other outside factors impact their operations.

any of our key suppliers becomes insolvent, ceases, or significantly reduces its operations or experiences financial distress, or if

any environmental, economic or other outside factors impact their operations.

If we are unable to identify or enter distribution relationships

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actions contrary to our instructions, requests, policies, or objectives;

unable or unwilling to fulfill their obligations under relevant purchase orders, including

obligations to meet our production deadlines, quality standards, pricing guidelines and product

specifications, and to comply with applicable regulations, including those regarding the

safety and quality of products;

unable or unwilling to fulfill their obligations under relevant purchase orders, including obligations to meet our production deadlines,

quality standards, pricing guidelines and product specifications, and to comply with applicable regulations, including those regarding

the safety and quality of products;

financial difficulties;

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The effective

interest rate for the period from execution of the Revolving Credit Facility through June 30, 2024, was 9.5%.

interest rate for the period from execution of the Revolving Credit Facility through June 30, 2025 and 2024, was 9.25% and 9.5% respectively.

June 30, 2025, the Company entered into an amendment to which reduced the applicable interest rate

margin from a range of 4.5% – 4.75% to a range of 4.0% – 4.25%, effective immediately.

The Company expects the reduction

in the applicable interest rate range to decrease its interest expense in future periods.

Credit Agreement is secured by a first priority security interest on the Company’s and the borrowers’ and other guarantors’

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August 21, 2025 plus an amount of minimum interest if reduced or terminated on or prior to June 21, 2025.

The Company did not reduce or terminate the facility, and as of June 30, 2025, the early termination fee provisions

The Company remains subject to the unused commitment fee.

under the Revolving Credit Facility is limited by formula based on eligible accounts receivable and eligible inventory, subject to adjustment

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financial obligations and contractual commitments could have significant adverse consequences, including:

us to dedicate a portion of our cash resources to the payment of interest and principal,

reducing money available to fund working capital, capital expenditures, potential acquisitions,

international expansion, new product development, new enterprise relationships and other

general corporate purposes;

us to dedicate a portion of our cash resources to the payment of interest and principal, reducing money available to fund working

capital, capital expenditures, potential acquisitions, international expansion, new product development, new enterprise relationships

and other general corporate purposes;

our vulnerability to adverse changes in general economic, industry and market conditions;

us to restrictive covenants that may reduce our ability to take certain corporate actions

or obtain further debt or equity financing;

our flexibility in planning for, or reacting to, changes in our business and the industry

in which we compete;

us at a competitive disadvantage compared to our competitors that have less debt or better

debt servicing options.

intend to satisfy our current and future debt service obligations with our then existing cash and cash equivalents.

However, we may not

have sufficient funds, and may be unable to arrange for additional financing, to pay the amounts due under the Revolving Credit Facility

or any other debt instruments.

Failure to make payments or comply with other covenants under our existing credit facility or such other

debt instruments could result in an event of default and acceleration of amounts due, which would have a material adverse effect on our

us to restrictive covenants that may reduce our ability to take certain corporate actions or obtain further debt or equity financing;

our flexibility in planning for, or reacting to, changes in our business and the industry in which we compete;

us at a competitive disadvantage compared to our competitors that have less debt or better debt servicing options.

intend to satisfy our current and future debt service obligations with our then existing cash.

However, we may not have sufficient funds

and may be unable to arrange for additional financing to pay the amounts due under the Revolving Credit Facility or any other debt instruments.

Failure to make payments or comply with other covenants under our existing credit facility or such other debt instruments could result

in an event of default and acceleration of amounts due, which would have a material adverse effect on our business.

breach of the covenants under the Revolving Credit Facility could result in an event of default under the applicable indebtedness.

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operate the business with an asset-based line of credit to fund working capital to support our Accounts Payable and our Inventory purchases.

it more difficult and/or costly for us to pay or refinance our debts as they become due,

particularly during adverse economic and industry conditions, because a decrease in revenues

or increase in costs could cause cash flow from operations to be insufficient to make scheduled

debt service payments;

a substantial portion of our available cash to be used for debt service payments, thereby

reducing the availability of our cash to fund working capital, capital expenditures, development

projects, acquisitions or other strategic opportunities, dividend payments, share repurchases

and other general corporate purposes;

it more difficult for us to raise capital to fund working capital, make capital expenditures,

pay dividends, pursue strategic initiatives or for other purposes and result in higher interest

expense, which could be further increased in case of current or future borrowings subject

to variable rates of interest;

that materially adverse terms, conditions, or covenants be placed on us under our debt instruments,

which could include, for example, limitations on additional borrowings or limitations on

our ability to create liens, pay dividends, repurchase our common stock or make investments,

any of which could hinder our access to capital markets or our flexibility in the conduct

of our business and make us more vulnerable to economic downturns and adverse competitive

industry conditions;

it more difficult and/or costly for us to pay or refinance our debts as they become due, particularly during adverse economic and

industry conditions, because a decrease in revenues or increase in costs could cause cash flow from operations to be insufficient

