What changed in this filing

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Item 9A. Controls and Procedures

2025-09-10 compared with 2024-09-20 · 1068 added, 987 removed, 1322 unchanged (61% of the section changed)

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

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

These material weaknesses

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

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

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

generally accepted accounting principles, as described further below.

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

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

most of the year.

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

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

Weaknesses in Internal Control Over Financial Reporting

2025, our disclosure controls and procedures were effective.

The material weaknesses previously identified in our internal control over

financial reporting have been fully remediated.

The Company has implemented the necessary business processes and related internal controls

to provide reasonable assurance regarding the reliability of the financial reporting and the preparation of our financial statements

in accordance with U.S.

generally accepted accounting principles.

of Previously Identified Material Weaknesses in Internal Control Over Financial Reporting

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

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or detected on a timely basis.

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

Level Controls

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

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

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

These deficiencies were primarily attributed

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

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

● Information

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

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

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

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

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

for certain business processes.

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

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

Specifically,

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

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

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

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

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

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

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

owners in the operation of certain controls.

Plan for Material Weaknesses

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

that we are confident will remediate the identified material weaknesses.

While certain controls were fully operational only for a portion

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

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

our internal controls over financial reporting (ICFR).

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

sustained compliance.

remediation actions included:

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

Management continues to assess

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

as necessary.

previously disclosed in our Annual Report for the fiscal year ended June 30, 2024, management identified material weaknesses in the Company’s

internal control over financial reporting related to (i) the control environment and certain entity-level controls, (ii) information

technology general controls, and (iii) certain financial close and reporting processes.

These material weaknesses arose primarily due

to insufficient qualified personnel, ineffective segregation of duties, and a lack of appropriately designed and documented control activities.

of Material Weaknesses

of June 30, 2025, management has completed the remediation of all previously identified material weaknesses.

The following actions were

taken to remediate the deficiencies:

We enhanced our governance and oversight structure, including increased involvement by the Board of Directors and the Audit

Committee in evaluating internal control matters.

Additional accounting and compliance personnel were hired to strengthen the control

environment and provide appropriate oversight of financial reporting functions.

Technology General Controls:

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

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

to third-party providers.

Close Process and ICFR:

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

other business processes.

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

Additionally,

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

across various business processes.

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

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

However, the full

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

that additional weaknesses will not be identified in the future.

We designed and implemented new user access controls, including periodic access reviews for key IT systems.

Logical access and segregation of duties were reinforced to mitigate the risk of unauthorized access.

We also centralized key IT

processes and engaged third-party service providers to support certain IT functions.

Close and Reporting Controls:

We established formal accounting policies and procedures and implemented improved management review

controls over key financial statement areas, including revenue recognition, inventory, accounts payable, payroll, income taxes, and

journal entries.

Monthly and quarterly close processes were strengthened through enhanced review of journal entries, account reconciliations,

and financial analyses.

We also implemented procedures to ensure the completeness and accuracy of information used in control execution.

A third-party advisor was engaged to assist with documenting transaction flows and implementing key control activities across critical

financial processes.

remediation activities were overseen by management and the Audit Committee, which received regular updates on progress and testing outcomes.

Management tested the design and operating effectiveness of the remediated controls, which had been in place and operating for a sufficient

period, and concluded that, as of June 30, 2025, the controls were operating effectively.

As a result, management has concluded that

the previously reported material weaknesses have been fully remediated.

Commitment to Internal Control Excellence

we have remediated the identified material weaknesses, we remain committed to maintaining a strong internal control environment.

continue to monitor the effectiveness of our internal controls, address evolving risks, and make enhancements as necessary to support

the reliability of our financial reporting and promptly address any future risks that may arise.

Report on Internal Controls Over Financial Reporting

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over financial reporting includes those policies and procedures that:

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

transactions and dispositions of the assets of our company,

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

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

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

reasonable assurance regarding prevention or timely detection of unauthorized acquisition,

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

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

assets of our company,

reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance

with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors,

reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that

could have a material effect on the consolidated financial statements.

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

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in Internal Control over Financial Reporting

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

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

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

the fiscal year ended June 30, 2025, the Company completed the implementation and testing of certain controls that had been operating

for a sufficient period to demonstrate effectiveness, as part of the remediation efforts for previously identified material weaknesses

in internal control over financial reporting.

These changes did not materially affect our internal control over financial reporting.

discussed in “Remediation of Previously Identified Material Weaknesses,” these changes included enhancements to entity-level

controls, the implementation of new user access and IT general controls, and improvements to our financial close and reporting processes.

Management’s evaluation of internal control over financial reporting, conducted in accordance with the criteria established in

the Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission

(COSO) and pursuant to Rules 13a-15(d) and 15d-15(d) under the Exchange Act, concluded that, as of June 30, 2025, these controls were

operating effectively.

As a result, the previously reported material weaknesses have been fully remediated.

Other Information.

the three months ended June 30, 2025, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement”

or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

June 30, 2025, the Company entered into a material definitive agreement in the form of an amendment to its already existing Credit Facility

with White Oak, 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

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

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Chairman of the Board and AEC Director

Executive Officer/Chief Financial Officer and AEC Director

Executive Officer and AEC Director

Operating Officer

Accounting Officer

Financial Officer

Compliance Officer

Tom Donaldson III

Gnecco was appointed Chief Financial Officer effective July 21, 2025, succeeding Jeffrey Walker in that role.

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

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

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

Jeffrey Walker has been Alliance’s Chief Executive Officer since February 2023, was Alliance’s Chief Financial Officer from February 2023 until July 2025 and was Legacy Alliance’s

Chief Executive Officer since 2013.

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

Warwick Goldby.

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

to Chief Operations Officer in May 2024.

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

until his promotion to Chief Operations Officer in May 2024.

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

Goldby has held several

positions with increasing responsibilities in the operations department at Alliance.

Goldby graduated from the University of Natal,

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

Amanda Gnecco .

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

to Chief Accounting Officer in May 2024.

Goldby has held several positions with increasing responsibilities in the operations department at Alliance.

Goldby graduated from

the University of Natal, South Africa, with a bachelor’s degree in Commerce.

Gnecco, CPA .

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

May 2024, as Chief Accounting Officer in May 2024 until her promotion to Chief Financial Officer in July 2025.

As Senior Vice President, Accounting and Finance, Ms.

Gnecco, together with Mr.

Black, has been

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

Gnecco received a Master of Science

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

Black, has been responsible for overseeing Alliance’s financial operations and financial and SEC reporting.

Gnecco received

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

in Accounting from Midwestern State University.

Robert Black.

Robert Black joined Alliance in September 2019 and previously served

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

In May 2024 As Senior Vice President,

Accounting and Finance, Mr.

Black, together with Ms.

Gnecco, has been responsible for overseeing Alliance ’ s

financial operations and financial and SEC reporting.

Prior to joining Alliance, Mr.

Black served as Senior Finance Manager at Amazon.com,

Robert Black joined Alliance in September 2019 and previously served as Senior Vice President, Accounting and Finance

until his promotion to Chief Compliance Officer.

In May 2024 As Senior Vice President, Accounting and Finance, Mr.

Black, together with

Gnecco, has been responsible for overseeing Alliance’s financial operations and financial and SEC reporting.

Prior to joining

Alliance, Mr.

Black served as Senior Finance Manager at Amazon.com, Inc.

from March 2017 through August 2019.

Black earned an M.B.A.

from the University of Notre Dame Mendoza College of Business and

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

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

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

Combination, Mr.

Finke has served as a director of Invesco Ltd.

IVZ), a global investment management firm, since December 1, 2020.

From September 2016 to November 2020, Mr.

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

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

From December 2008 until September

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

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

create Barings LLC.

From December 2008 to May 2011, Mr.

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

for the MassMutual Life.

He was appointed President of Babson Capital in August 2007.

Prior to joining Babson Capital, Mr.

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

First Union Corporation, from September 1998 until June 2002.

He was appointed President of IDM in March of 2001.

Finke served on

the boards of Barings Business Development Corp.

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

middle market companies, since August 2018;

Barings Global Short Duration High Yield Fund (NYSE:

BGH), a closed end fund that primarily

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

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

from Barings LLC in 2020.

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

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

Finke is a Trustee of Davidson College, member of the

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

of the Roman Catholic Diocese of Charlotte.

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

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

from the University of Notre Dame Mendoza College of Business and a B.S.

at Ferris State University in Industrial Relations and Machine

Tool Technology.

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

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Our board of directors has determined

Donaldson, Finke, and Nagelson and Ms.

Donaldson and Nagelson and Ms.

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

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

Wielenga and Messrs.

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

Wielenga and Mr.

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

Wielenga chairs the audit committee.

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

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

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

Under the Nasdaq

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

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

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

appoint a third member to the Audit Committee at or prior to our annual stockholder meeting.

Each member of the audit committee

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

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

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

Donaldson qualifies as an “audit

committee financial expert” as defined in applicable SEC rules.

Nagelson qualifies as an

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

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

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

registered public accounting firm engaged by us;

appointment, compensation, retention, replacement, and oversight of the work of the independent registered public accounting firm

engaged by us;

pre-approving

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

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

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

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

all audit and permitted non-audit services to be provided by the independent registered public accounting firm engaged by us, and

establishing pre-approval policies and procedures;

clear hiring policies for employees or former employees of the independent registered public accounting firm, including but not limited

to, as required by applicable laws and regulations;

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

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

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

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

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

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

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

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

the independent registered public accounting firm’s independence;

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

special audit procedures in response to any material control deficiencies;

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

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

any conflicts of interest;

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

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

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

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

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

Board, the SEC or other regulatory authorities;

● periodically

and reviewing a report, at least annually, from the independent registered public accounting firm describing (i) the independent

registered public accounting firm’s internal quality-control procedures, (ii) any material issues raised by the most recent

internal quality-control review, or peer review, of the audit firm, or by any inquiry or investigation by governmental or professional

authorities within the preceding five years respecting one or more independent audits carried out by the firm and any steps taken

to deal with such issues and (iii) all relationships between the independent registered public accounting firm and us to assess the

independent registered public accounting firm’s independence;

the adequacy and effectiveness of internal control policies and procedures, including establishing special audit procedures in response

to any material control deficiencies;

and approving any related party transaction required to be disclosed pursuant to Item 404 of Regulation S-K promulgated by the SEC

prior to us entering into such transaction address any conflicts of interest;

with management, the independent registered public accounting firm, and our legal advisors, as appropriate, any legal, regulatory

or compliance matters, including any correspondence with regulators or government agencies and any employee complaints or published

reports that raise material issues regarding our financial statements or accounting policies and any significant changes in accounting

standards or rules promulgated by the Financial Accounting Standards Board, the SEC or other regulatory authorities;

review risk management policies;

approve and monitor code of ethics for senior officers.

Donaldson, Finke, Nagelson and Ms.

Donaldson, Nagelson, and Ms.

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

Donaldson chairs our

compensation committee.

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

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

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

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

Donaldson chairs our compensation committee.

Under the Nasdaq listing standards and applicable SEC rules, the compensation committee is required to have at least two members, all

of whom must be independent, except that the compensation committee may, if it is comprised of at least three members, have as one of

its members a “non-independent director” under exceptional and limited circumstances pursuant to the exemption under Rule

5605(d)(2)(B) of the Nasdaq listing rules.

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

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

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

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

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

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

and approving on an annual basis the corporate goals and objectives relevant to our Chief Executive Office’s compensation,

if any is paid by us, evaluating our Chief Executive Officer’s performance in light of such goals and objectives and determining

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

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

on an annual basis our executive compensation policies and plans;

● implementing

and administering our incentive compensation equity-based remuneration plans;

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

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

arrangements for our officers and employees;

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

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

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

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

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

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

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

such adviser.

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

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

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

securities exchange on which the Company is listed.

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

Finke serves as chair of the

nominating committee.

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

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

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

of the Nasdaq listing rules.

charter also provides that the compensation committee may, in its sole discretion, retain or obtain the advice of a compensation

consultant, legal counsel or other adviser and will be directly responsible for the appointment, compensation and oversight of the

work of any such adviser.

However, before engaging or receiving advice from a compensation consultant, external legal counsel or

any other adviser, the compensation committee will consider the independence of each such adviser, including the factors required

by the SEC and any national securities exchange on which the Company is listed.

Donaldson, and Ms.

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

Nagelson serves as chair of the nominating committee.

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

committee may, if it is comprised of at least three members, have as one of its members a “non-independent director” under

exceptional and limited circumstances pursuant to the exemption under Rule 5605(e)(3) of the Nasdaq listing rules.

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

● identifying,

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

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

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

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

governance guidelines;

● coordinating

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

directors and management in the governance of the company;

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

when necessary.

screening and reviewing individuals qualified to serve as directors, consistent with criteria approved by the board, and recommending

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

of directors;

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

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

of the company;

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

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

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2025, there have been no delinquent filers.

