What changed in this filing

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Item 3. Legal Proceedings

2025-09-10 compared with 2024-09-20 · 88 added, 26 removed, 22 unchanged (84% of the section changed)

10 unchanged sentences

and subject to significant judgment to determine the likelihood and amount of loss related to such matters.

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

Alliance Entertainment Holding Corp.

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 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 litigation.

A settlement hearing

is scheduled for November 25, 2024.

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.

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.

At this time, we are unable to estimate potential losses, if any, related

to this 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.

August 8, 2024, a class action complaint, Feller v.

7 unchanged sentences

potential outcome or range of financial impact cannot be reasonably estimated.

it is not possible to determine the outcomes, the Company believes based on its current knowledge that the resolution of all such pending

matters will not, either individually or in the aggregate, have a material adverse effect on the business, results of operations, cash

flows or financial condition.

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 has accrued the liability

in current liabilities and the receivables in current assets on the balance sheet as of June 30, 2025.

The settlement approval

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

v Abysse America, Inc., Target Corporation, DirectToU, LLC (Prop 65):

On or about December 11, 2024, DirectToU received a tender of defense

from Target Corporation citing a possible violation of California Proposition 65 for a product sold by DirectToU allegedly containing

The product in question was supplied to Alliance by Abysse America.

Alliance/DTU have tendered defense to Abysse.

Abysse has engaged

counsel to respond to the Prop 65 Violation Notice.

At this time, Alliance/DTU have discontinued the product, but have documentation

supplied by Abysse showing that the product was properly tested and was within allowable thresholds for lead and other substances.

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 for Walmart.

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.

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.

Mine Safety Disclosures.

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 3. Legal Proceedings