to make scheduled debt service payments;

a substantial portion of our available cash to be used for debt service payments, thereby reducing the availability of our cash to

fund working capital, capital expenditures, development projects, acquisitions or other strategic opportunities, dividend payments,

share repurchases and other general corporate purposes;

it more difficult for us to raise capital to fund working capital, make capital expenditures, pay dividends, pursue strategic initiatives

or for other purposes and result in higher interest expense, which could be further increased in case of current or future borrowings

subject to variable rates of interest;

that materially adverse terms, conditions, or covenants be placed on us under our debt instruments, which could include, for example,

limitations on additional borrowings or limitations on our ability to create liens, pay dividends, repurchase our common stock or

make investments, any of which could hinder our access to capital markets or our flexibility in the conduct of our business and make

us more vulnerable to economic downturns and adverse competitive industry conditions;

our ability to pay our indebtedness if our business experienced a severe downturn.

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Bruce Ogilvie, our Executive Chairman, and Mr.

Jeff Walker, our Chief Executive Officer/Chief Financial Officer.

Jeff Walker, our Chief Executive Officer.

The loss of any key members of our management team, including Mr.

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effect on our business and results of operations.

has entered transactions with related parties, including our two principal stockholders.

We have entered into transactions with companies

owned by Bruce Ogilvie and Jeffrey Walker, including GameFly Holdings, LLC.

For the year ended June 30, 2024, and 2023, Alliance 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.

has entered into transactions with related parties, including our two principal stockholders.

We have entered into transactions with

companies owned by Bruce Ogilvie and Jeffrey Walker, including GameFly Holdings, LLC.

For the year ended June 30, 2025, and 2024, Alliance

made sales of new release movies, video games, and video game consoles to GameFly Holdings LLC in the amount of $2.7 million and $8.4

million, respectively.

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

believes the amounts payable to GameFly are at fair market value.

Although the agreement between Alliance and GameFly can be terminated

by either party at any time, given Mr.

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

Although the agreement between Alliance and GameFly can be

terminated by either party at any time, given Mr.

Ogilvie’s and Mr.

Walker’s positions with Alliance as Executive Chairman and Chief

Executive Officer/Chief Financial Officer, respectively.

We may in the future enter into additional transactions with entities in which

majority shareholders, executive officers and members of our board of directors and other related parties hold ownership interests.

“Certain Relationships and Related Party Transactions.”

Walker’s positions with Alliance as Executive Chairman

and Chief Executive Officer, respectively.

We may in the future enter into additional transactions with entities

in which majority shareholders, executive officers and members of our board of directors and other related parties hold ownership interests.

See “Certain Relationships and Related Party Transactions.”

with such related parties present potential for conflicts of interest, as the interests of the third-party owned related entity and its

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aggregate, may have an adverse effect on our business and results of operations or may result in government enforcement actions or other

management has limited experience in operating a public company.

executive officers have limited experience in the management of a publicly traded company.

Alliance’s management team may not successfully

or effectively manage its transition to a public company that will be subject to significant regulatory oversight and reporting obligations

under federal securities laws.

Their limited experience in dealing with the increasingly complex laws pertaining to public companies

could be a significant disadvantage in that it is likely that an increasing amount of their time may be devoted to these activities which

will result in less time being devoted to the management and growth of Alliance.

may not have adequate personnel with the appropriate level of knowledge, experience, and training in the accounting policies, practices

or internal controls over financial reporting required of public companies in the United States.

The development and implementation of

the standards and controls necessary for Alliance to achieve the level of accounting standards required of a public company in the United

States may require costs greater than expected.

It is possible that Alliance will be required to expand its employee base and hire additional

employees to support its operations as a public company, which will increase its operating costs in future periods.

Related to Our Technology and Intellectual Property

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Related to Matters Outside our Control That May Impact Our Business

global coronavirus outbreak or other similar outbreaks of communicable infections, diseases, or public health pandemics in the markets

in which we and our employees, consumers, customers, partners, licensees, suppliers, and manufacturers operate, could substantially harm

our business.

global outbreak of the coronavirus which had adversely impacted global populations, and any other variants or outbreaks of communicable

infections, diseases or other adverse public health conditions in markets in which we, our employees, consumers, customers, partners,

licensees, licensors, suppliers and manufacturers operate, could have a significant negative impact on our business, revenues and profitability.

The occurrence of these types of events can result, and in the case of the coronavirus has resulted in, disruptions and damage to our

business, caused by a number of factors:

● difficulties

in shipping and distributing products due to ongoing port capacity, and labor, shipping container

and truck transportation shortages, resulting in higher costs for both ocean and air freight

and delays in the availability of products, which can result in delayed sales and in some

cases result in lost sales.

● disruptions

in supply of products, due to closures or reductions in operations at third-party manufacturing

facilities across several geographies including, but not limited to, China, Vietnam, and

Related to International Trade Policies and Tariffs

are subject to risks arising from changes in international trade policies, including the imposition of new or increased tariffs on imported

These risks are particularly relevant to our gaming and collectibles categories, where a significant portion of our inventory

is sourced from foreign suppliers.

have recently been significant changes to international trade policies and tariffs affecting imports and exports.