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

financial and accounting officer.

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

We intend to disclose

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

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

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

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

financial officer, and principal accounting officer.

The Code of Ethics is designed to promote honest and ethical conduct, full and fair

disclosure in reports and documents filed with the SEC, and compliance with applicable laws and regulations.

The Code of Ethics

was adopted on March 15, 2023.

Code of Ethics is posted on our website at SEC Filings – AENT .

amendments to, or waivers from, certain provisions of the Code of Ethics applicable to our principal executive officer, principal financial

officer, or principal accounting officer require approval by the Board of Directors or the Audit Committee.

We intend to disclose such

amendments or waivers promptly in a Current Report on Form 8-K.

waivers were granted during the fiscal year ended June 30, 2025.

Trading Policy

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the fiscal years ended June 30, 2025, and 2024.

Other Compensation

Executive Offer/Chief Financial Officer

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

Also included is $16,151 in 401K and

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

Name and Position

All Other Compensation

Total Compensation

Bruce Ogilvie (1)

Executive Chairman

Jeffrey Walker (2)

Chief Executive Offer/Chief Financial Officer

Robert Black (3)

Chief Compliance Officer

in all other compensation expenses is $19,219 and $22,912 for car and phone allowance in FY25 and FY24.

Also included is $16,408

in 401K and health benefits in FY25 and $16,151 in FY24.

in all other compensation expenses is $20,467 for car and phone allowance in FY25 and $19,500 in FY24.

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401K and health benefits in FY25 and $16,151 in FY24.

Neither of the named executive officers had any outstanding

equity awards at June 30, 2024.

Served as our Chief Financial Officer until July 21, 2025.

Included in all other compensation expenses is $11,622 for

401K and health benefits in FY25.

of the named executive officers had any outstanding equity awards at June 30, 2025.

Outstanding Equity Awards at Fiscal Year-End

Option awards

Number of securities underlying unexercised options

(#) exercisable

Number of securities

(#) unexercisable

exercise price

Option expiration date

Number of shares or units of stock that have not vested

Market value of shares of units of stock that have not vested

shares, units or other rights that have not vested

Market or payout value of

shares, units or other rights that have not vested

Warwick Goldby

Amanda Gnecco

Agreements for Named Executive Officers

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

his base salary as follows:

Percentage(%)

their base salary as follows:

Base Salary ($)

Bonus Percentage(%)

Bruce Ogilvie

Jeffrey Walker

Incentive Plan Awards

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

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

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

Each also receives approximately $2,000 per month for

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

Severance Benefits

4 unchanged sentences

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

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

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

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

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

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

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

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

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

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

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

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

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

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

another employer.

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

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

subject to his execution and non-revocation of a general release of claims and continued compliance with his restrictive covenant obligations,

as described below, such Named Executive Officer would be entitled to payment of an amount (i) equal to the executive’s base salary

immediately prior to the termination date (or, if for “good reason” was attributable to the Company’s failure to pay

the minimum amount of Base Salary provided herein, such minimum amount) for the period of time from the day after the Termination Date

through the last day of the employment term or for a period of twelve (12) months, whichever is greater (the “Severance Period”);

(ii) in addition to payment of any unpaid bonuses from a prior fiscal year, a pro-rata portion of the bonus based on the amount of days

executive worked for the fiscal year in which the termination occurs, and (iii) payment for such Named Executive Officer’s insurance

premiums incurred for participation in COBRA coverage pursuant group health plan through the earliest to occur of (A) the last day of

the Severance Period, (B) the date the executive ceases to be eligible for COBRA or (C) such time as Executive is eligible for group

health insurance benefits from another employer.

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

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Director Compensation

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

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

earned or paid in cash

incentive plan compensation

in pension value and nonqualified deferred compensation earnings

other compensation

Teri Wielenga

Chris Nagelson

has established a formal arrangement to compensate certain independent directors.

Under this arrangement, eligible independent directors

receive an annual fee of $50,000 for their service on the board of directors and its committees.

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

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for awards which are incentive share options).

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

to be made under the 2023 Plan.

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

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

of a new award.

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

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

The Board of Directors in its discretion may

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

provided, however,

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

with respect to any award previously granted.

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

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

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

Future new hires, non-

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

The number of awards

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

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

We have reserved a total of 1,000,000 shares of common stock for issuance as or under

awards to be made under the 2023 Plan.

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

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

for the grant of a new award.

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

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

The Board of Directors in its

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

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

of the holder, with respect to any award previously granted.

The number of shares of common stock for which awards which are options

or SARs may be granted to a participant under the 2023 Plan during any calendar year is limited to a number of shares equal to three

percent (3%) of the total number of shares of common stock of the Company outstanding on the last day of the prior calendar year.

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

number of awards to be granted to officers, non-employee directors, employees and non-employee consultants cannot be determined at this

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

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

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

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

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

The Plan Committee or the board of directors shall

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

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

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

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

share options.

provided, however,

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

shall be subject to adjustment as provided in the 2023 Plan.

The Plan Committee or the board of directors shall determine the time or

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

shall cease to be or become exercisable following termination of the share option holder’s employment or upon other conditions,

the methods by which such exercise price may be paid or deemed to be paid, the form of such payment, and the methods by or forms in which

common stock will be delivered or deemed to be delivered to participants who exercise share options.

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

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of June 30, 2025, a total of 561,300 awards have been granted under the 2023 Plan.

Bonus Incentive Plan

In fiscal year 2025, the Company

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

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

is structured as follows:

The Plan applies to executives

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

The bonus payout under the Plan is directly linked

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

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

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

A full payout of the cash bonus

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

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

Incentive Plan

fiscal year 2024, the Company updated its cash Bonus Incentive Plan (the “Plan”) designed to align leadership compensation

with the Company’s financial performance, specifically its growth in earnings before interest, taxes, depreciation, and amortization

The Plan is structured as follows:

Plan applies to executives and leaders as determined by the Compensation Committee of the Board of Directors.

The bonus payout under

the Plan is directly linked to the Company’s EBITDA growth year-over-year.

The Plan uses the percentage increase in the Company’s

EBITDA for the current fiscal year as compared to the prior fiscal year as the performance metric.

full payout of the cash bonus will occur if the Company’s EBITDA for the current fiscal year increases by 10% or more compared

to the prior year’s EBITDA.

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

percentage increase in EBITDA.

or greater EBITDA increase:

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80% bonus payout.

This pattern continues, with a 10% reduction in payout

for every 1% decrease in EBITDA growth.

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

Bonuses earned under the Plan,

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

are finalized and audited.

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

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

The Company will accrue bonuses based on its estimated

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

pattern continues, with a 10% reduction in payout for every 1% decrease in EBITDA growth.

No bonus will be paid if EBITDA growth is less

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

for the relevant year are finalized and audited.

The Compensation Committee retains the discretion to adjust the final bonus payouts

in the event of extraordinary or non-recurring items that materially affect the Company’s reported EBITDA.

The Company will accrue

bonuses based on its estimated performance to the Plan’s EBITDA targets throughout the fiscal year.

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

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

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

The clawback policy is incorporated by reference into this Annual Report as an exhibit.

Equity Compensation Policy and Practices

While we do not have a formal written

policy in place with regard to the timing of awards of options in relation to the disclosure of material nonpublic information, the Compensation

Committee does not seek to time equity grants to take advantage of information, either positive or negative, about our company that has

not been publicly disclosed.

It has been our practice to grant equity awards to our officers and directors upon their appointment.

intend to issue equity grants to our officers and/or directors at the same time each year, in connection with our first meeting of the

Board of Directors each fiscal year.

Option grants are effective on the date the award determination is made by the Compensation Committee,

and the exercise price of options is the closing market price of our Common Stock on the business day of the grant or, if the grant is

made on a weekend or holiday, on the prior business day.

During the fiscal year ended June 30,

2025, we did not award any options to a named executive officer in the period beginning four business days before the filing of a periodic

report on Form 10-Q or Form 10-K, or the filing or furnishing of a current report on Form 8-K that discloses material nonpublic information,

and ending one business day after the filing or furnishing of such report.

Alliance Indemnification

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

indemnification in addition to the indemnification provided for in its certificate of incorporation.

Alliance also purchased a policy

of directors’ and officers’ liability insurance that insures its officers and directors against the cost of defense, settlement

or payment of a judgment in some circumstances and insures Alliance against its obligations to indemnify its officers and directors.

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

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as of September 10, 2024.

Class A Common Stock

of Outstanding Class

of Beneficial Owner (1)

Ogilvie (2)(3)

Number of Shares

Class A Common

Percentage of

Outstanding Class

Name of Beneficial Owner (1)

Beneficially Owned

A Common Stock

Bruce Ogilvie (2)(3)

Jeffrey Walker (2)

Tom Donaldson III (4)

and executive officers as a group (9 individuals)

Legacy Trust dated September 14, 2021 (6)

Chris Nagelson

Amanda Gnecco

Warwick Goldby

Directors and executive officers as a group (8 individuals)

Ogilvie Legacy Trust dated September 14, 2021 (5)

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

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

637,333 shares issuable upon exercise of private warrants.

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

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

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

Finke’s spouse is the

trustee and Mr.

Finke’s spouse and children are the beneficiaries.

Finke disclaims beneficial ownership of such shares

except to the extent of his pecuniary interest therein.

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

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Certain Relationships and Related Transactions.

Stockholder Shares

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

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

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

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

In connection with the Business Combination the Adara Initial Stockholders

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

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

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

Rights Agreement

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

Simultaneously

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

the aggregate) in a private placement.

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

of $11.50 per share, subject to adjustment.

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

they are held by the Sponsor or its permitted transferees.

Note and Affiliate Loans

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

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

The loan was fully repaid

from the offering proceeds at the IPO closing.

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

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

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

including those related to the Business Combination.

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

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

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

LLC and $221,598 to Mr.

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

on our behalf.

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

Finke agreed to convert the amounts owed into payable

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

connection with the Business Combination.

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

& Donaldson, LLC, Mr.

Finke, and Mr.

Donaldson, respectively.

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

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

Support Agreement

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

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

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

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

Indemnification Agreements

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

to the indemnification provided for in its certificate of incorporation.

Alliance also purchased a policy of directors’ and officers’

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

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

Related Party Transactions

Interest-Charge

Domestic International Sales Corporation (IC-DISC)

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

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

The IC-DISC is owned

by the Company Stockholders.

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

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

The commissions

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

Determined under formulas and rules defined

in the law and regulations of the US tax code.

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

specified profit to the IC-DISC.

This net profit is not subject to Federal income tax.

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

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

For twelve months ended December 31, 2022, the

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

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

for the period ending June 30, 2023.

Holdings, LLC

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

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

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

and Jeff Walker, the two shareholders of Alliance.

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

and video game consoles are at fair market value.

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

at market rates.

the years ended June 30, 2025, and 2024, Alliance has 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.

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

games, and video game consoles are at fair market value.

GameFly does fulfillment services of fast selling new releases by providing

3PL services at market rates.

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

GameFly is free to purchase

from any competitor of Alliance.

GameFly is free

to purchase from any competitor of Alliance.

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

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

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

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

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

the years ended June 30, 2025, and 2024 Alliance incurred costs with MVP Logistics, LLC, in the amount of $0 , and $1.0 million, respectively,

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

California and South Gate, California distribution facilities.

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

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$7 million on August 28, 2023.

Further transactions occurred on September 14th, with a borrowing of $7 million, repaid on September 28,

On October 10, 2023, an additional $7 million was borrowed and repaid on October 18th, 2023.

As of June 30, 2024, the outstanding

balance on the Ogilvie Loan stood at $10 million.

Ogilvie Loan matures on December 22, 2026, and bears interest at the rate of the 30-day SOFR plus 5.5%.

Interest expenses for the fiscal

year ended June 30, 2024, and 2023 were $10.0 million and $0, respectively.

The interest rate at June 30, 2024, was 8.6%.

Further transactions occurred on September 14, 2023, with a borrowing of $7 million, repaid on September

On October 10, 2023, an additional $7 million was borrowed and repaid on October 18, 2023.

As of June 30, 2025, and June 30,

2024, the outstanding balance on the Ogilvie Loan was $10 million.

Ogilvie Loan is subordinated to the Company’s revolving credit facility, meaning that in the event of liquidation or default, repayment

of the Ogilvie Loan is subordinate to amounts outstanding under the Company’s debt arrangements.

Ogilvie Loan matures on December 22, 2026, and bears interest at the rate of the 30-day SOFR plus 5.5% (4.34% and 5.29% at June 30, 2025,

and June 30, 2024, respectively).