Any significant increases

in tariffs on goods or materials or other changes in trade policy could negatively affect our search for a target and/or our ability

to complete a business combination.

has implemented a range of new tariffs and increases to existing tariffs.

In response to the tariffs announced by the U.S.,

other countries have imposed, are considering imposing and may in the future impose new or increased tariffs on certain exports from

the United States.

sales impact due to changes in consumer purchasing behavior and availability of products

to consumers, resulting from retail store closures, limited reopening of retail stores and

limitations on the capacity of ecommerce channels to supply additional products.

● fluctuations

in our performance based on the progress of different countries in controlling the coronavirus

and the maturity of e-commerce platforms in those markets.

production of live action scripted and unscripted entertainment content due to the hard stop

and soft reopening of production studios.

or postponements of entertainment productions and releases of entertainment content both

internally and by our partners.

in entertainment production costs due to measures required to minimize COVID-19 risks;

of working remotely.

have reopened our offices, providing employees with flexibility in their return to the office by working partially in the office and

partially remote.

We have taken measures to safely bring additional workers back to the office, including a return to fully remote work

when variants emerge which increase infection rates significantly in areas where we do business.

The transition back from fully remote

work to partial remote and partial in person may be difficult for some employees.

We are actively soliciting feedback and making modifications

to provide our employees with a productive and safe environment, and plan to continue to monitor employee efficiency, satisfaction, and

morale as we continue to transition.

There can be no assurance that employees will not have some disruption in their work due to the

Changes in flexible working arrangements could impact employee retention, employees’ productivity, and morale, strain

our technology resources, and introduce operational risks.

Additionally, the risk of cyber-attacks or other privacy or data security

incidents may be heightened as a result of our moving increasingly towards a remote working environment, which may be less secure and

more susceptible to hacking attacks.

There is currently significant uncertainty about the future relationship between the United States and other countries

with respect to trade policies, taxes, government regulations and tariffs, and we cannot predict whether and to what extent current tariffs

will continue or trade policies will change in the future.

the threat of tariffs or increases in tariffs, could materially increase our cost of goods sold.

While we may be able to offset some

of these increases through price adjustments, there is no guarantee that market conditions will support such increases without negatively

affecting consumer demand.

In some cases, higher retail prices could increase revenues, but these effects are uncertain and highly dependent

on our ability to maintain price elasticity and competitive positioning in the marketplace.

we are unable to pass through increased costs or if supply chain disruptions prevent us from sourcing key products, our business, financial

condition, results of operations, and cash flows could be materially and adversely affected.

economic conditions in the markets in which we and our employees, consumers, customers, suppliers, and manufacturers operate could negatively

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in the market.

Additionally, the SAG AFTRA strike has created a lack of content for CDs, DVDs and other entertainment sectors.

negatively affect our business.

seasonal pattern of our business requires significant use of working capital, mainly to purchase inventory during the months prior to

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changes in our geographic operating results, may impact our effective tax rate.

are subject to a variety of taxes and tax collection obligations in the U.S.

(federal and state) and numerous foreign jurisdictions.

We may recognize additional tax expense and be subject to additional tax liabilities, including other liabilities for tax collection

obligations due to changes in laws, regulations, administrative practices, principles, and interpretations related to tax, including

changes to the global tax framework, competition, and other laws and accounting rules in various jurisdictions.

Such changes could come

about as a result of economic, political, and other conditions.

Proposals to reform U.S.

and foreign tax laws could significantly impact

multinational corporations are taxed on global earnings and could increase the U.S.

corporate tax rate.

For example, the Organization

for Economic Co-operation and Development (OECD) and the G20 Inclusive Framework on Base Erosion and Profit Shifting (the “Inclusive

Framework”) has put forth two proposals—Pillar One and Pillar Two—that revise the existing profit allocation and nexus

rules and ensure a minimal level of taxation, respectively.

On December 12, 2022, the European Union member states agreed to implement

the Inclusive Framework’s global corporate minimum tax rate of 15%.

Other countries are also actively considering changes to their

tax laws to adopt certain parts of the Inclusive Framework’s proposals.

Although we cannot predict whether or in what form these

proposals will be enacted into law, these changes, if enacted into law, would not have a material impact on our effective tax rate, income

tax expense and cash flows.

On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022, which contained

certain tax measures, including, among other items, a corporate alternative minimum tax of 15% on some large corporations and an excise

tax of 1% on certain corporate stock buy-backs.

Moreover, an increasing number of jurisdictions are considering or have adopted laws

or administrative practices that impose new tax measures, including revenue-based taxes, targeting online commerce and the remote selling

of goods and services.

These include new obligations to collect sales, consumption, value added, or other taxes on online marketplaces

and remote sellers, or other requirements that may result in liability for third party obligations.