Interest expenses for the fiscal year ended June 30, 2025, and 2024 were $1.0 million each.

rate on June 30, 2025, and 2024, was 9.80% and 10.8% respectively.

Capital Partners, LLC

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and engagement of potential transaction parties, and assistance with investor presentations.

the fiscal year, the Company paid BDCP approximately $1.8 million for these services, which included an advisory fee of 1.5% of the gross

proceeds from transactions involving White Oak Commercial Finance, LLC.

the fiscal year ended June 30, 2025, the Company did not incur any related party fees with BDCP.

For the fiscal year ended June 30, 2024,

the Company paid BDCP approximately $1.8 million, which included an advisory fee equal to 1.5% of the gross proceeds from transactions

involving White Oak Commercial Finance, LLC.

and Procedures for Related Person Transactions

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Principal Accountant Fees and Services.

For the years ended June 30, 2024, and 2023, fees for our independent registered public accounting firm were $778,400 and $1,318,110,

respectively, for the services BDO performed in connection with SEC filings and registrations, offerings, quarterly reviews, and the

audit of our June 30, 2024, and 2023 financial statements.

For the years ended June 30, 2024, and 2023, our tax accounting firm’s fees for preparing our corporate tax returns were

approximately $246,822, and $100,000, respectively.

June 30, 2025

June 30, 2024

Audit Fees (Grassi)

Professional Audit-related services (Grassi)

Audit Fees (BDO)

Total Audit Fees

audit committee was formed upon the consummation of the Merger.

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Statement Schedules:

financial statement schedules have been omitted because they are not applicable, not required or the information

financial statement schedules have been omitted because they are not applicable, not required

or the information

is shown in the financial statements or the notes thereto.

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20549, at prescribed rates or on the SEC website at www.sec.gov.

Incorporated by Reference

Description of Document

Schedule/Form

Business Combination Agreement, dated as of June 22, 2022, by and among Alliance, Merger Sub and Alliance.

June 23, 2022

Second Amended and Restated Certificate of Incorporation.

February 13, 2023

Amended and Restated Bylaws.

February 13, 2023

Specimen Class A Common Stock Certificate.

October 18, 2022

Specimen Warrant Certificate.

October 18, 2022

Warrant Agreement, dated February 8, 2021, by and between the Company and Continental Stock Transfer & Trust Company, as warrant agent.

February 11, 2021

Description of the Registrant’s Securities

October 19, 2023

Schedule/Form

Form of Lock-Up Agreement (included in Exhibit 2.1).

June 23, 2022

Alliance Entertainment Holding Corporation 2023 Omnibus Equity Incentive Plan.

October 19, 2023

Form of Indemnity Agreement.

October 18, 2022

Lease Agreement, dated as of August 18, 2017, by and between Liberty Property Limited Partnership and COKeM International, Ltd.

October 18, 2022

First Amendment to Lease, dated as of January 22, 2018, by and among Liberty Property Limited Partnership and COKeM International, Ltd.

October 18, 2022

Multi-Tenant Industrial Triple Net Lease, dated as of December 14, 2007, by and between Cedar Grove - Crossdock, LLC and Alliance Entertainment, LLC.

October 18, 2022

First Amendment to Lease Agreement, dated as of January 18, 2013, by and between KTR LOU I LLC and Alliance Entertainment, LLC.

October 18, 2022

Second Amendment to Lease Agreement, dated as of August 1, 2014, by and between KTR LOU I LLC and Alliance Entertainment, LLC.

October 18, 2022

Guaranty Agreement, dated as of November 9, 2012, by and between Project Panther Acquisition Corporation and KTR LOU I LLC.

October 18, 2022

Office Lease, dated as of January 7, 2011, by and between French Overseas Company, LLC and Alliance Entertainment, LLC.

October 18, 2022

Schedule/Form

First Amendment to Lease, dated as of January 31, 2012, by and between French Overseas Company, LLC and Alliance Entertainment, LLC.

October 18, 2022

Second Amendment to Lease, dated August 2016, by and between French Overseas Company, LLC and Alliance Entertainment, LLC.

October 18, 2022

Standard Industrial Lease, dated as of August 12, 2020, by and between SCRS Valley Park Business Center, LLC and COKeM International, Ltd.

October 18, 2022

Second Amendment to Lease, dated as of June 26, 2020, by and between Liberty Property Limited Partnership and COKeM International, Ltd.

October 18, 2022

Form of Employment Agreement, by and between Alliance Entertainment Holding Corporation and Bruce Ogilvie.

October 18, 2022

Form of Employment Agreement, by and between Alliance Entertainment Holding Corporation and Jeffrey Walker.

October 18, 2022

Contingent Consideration Escrow Agreement by and among the Combined Company, Bruce Ogilvie and Continental Stock Transfer and Trust Company dated February 10, 2023.

February 13, 2023

Schedule/Form

Loan and Security Agreement, dated as of December 31, 2023 by and among Alliance Entertainment Holding Corporation, as Parent and Guarantor, each of its subsidiaries from time to time party thereto, as Borrowers and Guarantors, the Lenders from time to time parties thereto, and White Oak Commercial Finance LLC, as Administration Agent and Collateral Agent

December 26, 2023

Gamefly Distribution Agreement

Code of Ethics.

Amendment to Revolving Credit Facility

Letter from WithumSmith+Brown PC to the U.S.

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Consent of BDO USA, P.C.

Consent of GRASSI

Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Certification

of Principal Executive Officer and Principal Financial Offic er

Pursuant to 18 U.S.C.

Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C.

Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Clawback Policy

September 20, 2024

Schedule/Form

XBRL Instance Document

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report to be signed on its behalf by the undersigned, thereunto duly authorized, in Irvine, California, on the 10th day of September

Alliance Entertainment Holding Corporation

Entertainment Holding Corporation

Jeffrey Walker

Executive Officer/Chief Financial Officer

Executive Officer

to the requirements of the Securities Exchange Act of 1934, as amended, this annual report has been signed below by the following persons

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Jeffrey Walker

Chief Executive Officer/Chief Financial Officer and Director

September 19,

Jeffrey Walker

(Principal Executive Officer, Principal Financial )

Bruce Ogilvie

Executive Chairman of the Board of Directors

September 19,

Executive Officer and Director

Executive Officer )

Bruce Ogilvie

/ s/ Amanda Gnecco

Accounting Officer (Principal Accounting Officer)

Chairman of the Board of Directors

Amanda Gnecco

Financial Officer (Principal Accounting Officer)

Tom Donaldson III

September 19,

Tom Donaldson III

September 19,

Chris Nagelson

September 19,

Chris Nagelson

September 19,

ENTERTAINMENT HOLDING CORPORATION.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

TO CONSOLIDATED FINANCIAL STATEMENTS

of Independent Registered Public Accounting Firm (PCAOB ID # 606 )

Report of Independent Registered Public Accounting Firm (PCAOB ID # 243 )

Consolidated Balance Sheets as of June 30, 2025, and 2024

Consolidated Statements of Operations for the years end June 30, 2024 and 2023

Consolidated Statements of Changes in Stockholders’ Deficit for the years end June 30, 2024 and 2023

Statements of Income and Comprehensive Income for the years end June 30, 2025, and 2024

Consolidated Statements of Changes in Stockholders’ Equity for the years end June 30, 2025, and 2024

Consolidated Statements of Cash Flows for the years end June 30, 2025, and 2024

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OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

and Board of Directors

Alliance Entertainment Holding Corporation

Plantation, Florida

on the Consolidated Financial Statements

have audited the accompanying consolidated balance sheets of Alliance Entertainment Holding Corporation (the “Company”)

as of June 30, 2024, and 2023, the related consolidated statements of operations and comprehensive income (loss),

stockholders’ equity, and cash flows for each of the years then ended, and the related notes (collectively referred to as the

“consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all

material respects, the financial position of the Company at June 30, 2024 and 2023, and the results of its operations and its cash

flows for each of the years then ended , in conformity with accounting principles generally accepted in the

United States of America.

consolidated financial statements are the responsibility of the Company’s management.

the Board of Directors and

Stockholders of Alliance

Entertainment Holding Corporation

on the Financial Statements

have audited the accompanying consolidated balance sheets of Alliance Entertainment Holding Corporation (the Company) as of June 30,

2025, and the related consolidated statements of income and comprehensive income, changes in stockholders’ equity, and cash

flows for the year ended June 30, 2025, and the related notes (collectively referred to as the financial statements).

opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30,

2025, and the results of its operations and its cash flows for the year ended June 30, 2025, in conformity with accounting principles

generally accepted in the United States of America.

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion

on the Company’s consolidated financial statements based on our audits.

on the Company’s financial statements based on our audit.

We are a public accounting firm registered with the Public

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and the PCAOB.

conducted our audits in accordance with the standards of the PCAOB.

conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain

reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing

of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing

an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether

audit included performing procedures to assess the risks of material misstatement of the financial statements, whether

due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence

regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles

used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

& Co., CPAs, P.C.

have served as the Company’s auditor since 2024.

Jericho, New York

of Independent Registered Public Accounting Firm

and Board of Directors

Entertainment Holding Corporation

on the Consolidated Financial Statements

have audited the accompanying consolidated balance sheet of Alliance Entertainment Holding Corporation (the “Company”) as

of June 30, 2024, the related consolidated statements of income and comprehensive income, changes in stockholders’ equity, and

cash flows for the year then ended, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company

at June 30, 2024, and the results of its operations and its cash flows for the year then ended , in conformity with accounting

principles generally accepted in the United States of America.

consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion

on the Company’s consolidated financial statements based on our audit.

We are a public accounting firm registered with the Public

Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance

with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain

reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing

an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due

to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence

regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles

Our audit also included evaluating the accounting principles

used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

BDO USA, P.C .

have served as the Company’s auditor since 2021.

We believe that our audit provides a reasonable basis for our opinion.

/s/ BDO USA, P.C.

served as the Company’s auditor from 2021 to 2024.

19, 2024, except for Note 10, as to which the date is September 10, 2025

ENTERTAINMENT HOLDING CORPORATION

CONSOLIDATED BALANCE SHEETS

BALANCE SHEETS

($ in thousands, except per share amounts)

June 30, 2025

June 30, 2024

Current Assets

Trade Receivables, Net

Trade Receivables, Net of Allowance for Credit Losses of $ 867 and $ 648 , respectively

Inventory, Net

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Property and Equipment, Net

Operating Lease Right-Of-Use Assets

Operating Lease Right-Of-Use Assets, Net

Intangibles, Net

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Current Portion of Finance Lease Obligations

Promissory Note

Contingent Liability

Revolving Credit Facility, Net

Total Current Liabilities

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ENTERTAINMENT HOLDING CORPORATION

STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

($ in thousands except share and per share amounts)

June 30, 2025

June 30, 2024

Cost of Revenues (excluding depreciation and amortization)

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Transaction Costs

IC DISC Commissions

Restructuring Cost

Loss (Gain) on Disposal of Fixed Assets

(Gain) Loss on Disposal of Fixed Assets

Total Operating Expenses

Operating Income (Loss)

Operating Income

Other Expenses

Interest Expense, Net

Interest Expense

Change in Fair Value of Warrants

Total Other Expenses

Income (Loss) Before Income Tax Benefit

Income Tax Benefit

Net Income (Loss)

Income Before Income Tax Expense (Benefit)

Income Tax Expense (Benefit)

Other Comprehensive Income (Loss)

Foreign Currency Translation

Total Comprehensive Income (Loss)

Net Income (Loss) per Share – Basic and Diluted

Total Comprehensive Income

Net Income per Share – Basic and Diluted

Weighted Average Common Shares Outstanding – Basic

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ENTERTAINMENT HOLDING CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

ENDED JUNE 30, 2025 AND 2024

Common Stock Shares

Cost of Treasury

Common Stock Shares Issued and

Accumulated Other Comprehensive

($ in thousands)

(Loss) Income

Balances at June 30, 2023

Capital Contribution

Conversion of Treasury Stock

Reverse Recapitalization

Fair Value of Contingent Shares

Issuance of common stock, net of transaction costs of $ 1.9 million

Currency Translation Adjustment

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Balances at June 30, 2024

Issuance of common stock, net of transaction costs of $ 1.9 million

Warrant Conversion

Currency Translation Adjustment

Stock-based Compensation

Net Income (Loss)

Balances at June 30, 2025

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ENTERTAINMENT HOLDING CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

STATEMENTS OF CASH FLOWS

($ in thousands)

June 30, 2025

June 30, 2024

Cash Flows from Operating Activities:

Net Income (Loss)

Adjustments to Reconcile Net Income (Loss) to

Net Cash Provided by (Used in) Operating Activities:

Inventory write-down

Adjustments to Reconcile Net Income to

Net Cash Provided by Operating Activities:

Adjustments to Reconcile Net Income to Net Cash Provided by (Used in) Operating Activities:

Depreciation of Property and Equipment

Amortization of Intangible Assets

Amortization of Deferred Financing Costs (Included in Interest)

Bad Debt Expense

Amortization of Deferred Financing Costs (Included in Interest Expense)

Allowance for Credit Losses

Change in Fair Value of Warrants

Deferred Income Taxes

Non-cash lease expense

Stock-based Compensation Expense

Loss (Gain) on Disposal of Fixed Assets

(Gain) Loss on Disposal of Fixed Assets

Changes in Assets and Liabilities

Trade Receivables

Related Party Receivable

Income Taxes Payable\Receivable

Operating Lease Right-Of-Use Assets

Operating Lease Obligations

Accounts Payable

Accrued Expenses

Accrued Expenses and Contingent Liability

Net Cash Provided by Operating Activities

Cash Flows from Investing Activities:

Cash Received for Business Acquisitions, Net of Cash Acquired

Capital Expenditures

Cash Inflow from Asset Disposal

Cash Paid for Business Asset Purchase

Cash Paid for Contract

Net Cash Used in Investing Activities

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( 1,095,772 )

( 1,092,306 )

Borrowings on Revolving Credit Facility

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Net Cash Used in Financing Activities

Net Increase (Decrease) in Cash

Net Increase in Cash

Net Effect of Currency Translation on Cash

Cash, Beginning of the Period

Cash, End of the Period

Cash, Beginning of the Year

Cash, End of the Year

Supplemental disclosure for Cash Flow Information

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Supplemental Disclosure for Non-Cash Investing and Financing Activities

Conversion of Treasury stock

Fixed Asset Financed with Debt

Capital Contribution

Business Combination:

Reverse recapitalization

Fixed Assets Financed with Debt

Right-of-use assets obtained in exchange for new operating lease liabilities

Conversion of Warrants from liability to Equity

Contract Acquisition

accompanying notes are an integral part of the consolidated financial statements.

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and related accessories.

July 1, 2022, the Company added Think3Fold Ltd.

to its portfolio.

Consolidated financial statements are presented for Alliance Entertainment

Holding Corporation and business operations are conducted through seven subsidiaries.

The Company’s corporate offices are headquartered

in Plantation, FL, with primary warehouse facilities located in Shepherdsville, KY and Shakopee, MN.

February 10, 2023, Alliance, Adara Acquisition Corp.

(“Adara”) and a Merger Sub consummated the closing of the transactions

contemplated by a Business Combination Agreement.

Pursuant to the terms of the Business Combination Agreement, a business combination

of Legacy Alliance (Alliance Entertainment Holding Corporation pre-Merger, as defined below) and Adara was affected by the merger of

Merger Sub with and into Alliance (the “Merger”), with Alliance surviving the Merger as a wholly- owned subsidiary of Adara.

Following the consummation of the Merger on the closing date, Adara changed its name from Adara Acquisition Corp.

to Alliance Entertainment

Holding Corporation (the “Company”).

the closing of the Merger, each of the then issued and outstanding shares of Alliance common stock were cancelled and automatically converted

into the right to receive the number of shares of Adara common stock equal to the exchange ratio (determined in accordance with the Business

Combination Agreement).

The Company’s 900 shares of previously outstanding common stock were exchanged for 47,500,000 shares of

Class A Common Stock.

The Merger was accounted for as a recapitalization of Legacy Alliance and the change in equity structure has been

retroactively reflected in the financial statements for all periods presented.

In addition, pursuant to the Business Combination Agreement,

60,000,000 shares of Class E common stock of Adara to the Legacy Alliance stockholders were placed in an escrow account to be released

to such Legacy Alliance stockholders and converted into Class A common stock upon the occurrence of certain triggering events.

February 10, 2023, Alliance completed its business combination with Adara Acquisition Corp., which was accounted for as a reverse recapitalization

with Alliance treated as the accounting acquirer.

The recapitalization has been retroactively reflected in all periods presented.

Company continues to recognize certain warrant and equity-related impacts from this transaction, including the outstanding Class E contingent

shares and warrant liabilities, as discussed further in Notes 15 and 20.

summary of the significant accounting policies consistently applied in the preparation of the consolidated financial statements:

Reclassification

amounts from prior periods have been reclassified to conform to the current period presentation.

of Presentation

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Holding Corporation and its wholly owned subsidiaries.

Significant intercompany transactions have been eliminated in consolidation.

the fiscal year ended June 30, 2023, Alliance disclosed substantial doubt regarding its ability to continue as a going concern, citing

operational losses, a working capital deficit, and the approaching December 31, 2023, maturity date of the Revolver with Bank of America

(the “Revolver”).

December 21, 2023, the Company secured a new three-year $ 120 million credit facility, replacing the Revolver (see Note 8).

Additionally,

the Company has implemented certain strategic initiatives to reduce expenses and focus on the sale of higher margin products.

of the new credit facility, combined with these initiatives and the Company’s financial performance for the year ended June 30,

2024, the Company has concluded that it has sufficient cash to fund its operations and obligations (from its cash on hand, operations,

working capital and availability on the credit facility) for at least twelve months from the issuance of these consolidated financial

Intercompany transactions have been eliminated in consolidation.

December 21, 2023, the Company entered into a new three 3 -year

credit facility with White Oak Commercial Finance, LLC, which will mature on December 21, 2026.

The facility is a $ 120

million asset-based revolving credit facility (the “Revolving Credit

Additionally, the Company has implemented certain strategic

initiatives to reduce expenses and focus on the sale of higher margin products.

As a result of the new credit facility, combined

with these initiatives and the Company’s financial performance for the year ended June 30, 2025, the Company has concluded

that it has sufficient cash to fund its operations and obligations (from its cash on hand, operations, working capital and

availability on the credit facility) for at least twelve months from the issuance of these consolidated financial

Company enters into contracts with its customers for the purchase of products in the ordinary course of business.

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on these arrangements, has inventory risk, and has latitude in establishing prices.

In limited circumstances, the Company has

determined that it acts as an agent (ASC 606-10-55-36 through 55-40) because it does not control the specified goods before they are

transferred to the customer.

For these arrangements, revenue is recognized on a net basis, reflecting only the fee or commission to which

the Company is entitled in exchange for arranging the sale.

Additionally, the Company ships some of its products

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approach practical expedient relative to the estimation of variable consideration.

and handling practical expedient to account for shipping and handling activities that occur after control of the related good

transfers as fulfillment activities.

of obtaining a contract practical expedient to recognize the incremental costs of obtaining a contract as an expense when incurred if

the amortization period of the asset is one year or less.

and handling practical expedient to account for shipping and handling activities that occur after control of the related good transfers

as fulfillment activities.

of obtaining a contract practical expedient to recognize the incremental costs of obtaining a contract as an expense when incurred

if the amortization period of the asset is one year or less.

taxes practical expedient to exclude sales taxes and other similar taxes from the transaction price.

Significant financing component

practical expedient

financing component practical expedient

is recognized at the transaction price which the Company expects to be entitled to receive.

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generally it is the Company’s policy not to accept product returns that cannot be returned to the Company’s vendors.

Revenue from product sales is recognized net of estimated returns.

Sales in the pre-recorded music and video movies industry

generally give certain customers the right to return products.

In addition, the Company’s suppliers generally permit

the Company to return products that are in the supplier’s current product listing, except for video games and vinyl.

from product sales is recognized net of estimated returns.

Sales in the pre-recorded music and video movies industry generally give certain

customers the right to return products.

In addition, the Company’s suppliers generally permit the Company to return products that

are in the supplier’s current product listing, except for video games and vinyl.

on historical returns, review of current catalog list and the change of mass merchant’s floor space and store locations carrying

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Trade receivables are carried at the original invoice

amount less estimates made for allowances for uncollectable accounts based on a periodic review of all outstanding amounts.

amount less estimates made for allowances for credit losses based on a periodic review of all outstanding amounts.

measures all expected losses based on a forward-looking expected loss model, which reflects probable losses based on historical experience,

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when received.

of June 30, 2025, the Company had $ 8.5 million held in escrow related to a terminated acquisition transaction.

The Company does not have

access to or control over the escrow account, and the acquisition did not proceed.

The funds are classified as a receivable within Other

Current Assets, and the Company is actively pursuing return of the escrowed funds.

Management believes the balance is recoverable within

the next 12 months.

and Inventory Reserves

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When items are disposed of, the cost and accumulated depreciation are eliminated from the accounts,

and any gain or loss is reflected in the consolidated statements of operations.

and any gain or loss is reflected in the consolidated statements of income and comprehensive income.

and Amortization

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Capitalized Software

Equipment Under Capital Leases

Equipment Under Finance Leases

Computer Equipment

improvements and equipment under capitalized leases are amortized over the shorter of the useful life of the asset or the life of the

improvements and equipment under financed ROU leases are amortized over the shorter of the useful life of the asset or the life of the

and Definite-Lived Intangible Assets, Net

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intangible assets are stated at cost, less accumulated amortization.

Amortization of customer relationships and lists is recorded using

an accelerated method over the useful lives of the related assets, which range from 10 to 15 years.

Covenants not to compete, trade name

and favorable leases are amortized using the straight-line method over the estimated useful lives of the related assets, which range

from 5 to 15 years.

Amortization of customer relationships and lists is recorded

using an accelerated method over the useful lives of the related assets, which range from 10

Covenants not to compete and trade names are amortized using the straight-line method over the estimated

useful lives of the related assets, which range from 5

Indefinite-lived

intangible assets, such as certain trade names, are not amortized but are tested for impairment annually, or more frequently if events

or changes in circumstances indicate that the asset might be impaired.

For the years ended June 30, 205 and 2024 the company did no t record any impairment.

of Long-Lived Assets

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estimates inherent in the preparation of the accompanying consolidated financial statements include management’s estimates of

sales returns, warrants fair value, rebates, goodwill impairment, and inventory valuation.

On an ongoing basis, management evaluates

its estimates compared to historical experience and trends, which form the basis for making judgments about the carrying value of

assets and liabilities.

sales returns reserve, warrants fair value, customer rebates and discount reserves, goodwill impairment, and inventory valuation.

On an ongoing basis,

management evaluates its estimates compared to historical experience and trends, which form the basis for making judgments about the

carrying value of assets and liabilities.

Value of Financial Instruments

Company complies with ASC 820, Fair Value Measurements and Disclosures, which defines fair value, establishes a framework for measuring

fair value in accordance with U.S.

generally accepted accounting principles and expands disclosure requirements about fair value measurements.

Under ASC 820, there are three categories for the classification and measurement of assets and liabilities carried at fair value:

Company complies with ASC 820, Fair Value Measurements and Disclosures , which defines fair value, establishes a framework for

measuring fair value in accordance with U.S.

generally accepted accounting principles and expands disclosure requirements about fair

value measurements.

Under ASC 820, there are three categories for the classification and measurement of assets and liabilities carried

at fair value:

Valuation based on quoted market prices in active markets for identical assets or liabilities.

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evaluates all of the Company’s financial instruments, including warrants issued to purchase its Class A Common Stock, to determine

if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and ASC 815-15.

classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is assessed

at issuance of the financial instrument and re-assessed at the end of each reporting period.

if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480, Distinguishing

Liabilities from Equity and ASC 815-15, Derivatives and Hedging-Embedded Derivatives .

The classification of derivative instruments,

including whether such instruments should be recorded as liabilities or as equity, is assessed at issuance of the financial instrument

and re-assessed at the end of each reporting period.

a result of the Merger, the Company initially had 5,750,000 Public Warrants, 4,120,000 Private Placement Warrants, and 50,090 Representative

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sheets with the warrant liabilities subject to re-measurement at each balance sheet date until exercised, and any change in fair value

recognized in the consolidated statements of operations.

recognized in the consolidated statements of income and comprehensive income.

Company re-computes the fair value of the Private and the Representative Warrants at the issuance date and the end of each quarterly

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under which those shares would not be issued.

a result of the Merger (see Note 15), the Company has retroactively adjusted the weighted average shares outstanding prior to February

10, 2023, to give effect to the Exchange Ratio used to determine the number of shares of Common Stock into which they were converted.

following table sets forth the computation of basic and diluted net earnings (loss) per share of Common Stock for the years ended June

following table sets forth the computation of basic and diluted net earnings per share of Common Stock for the years ended June

30, 2025, and 2024 respectively:

of Computation of Basic and Diluted Net Earnings (loss) Per Share of Common Stock

Income (Loss) (in thousands)

and diluted shares

Weighted-average

Class A Common Stock outstanding (basic)

Weighted-average

Class A Common Stock outstanding (diluted)

(Loss) per share for Class A Common Stock

Schedule of Computation of Basic and Diluted Net Earnings (loss) Per Share of Common Stock

June 30, 2025

June 30, 2024

Net Income (in thousands)

Basic and diluted shares

Weighted-average Class A Common Stock outstanding (basic)

Weighted-average Class A Common Stock outstanding (diluted)

Income per share for Class A Common Stock

— Basic and Diluted

60,000,000 shares of contingently issuable Common Stock that were not included in the computation of basic or diluted

earnings (loss) per share since the contingencies for the issuance of these shares have not been met as of June 30, 2024.

year ended June 30, 2024, there are 9,920,090

warrants outstanding that have been excluded from diluted earnings per share because they are anti-dilutive.