For example, non-U.S.

jurisdictions

have proposed or enacted taxes on online marketplace service revenues.

Proliferation of these or similar unilateral tax measures may

continue unless broader international tax reform is implemented.

Our results of operations and cash flows could be adversely affected

by additional taxes imposed on us prospectively or retroactively or additional taxes or penalties resulting from the failure to comply

with any collection obligations or failure to provide information about our customers, suppliers, and other third parties for tax reporting

purposes to various government agencies.

In some cases, we also may not have sufficient notice to enable us to build systems and adopt

processes to properly comply with new reporting or collection obligations by the effective date.

are subject to income taxes in the United States and in United Kingdom tax jurisdictions.

We also conduct business activities between

our operating units, and we are subject to transfer pricing rules in the United Kingdom in which we operate.

There is some degree of

uncertainty and subjectivity in complying with transfer pricing rules.

Our effective tax rate could be impacted by changes in, or the

interpretation of, tax laws, such as those being considered by the current United States administration and other jurisdictions in which

we do business, or by changes in the amount of revenue and earnings we derive, or are determined to derive by tax authorities, from jurisdictions

with differing tax rates.

addition, we have been and may be subject to tax examinations by federal, state, and international jurisdictions, and these examinations

can result in significant tax findings if the tax authorities interpret the application of laws and rules differently than we do or disagree

with the intercompany rates we are applying.

We assess the likelihood of outcomes resulting from tax uncertainties.

While we believe

our estimates are reasonable, the ultimate outcome of these uncertain tax benefits, or results of possible current or future tax examinations,

may differ from our estimates and may have a significant adverse impact on our business and operating results.

are subject to income taxes in the United States and the United Kingdom, as well as tax collection and reporting obligations in various

other jurisdictions where we conduct business.

Changes in tax laws, regulations, or their interpretations, whether at the federal, state,

or international level, could increase our tax liabilities or compliance costs.

For example, the OECD’s Pillar Two initiative has

resulted in the implementation of a 15% global minimum tax in the European Union and other jurisdictions, and additional countries are

actively considering similar legislation.

At this time, we do not expect these developments to have a material impact on our effective

tax rate or financial position, but we continue to monitor legislative activity across relevant jurisdictions.

the U.S., the Inflation Reduction Act of 2022 introduced a corporate alternative minimum tax and a 1% excise tax on certain stock repurchases.

These provisions currently do not have a material effect on our consolidated financial statements.

In addition, we are subject to routine

audits by domestic and international tax authorities.

The outcome of tax audits or disputes, changes in applicable tax laws or rates,

or changes in the recognition of deferred tax assets could materially affect our effective tax rate, income tax expense, or cash flows.

are subject to various government regulations, violations of which could subject us to sanctions or otherwise harm our business.

we could be the subject of future product liability suits or merchandise recalls, which could harm our business.

are subject to significant government regulations, including, in the U.S., under The Consumer Products Safety Act, The Federal

Hazardous Substances Act, and The Flammable Fabrics Act, as well as under product safety and consumer protection statutes in our

international markets.

In addition, certain of our products are subject to regulation by the Food and Drug Administration or similar

international authorities.

Advertising to children is subject to regulation by the Federal Trade Commission, the Federal

Communications Commission, and a host of other agencies globally, and the collection of information from children under the age of

13 is subject to the provisions of the Children’s Online Privacy Protection Act and other privacy laws around the world.

collection of personally identifiable information from anyone, including adults, is under increasing regulation in many markets,

such as the General Data Protection Regulation adopted by the European Union, and data protection laws in the United States and in a

number of other counties.

While we take all the steps, we believe are necessary to comply with these acts and regulations, we cannot

assure you that we will be in compliance and, if we fail to comply with these requirements or other regulations enacted in the

future, we could be subject to fines, liabilities or sanctions which could have a significant negative impact on our business,

financial condition and results of operations.

We may also be subject to involuntary product recalls or may voluntarily conduct a

product recall.

While costs associated with product recalls have generally not been material to our business, the costs associated

with future product recalls individually or in aggregate in any given fiscal year could be significant.

In addition, any product

recall, regardless of direct costs of the recall, may harm the reputation of our products and have a negative impact on our future

revenues and results of operations.

are subject to significant government regulations, including, in the U.S., under The Consumer Products Safety Act, The Federal Hazardous

Substances Act, and The Flammable Fabrics Act, as well as under product safety and consumer protection statutes in our international

In addition, certain of our products are subject to regulation by the Food and Drug Administration or similar international

Advertising to children is subject to regulation by the Federal Trade Commission, the Federal Communications Commission,

and a host of other agencies globally, and the collection of information from children under the age of 13 is subject to the provisions

of the Children’s Online Privacy Protection Act and other privacy laws around the world.

The collection of personally identifiable

information from anyone, including adults, is under increasing regulation in many markets, such as the General Data Protection Regulation

adopted by the European Union, and data protection laws in the United States and in a number of other counties.