For the year ended June 30, 2023, there are also 9,920,090 warrants outstanding and 260,000 restricted shares that

have been excluded from diluted earnings per share because they are anti-dilutive.

are 60,000,000 shares of contingently issuable Common Stock that were not included in the computation of basic or diluted earnings per

share since the contingencies for the issuance of these shares have not been met as of June 30, 2025.

For the year ended June 30, 2025,

there are 9,920,090 warrants outstanding that have been excluded from diluted earnings per share because they are anti-dilutive.

the year ended June 30, 2025, there are also 9,920,090 warrants outstanding and 660,000 restricted shares that have been excluded from

diluted earnings per share because they are anti-dilutive.

costs, which consist primarily of mailers, catalogs, online marketing and other promotions, are expensed in the period in which the advertisement

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Financing Costs

financing costs relating to the Company’s revolving credit facility are deferred and amortized ratably over the life of the debt

using the straight-line method.

Deferred financing costs are included as an addition to interest expense on the consolidated statements

of operations and comprehensive income and are included in Revolving Credit Facility, Net on the Consolidated Balance Sheets.

financing costs relating to the Company’s revolving credit facility are deferred and amortized ratably over the life of the

debt using the straight-line method.

Deferred financing costs are included as an addition to interest expense on the consolidated

statements of income and comprehensive income and are included in Revolving Credit Facility, Net on the consolidated

balance sheets.

Company accounts for shipping and handling activities as fulfillment activities.

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Shipping and handling costs are included in cost of revenues in the accompanying consolidated

statements of operations and comprehensive income.

statements of income and comprehensive income.

Currency Translation and Transactions

financial position and results of operations of the Company’s foreign subsidiary is measured using the local currency as the functional

Assets and liabilities of this subsidiary are translated into United States dollars at the exchange rate in effect at each

financial position and results of operations of the Company’s foreign subsidiary is measured using the local currency as the

functional currency.

Assets and liabilities of this subsidiary are translated into United States dollars at the exchange rate in

effect at each period end.

Income statement accounts are translated at the average rate of exchange prevailing during the period.

Foreign currency translation

(loss) income totaled ($ 2 ) thousand and ($ 11 ) thousand for the years ended June 30, 2024, and 2023, respectively.

Foreign currency translation income (loss) totaled $ 3

thousand and ($ 2 )

thousand for the years ended June 30, 2025, and 2024, respectively.

Company does not typically hedge its foreign exchange rate position.

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Acquisition costs are expensed as incurred and are included in the consolidated statements

of operations and comprehensive income.

of income and comprehensive income.

Company is a lessee in multiple noncancelable operating and financing leases.

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The ROU asset for finance leases is amortized on a straight-line basis over the lease term.

all underlying classes of assets, the Company has elected to not recognize ROU assets and lease liabilities for short-term leases that

have a lease term of 12 months or less at lease commencement and do not include an option to purchase the underlying asset that the Company

is reasonably certain to exercise.

Leases containing termination clauses in which either party may terminate the lease without cause

and the notice period is less than 12 months are generally deemed short-term leases with lease costs included in short- term lease expense.

The Company recognizes short-term lease cost on a straight-line basis over the lease term.

all underlying classes of assets, the Company has elected the practical expedient to not recognize ROU assets and lease liabilities

for short-term leases that have a lease term of 12 months or less at lease commencement and do not include an option to purchase the

underlying asset that the Company is reasonably certain to exercise.

Leases containing termination clauses in which either party may

terminate the lease without cause and the notice period is less than 12 months are generally deemed short-term leases with lease

costs included in short- term lease expense.

The Company recognizes short-term lease cost on a straight-line basis over the lease

Interest Entity

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Concentrations

of Concentration of Credit Risk

Schedule of Concentration of Credit Risk

June 30, 2025

June 30, 2024

* Less than 10%

June 30, 2025

June 30, 2024

* Less than 10%

June 30, 2025

June 30, 2024

* Less than 10%

June 30, 2025

June 30, 2024

* Less than 10%

segments are defined as components of an enterprise where discrete financial information is available and evaluated regularly by the

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Pronouncements

Issued Accounting Pronouncements

October 2021, The FASB issued ASU No.

2021-08, Accounting for contract Assets and Contract Liabilities from contracts with customers

(Topic 805) (“ASU 2021-08”).

ASU 2021-08 requires an acquirer in a business combination to recognize and measure contract

assets and contract liabilities (deferred revenue) from acquired contracts using the revenue recognition guidance in Topic 606.

acquisition date, the acquirer applies the revenue model as if it had originated the acquired contracts.

ASU 2021-08 is effective for

annual periods beginning after December 15, 2022, including interim periods within those fiscal years.

The company adopted this ASU using

the prospective approach method in July 2023.

There have been no acquisitions since adoption and thus did not have a material impact

on the Company’s condensed consolidated financial statements.

Issued and Adopted Pronouncements

November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07,

Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures.

ASU 2023-07 requires public entities to disclose significant

segment expense categories that are regularly provided to the Chief Operating Decision Maker (“CODM”) and included in the

measure of segment profit or loss, as well as the title and position of the CODM.

The amendments also require disclosure of all annual

segment profit or loss and asset disclosures in interim periods and provide expanded disclosure requirements for entities with a single

reportable segment.

2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods beginning after December 15, 2024.

adopted ASU 2023-07 for its fiscal year ended June 30, 2025, in accordance with the required effective date for non-accelerated filers.

The adoption did not impact the Company’s consolidated financial position, results of operations, or cash flows;

however, it resulted

in enhanced segment disclosures in the notes to the consolidated financial statements in accordance with ASC 280, Segment Reporting .

These enhancements include the identification of significant segment expense categories, disclosure of the measures of segment profit

or loss used by the CODM, related reconciliations to the most comparable GAAP measure, and expanded disclosures for entities with a single

reportable segment.

period comparative disclosures have been updated to conform to the current year presentation.

The Company will include comparable disclosures

in its interim financial statements beginning with the quarter ending September 30, 2025.

Issued but Not Yet Adopted Accounting Pronouncements

Standard Update 2024-03, In 2024, Income Statement Reporting Comprehensive Income.

The Financial Accounting Standards Board issued Accounting

Standards Update (ASU) 2024-03, Income Statement Reporting Comprehensive Income Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses.

This ASU provides guidance on the disaggregation of income statement expenses, aiming to

enhance the transparency of financial reporting by requiring more detailed disclosures of expense categories.

This ASU is effective for

annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, with early

adoption permitted.

The Company is currently evaluating the impact of this ASU on its financial statements to determine the potential

effect on its financial reporting and disclosures.

Standard Update 2024-02, In 2024, Codification Improvements Amendments to Remove References to the Concepts Statements.

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Standard Update 2024-01 In 2024, Compensation Stock Compensation (Topic 718):

Scope Application of Profits Interest and Similar

The Financial Accounting Standards Board (FASB) issued ASU 2024-01, which introduces updates to accounting standards related

to the classification and measurement of financial instruments under ASC 320.

The update primarily focuses on clarifying guidance for

equity securities, debt instruments, and other financial assets, particularly in the areas of fair value measurement and impairment recognition.

It aims to improve consistency and comparability in the reporting of financial instruments by refining the criteria for classifying securities

and enhancing the methodology for recognizing and measuring impairments.

ASU 2024- 01 also mandates additional disclosures to provide

greater transparency around the valuation techniques and assumptions used in determining the fair value of financial instruments.

update is effective for fiscal years beginning after December 15, 2024, with early adoption permitted.

The Company is currently evaluating

the impact of this ASU on its financial statements and disclosures.

Scope Application of Profits Interest and Similar Awards.

The Financial Accounting Standards Board (FASB) issued ASU 2024-01, which introduces updates to accounting standards related to the classification

and measurement of financial instruments under ASC 320.

The update primarily focuses on clarifying guidance for equity securities, debt

instruments, and other financial assets, particularly in the areas of fair value measurement and impairment recognition.

It aims to improve

consistency and comparability in the reporting of financial instruments by refining the criteria for classifying securities and enhancing

the methodology for recognizing and measuring impairments.

ASU 2024- 01 also mandates additional disclosures to provide greater transparency

around the valuation techniques and assumptions used in determining the fair value of financial instruments.

The update is effective

for fiscal years beginning after December 15, 2024, with early adoption permitted.

The Company is currently evaluating the impact of

this ASU on its financial statements and disclosures.

Standard Update 2023-09, Improvements to Income Tax Disclosures (“ASU 2023-09”).

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We are evaluating the disclosure requirements related to the new standard.

Standard Update 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures (“ASU 2023-07”).

November 2023, the FASB issued ASU 2023-07, which is intended to improve reportable segment disclosure requirements, primarily through

additional disclosures about significant segment expenses.

The standard is effective for fiscal years beginning after December 15, 2023,

and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

The amendments should be applied

retrospectively to all prior periods presented in the financial statements.

We are evaluating the disclosure requirements related to

the new standard.

Trade Receivables, Net

Receivables, Net consists of the following at:

of Trade Receivables, Net

Schedule of Trade Receivables, Net

($ in thousands)

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Allowance for Credit Losses

Sales Returns Reserve, Net

Sales Returns Reserve

Customer Rebate and Discount Reserve

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Trade Receivables, Net

Schedule of Allowance for Credit Losses

Allowance for Credit Losses Roll forward

June 30, 2025

June 30, 2024

($ in thousands)

Beginning Balance

Current Period Provision for Expected Credit Losses

Recoveries of Previously Written-off Accounts

Ending Balance

Inventory, Net

a result of the Company’s evaluation of the net realizable value of inventory during the twelve months ended June 30, 2023, the

Company recorded a $ 10.8 million inventory write-down to reflect it at its net realizable value, which is recorded in the cost of revenue

in the consolidated financial statements.

Net (all finished goods) consists of the following at:

of Inventory, Net

Schedule of Inventory, Net

($ in thousands)

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Inventory, Net

There were no inventory write-downs recorded

for the fiscal years ended June 30, 2025, and 2024.

Other Current and Long-Term Assets

Current and Long-Term Assets consists of the following at:

of Other Current and Long-term Assets

Current and Long-Term Assets consist of the following at:

Schedule of Other Current and Long-term Assets

($ in thousands)

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Prepaid Intellectual Property

Escrow Receivable

Insurance Receivable

Prepaid Insurance

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Prepaid Inventory

Prepaid Molding

Prepaid Shipping Supplies

Prepaid Vault

Prepaid Royalties

Total Other Assets–Current

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and Equipment, Net consists of the following at:

of Property and Equipment, Net

Schedule of Property and Equipment, Net

($ in thousands)

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Capitalized Software

Equipment Under Capital Leases

Equipment Under Finance Leases

Computer Equipment

Construction in Progress

Property and Equipment,

Accumulated Depreciation and Amortization

Total Property and Equipment, Net

Expense for the year ended June 30, 2024, and 2023 was $ 1.9 million and $ 2.2 million respectively.

Expense for the years ended June 30, 2025, and 2024 was $ 1.8 million and $ 1.9 million respectively.

Goodwill and Intangibles, Net

Schedule of Goodwill

in thousands)

June 30, 2023

Goodwill, as of June 30, 2023

Goodwill, Beginning

Additions from business acquisition

Goodwill, as of June 30, 2024

Goodwill, Ending

Beginning Balance

Ending Balance

Net consists of the following at:

of Intangible Assets, Net

ended June 2024

Ended June 2023

Schedule of Intangible Assets, Net

($in thousands)

Year ended June 2025

Year Ended June 2024

Intangibles Cost

Intangibles, Net

Customer Relationships

Trade Name – Alliance

Contract Acquisition

Tradename - HMBR

Mecca Customer Relationships

Customer List

the years ended June 30, 2024, and 2023, the Company recorded amortization expense of $ 4.0 million and $ 4.4 million, respectively.

the years ended June 30, 2025, and 2024, the Company recorded amortization expense of $ 3.5

million and $ 4.0

million, respectively.

amortization over the next five years and thereafter, as of June 30, 2025, is as follows:

of Expected Amortization Over the Next Five Years and Thereafter

Schedule of Expected Amortization Over the Next Five Years and Thereafter

($ in thousands)

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Total Expected Amortization

Indefinite-lived Intangible asset

Total Intangible Assets

Accrued Expenses

Expenses consists of the following at:

of Accrued Expenses

Schedule of Accrued Expenses

($ in thousands)

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Accruals for Other Expenses

Accrued Contract Liability

Total Accrued Expenses

Revolving Credit Facility

December 21, 2023, the Company terminated its old credit facility with Bank of America, which was scheduled to mature on December

31, 2023 and established a new Credit Facility with White Oak Commercial Financing, LLC.