While we take all the

steps, we believe are necessary to comply with these acts and regulations, we cannot assure you that we will be in compliance and, if

we fail to comply with these requirements or other regulations enacted in the future, we could be subject to fines, liabilities or sanctions

which could have a significant negative impact on our business, financial condition and results of operations.

We may also be subject

to involuntary product recalls or may voluntarily conduct a product recall.

While costs associated with product recalls have generally

not been material to our business, the costs associated with future product recalls individually or in aggregate in any given fiscal

year could be significant.

In addition, any product recall, regardless of direct costs of the recall, may harm the reputation of our

products and have a negative impact on our future revenues and results of operations.

a multinational corporation, we are subject to a host of governmental regulations throughout the world, including antitrust, employment,

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claim against us could significantly harm our business, financial condition, and results of operations.

particular, on March 31, 2023, a class action complaint, titled Matthew McKnight v.

Alliance Entertainment Holding Corp.

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.

On August 8, 2024, the Company entered into a

settlement agreement regarding pending litigation.

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.

On 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:

Office Create Corporation is seeking damages of no less than $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.

On September 12, 2024, COKeM filed a Third-Party Complaint against Planet Entertainment LLC and Steven Grossman asserting claims for indemnification and contribution.

Mediation has been postponed.

Office Create Corporation has filed an amended complaint impleading the former owner, chairman, CFO and SVP of Sales for COKeM seeking willful trademark infringement claims and civil conspiracy.

Alliance filed an amended Answer insofar as any new claims pertain to COKeM directly on March 12, 2025.

The Amended Complaint is now seeking damages in excess of $35MM.

The court did schedule a settlement conference for August 11, 2025 but Office Create Corporation cancelled it with no new date scheduled.

COKeM has offered a settlement amount of $330,000 which has been rejected by Office Create Corporation.

COKeM believes that Office Create Corporation is relying on case law that has been overturned and precedent that is not-binding in the 8th Circuit.

COKeM has some insurance coverage for this claim with CNA but the policy is capped at $2.5 million for all claims and also has to be shared with the VPPA class action claim(s) discussed below.

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.

At this time, the potential outcome or range of financial impact cannot be reasonably estimated.

DirectToU, LLC, United States District Court for the Northern District of California;

3:24-cv-06447;

Feller, Jeffry Haise, and Joseph Mull v.

Alliance Entertainment, LLC and DirectToU, LLC, United States District Court for the

Southern District of Florida, Case No.

0:24-cv-61444;

and Vivek Shah v.

DirectToU, LLC, JAMS Arbitration, No.

5220006749.- On or

about September 12, 2024, Jonathan Hoang To, who allegedly used the website www.deepdiscount.com;

Douglas Feller and Jeffry Haise,

who allegedly used the website www.ccvideo.com;

Joseph Mull and Vivek Shah, who allegedly used the website www.moviesunlimited.com.

The lawsuits also put at issue any other website owned or operated by Alliance Entertainment, LLC (“Alliance”) or one of

its corporate affiliates, including the websites www.ccmusic.com and wowhd.co.uk.

The lawsuits bring claims against DirectToU, LLC

(“DirectToU”) and/or Alliance, alleging a violation of the Video Privacy Protection Act (“VPPA”) related to

the alleged collection of, and alleged disclosure to Meta and other third parties, including data brokers, of alleged private

information and user data regarding a user’s account information and video viewing/purchasing history from the respective

Plaintiff Hoang To also alleges violations of California’s state VPPA equivalent, as well as violations of

California’s Unfair Competition Law.

DirectToU and Alliance dispute the allegations and will defend the lawsuits vigorously.

The parties in the Hoang To matter have reached a settlement with respect to all potential class members.

The settlement agreement

has been submitted to the court for approval, slated for December 15, 2024.

An approved settlement would cover the class members

covered by the Feller matter, rendering such litigation moot.

A motion to stay the Feller matter pending court approval of the

settlement in Hoang To has been filed and granted.

Counsel for the Feller parties filed a motion to intervene and stay the

settlement in Hoang, which motions were rejected.

The parties await final settlement approval.

The settlement was rejected and the

court has mandated the parties initiate discovery with respect to third-party data collection.

The Alliance parties have filed a

reply memorandum in support of its motion to compel arbitration on April 28, 2025.

The parties reached a settlement on June 12,

2025, whereby COKem will pay to the class a settlement amount of $1.577MM and COKeM’s insurance carrier CNA has approved to

cover their part of the settlement amount.

COKeM will have an estimated receivable of $1.377M.

The company had accrued for the

liability and the receivables from CNA on the balance sheet for the fiscal year ended June 30, 2025.

The settlement approval before

the court is pending and is expected to be ruled on in late October/early November 2025.

Alliance/DirectToU, LLC:

On December 29, 2024, McConigle filed a class action lawsuit against the Company in the United States District Court for the Southern District of Florida (Case No.

0:24-cv-62443-DSL), alleging violations of the Telephone Consumer Protection Act, 47 U.S.C.

§ 227 (“TCPA”).

On August 8, 2025, subsequent to year-end, the parties entered into a settlement agreement for $70,000.

The Company did not record an accrual for this matter as of June 30, 2025, as the amount was not considered material to the consolidated financial statements.

The Company does not expect any further material impact from this matter.

Alliance received a cease and desist notice from Algomus on July 24, 2025, alleging that Alliance

breached a non-solicitation provision of a Master Services Agreement between the parties when Alliance agreed to become the Category Advisor

Alliance responded to the letter on August 8, 2025, asserting that Algomus’s position lacks merit.

Alliance had been

conducting business with Walmart prior to the Master Services Agreement, and Algomus and Walmart’s relationship is not governed

by the language of the non-solicitation provision.

On June 9, 2025, Sparkle

Alliance Entertainment Holding Corporation and Alliance Entertainment.

Bankruptcy Court for MD-In Re Diamond Comic

Distributors):

Sparkle Pop has sued the Alliance entities in bankruptcy court alleging theft of trade secrets and tortious interference

with contracts arising out of Alliance’s successful bid and subsequent termination of the Asset Purchase Agreement in the DCD bankruptcy

Alliance brought a motion to dismiss the original complaint with prejudice, but during the pendency of the motion plaintiff filed

an Amended Complaint.

Alliance will file a motion to dismiss the Amended Complaint shortly.

Related to Accounting Matters

has identified material weaknesses in its internal controls over financial reporting:

While we have developed and implemented a remediation

plan designed to address these material weaknesses, the remediation measures have not yet proven effective.

has identified material weaknesses in its internal controls over financial reporting.

We have actively developed and implemented a remediation

plan designed to address these material weaknesses.

However, certain remediation measures are still ongoing or were not in place long

enough to be deemed effective as of the reporting period and we cannot guarantee these steps will be sufficient to address the material

If this remediation proves ineffective, if we fail to develop and maintain proper and effective internal controls over financial

reporting, or if additional material weaknesses in our disclosure controls and internal control over financial reporting are discovered

or occur in the future, Alliance’s ability to produce timely and accurate financial statements, comply with applicable laws and

regulations, or access the capital markets could be impaired and we could be required to restate our financial results.

a public company, Alliance is actively evaluating its internal control over financial reporting in a manner that meets the standards

of publicly traded companies required by Section 404(a) of the Sarbanes-Oxley Act, or Section 404.

A material weakness is defined as

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

that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

is ultimately responsible for establishing and maintaining adequate internal control over our financial reporting, as defined in Rule

13a-15(f) under the Securities Exchange Act of 1934.

As disclosed in Item 9A, “Controls and Procedures,” management noted

several material weaknesses in our internal control over financial reporting as of June 30, 2023.

Refer to “Item 9A.

Procedures” for a detailed discussion regarding the material weaknesses identified, as well as management’s remediation actions

we identify any new material weaknesses in the future, or if our remediation measures are not effective, any such newly identified or

existing material weakness could limit our ability to prevent or detect a misstatement of our accounts or disclosures that could result

in a material misstatement of our annual or interim financial statements.

In such case, we may be unable to maintain compliance with

securities law requirements regarding the timely filing of periodic reports, in addition to applicable stock exchange listing requirements.

Has Fully Remediated Previously Identified Material Weaknesses in Its Internal Controls Over Financial Reporting

the fiscal year ended June 30, 2025, we believe we fully remediated previously identified material weaknesses in our internal

control over financial reporting.

As a result, management has concluded, based on its assessment conducted in accordance with

Section 404(a) of the Sarbanes-Oxley Act, that our internal controls were effective as of June 30, 2025.

maintaining effective internal controls is an ongoing process subject to inherent limitations.

Changes in personnel, evolving business

processes, new systems implementations, or other factors may impact the effectiveness of our controls.

Accordingly, there can be no assurance

that additional material weaknesses will not be identified in the future.

If we identify any new material weaknesses in the future, or if our remediation measures are not effective, any such

newly identified or existing material weakness could limit our ability to prevent or detect a misstatement of our accounts or disclosures

that could result in a material misstatement of our annual or interim financial statements.

In such case, we may be unable to maintain

compliance with securities law requirements regarding the timely filing of periodic reports, in addition to applicable stock exchange

listing requirements.

Investors may lose confidence in our financial reporting, and our stock price may decline as a result.

We cannot assure you that the

measures we have taken to date, or any measures we may take in the future, will be sufficient to avoid potential future material weaknesses.

to the Business Combination, Adara had accounted for its outstanding Warrants as a warrant liability and following the Business Combination,

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Accounting Standards Codification 815, Derivatives and Hedging (“ASC

provides for the remeasurement of the fair value of such derivatives at each balance sheet date, with a resulting non-cash gain or loss

related to the change in the fair value being recognized in earnings in the statements of operations.

As a result of the recurring fair

value measurement, our financial statements and results of operations may fluctuate quarterly based on factors that are outside of our

Due to the recurring fair value measurement, we expect that we will recognize non-cash gains or losses on our warrants each

reporting period and that the amount of such gains or losses could be material.

815”) provides for the remeasurement of the fair value of such derivatives at each balance sheet date, with a resulting non-cash

gain or loss related to the change in the fair value being recognized in earnings in the statements of income and comprehensive income.

As a result of the

recurring fair value measurement, our financial statements and results of operations may fluctuate quarterly based on factors that are

outside of our control.

Due to the recurring fair value measurement, we expect that we will recognize non-cash gains or losses on our

warrants each reporting period and that the amount of such gains or losses could be material.

the Business Combination, although Alliance has determined that the Public Warrants are treated as equity, Alliance is required to continue

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period, which could have a material impact on Alliance’s financial position and operating results.

will incur significantly increased expenses and administrative burdens as a public company, which could negatively impact our business,

financial condition, and results of operations.

a public company, we face increased legal, accounting, administrative and other costs, and expenses as a public company that we did

not incur as a private company.

The Sarbanes-Oxley Act, including the requirements of Section 404, as well as rules and regulations

subsequently implemented by the SEC, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and the rules and

regulations promulgated and to be promulgated thereunder, the PCAOB and the securities exchanges, impose additional reporting and

other obligations on public companies.

Compliance with public company requirements have increased costs and made certain activities

more time-consuming.

A number of those requirements require Alliance to carry out activities Alliance had not done previously.

example, Alliance created new board committees and has adopted new internal controls and disclosure controls and procedures.

addition, expenses associated with SEC reporting requirements have been incurred.

Furthermore, issues in complying with those

requirements have been identified, and Alliance has incurred additional costs in connection with remediation of such compliance

As an example, management has identified material weaknesses in our internal control over financial reporting.

additional material weaknesses, or a significant deficiency in the future.

Alliance could incur additional costs rectifying those

issues, and the existence of those issues could adversely affect Alliance’s reputation or investor perceptions of it.

also be more expensive to obtain director and officer liability insurance.

Risks associated with Alliance’s status as a public

company may make it more difficult to attract and retain qualified people to serve on Alliance’s board of directors or as

executive officers.

The additional reporting and other obligations imposed by these rules and regulations have increased legal and

financial compliance costs and the costs of related legal, accounting, and administrative activities, and may continue to do so.

These increased costs require Alliance to divert a significant amount of funds that could otherwise be used to expand the business

and achieve strategic objectives.

Advocacy efforts by stockholders and third parties may also prompt additional changes in

governance and reporting requirements, which could further increase these related costs.

Since Alliance currently qualifies as an “emerging growth company” and a “smaller reporting company”

within the meaning of the Securities Act, it could make Alliance’s securities less attractive to investors and may make it more

difficult to compare Alliance’s performance to the performance of other public companies.

Alliance qualifies as an “emerging growth company” and a “smaller reporting company” as defined

in Rule 405 promulgated under the Securities Act and Rule12b-2 promulgated under the Exchange Act.

As such, Alliance will be eligible

for and intends to take advantage of certain exemptions from various reporting requirements applicable to other public companies, including

(a) the exemption from the auditor attestation requirements with respect to internal control over financial reporting under Section 404(b)

of the Sarbanes-Oxley Act, (b) the exemptions from say-on-pay, say-on-frequency and say-on- golden parachute voting requirements and (c)

reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements.

In addition, Section 107

of the JOBS Act also provides that an emerging growth company can take advantage of the exemption from complying with new or revised accounting

standards provided in Section 7(a)(2)(B) of the Securities Act as long as Alliance is an emerging growth company.

An emerging growth company

can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies, which

Alliance will not be able to do for its next fiscal year.

Even after Alliance no longer

qualifies as an emerging growth company, it may still qualify as a “smaller reporting company” or “non-accelerated

filer,” which would allow it to continue to take advantage of many of the same exemptions from disclosure requirements, including

not being required to comply with the auditor attestation requirements, Section 404 of the Sarbanes-Oxley Act and reduced disclosure

Alliance currently qualifies as an “emerging growth company” and a “smaller reporting company” within the meaning

of the Securities Act, it could make Alliance’s securities less attractive to investors and may make it more difficult to compare

Alliance’s performance to the performance of other public companies.

qualifies as an “emerging growth company” and a “smaller reporting company” as defined in Rule 405 promulgated

under the Securities Act and Rule12b-2 promulgated under the Exchange Act.

As such, Alliance will be eligible for and intends to take

advantage of certain exemptions from various reporting requirements applicable to other public companies, including (a) the exemption

from the auditor attestation requirements with respect to internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley

Act, (b) the exemptions from say-on-pay, say-on-frequency and say-on- golden parachute voting requirements and (c) reduced disclosure

obligations regarding executive compensation in its periodic reports and proxy statements.

Moreover, smaller reporting companies may

choose to present only the two most recent fiscal years of audited financial statements in their Annual Reports on Form 10-K.

In addition, Section 107 of the JOBS Act also

provides that an emerging growth company can take advantage of the exemption from complying with new or revised accounting standards

provided in Section 7(a)(2)(B) of the Securities Act as long as Alliance is an emerging growth company.

An emerging growth company can

therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies, which

Alliance will not be able to do for its next fiscal year.

after Alliance no longer qualifies as an emerging growth company, it may still qualify as a “smaller reporting company” or

“non-accelerated filer,” which would allow it to continue to take advantage of many of the same exemptions from disclosure

requirements, including not being required to comply with the auditor attestation requirements, Section 404 of the Sarbanes-Oxley Act

and reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements.

Moreover, smaller reporting

companies may choose to present only the two most recent fiscal years of audited financial statements in their Annual Reports on Form

may find the Class A common stock less attractive due to Alliance’s reliance on these exemptions, which could result in a less

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deemed to have consented to:

personal jurisdiction of the state and federal courts located in the State of New York in

connection with any action brought in any such court to enforce the forum provisions (an

“enforcement action”), and

service of process made upon such warrant holder in any such enforcement action by service

upon such warrant holder’s counsel in the foreign action as agent for such warrant

personal jurisdiction of the state and federal courts located in the State of New York in connection with any action brought in any

such court to enforce the forum provisions (an “enforcement action”), and

service of process made upon such warrant holder in any such enforcement action by service upon such warrant holder’s counsel

in the foreign action as agent for such warrant holder.

choice of forum provision may limit a warrant holder’s ability to bring a claim in a judicial forum that it finds favorable for

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per share for which you purchased it.

Class A common stock was quoted on the OTC Pink Open Market until June 30, 2023, when we began trading on the Nasdaq Capital Market.

Our Class A common stock shares are thinly traded, and we cannot predict when or if an active trading market will develop or how liquid

that market might become.

Class A common stock shares are thinly traded, and we cannot predict when or if an active trading market will develop or how liquid that

market might become.

If such a market does not develop or is not sustained, it may be difficult for you to sell your shares of Class

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but not limited to:

Actual or anticipated variations in our results of operations.

Our ability or inability to generate revenues or profit.

The relatively small number of shares in our public float,

which could exacerbate stock price volatility.

Increased competition.

or anticipated variations in our results of operations.

ability or inability to generate revenues or profit.

relatively small number of shares in our public float, which could exacerbate stock price volatility.

our stock price may be impacted by unrelated or disproportionate factors to our operating performance.

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prohibition on actions by its stockholders by written consent;

ability of the board of directors to issue preferred stock without stockholder approval,

which could be used to institute a “poison pill” that would work to dilute the

stock ownership of a potential hostile acquirer, effectively preventing acquisitions that

ability of the board of directors to issue preferred stock without stockholder approval, which could be used to institute a “poison

pill” that would work to dilute the stock ownership of a potential hostile acquirer, effectively preventing acquisitions that

have not been approved by the board of directors.

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Pursuant to Alliance’s 2023 Omnibus Equity Incentive Plan,

Alliance may issue an aggregate of up to 600,000 shares of Class A common stock, which amount may be subject to increase from time to

For additional information about this plan, please read the discussion under the heading “ Alliance’s Executive Compensation

— Employee Benefit Plans .” Additionally, as of the date of this 10-K, Alliance has Warrants outstanding to purchase an

aggregate of 9,920,090 shares of common stock.

Alliance may also issue additional shares of common stock or other equity securities of

equal or senior rank in the future in connection with, among other things, future acquisitions, or repayment of outstanding indebtedness,

without stockholder approval, in a number of circumstances.

Alliance may issue an aggregate of up to 1,000,000 shares of Class A common stock, which amount may be subject to increase from time

For additional information about this plan, please read the discussion under the heading “ Alliance’s Executive

Compensation — Employee Benefit Plans .” Additionally, as of the date of this 10-K, Alliance has Warrants outstanding

to purchase an aggregate of 9,920,090 shares of common stock.

Alliance may also issue additional shares of common stock or other equity

securities of equal or senior rank in the future in connection with, among other things, future acquisitions, or repayment of outstanding

indebtedness, without stockholder approval, in a number of circumstances.

issuance of additional common stock or preferred shares:

significantly dilute the equity interest of holders of Class A common stock.

subordinate the rights of holders of shares of common stock if one or more classes of preferred

stock are created, and such shares of preferred stock are issued, with rights senior to those

afforded to Class A common stock.

cause a change in control if a substantial number of shares of common stock are issued, which

may affect, among other things, our ability to use our net operating loss carry forwards,

if any, and could result in the resignation or removal of our present officers and directors;

subordinate the rights of holders of shares of common stock if one or more classes of preferred stock are created, and such shares

of preferred stock are issued, with rights senior to those afforded to Class A common stock.

cause a change in control if a substantial number of shares of common stock are issued, which may affect, among other things, our

ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers

and directors;

adversely affect prevailing market prices for the Class A common stock and/or Warrants.

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 1A. Risk Factors