Bank of America Credit Facility has been fully terminated, resulting in an outstanding revolver balance of $ 0 million as of June 30,

Availability under the terminated Bank of America Credit Facility was limited by the Company’s borrowing base

calculation, as defined in the Credit Agreement.

In addition, there was a commitment fee of 0.25 % for unused credit line with fees

for the twelve months ended June 30, 2023, of $ 147,000 .

Availability at June 30, 2023, was approximately $ 2 million with an outstanding

revolver balance of $ 133 million.

As of June 30, 2023, the effective interest rate was 6.5 % (SOFR plus a spread of 2.11 %)

December 21, 2023, the Company entered into a new credit facility with White Oak Commercial Finance, LLC, which will mature on December

The facility a $ 120

million asset-based revolving credit facility (the “Revolving Credit Facility”).

Borrowings under this facility bear

interest at the 30-day SOFR rate, subject to a floor of 2.00 %,

plus a margin ranging from 4.50 %

depending on the Company’s utilization and consolidated fixed charge coverage ratio.

As of June 30, 2024, the effective

interest rate was 9.5 %,

reflecting changes in market conditions and facility utilization.

the Company reduces or terminates the commitments under the Revolving Credit Facility before its maturity, it will incur an early

termination fee of 2.0 %

if done before December 21, 2024, or 1.0 %

if done between December 21, 2024, and August 21, 2025.

Additionally, if the facility is reduced or terminated on or before June 21,

2025, the Company is required to pay a minimum interest amount of 10 %

of revolver minimum based on $ 100

million until December 2024.

The facility is a $ 120 million asset-based revolving credit facility (the “Revolving Credit Facility”).

under the Revolving Credit facility bear interest at the 30-day SOFR rate, subject to a floor of 2 %, plus a margin ranging from 4.00 %

to 4.25 %, depending on the Company’s utilization and consolidated fixed charge coverage ratio.

The 30-day SOFR rates as of June

30, 2025, and June 30, 2024, were 4.35 % and 5.29 % , respectively.

The effective interest rates at June 30, 2025, and June 30, 2024, were

9.2 % and 9.5 %, respectively.

June 30, 2025, the Company entered into an amendment to its Credit Facility with White Oak, 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.

the Company reduces or terminates the commitments under the Revolving Credit Facility before its maturity, it will incur an early termination

fee of 1 % if done between December 21, 2024, and August 21, 2025.

As of August 21, 2025, the Company is no longer subject to any early

termination fees.

under the Revolving Credit Facility is determined by the Company’s borrowing base calculation, as defined in the credit agreement

The Company also incurs a commitment fee of 0.25 %

on unused credit line with fees for twelve months ended June 30, 2024 of $ 151

As of June 30, 2024, the Company had

approximately $ 44

million in available credit, with an outstanding

balance of $ 73 million.

relating to this facility.

The Company also incurs a commitment fee of 0.25 % for unused credit line with fees for the fiscal year ended

June 30, 2025, and June 30, 2024, of $ 0.22 million and $ 0.15 million, respectively.

Availability as of June 30, 2025, was approximately

$ 54 million with an outstanding revolver balance of approximately $ 57 million.

Availability as of June 30, 2024, was $ 44 million with

an outstanding revolver balance of $ 73 million.

maximum borrowings under the Revolving Credit Facility are determined by a formula based on eligible accounts receivable and inventory,

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and its subsidiaries’ cash, accounts receivable, and related assets.

Company was in compliance with its covenants as of June 30, 2024.

Revolving Credit Facility, net consists of the following at:

of Revolver Balance

Company was in compliance with its covenants as of June 30, 2025 and 2024.

Revolving Credit Facility, net consists of the following

Schedule of Revolver Balance

($ in thousands)

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Revolving Credit Facility, Net

the years ended June 30, 2024, and 2023, the Company had interest expenses of $ 11.2 million and $ 11.4 million, amortization of deferred

finance costs of $ 0.9 million and $ 0.2 million, and unused credit line fees of $ 0.1 million and $ 0.1 million, respectively.

the years ended June 30, 2025, and 2024, the Company had interest expenses of $ 7.2 million and $ 11.2 million, respectively, and amortization

of deferred finance costs of $ 1.4 million and $ 0.9 million, respectively.

Employee Benefits Company Health Plans

Company sponsors the Alliance Health & Benefits Plan (AHBP), consisting of the following plans:

self-insured medical (PPO and HDHP),

dental (PPO and HMO), vision, life Insurance, and short & long-term disability.

The medical insurance is self-insured to a maximum

company exposure of $ 225,000 per individual occurrence, at this time, a stop loss policy covers the balance of covered claims.

contributes various percentages to different levels of premium coverage.

As of June 30, 2024, the Company fully accrued for estimated

run-out exposure on a mature claim basis, as provided and calculated by our plan administrator.

Dental insurance HMO is self-insured to a maximum per individual procedure based on a published schedule that measures exposure.

PPO policy is fully insured.

The Company contributes various percentages to different levels of premium coverage.

As of June 30, 2024,

the Company was fully accrued for estimated run-out exposure on a mature claim basis, as provided and calculated by the plan administrator.

The vision, life insurance, and short and long-term disability plans are fully insured and sponsored by the Company, and premiums are

paid by the employer and employee based on various Board approved schedules.

On June 30, 2024, and June 30, 2023, the accrued estimated

run-out exposure totaled approximately $ 218,000 and $ 218,000 , respectively, for the medical and dental insurance plans.

Accrued estimated

runout exposure is included in accrued expenses on the consolidated balance sheets.

the year ended June 30, 2025, the Company transitioned its health insurance coverage from a self-funded model to an Individual

Coverage Health Reimbursement Arrangement (“ICHRA”).

As a result, the self-insured medical plans (including both PPO and

HDHP options) under the Alliance Health & Benefits Plan (“AHBP”) were terminated.

Under the ICHRA model, the Company

reimburses employees and executive officers for individual health insurance premiums, with contribution levels varying based on coverage

were no changes to the Company’s dental (PPO and HMO), vision, life insurance, or short-term disability plans.

The Company’s

dental HMO plan remains self-insured, with exposure limited to a maximum per individual procedure based on a published fee schedule.

The dental PPO plan is fully insured.

The Company contributes various percentages toward premium costs across benefit offerings, based

on coverage levels and Board-approved schedules.

The vision, life insurance, and short- and long-term disability plans are fully insured

and Company-sponsored, with premiums paid by both the employer and employees in accordance with Board-approved contribution structures.

of June 30, 2025, the Company had no remaining liability related to the terminated self-insured medical plans, as the previously accrued

estimated run-out exposure was fully settled during the fourth quarter of fiscal 2025.

At June 30, 2024, the accrued estimated run-out

exposure for the medical and dental plans totaled approximately $ 332,000 and was included in accrued expenses on the Company’s

consolidated balance sheet.

Effective in fiscal 2025, the Company implemented an Individual Coverage Health Reimbursement Arrangement

(“ICHRA”) plan, which eliminates the Company’s exposure to self-insured medical and dental claims;

therefore, no similar

liabilities are expected under the current plan structure.

Company has the Alliance Entertainment 401(k) Plan (the Plan) covering all eligible employees of the Company.

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of $ 0.50 of every dollar up to 4 % of contribution percentage.

For the fiscal year ending June 30, 2024, and 2023 the company’s matching

expense was approximately $ 620,000 and $ 688,000 , respectively.

For the fiscal year ending June 30, 2025, and 2024 the company’s

matching expense was approximately $ 588,000 and $ 620,000 , respectively.

The Company conducts a retirement plan review on an annual basis.

Segment Information

In November 2023, the Financial Accounting Standards Board (“FASB”)

issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures,

which requires enhanced disclosures about a public entity’s reportable segments, including significant segment expense categories

and expanded interim reporting requirements.

The amendments are effective for fiscal years beginning after December 15, 2023, and interim

periods beginning after December 15, 2024.

Early adoption is permitted.

The Company adopted ASU 2023-07 for the fiscal year ended June

Management performed an assessment of the Company’s operating segments

in accordance with ASC 280-10-50-1 through 50-9.

Based on this evaluation, the Company determined that it operates as a single operating

segment, which is also its sole reportable segment.

Segment revenue is derived from the sale of distribution of pre-recorded music, video

movies, video games and related accessories, and merchandising.

This conclusion is consistent with prior periods.

The Company’s Chief Executive Officer and Chairman are the Chief

Operating Decision Makers (“CODM”) and review financial performance and make resource allocation decisions at the consolidated

entity level.

The CODM uses net income, prepared in accordance with U.S.

GAAP to assess performance and make resource allocation decisions.

The CODM utilizes net income, prepared in accordance with U.S.

GAAP, to evaluate financial performance, monitor variances against budget

and forecast, and guide strategic decisions.

Segment assets are reported as consolidated assets on the Company’s balance sheet.

expense categories regularly reviewed by the CODM include:

of Revenues (excluding depreciation and Amortization )

● Distribution

and Fulfillment Expense

and Marketing

Segment Items :

segment items include expenses that are part of segment profit or loss but are not classified as significant segment expenses.

and Administrative Expense

following table presents segment revenue, net loss, and the significant segment expenses for the Company’s single reportable segment

for the fiscal years ended June 30, 2025, and 2024 (in thousands):

Reconciliation to Consolidated

Schedule of Segment Reporting for Financial Information

Fiscal Year ended June 30

Cost of Revenues (excluding depreciation and Amortization)

Distribution and Fulfillment Expense

Sales and Marketing

Other Segment items *

Other segment items include interest expense, income tax expense,

general and administrative expenses, and technology expenses, which are reported separately on the consolidated statements of income.

Company accounts for income taxes under an asset and liability approach that requires the recognition of deferred tax assets and liabilities

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tax authorities for all years subsequent to 2020.

Substantially all

the Company’s income is derived from U.S.

components of the provision for income taxes for the fiscal year-ended June 30, 2024, and 2023 are as follows:

of Income Tax Provision

components of the provision for (benefit from) income taxes for the fiscal year-ended June 30, 2025 and 2024 are as

Schedule of Income Tax Provision

($ in thousands)

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($ in thousands)

Income Tax (Benefit) Expense:

Total Current Expense (Benefit)

Total Deferred Benefit

Income Tax Benefit

Income Tax Expense:

Total Current Expense

Total Deferred Expense (Benefit)

Income Tax Expense (Benefit)

items accounting for the difference between income taxes computed at the U.S.

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(benefit) at the effective tax rate for each of the years are as follows:

of Effective Income Tax Rate Reconciliation

Schedule of Effective Income Tax Rate Reconciliation

Year Ended June 30

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State Taxes, Net of Federal Benefits

Meals and Entertainment

Other – Permanent Adjustments

Fair Value Adjustments on Warrants

Foreign Derived Intangible Income

Deferred Tax True-Up

Equity Compensation

Immaterial Income Tax out-of-period Adjustment

Income Tax Benefit

Equity Compensation

Income Tax Expense (Benefit)

income taxes reflect the net tax effects of temporary differences between the amount of assets and liabilities for accounting purposes

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components of deferred taxes consist of the following (amounts in thousands):

of Components of Deferred Taxes

Schedule of Components of Deferred Taxes

($in thousands)

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Net Operating Losses

Credit Losses

Section 248 Organization Costs

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Total Deferred Tax Liabilities

Net Deferred Tax Asset

of June 30, 2024, 2023 and 2022, the Company had recorded no unrecognized tax benefits and, therefore, no accrued interest or penalties

for unrecognized tax positions.

Net Deferred Tax Asset, Net

As of June 30, 2025,

2024 and 2023, The Company had recorded no unrecognized tax benefits and, therefore, no accrued interest or penalties for unrecognized

tax positions.

In addition, The Company is under examination by the Florida tax authorities.

These proceedings may lead

to adjustments or proposed adjustments to their taxes or provisions for uncertain tax provisions.

The Company believes that it would

prevail under such examination and, accordingly, has not recorded a provision for uncertain tax positions.

Company evaluates deferred tax assets each period for recoverability.

The Company records a valuation allowance for assets that do not

meet the threshold of “more likely than not” to be realized in the future.

To make that determination, the Company evaluates

the likelihood of realization based on the weight of all positive and negative evidence available.

As of June 30, 2024 and 2023, the

Company has not recorded a valuation allowance.

Company will reevaluate this determination quarterly and record a tax expense if and when future evidence requires a valuation allowance.

These proceedings may lead to adjustments

or proposed adjustments to their taxes or provisions for uncertain tax provisions.

The Company believes that it would prevail under such

examination and, accordingly, has not recorded a provision for uncertain tax positions.

The Company evaluates deferred tax assets each

period for recoverability.

The Company records a valuation allowance for assets that do not meet the threshold of “more likely than

not” to be realized in the future.

To make that determination, the Company evaluates the likelihood of realization based on the

weight of all positive and negative evidence available.

As of June 30, 2025 and 2024, The Company has not recorded a valuation allowance.

The Company will reevaluate this determination

quarterly and record a tax expense if and when future evidence requires a valuation allowance.

of June 30, 2025, the Company had federal net operating loss carryforwards (“NOLs”) of $ 14.7 million and state NOLs of $ 19.3

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carryforwards have no expiration.

Internal Revenue Code of 1986, as amended, imposes restrictions on the utilization of net operating losses and certain credits in the

event of an “ownership change” of a corporation.

Accordingly, a company’s ability to use net operating losses and certain

credits may be limited as prescribed .

The Internal Revenue Code of 1986, as amended, imposes restrictions

on the utilization of net operating losses and certain credits in the event of an “ownership change” of a corporation.

a company’s ability to use net operating losses and certain credits may be limited as prescribed under.

Commitments and Contingencies

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We do not believe that any of these identified claims or litigation will be material to our results of operations, cash flows, or financial

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

Alliance Entertainment Holding Corp.

f/k/a 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

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 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.

June 6, 2024, Office Create Corporation filed a complaint against COKeM International Ltd.

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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.

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

Alliance Entertainment, LLC and DirectToU, LLC , was

filed under the Video Privacy Protection Act (“VPPA”).

The complaint alleges that the Company violated the VPPA by disclosing

users' personally identifiable information, as well as information regarding videos they viewed on the Company’s website, to Facebook

through the use of Facebook Pixel.

The Company is evaluating the claims and intends to defend against the allegations vigorously.

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

Related Party Transactions

Interest-Charge

Domestic International Sales Corporation (“IC-DISC”)

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

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

The IC- DISC is

owned by the Company Stockholders.

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

or commissions paid out.

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

The commissions

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

Determined under formulas and rules defined

in the law and regulations of the US tax code.

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

specified profit to the IC-DISC.

This net profit is not subject to Federal income tax.

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

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

For twelve months ended December 31, 2022, the

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

The forgiveness of the $ 6.6 million was recorded as a deemed capital contribution

by the Company Stockholders in the twelve months ended June 30, 2023.

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 $ 35 MM.

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

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.

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 $ 1.577 MM

and COKeM’s insurance carrier CNA has approved to cover their part of the settlement amount.

COKeM will have an estimated

receivable of $ 1.377 M.

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,

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.

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 .

Balabbo 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 lead.

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

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 Pop, LLC v.

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 matter.

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 Party Transactions

the fiscal year ending June 30, 2024, the Company repaid $ 0.50 million of outstanding promissory notes to two former Adara shareholders

to fund operating costs.

These interest-free notes were due for payment at the earlier of the Merger’s closing or February 10,

As of June 30, 2023, the total outstanding balance under these notes was approximately $ 0.50 million.

the twelve-month periods ended June 30, 2024, and 2023, the Company had sales to a related party company owned by the Company’s

shareholders of $ 8.4 million, and $ 16.8 million, respectively.

During the same periods, the Company had costs incurred with another related

party company in the amount of $ 1.0 million and $ 8.3 million, respectively.

February 1, 2023, Alliance entered into a Distribution Agreement (the “Agreement”) with GameFly Holdings, Inc., a Alliance

customer owned by the principal stockholders of Alliance, effective from February 1, 2023 through March 31, 2028.

Holdings, LLC

February 1, 2023, Alliance entered into a Distribution Agreement (the “Agreement”) with GameFly Holdings, LLC, a customer owned by the principal stockholders of Alliance, effective from February 1, 2023, through March 31, 2028.

At that time, the Agreement

continues indefinitely until either party provides the other party with six-month advance notice to terminate the Agreement.

year ending June 30, 2024, and 2023, Alliance had distribution revenue of $ 0.25 million and $ 0.22 million, respectively.

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

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

were repaid on July 26, 2023.

Subsequently, on August 10, 2023, the Company accessed the Ogilvie Loan for the full $ 17 million, repaying

year ending June 30, 2025, and 2024, Alliance had distribution revenue of $ 0 and $ 0.25 million, respectively.

the fiscal year ended June 30, 2025, and 2024, the Company had sales to GameFly LLC, owned by the Company’s shareholders, of

$ 2.7 million and

$ 8.4 million,

respectively.

As of June 30, 2025, and June 30, 2024, the Company

had receivables from GameFly of $ 0.20 million and $ 1.8 million, respectively, recorded within other receivables, net, on the consolidated

balance sheets.

the year ended June 30, 2024, the Company repaid $ 0.50 million of outstanding promissory notes to two former Adara shareholders to fund

operating costs.

These interest-free notes were due for payment at the earlier of the Merger’s closing of February 10, 2023.

MVP Logistics, LLC

MVP Logistics is an independent

contractor, which, prior to August 31, 2023, was partially owned by Joe Rehak, the SVP of Operations of COKeM International Limited, which

Alliance acquired in September 2020.

Subsequent to August 31, 2023, Mr.

Rehak no longer has an equity stake in MVP Logistics and retired

from COKeM in January 2024.

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

During the years ended June 30, 2025 and 2025, Alliance incurred costs with

MVP Logistics, LLC, in the amount of $ 0 and $ 1.0 million, respectively, for freight shipping fees, transportation costs, warehouse

distribution, and 3PL management services (for Arcades) at the Santa Fe Springs, California and South Gate, California distribution facilities.

July 3, 2023, the Company entered into a $ 17

million line of credit (the “Ogilvie Loan”) with Bruce Ogilvie, a principal stockholder.

Initial borrowings amounted to

million on that date, followed by an additional $ 5

million on July 10, 2023.

These sums were repaid on July 26, 2023.

On August 10, 2023, the Company accessed the Ogilvie Loan for the

million, repaying $ 7

million on August 28, 2023.

Further transactions occurred on September 14th, with a borrowing of $ 7 million, repaid on September 28,

On October 10, 2023, an additional $ 7 million was borrowed and repaid on October 18th, 2023.

As of June 30, 2024, the outstanding

balance on the Ogilvie Loan was $ 10 million.

The Ogilvie Loan matures on December 22, 2026, and bears interest at the rate of the

30-day SOFR plus 5.5 %.

Interest expenses for the fiscal year ended June 30, 2024, and 2023 were $ 10.0 million and $ 0 , respectively.

interest rate at June 30, 2024, was 8.6 %.

the fiscal year ending June 30, 2024, the Company entered into a financial advisory agreement with B&D Capital Partners, LLC (“BDCP”),

a related party.

The agreement, dated July 28, 2023, engaged BDCP as a non-exclusive financial advisor to assist the Company in issuing

privately held debt securities and related transactions.

Further transactions occurred on September 14th, with a borrowing of $ 7

million, repaid on September 28, 2023.

On October 10, 2023, an additional $ 7

million was borrowed and repaid on October 18th, 2023.

As of June 30, 2025, the outstanding balance on the Ogilvie Loan was $ 10

The Ogilvie Loan matures on December 22, 2026, and bears interest at the rate of the 30-day SOFR plus 5.5 %.

Interest expenses for the fiscal years ended June 30, 2025, and June 30, 2024, were $ 1.0

million each.

The interest rate as of June 30, 2025, and 2024, was 9.8 %

and 10.8 % respectively.

Capital Partners, LLC

the fiscal year ended June 30, 2024, the Company entered into a financial advisory agreement with B&D Capital Partners, LLC (“BDCP”).

Tom Donaldson III, a director of the company, is a managing partner and a principal equity holder of Blystone & Donaldson, the

parent company of BDPC.

The agreement, dated July 28, 2023, engaged BDCP as a non-exclusive financial advisor to assist the Company in

issuing privately held debt securities and related transactions.

BDCP is owned by Blystone & Donaldson, LLC, and Mr.

Donaldson, an independent

director of the Company, is a principal of BDCP.

Under the terms of the agreement, BDCP provided financial advisory services, including

the review of confidential information, identification and engagement of potential transaction parties, and assistance with investor

presentations.

the fiscal year, the Company paid BDCP approximately $ 1.8 million for these services, which included an advisory fee of 1.5 % of the gross

proceeds from transactions involving White Oak Commercial Finance, LLC, recorded as deferred financing costs with the amortization being recorded as interest expense in the consolidated

statements of operations and comprehensive income (loss)

Donaldson, an

independent director of the Company, is a principal of BDCP.

the terms of the agreement, BDCP provided financial advisory services, including the review of confidential information, identification

and engagement of potential transaction parties, and assistance with investor presentations.

During the fiscal year ended June 30, 2025,

the Company did not incur any related party fees with BDCP.

For the fiscal year ended June 30, 2024, the Company paid BDCP approximately

$ 1.8 million, which included an advisory fee equal to 1.5 % of the gross proceeds from transactions involving White Oak Commercial Finance,

Company leases offices, warehouses, computer equipment, and vehicles.

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term from 1 one to 13 years.

The decision to exercise renewal options is at the Company’s sole discretion and is included in the

lease term when it is reasonably certain that the option will be exercised.

The decision to exercise renewal options is at the Company’s sole discretion and is included

in the lease term when it is reasonably certain that the option will be exercised.

improvements and assets are depreciated over the shorter of their useful life or the lease term unless the lease includes a purchase

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taxes, insurance, and common area maintenance and are recognized as incurred rather than being included in the lease liability.

the balance sheet, operating leases are reflected in “Operating Lease Right-of-Use Assets,” “Current Portion of Operating

Lease Obligations,” and “Noncurrent Operating Lease Obligations.” Finance leases are included under “Property

& Equipment - Net,” “Current Portion of Finance Lease Obligations,” and “Noncurrent Finance Lease Obligations.

On June 1, 2024, the

Company executed a modification to one of its existing lease agreements to extend the lease term for an additional seventy-four months.

As a result of this modification, the Company recognized an additional $ 21.9

million to its right-of-use (ROU) asset.

The extended lease term will

result in continued amortization of the ROU asset over the remaining lease period, with the associated lease liabilities being remeasured

in accordance with ASC 842, Leases .

The Company will continue to amortize the ROU asset in line with the revised lease terms and

conditions, reflecting the financial impact of the extension in future periods.

of lease expense were as follows for the twelve months ended June 30, 2024, and 2023:

the balance sheet, operating leases are reflected in “Operating Lease Right-of-Use Assets, Net,” “Current Portion

of Operating Lease Obligations,” and “Operating Lease Obligations, Non-Current.” Finance leases are included under

“Property & Equipment, Net,” “Current Portion of Finance Lease Obligations,” and “Finance Lease Obligations, Non-Current.

June 1, 2024, the Company executed a modification to one of its existing lease agreements to extend the lease term for an additional

seventy-four months.

As a result of this modification, the Company recognized an additional $ 21.9 million to its right-of-use (ROU) asset.

extended lease term will result in continued amortization of the ROU asset over the remaining lease period, with the associated lease

liabilities being remeasured in accordance with ASC 842, Leases .

The Company will continue to amortize the ROU asset in line with

the revised lease terms and conditions, reflecting the financial impact of the extension in future periods.

of lease expense were as follows for the years ended June 30, 2025, and 2024:

Schedule of Components of Lease Expense

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Less Imputed Interest

Business Acquisition

July 1, 2022, Alliance purchased 100 % of the stock of Think3Fold, a collectables distribution company for contingent consideration with

a fair value of zero at the acquisition date.

The transaction expanded and diversified the Company’s portfolio of products and

enabled scale and fixed cost leverage.

acquired entity’s results of operations are included in the Consolidated Financial Statements from July 1, 2022, through June 30,

The Company recognized $ 694,000 of acquisition-related costs that were expensed in the year ended June 30, 2023.

These costs are

included in the consolidated statements of operations and comprehensive income within transaction costs.

revenue and earnings included in the Company’s consolidated statements of operations for the periods July 1, 2022, through June

30, 2023, are as follows:

of Consolidated Statements of Operations

($ in thousands)

Present Value Obligation

Short-term Liability

Finance ROU leases are recorded in

Property and Equipment, net on the consolidated balance sheets.

of Finance leases in Property and Equipment

June 30, 2025

part of the Think3Fold acquisition, a contingent consideration, or earn-out, arrangement was established.

The contingent consideration

is contingent upon the achievement of certain predefined performance milestones from July 1, 2022, to June 30, 2025.

The fair value of

the contingent consideration was zero at the acquisition date and as of June 30, 2024, and 2023.

Any subsequent changes in the fair value

of the contingent consideration will be accounted for as an adjustment to the statement of operations and comprehensive (loss) income.

Think3Fold acquisition was treated for accounting purposes as a purchase of Think3Fold using the acquisition method of accounting in

accordance with ASC 805, Business Combinations.

Under this method, the aggregate consideration was allocated to the acquired assets and

assumed liabilities, in each case, based on their respective fair value as of the closing date, with the excess of the consideration

transferred over the fair value of the net assets acquired (or net liabilities assumed) being allocated to intangible assets and goodwill.

purchase price allocation for this business acquisition was completed in the fourth quarter of the fiscal year ending June 30, 2023.

Based on the purchase price allocation and the fair value measurements, the following assets and liabilities are recognized:

of purchase price consideration ($ in thousands)

of Acquisition Date Fair Value of Consideration Transferred

Cash Acquired

Trade Receivables

Customer Relationship Intangibles

Accounts Payable

Total identifiable net assets (liabilities)

Total Consideration

resulting from the Think3Fold acquisition is not deductible for tax purposes.

This non-deductibility arises from the intrinsic nature

of the transaction and applicable tax regulations.

The recognized goodwill associated with the Think3Fold acquisition primarily comprises

expected synergies, since the acquisition is expected to generate synergies in various aspects, including operational efficiencies and

revenue growth.

These synergies are a significant component of recognized goodwill, as they are anticipated to enhance the overall value

of the combined entity.

Accumulated Depreciation

Net Book Value

disclosed in Note 1, on February 10, 2023, the Company completed the Merger with Alliance and a Merger Sub, resulting in the Company

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account to the three major shareholders, and converted to Class A shares on a 1:1 basis:

the stock price increases to $ 20 per share within 5 years, 20 million Class E shares will

the stock price increases to $ 30 per share within 7 years, 20 million Class E shares will

the stock price increases to $ 50 per share within 10 years, 20 million Class E shares will

the stock price increases to $ 20 per share within 5 years, 20 million Class E shares will be released.

the stock price increases to $ 30 per share within 7 years, 20 million Class E shares will be released.

the stock price increases to $ 50 per share within 10 years, 20 million Class E shares will be released.

share of Class A and Class E common stock has one vote, and the common shares collectively will possess all voting power and will have

6 unchanged sentences

connection with the Merger, the Company’s 2023 Omnibus Equity Incentive Plan (the “2023 Plan”) became effective.

2023 Plan is a comprehensive incentive compensation plan under which the Company can grant equity-based and other incentives awards to

based officers, employees and directors of, and consultants and advisers to, Alliance and its subsidiaries.

The Company has reserved

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

To the extent that an award

lapses, expires, is canceled, is terminated unexercised or ceases to be exercisable for any reason, or the rights of its holder terminate,

any common stock subject to such award shall again be available for the grant of a new award.

The 2023 Plan shall continue in effect,

unless sooner terminated, until the tenth anniversary of the date on which it is adopted by the Board of Directors (except as to awards

The 2023 Plan is a comprehensive incentive compensation plan under which the Company can grant equity-based and other incentives

awards to based officers, employees and directors of, and consultants and advisers to, Alliance and its subsidiaries.

has reserved a total of 600,000

shares of common stock for issuance as or under awards to be made under the 2023 Plan.

To the extent that an award lapses, expires,

is canceled, is terminated unexercised or ceases to be exercisable for any reason, or the rights of its holder terminate, any common

stock subject to such award shall again be available for the grant of a new award.

The 2023 Plan shall continue in effect, unless

sooner terminated, until the tenth anniversary of the date on which it is adopted by the Board of Directors (except as to awards

outstanding on that date).

The Board of Directors, in its discretion, may terminate it at any time with respect to any shares for which

awards have not theretofore been granted, provided certain conditions are met, in accordance with the 2023 Plan.

The price at which a

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

provided, however, that such option

price (i) shall not be less than the fair market value of a share on the date such share option is granted, and (ii) shall be subject

to adjustment as provided in the 2023 Plan.

As of June 30, 2024, 463,800 shares were awarded under the 2023 Plan.

The Board of Directors, in its discretion, may terminate it at any time with respect to any shares for

which awards have not theretofore been granted, provided certain conditions are met, in accordance with the 2023 Plan.

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

provided, however, that

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

shall be subject to adjustment as provided in the 2023 Plan.

As of June 30, 2025, and 2024, 101,300 and 463,800 shares,

respectively, were awarded under the 2023 Plan.

Asset Purchase

December 17, 2024, the Company completed an asset purchase from Bensussen Deutsch & Associates, LLC, “an unrelated third party”

for a total cash consideration to the seller of $7,551,000.

The asset purchase included inventory, tooling equipment, and a trademark.

allocation of the purchase price was as follows:

of Allocation of Purchase Price

($ in thousands)

Property and Equipment, tooling

Prepaid Assets

Accrued Liability

Total Identifiable net assets (liabilities)

Intangible assets (Trademark) (including capitalized costs)

Total Purchase Price (allocated)

Total Cash Consideration Paid to Seller

Capitalized Acquisition Costs (Legal and Shipping fees)

acquired intangible asset represents a trademark associated with the Company’s recently acquired product line, Handmade by Robots.

The trademark is determined to have an indefinite useful life and will not be amortized.

Instead, it will be tested for impairment annually

or more frequently if events or changes in circumstances indicate that the asset may be impaired, in accordance with ASC 350 (Intangibles

– Goodwill and Other).

Inventory was recorded at its estimated fair value on the acquisition date

and is expected to be sold within 18 months.

Acquisition-related costs of $ 59 thousand, consisting of capitalized legal and shipping

fees, included in the value of the intangible asset in accordance with ASC 805 -50-30-1.

As a result, the total allocated purchase price,

including capitalized costs, is $ 7,610 thousand.

Reclassification of Private Warrants to Public Warrants

Reclassification

from Liability to Equity

the fiscal year ended June 30, 2025, certain shareholders of the Company sold private warrants to third parties who were not deemed “permitted

transferees” under the terms of the Warrant Agreement.

In accordance with the Warrant Agreement, upon such a sale, the private

warrants became subject to the same redemption provisions as the Company’s public warrants.

a result of this change in terms, the affected warrants, which had previously been accounted for as a liability, were reclassified to

Accordingly, the Company reclassified approximately 769,000 warrants with a carrying value of $ 0.5 million from warrant liabilities

to Paid-in Capital during fiscal 2025.

This reclassification had no impact on the Company’s consolidated statements

of income and comprehensive income or cash flows.

Prior period balances were not restated (See Note 20).

Stock-Based Compensation :

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company does not have an annual stock-based compensation plan.

September 2024, the Company’s Board approved, subject to stockholder approval, an amendment to the 2023 Plan to increase the number

of shares authorized for issuance thereunder by 400,000 shares of Class A common stock, for a total amount reserved under the 2023 Plan

of 1,000,000 shares of Class A common stock.

On November 7, 2024, the Company’s stockholder approved the amendment to the 2023

of Stock Based Compensation Plan

Number of RSAs

Outstanding as of June 30, 2023

Outstanding June 30, 2024

Outstanding as of June 30, 2024

Outstanding as of June 30, 2025

connection with awards granted, the Company recognized $ 0.05 million and $ 1.4 million in stock-based compensation during the years ended

June 30, 2025, and 2024, respectively.

a result of the Merger, at June 30, 2024 and 2023, there were 5,750,000

Public Warrants, 4,120,000

Private Placement Warrants and 50,090

restricted stock vested during the year ended June 30, 2025.

The total fair value of restricted stock that vested during the year ended

June 30, 2024, was $ 1.4 million.

Impact of Warrant Liabilities on Earnings Per Share (EPS)

outstanding warrants issued by the Company are classified as liabilities in accordance with ASC 815-40, Derivatives and Hedging –

Contracts in Entity’s Own Equity, due to specific terms that require them to be remeasured at fair value at each reporting date.

Changes in fair value are recognized as a non-cash gain or loss in the consolidated statements of income and comprehensive income, which

resulted in fluctuations in the Company’s reported net income and earnings per share (EPS).

the fiscal year ended June 30, 2025, and 2024, the Company recorded a loss of $ 0.9 million, and a loss of $ 0.04 million, respectively,

related to the fair value measurement of warrant liabilities, primarily due to changes in the market price of our common stock and the

volatility assumptions used in the valuation model.

fair value of the warrant liabilities at June 30, 2025, and 2024, was $ 0.6 million and $ 0.2 million, respectively, and is recorded under

warrant liabilities on the consolidated balance sheets.

should note that the remeasurement of warrant liabilities is a non-operational, non-cash item.

Future changes in fair value will continue

to be recorded in earnings until the warrants are either exercised or expire.

Additional details on the fair value assumptions and measurement

techniques are provided in Note 21 – Fair Value.

a result of the Merger, at June 30, 2025 and 2024, there were 5,750,000 Public Warrants , 4,120,000 Private Placement Warrants and 50,090

Representatives Warrants issued and outstanding, each exercisable for one share of Class A Common Stock with an exercise price of $ 11.50

22 unchanged sentences

a price of $ 0.01 per Public Warrant.

not less than 30 days’ prior written notice of redemption after the warrants become

exercisable to each warrant holder;

and only if, the reported last sale price of the Class A common stock equals or exceeds $ 18.00

per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations,

and the like) for any 20 trading days within a 30 -trading day period commencing once the

Public Warrants become exercisable and ending three business days before the Company sends

the notice of redemption to the warrant holders.

If and when the Public Warrants become redeemable

by the Company, the Company may exercise its redemption right.

not less than 30 days’ prior written notice of redemption after the warrants become exercisable to each warrant holder;

and only if, the reported last sale price of the Class A common stock equals or exceeds $ 18.00 per share (as adjusted for stock splits,

stock dividends, reorganizations, recapitalizations, and the like) for any 20 trading days within a 30 -trading day period commencing

once the Public Warrants become exercisable and ending three business days before the Company sends the notice of redemption to the

warrant holders.

If and when the Public Warrants become redeemable by the Company, the Company may exercise its redemption right.

if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws.

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in one of these three levels based on the lowest level input that is significant to the fair value measurement in its entirety.

June 30, 2024 and 2023, the Company has classified the Private Placement Warrants and the Representative Warrants as Level 3 fair value

measurements.

of June 30, 2025 and 2024, the Company has classified the Private Placement Warrants and the Representative Warrants as Level 3 fair

value measurements.

Management evaluates a variety of inputs and then estimates fair value based on those inputs.

As discussed below, the Company

utilized the Black Scholes Model in valuing the Private Placement Warrants and Representative Warrants.

As discussed below,

the Company utilized the Black Scholes Model in valuing the Private Placement Warrants and Representative Warrants.

estimated fair value of cash, trade receivables, accounts payable, accrued expenses and other current liabilities are based on Level

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were determined in the following manner:

(i) Risk-free

interest rate:

the risk-free interest rate is based on the U.S.

Treasury rate with a term

matching the time to expiration.

(ii) Expected

Treasury rate with a term matching the time to expiration.

the expected term is estimated to be equivalent to the remaining contractual term.

(iii) Expected

expected stock volatility is based on daily observations of the Company’s

historical stock value and implied by market price of the Public Warrants, adjusted by guideline

public company volatility.

(iv) Expected

expected stock volatility is based on daily observations of the Company’s historical stock value and implied by

market price of the Public Warrants, adjusted by guideline public company volatility.

dividend yield:

expected dividend yield is based on the Company’s anticipated dividend

As the Company has never issued dividends, the expected dividend yield is 0 %, and

this assumption will be continued in future calculations unless the Company changes its dividend

expected dividend yield is based on the Company’s anticipated dividend payments.

As the Company has never issued

dividends, the expected dividend yield is 0 %, and this assumption will be continued in future calculations unless the Company changes

its dividend policy.

table below presents the balances of assets and liabilities measured at fair value on a recurring basis by level within the hierarchy

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June 30, 2024

Classification change from Private to Public

Change in value

June 30, 2025

Note 22 – Issuance of Common Stock

During the fiscal year ended June 30, 2024,

the Company sold 1,335,000 shares

of its Class A common stock at a price of $ 3.00 per

share, generating gross proceeds of approximately $ 4.0 million.

After deducting underwriting discounts, offering expenses, and representative warrants, net proceeds were approximately $ 2.1

were issued during the fiscal year ended June 30, 2025.

Subsequent Events

The Company has evaluated subsequent events through September

10, 2025, the date the consolidated financial statements were issued, and determined that there are no subsequent events that require

adjustment to or disclosure in the consolidated financial statements.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures