ALLIANCE ENTERTAINMENT HOLDING CORP 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (MARK ONE) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended March 31, 2026 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 001-40014 ALLIANCE ENTERTAINMENT HOLDING CORPORATION (Exact Name of Registrant as Specified in Its Charter) Delaware 85-2373325 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 8201 Peters Road , Suite 1000 Plantation , FL 33324 (Address of principal executive offices) (954) 255-4000 (Issuer’s telephone number) Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol(s) Name of each exchange on which registered Class A common stock, par value $0.0001 per share AENT The Nasdaq Stock Market LLC Redeemable warrants, exercisable for shares of Class A common stock at an exercise price of $11.50 per share AENTW The Nasdaq Stock Market LLC Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definition of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act.: Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☒ Emerging growth company ☒ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ As of May 14, 2026, 50,974,630 shares of Class A common stock, par value $ 0.0001 per share and 60,000,000 contingent 1 shares of Class E common stock, par value $ 0.0001 per share, were issued and outstanding. 1 The 60 million Class E shares are set aside in an escrow account as additional consideration contingent on triggering events occurring within 10 years after the Merger ALLIANCE ENTERTAINMENT HOLDING CORPORATION FORM 10-Q FOR THE QUARTER ENDED MARCH 31 , 2026 TABLE OF CONTENTS Page Part I. Financial Information 1 Item 1. Condensed Consolidated Financial Statements 1 Condensed Consolidated Balance Sheets as of March 31, 2026 (Unaudited) and June 30, 2025 1 Condensed Consolidated Statements of Operations (Unaudited) for the Three and Nine Months Ended March 31, 2026, and 2025 2 Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) for the Three and Nine Months Ended March 31, 2026, and 2025 3 Condensed Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended March 31, 2026, and 2025 5 Notes to Condensed Consolidated Financial Statements (Unaudited) 6 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 26 Item 3. Quantitative and Qualitative Disclosures About Market Risk Item 4. Controls and Procedures Part II. Other Information 37 Item 1. Legal Proceedings 37 Item 1A. Risk Factors 38 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 38 Item 3. Defaults Upon Senior Securities 39 Item 4. Mine Safety Disclosures 39 Item 5. Other Information 39 Item 6. Exhibits 39 Part III. Signatures 40 i Table of Contents PART I - FINANCIAL INFORMATION Item 1. Unaudited Condensed Consolidated Financial Statements. ALLIANCE ENTERTAINMENT HOLDING CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS ($ in thousands except per share amounts) March 31, 2026 June 30, 2025 (Unaudited) Assets Current Assets Cash $ 1,237 $ 1,236 Trade Receivables, Net of Allowance for Credit Losses of $ 799 and $ 867 , respectively 92,849 95,027 Inventory, Net 126,690 102,848 Other Current Assets 19,200 19,021 Total Current Assets 239,976 218,132 Property and Equipment, Net 10,919 11,291 Operating Lease Right-of-Use Assets, Net 16,875 19,214 Goodwill 94,081 89,116 Intangibles, Net 19,397 18,475 Other Long-Term Assets 1,644 789 Deferred Tax Asset, Net 4,211 4,211 Total Assets $ 387,103 $ 361,228 Liabilities and Stockholders’ Equity Current Liabilities Accounts Payable $ 158,453 $ 155,300 Accrued Expenses 12,660 9,548 Current Portion of Operating Lease Obligations 3,314 3,229 Current Portion of Finance Lease Obligations 2,720 3,075 Deferred Consideration 1,300 - Contingent Liability 1,577 1,577 Total Current Liabilities 180,024 172,729 Revolving Credit Facility, Net 64,330 55,268 Finance Lease Obligation, Non- Current 7 1,931 Operating Lease Obligations, Non-Current 15,052 17,432 Shareholder Loan (subordinated), Non-Current - 10,000 Contingent Liability, Non-Current 5,500 Acquired Royalty Obligation (Endstate), Non-Current 165 - Warrant Liability 2,075 646 Total Liabilities 267,153 258,006 Commitments and Contingencies (Note 13) - - Stockholders’ Equity Preferred Stock: Par Value $ 0.0001 per share, Authorized 1,000,000 shares, Issued and Outstanding and 0 shares as of March 31, 2026, and June 30, 2025 - - Common Stock: Par Value $ 0.0001 per share, Authorized 550,000,000 shares at March 31, 2026, and at June 30, 2025; Issued and Outstanding 50,974,630 Shares as of March 31, 2026, and 50,957,370 at June 30, 2025, respectively 5 5 Paid In Capital 48,719 48,570 Accumulated Other Comprehensive Loss ( 76 ) ( 76 ) Retained Earnings 71,302 54,723 Total Stockholders’ Equity 119,950 103,222 Total Liabilities and Stockholders’ Equity $ 387,103 $ 361,228 The accompanying notes are an integral part of the unaudited condensed consolidated financial statements. 1 Table of Contents ALLIANCE ENTERTAINMENT HOLDING CORPORATION UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended ($ in thousands except share and per share amounts) March 31, 2026 March 31, 2025 March 31, 2026 March 31, 2025 Net Revenues $ 258,201 $ 213,045 $ 880,886 $ 835,707 Cost of Revenues (excluding depreciation and amortization) 225,180 183,984 763,590 738,821 Operating Expenses Distribution and Fulfillment Expense 11,120 9,989 33,161 31,425 Selling, General and Administrative Expense 16,878 14,187 48,545 41,092 Depreciation and Amortization 1,392 1,352 3,966 3,865 Transaction Costs 313 - 909 - Insurance Claim Recovery - - ( 408 ) - Restructuring Cost - 4 2 73 Gain on Disposal of Fixed Assets - - ( 24 ) ( 15 ) Total Operating Expenses 29,703 25,532 86,151 76,440 Operating Income 3,318 3,529 31,145 20,446 Other Expenses Interest Expense 1,568 2,435 7,369 8,101 Change in Fair Value of Warrants ( 884 ) ( 1,676 ) 1,428 910 Total Other Expenses 684 759 8,797 9,011 Income Before Income Tax Expense 2,634 2,770 22,348 11,435 Income Tax Expense 323 919 5,769 2,116 Net Income 2,311 1,851 16,579 9,319 Net Income per Share – Basic $ 0.05 $ 0.04 $ 0.33 $ 0.18 Weighted Average Common Shares Outstanding - Basic 50,963,322 50,957,370 50,959,324 50,957,370 Net Income per Share – Diluted $ 0.05 $ 0.04 $ 0.32 $ 0.18 Weighted Average Common Shares Outstanding - Diluted 51,028,493 50,965,970 51,024,496 50,965,970 The accompanying notes are an integral part of the unaudited condensed consolidated financial statements. 2 Table of Contents Alliance Entertainment Holding Corporation Condensed Consolidated Statements of Changes in Stockholders’ Equity Three and Nine Months Ended March 31, 2026 (Unaudited) ($ in thousands) Common Stock Shares Issued and Outstanding Par Value Paid In Capital Accumulated Other Comprehensive Loss Retained Earnings Total Balances at June 30, 2025 50,957,370 $ 5 $ 48,570 $ ( 76 ) $ 54,723 $ 103,222 Stock-based Compensation Expense - - 25 - - 25 Net Income - - - - 4,880 4,880 Balances at September 30, 2025 50,957,370 $ 5 $ 48,595 $ ( 76 ) $ 59,603 $ 108,127 Stock-based Compensation Expense - - 69 - - 69 Net Income - - - - 9,388 9,388 Balances at December 31, 2025 50,957,370 $ 5 $ 48,664 $ ( 76 ) $ 68,991 $ 117,584 Stock-based Compensation Expense 17,260 - 55 - - 55 Net Income - - - - 2,311 2,311 Balances at March 31, 2026 50,974,630 $ 5 $ 48,719 $ ( 76 ) $ 71,302 $ 119,950 The accompanying notes are an integral part of the unaudited condensed consolidated financial statements. 3 Table of Contents Alliance Entertainment Holding Corporation Condensed Consolidated Statements of Changes in Stockholders’ Equity Three and Nine Months Ended March 31, 2025 (Unaudited) ($ in thousands) Common Stock Shares Issued Par Value Paid In Capital Accumulated Other Comprehensive Loss Retained Earnings Total Balances at June 30, 2024 50,957,370 $ 5 $ 48,058 $ ( 79 ) $ 39,645 $ 87,629 Net Income - - - 397 397 Balances at September 30, 2024 50,957,370 $ 5 $ 48,058 $ ( 79 ) $ 40,042 $ 88,026 Warrants conversion, from Liability to Equity - - 454 - - 454 Net Income - - - - 7,071 7,071 Balances at December 31, 2024 50,957,370 $ 5 $ 48,512 $ ( 79 ) $ 47,113 $ 95,551 Balances 50,957,370 $ 5 $ 48,512 $ ( 79 ) $ 47,113 $ 95,551 Net Income - - - - 1,851 1,851 Balances at March 31, 2025 50,957,370 $ 5 $ 48,512 $ ( 79 ) $ 48,964 $ 97,402 Balances 50,957,370 $ 5 $ 48,512 $ ( 79 ) $ 48,964 $ 97,402 The accompanying notes are an integral part of the unaudited condensed consolidated financial statements. 4 Table of Contents ALLIANCE ENTERTAINMENT HOLDING CORPORATION UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Nine Months Ended Nine Months Ended ($ in thousands) March 31, 2026 March 31, 2025 Cash Flows from Operating Activities: Net Income $ 16,579 $ 9,319 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 1,339 1,280 Amortization of Intangible Assets 2,627 2,585 Amortization of Deferred Financing Costs (Included in Interest Expense) 2,053 1,053 Allowance for Credit Losses 1,190 780 Change in Fair Value of Warrants 1,428 910 Deferred Income Taxes - ( 967 ) Non-cash lease expense 2,339 2,157 Stock-based Compensation Expense 149 - Gain on Disposal of Fixed Assets ( 24 ) ( 15 ) Changes in Assets and Liabilities Trade Receivables 988 ( 3,283 ) Inventory ( 23,842 ) 4,994 Income Taxes Payable 5,182 1,558 Operating Lease Obligations ( 2,294 ) ( 1,004 ) Other Assets ( 1,071 ) ( 6,027 ) Accounts Payable 3,153 6,368 Accrued Expenses and Contingent Liability ( 2,467 ) ( 3,627 ) Net Cash Provided by Operating Activities 7,329 16,081 Cash Flows from Investing Activities: Capital Expenditures ( 974 ) ( 52 ) Cash Paid for Business Acquisition/Asset Purchase ( 1,150 ) ( 7,551 ) Cash Inflow from Asset Disposal 30 15 Investment in Captive Stock 36 - Net Cash Used in Investing Activities ( 2,058 ) ( 7,588 ) Cash Flows from Financing Activities: Payments on Financing Leases ( 2,279 ) ( 2,116 ) Payments on Revolving Credit Facility ( 882,067 ) ( 778,620 ) Borrowings on Revolving Credit Facility 889,722 773,144 Repayments on Shareholder Note (Subordinated), Non-Current ( 10,000 ) - Deferred Financing Cost ( 646 ) - Net Cash Used in Financing Activities ( 5,270 ) ( 7,592 ) Net Increase in Cash 1 901 Cash, Beginning of the Period 1,236 1,129 Cash, End of the Period $ 1,237 $ 2,030 Supplemental disclosure for Cash Flow Information Cash Paid for Interest $ 7,300 $ 8,089 Cash Paid for Income Taxes $ 2,062 $ 1,675 Supplemental Disclosure for Non-Cash Investing and Financing Activities Conversion of Warrants from liability to Equity - 454 The accompanying notes are an integral part of these condensed consolidated financial statements 5 Table of Contents ALLIANCE ENTERTAINMENT HOLDING CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS March 31 , 2026 Note 1: Organization and Summary of Significant Accounting Policies Alliance is a leading global wholesaler and distributor of physical media, entertainment products, hardware, and accessories across various platforms. Employing an established multi-channel strategy, Alliance operates as the vital link between renowned international manufacturers of entertainment content and top-tier retail partners both domestically and internationally. Additionally, Alliance manages a diverse portfolio of owned e-commerce brands through its DirectToU LLC division, catering to various entertainment and collectible markets. Alliance also provides state-of-the art warehousing and distribution technologies, operating systems and services that seamlessly enable entertainment product transactions to better serve customers directly or through our distribution affiliates. On December 31, 2025, the Company completed the acquisition of Endstate Authentic LLC (“LLC”), a digital authentication and loyalty-driven consumer brand. The transaction was accounted for as a business combination under ASC 805. Accordingly, the assets acquired and liabilities assumed have been recorded at their estimated fair values as of the acquisition date. The purchase price allocation is preliminary and subject to adjustment as the Company continues to finalize its valuation analyses. Results of operations for Endstate are included in the Company’s condensed consolidated financial statements beginning on the acquisition date. Additional information related to this acquisition is provided in Note 23 – Business Combinations. On 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 “Merger”). The recapitalization has been retroactively reflected in all periods presented. The 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 16 and 21. The accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recurring accruals and adjustments) which are necessary in order to state fairly the Company’s results of operations, financial position, stockholders’ equity and cash flows as of and for the periods presented. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year or any other future period. The unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes, including the Summary of Significant Accounting Policies, included in the Company’s Annual Report on Form 10-K filed September 10, 2025. June 30, 2025, balance sheet information contained herein was derived from the Company’s audited consolidated financial statements as of that date included therein. Reclassification Certain amounts from prior periods have been reclassified to conform to the current period presentation. Basis for Presentation The condensed consolidated financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). The condensed consolidated financial statements include the accounts of Alliance Entertainment Holding Corporation and its wholly owned subsidiaries. Intercompany transactions have been eliminated in consolidation. Liquidity On October 1, 2025, the Company entered into a $ 120 million senior secured asset-based revolving credit facility with Bank of America, N.A. (the “Revolving Credit Facility”). The new facility refinanced and replaced the Company’s prior 3 three-year $ 120 million asset-based revolving credit facility with White Oak Commercial Finance, LLC, which was entered into on December 21, 2023, and was scheduled to mature on December 21, 2026. Based on the Company’s cash on hand, cash flows from operations, working capital, and availability under its revolving credit facility, management has concluded that the Company has sufficient liquidity to fund its operations and obligations for at least twelve months from the issuance of these condensed consolidated financial statements. 6 Table of Contents Concentration of Credit Risk Concentration of Credit Risk consists of the following at: Schedule of Concentration of Credit Risk Customers: * Less than 10% Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended Revenue March 31, 2026 March 31, 2025 March 31, 2026 March 31, 2025 Customer #1 22.5 % 14.8 % 20.5 % 14.7 % Customer #2 10.5 % 14.2 % 13.8 % 13.8 % Customer #3 10.7 % 12.5 % 10.5 % 11.1 Receivables March 31, 2026 June 30, 2025 Customer #1 25.6 % 30.2 % Customer #2 - * 13.1 % Customer #3 11.0 - * * Less than 10% Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended Purchases March 31, 2026 March 31, 2025 March 31, 2026 March 31, 2025 Supplier #1 27.0 % 27.1 % 23.5 % 22.3 % Supplier #2 14.8 % 14.1 % 12.0 % 10.8 % Supplier #3 - * - * - * 14.4 % Supplier #4 16.5 % 13.8 % 11.3 % - * * Less than 10% Payables March 31, 2026 June 30, 2025 Supplier #1 18.4 % 18.8 % Supplier #2 13.4 % - * Supplier #3 16.1 % 12.9 % Concentration of credit risk 16.1 % 12.9 % * Less than 10% Accounting Pronouncements Recently Issued and Adopted Accounting Pronouncements In July 2025, the Company adopted Accounting Standards Update (“ASU”) 2024-02, Codification Improvements -Amendments to Remove References to the Concepts Statements. This ASU removes references to the FASB Concepts Statements from the Accounting Standards Codification and makes related conforming amendments. The adoption of ASU 2024-02 did not have a material impact on the Company’s condensed consolidated financial statements or related disclosures. In July 2025, the Company adopted ASU 2024-01, Compensation - Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards, which clarifies how entities determine whether certain profits interest or similar awards should be accounted for as stock-based compensation under Topic 718 or under other applicable guidance. The Company does not issue profits interest or similar awards, and adoption of this ASU did not have a material impact on its condensed consolidated financial statements. 7 Table of Contents Recently Issued but Not Yet Adopted Accounting Pronouncements In November 2024, the Financial Accounting Standards Board (“FASB”) issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40), which requires additional disaggregation of certain income statement expense categories in the notes to the financial statements. The 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 condensed consolidated financial statement disclosures. In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures, which enhances income tax disclosure requirements, including expanded disaggregation of effective tax rate reconciliations and income taxes paid by jurisdiction. The standard is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is evaluating the impact of this ASU, which is expected to primarily affect annual income tax disclosures. In May 2025, the FASB issued ASU 2025-03, Business Combinations (Topic 805) and Consolidation (Topic 810): Determining the Accounting Acquirer in the Acquisition of a Variable Interest Entity. The amendments are effective for fiscal years beginning after December 15, 2026, including interim periods within those fiscal years, and early adoption is permitted. The Company is evaluating the applicability of this ASU to its consolidated financial statements. In September 2025, the FASB issued ASU 2025-06, Intangibles Goodwill and Other Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, which includes targeted improvements to the accounting and disclosure requirements for internal-use software costs. The amendments are effective for annual reporting periods beginning after December 15, 2027, including interim periods within those annual reporting periods, and early adoption is permitted. The Company is currently evaluating the impact of this ASU on its condensed consolidated financial statements. Note 2: Summary of Significant Accounting Policies There have been no material changes or updates to the Company’s significant accounting policies from those described in Note 1 to the Company’s audited consolidated financial statements included in the Annual Report on Form 10-K for the fiscal year ended June 30, 2025. Earnings per Share Basic Earnings Per Share (“EPS”) is computed by dividing net income available to common shareholders by the weighted average shares outstanding during the period. Diluted EPS takes into account the potential dilution that could occur if securities or other contracts to issue shares, such as stock options, warrants, and unvested restricted stock units, were exercised and converted into common shares and the impact would not be antidilutive. Diluted EPS is computed by dividing net income available to common shareholders by the weighted average shares outstanding during the period, increased by the number of additional shares that would have been outstanding if the potential shares had been issued and were dilutive. Contingently issuable shares are included in basic net income per share only when there is no circumstance under which those shares would not be issued. The following table sets forth the computation of basic and diluted net earnings per share of Common Stock for the three and nine months ended March 31, 2026, and 2025, respectively: Schedule of Computation of Basic and Diluted Net Earnings Per Share of Common Stock Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended March 31, 2026 March 31, 2025 March 31, 2026 March 31, 2025 Net Income (in thousands) $ 2,311 $ 1,851 $ 16,579 $ 9,319 Basic and diluted shares Weighted-average Class A Common Stock outstanding - Basic 50,963,322 50,957,370 50,959,324 50,957,370 Weighted-Average Class A Common Stock Outstanding - Diluted 51,028,493 50,965,970 51,024,496 50,965,970 Income per share for Class A Common Stock — Basic $ 0.05 $ 0.04 $ 0.33 $ 0.18 Income per share for Class A Common Stock — Diluted $ 0.05 $ 0.04 $ 0.32 $ 0.18 8 Table of Contents There 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 March 31, 2026, and March 31, 2025. For the three and nine months ended March 31, 2026, there are 9,920,090 warrants outstanding that have been excluded from diluted earnings per share because they are anti-dilutive. Note 3: Trade Receivables, Net Trade Receivables, Net consists of the following at: Schedule of Trade Receivables, Net ($ in thousands) March 31, 2026 June 30, 2025 Trade Receivables $ 97,954 $ 100,799 Less: Allowance for Credit Losses ( 799 ) ( 867 ) Sales Returns Reserve ( 2,130 ) ( 2,257 ) Customer Rebate and Discount Reserve ( 2,176 ) ( 2,648 ) Total Allowances ( 5,105 ) ( 5,772 ) Trade Receivables, Net $ 92,849 $ 95,027 The following table provides a roll forward of the allowance for credit losses accounts for the periods ending March 31, 2026 and June 30, 2025: Schedule of Allowance For Credit Losses Allowance for Credit Losses Roll forward March 31, 2026 June 30, 2025 ($ in thousands) Beginning Balance ( 867 ) ( 648 ) Current Period Provision for Expected Credit Losses ( 1,190 ) ( 1,068 ) Write-offs 1,266 861 Recoveries of Previously Written-off Accounts ( 8 ) ( 12 ) Ending Balance ( 799 ) ( 867 ) Note 4: Inventory, Net Inventory, Net (all finished goods) consists of the following at: Schedule of Inventory, Net ($ in thousands) March 31, 2026 June 30, 2025 Inventory $ 129,816 $ 108,590 Less: Reserves ( 3,126 ) ( 5,742 ) Inventory, Net $ 126,690 $ 102,848 Note 5: Other Current and Long-Term Assets Other Current and Long-Term Assets consist of the following at: Schedule of Other Current and Long-term Assets ($ in thousands) March 31, 2026 June 30, 2025 Other Assets–Current Prepaid Intellectual Property $ 1,917 $ 2,786 Escrow Receivable 8,500 8,500 Insurance Receivable 1,914 1,377 Prepaid Insurance 773 377 Contract Acquisition receivable - 2,342 Prepaid Catalogs 694 632 Prepaid Manufacturing Components 1,102 385 Prepaid Maintenance 1,353 1,041 Other Current Assets 396 - Prepaid Molding 336 140 Prepaid Shipping Supplies 1,946 1,270 Prepaid Vault - 154 Prepaid Royalties 269 17 Total Other Assets–Current $ 19,200 $ 19,021 Other Long-Term Assets Deposits $ 220 $ 175 Income tax receivable 1,424 614 Total Other Long-Term Assets $ 1,644 $ 789 9 Table of Contents Note 6: Property and Equipment, Net Property and Equipment, Net consists of the following at: Schedule of Property and Equipment, Net ($ in thousands) March 31, 2026 June 30, 2025 Property and Equipment Leasehold Improvements $ 1,313 $ 908 Machinery and Equipment 30,473 30,624 Furniture and Fixtures 1,688 1,717 Capitalized Software 10,377 10,377 Equipment Under Finance Leases 12,488 12,488 Computer Equipment 1,756 1,757 Construction in Progress 612 43 Property and Equipment, Gross 58,707 57,914 Less: Accumulated Depreciation and Amortization ( 47,788 ) ( 46,623 ) Total Property and Equipment, Net $ 10,919 $ 11,291 Depreciation Expense for the three months ended March 31, 2026, and 2025 was $ 0.5 and $ 0.4 million respectively, and for the nine months ended March 31, 2026, and 2025, it was $ 1.3 and $ 1.3 million. Note 7: Goodwill and Intangibles, Net Goodwill reported is the result of multiple acquisitions made by Alliance Entertainment Holding Corporation over the years. The $ 4.97 million increase in goodwill during the nine months ended March 31, 2026 relates to the Endstate business combination discussed in Note 23, Business Combination (Endstate). For the periods ending March 31, 2026 and June 30, 2025, goodwill activity consisted of the following: Schedule of Goodwill ($ in thousands) March 31, 2026 June 30, 2025 Goodwill, Beginning Balance $ 89,116 $ 89,116 Additions 4,965 - Goodwill, Ending Balance $ 94,081 $ 89,116 Intangibles, Net consists of the following at: Schedule of Intangible Assets, Net ($in thousands) March 31, 2026 June 30, 2025 Intangibles: Intangibles Cost Accum. Amortization Intangibles, Net Accum. Amortization Intangibles, Net Customer Relationships $ 78,000 $ ( 75,168 ) $ 2,832 $ ( 73,928 ) $ 4,072 Contract Acquisition 2,100 ( 465 ) 1,635 ( 180 ) 1,620 Tradename - HMBR 6,800 - 6,800 - 6,800 Trademark - Endstate 800 ( 20 ) 780 - - Technology - Endstate 1,550 ( 39 ) 1,511 - - Customer Relationships - Endstate 900 ( 23 ) 877 - - Mecca Customer Relationships 8,023 ( 6,825 ) 1,198 ( 6,393 ) 1,630 Customer List 12,760 ( 8,996 ) 3,764 ( 8,407 ) 4,353 Total $ 110,933 $ ( 91,536 ) $ 19,397 $ ( 88,908 ) $ 18,475 During the three months ended March 31, 2026, and 2025, the Company recorded amortization expenses of $ 0.9 and $ 0.8 million, respectively and during the nine months ended March 31, 2026 , and 2025, the Company recorded amortization expenses of $ 2.6 and $ 2.6 million, respectively. 10 Table of Contents Expected amortization over the next five years and thereafter, as of March 31, 2026, is as follows: Schedule of Expected Amortization Over the Next Five Years and Thereafter ($ in thousands) Intangible Assets Year Ended June 30, Remaining in fiscal year 2026 $ 940 2027 3,711 2028 2,683 2029 1,404 2030 794 Thereafter 3,065 Total Expected Amortization $ 12,597 Indefinite-lived Intangible asset 6,800 Total Intangible Assets $ 19,397 Note 8: Accrued Expenses Accrued Expenses consists of the following at: Schedule of Accrued Expenses ($ in thousands) March 31, 2026 June 30, 2025 Marketing Funds Accruals $ 5,263 $ 4,870 Payroll and Payroll Tax Accruals 1,172 1,690 Accruals for Other Expenses 1,256 1,688 Income Tax Payable 4,569 - Accrued Contract Liability 400 1,300 Total Accrued Expenses $ 12,660 $ 9,548 Note 9: Revolving Credit Facility New Credit Facility On October 1, 2025, the Company entered into an asset-based revolving credit facility (the “New Revolving Credit Facility”) with Bank of America, which refinanced and replaced its prior asset-based revolving credit facility with White Oak Commercial Finance, LLC. The Revolving Credit Facility provides for borrowings of up to $ 120.0 million, subject to a borrowing base, and matures on October 1, 2030 . Borrowings under the Revolving Credit Facility bear interest at the 30-day SOFR rate, subject to a floor of 2.00 %, plus an applicable margin of 1.50 % through March 31, 2026 and 1.625 % thereafter. The 30-day SOFR rate as of March 31, 2026 was 3.7 %. The Company also pays a commitment fee of 0.15 % per annum on unused availability. Commitment fees incurred during the three and nine months ended March 31, 2026 and March 31, 2025 were $ 0.01 million and $ 0.07 million, respectively and $ 0.09 million and $ 0.16 million respectively. Included in interest expense for the three and nine months ended March 31, 2026, is $ 1.6 million related to the accelerated amortization of unamortized deferred financing costs associated with the prior revolving credit facility that was refinanced and replaced. Availability under the Revolving Credit Facility is based on eligible accounts receivable and inventory. As of March 31, 2026, availability was approximately $ 55.1 million , with outstanding borrowings of approximately $ 64.9 million. The Revolving Credit Facility contains customary affirmative and negative covenants, including limitations on additional indebtedness, liens, dividends, and certain investments, and requires the maintenance of a fixed charge coverage ratio of at least 1.0 to 1.0 on a trailing twelve-month basis, as defined in the credit agreement. The facility is secured by a first-priority security interest in substantially all of the Company’s and its subsidiaries’ assets. The Company was in compliance with all applicable covenants under the Revolving Credit Facility as of March 31, 2026. 11 Table of Contents Letters of Credit The Revolving Credit Facility permits the issuance of letters of credit, which reduces availability under the borrowing base. As of March 31, 2026, the Company had letters of credit outstanding totaling $ 0.75 million. Prior Credit Facility The Company’s prior asset-based revolving credit facility with White Oak Commercial Finance, LLC (the “Prior Revolving Credit Facility”) provided for borrowings of up to $ 120 million, subject to a borrowing base, and was scheduled to mature on December 21, 2026. Borrowings under the Prior Revolving Credit Facility bore interest at the 30-day SOFR rate, subject to a floor of 2.00%, plus a margin ranging from 4.00% to 4.25%. As of March 31, 2025, the effective interest rate on outstanding borrowings was 8.4 %. The Prior Revolving Credit Facility was terminated and fully repaid on October 1, 2025; therefore, as of March 31, 2026, no amounts were outstanding and an effective interest rate was not applicable. As of June 30, 2025, outstanding borrowings under the Prior Revolving Credit Facility were approximately $ 57.0 million, with approximately $ 54.0 million in availability. Schedule of Revolver Balance ($ in thousands) New Credit Facility March 31, 2026 Prior Credit Facility June 30, 2025 Outstanding Balance $ 64,912 $ 57,257 Less: Deferred Finance Costs ( 582 ) ( 1,988 ) Revolving Credit Facility, Net $ 64,330 $ 55,269 During the three months ended March 31, 2026, and 2025, the Company incurred interest expense of approximately $ 1.5 and $ 1.5 million, respectively. During the nine months ended March 31, 2026, and 2025, interest expense was approximately $ 4.7 and $ 5.6 million, respectively. Recurring amortization of deferred financing costs was approximately $ 0.31 million and $ 0.35 million for the three months ended March 31, 2026, and 2025, respectively, and approximately $ 0.92 million and $ 1.05 million for the nine months ended March 31, 2026, and 2025, respectively. In addition, interest expense for the nine months ended March 31, 2026, included approximately $ 1.6 of accelerated amortization of deferred financing costs related to the early refinancing and termination of the prior revolving credit facility on October 1, 2025. Note 10: Employee Benefits Company Health Plans During 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”), which eliminates the Company’s exposure to self-insured medical and dental claims; therefore, no similar liabilities are expected under the current plan structure. 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 tiers. There 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. As of March 31, 2026, and 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 first quarter of fiscal 2026. 12 Table of Contents 401(k) Plan The Company has the Alliance Entertainment 401(k) Plan (the Plan) covering all eligible employees of the Company. All employees over the age of 18 are eligible to participate in the Plan at the beginning of the month following date of hire. The Plan has automatic deferral at the beginning of the month following the date of hire. Employees are automatically enrolled in the Plan with a 3 % contribution; however, they have the option to increase/decrease their deferrals or opt out of the Plan at any time. The Company currently offers a match contribution of $ 0.50 of every dollar up to 4 % of contribution percentage. The Company conducts a retirement plan review on an annual basis. During the three and nine months ended March 31, 2026, and 2025, the Company contributed $ 0.3 million and 0.2 million, respectively and $ 0.7 million and $ 0.4 million, respectively, to the Plan. Note 11: Segment Information 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 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 condensed consolidated balance sheet. Significant expense categories regularly reviewed by the CODM include: ● Cost of Revenues (excluding depreciation and Amortization) ● Distribution and Fulfillment Expense ● Sales and Marketing Other Segment Items : Other segment items include expenses that are part of segment profit or loss but are not classified as significant segment expenses. These include: ● General and Administrative Expense ● Technology Expense ● Interest Expense ● Income Tax Expense The following table presents segment revenue, net income, and the significant segment expenses for the Company’s single reportable segment for the three and nine months ending March 31, 2026, and 2025: Reconciliation to Condensed Consolidated Net Income: Schedule of Segment Reporting for Financial Information ($ in thousands) Three months ended March 31, 2026 Three months ended March 31, 2025 Nine months ended March 31, 2026 Nine months ended March 31, 2025 Net Revenues $ 258,201 $ 213,045 $ 880,886 $ 835,707 Cost of Revenues (excluding depreciation and Amortization) 225,180 183,984 763,590 738,821 Distribution and Fulfillment Expense 11,120 9,989 33,161 31,425 Sales and Marketing 9,486 6,816 25,512 19,658 Other Segment items * 10,104 10,405 42,044 36,484 Net income $ 2,311 $ 1,851 $ 16,579 $ 9,319 * Other segment items include interest expense, income tax expense, general and administrative expenses, and technology expenses, which are reported separately on the condensed consolidated statements of operations. 13 Table of Contents Note 12: Income Taxes The effective tax rates were 12 % and 33 % for the three months ended March 31, 2026 and 2025, respectively. In accordance with ASC 740-270, the Company calculates its interim income tax provision using an estimated annual effective tax rate (“ETR”) applied to year-to-date ordinary income. This approach ensures that the interim tax expense reflects the best estimate of the annual tax rate, as required by U.S. GAAP. Items that are unusual, infrequent, or not expected to recur such as discrete events are recognized separately in the period in which they occur and are not included in the estimated annual ETR. The difference between the Company’s effective tax rate for the three months ended March 31, 2026, and the federal statutory rate primarily resulted from state income taxes, Foreign Derived Intangible Income, and fair value adjustments related to the Company’s warrant liability. The effective tax rate was approximately 26 % and 19 % for the nine months ended March 31, 2026, and 2025, respectively. The difference between the Company’s effective tax rate and the U.S. federal statutory rate for the nine months ended March 31, 2026, primarily resulted from state income taxes, FDII, fair value adjustments related to the Company’s warrant liability, and tax items attributable to periods prior to the Company’s acquisition by its parent. The difference between the Company’s effective tax rate and the U.S. federal statutory rate for the nine months ended March 31, 2025, primarily resulted from state income taxes, FDII, and a discrete item related to an out-of-measurement period adjustment to the deferred tax liability related to software costs. The Company completed the acquisition of Endstate Authentic LLC on December 31, 2025. For U.S. federal and state income tax purposes, the transaction is treated as a taxable purchase of assets because Endstate Authentic LLC is a disregarded entity. As a result, the tax basis of the acquired assets and assumed liabilities was stepped up generally to their respective fair values. Based on the Company’s analysis as of the acquisition date, the acquisition did not result in material acquisition-date temporary differences and, accordingly, no material deferred tax assets or liabilities were recorded in connection with the acquisition. Note 13: Commitments and Contingencies Commitments The Company enters into various agreements with suppliers for the products it distributes. The Company had no long-term purchase commitments or arrangements with its suppliers as of March 31, 2026, and June 30, 2025. Litigation, Claims and Assessments We are exposed to claims and litigations of varying degrees arising in the ordinary course of business and use various methods to resolve these matters. When a loss is probable, we record an accrual based on the reasonably estimable loss or range of loss. When no point of loss is more likely than another, we record the lowest amount in the estimated range of loss and, if material, disclose the estimated range of loss. We do not record liabilities for reasonably possible loss contingencies but do disclose a range of reasonably possible losses if they are material and we are able to estimate such a range. If we cannot provide a range of reasonably possible losses, we explain the factors that prevent us from determining such a range. Historically, adjustments to our estimates have not been material. We believe the recorded reserves in our condensed consolidated financial statements are adequate in light of the probable and estimable liabilities. We do not believe that any of these identified claims or litigation will be material to our results of operations, cash flows, or financial condition. Video Privacy Protection Act Matters. Beginning in August 2024, several putative class actions and related proceedings were filed against the Company and its subsidiary, DirectToU, LLC (“DirectToU”), in federal courts and arbitration alleging violations of the Video Privacy Protection Act (“VPPA”) and similar state laws. The complaints generally allege that the Company disclosed certain customer information and video viewing or purchasing data to third parties through the use of website tracking technologies. In June 2025, the parties reached a settlement resolving the VPPA-related claims, subject to court approval. The settlement provides for a cash payment of $ 1.577 million to the class. The Company expects a portion of the settlement payment to be covered by insurance and, accordingly, recorded an insurance receivable of $ 1.377 million. The Company recorded a settlement liability of $ 1.577 million and the related insurance receivable during the three and nine months ended March 31, 2026, and such amounts remained recorded in accrued expenses on the Company’s condensed consolidated financial statements as of March 31, 2026. The court granted preliminary approval of the settlement in October 2025. Final approval of the settlement remains pending. The Company believes the recorded accrual is adequate based on currently available information. 14 Table of Contents Office Create Litigation. On June 6, 2024, Office Create Corporation filed a civil action against COKeM International Ltd. (“COKeM”) in the United States District Court for the District of Minnesota, alleging contributory trademark infringement, false designation of origin, unfair competition, unjust enrichment, and civil conspiracy arising from the alleged distribution of Cooking Mama: Cookstar. Office Create seeks monetary damages in excess of $ 40 million. No damages have been awarded. COKeM has denied the allegations and filed a third-party complaint against Planet Entertainment LLC and its principal seeking indemnification and contribution. Default has been entered against those third-party defendants. In January 2026, Office Create dismissed its claims against Plaion, Inc. and Plaion GmbH pursuant to a confidential settlement agreement, which is reflected in Office Create’s expert damages analysis. Discovery is ongoing. On March 9, 2026, Office Create served an expert report opining that total damages are approximately $ 37.9 million. Trial readiness is scheduled for October 2026. The Company maintains insurance coverage that may apply, subject to policy limits. The Company cannot reasonably estimate a possible loss, and no accrual has been recorded. Sparkle Pop Matter. On June 9, 2025, Sparkle Pop, LLC filed an adversary proceeding against the Company in the United States Bankruptcy Court for the District of Maryland in the matter In re Diamond Comic Distributors , alleging theft of trade secrets and tortious interference with contractual relations. The Company has moved to dismiss the amended complaint, and that motion remains pending. The Company denies the allegations. At this time, the Company cannot reasonably estimate the amount or range of any potential loss associated with this matter, and no accrual has been recorded. TCPA Demand. In November 2025, the Company received a demand letter asserting potential claims under the federal Telephone Consumer Protection Act against its subsidiary, DirectToU, LLC, relating to alleged marketing text messages. No complaint has been filed, and discussions between the parties are ongoing. At this time, the Company cannot reasonably estimate the amount or range of any potential loss associated with this matter, and no accrual has been recorded. Other Matters From time to time, the Company is involved in other legal and regulatory matters arising in the ordinary course of business. In December 2024, DirectToU, LLC received a third-party tender of defense regarding a notice of alleged noncompliance with California Proposition 65 concerning a product supplied by a vendor and sold by the Company. The Company discontinued the product and tendered defense to the supplier, which has assumed responsibility for responding to the notice. The Company does not believe this matter is material. In July 2025, the Company received a cease-and-desist letter alleging a breach of a contractual non-solicitation provision. The Company disputes the allegations, has responded to the correspondence, and has not filed any litigation. The Company does not believe this matter is material. Tariffs and Trade Policy: IEEPA Ruling and Contingent Refund Background. From February 4, 2025, through February 24, 2026, the U.S. government imposed tariffs on imported goods pursuant to executive orders issued under the International Emergency Economic Powers Act (IEEPA). These tariffs affected certain products the Company imported during that period. Supreme Court Ruling. On February 20, 2026, the U.S. Supreme Court issued a 6-3 decision in Learning Resources, Inc. v. Trump , No. 24-1287, holding that IEEPA does not authorize the President to impose tariffs. The ruling invalidated all IEEPA-based tariffs imposed during the period February 4, 2025, through February 24, 2026. Following the ruling, President Trump issued an executive order terminating the IEEPA tariff orders, effective February 24, 2026. The ruling did not affect tariffs imposed under other statutory authorities, including Section 232 (steel and aluminium) and Section 301 (goods of Chinese origin), which remain in effect. 15 Table of Contents CIT Refund Order. On March 4, 2026, the U.S. Court of International Trade (CIT) issued an order directing U.S. Customs and Border Protection (CBP) to refund IEEPA duties to importers of record through CBP’s normal administrative procedures. On March 6, 2026, the CIT suspended enforcement of that order to allow CBP time to develop a dedicated refund processing system. The CIT’s directive to provide refunds remains in place; only enforcement has been temporarily suspended. CBP has launched the Consolidated Administration and Processing of Entries (CAPE) portal on April 20, 2026, to process refund applications. The government’s deadline to appeal the scope of the CIT’s refund order is approximately June 7, 2026. Contingent Refund. The Company is the importer of record on entries subject to IEEPA tariffs paid during the period February 4, 2025, through February 24, 2026. Based on the Company’s internal analysis of its CBP entry records, management estimates the total IEEPA tariffs paid for which a refund may be available to be approximately $ 1.5 million. The Company has not recognized a receivable for this amount in its condensed consolidated balance sheet as of March 31, 2026, as the refund process remains subject to administrative implementation by CBP, potential government appeal of the CIT’s refund order, and other procedural uncertainties. The amount and timing of any refund the Company ultimately receives may differ materially from management’s estimate. The Company intends to submit its refund application through the CAPE portal and will continue to monitor developments. No Impact to Current Period Results. The impact of IEEPA tariffs on the Company’s cost of sales during the quarter ended March 31, 2026 and the year-to-date period was not material. Note 14: Related Party Transactions GameFly Holdings, LLC On February 1, 2023, the Company entered into a Distribution Agreement (the “Agreement”) with GameFly Holdings, LLC (“GameFly”), a customer owned by the Company’s principal stockholders. The Agreement is effective from February 1, 2023 through March 31, 2028, and thereafter continues on an indefinite basis unless terminated by either party upon six months’ prior written notice. During the three-month periods ended March 31, 2026, and 2025, and the nine-months periods ended March 31, 2026, and 2025, the Company had additional sales to GameFly of $ 0.6 million, $ 0.7 million, $ 2.2 million, and $ 2.3 million, respectively. Sales to GameFly were conducted on terms consistent with those offered to third-party customers. As of March 31, 2026, and June 30, 2025, the Company had receivables, net, from GameFly of approximately $ 0.1 and $ 0.03 million, respectively, which were included in other receivables, net, on the condensed consolidated balance sheets. For the three months ended March 31, 2026, and 2025, the Company recognized revenue of $ 0.08 for consulting services provided to GameFly. For the nine months ended March 31, 2026, and 2025, the Company recognized revenue of $ 0.25 million. For the three months ended March 31, 2026, and 2025, the Company incurred consulting expense of $ 0.02 million and $ 0.06 million, respectively, for services received from GameFly. For the nine months ended March 31, 2026, and 2025, the Company incurred consulting expense of $ 0.06 million and $ 0.17 million, respectively. 16 Table of Contents Ogilvie Loans On July 3, 2023, the Company entered into a $ 17.0 million line of credit with Bruce Ogilvie, a principal stockholder (the “Ogilvie Loan”). The Company made and repaid various short-term borrowings under the Ogilvie Loan through October 2023. The Ogilvie Loan would have matured on December 22, 2026 , and bore interest at a rate equal to 30-day SOFR plus 5.0 %. In connection with the Company’s entry into an asset-based revolving credit facility with Bank of America on October 1, 2025, the Company repaid the outstanding balance of $ 10.0 million under the Ogilvie Loan in full. As a result, there were no amounts outstanding under the Ogilvie Loan as of March 31, 2026. Interest expense related to the Ogilvie Loan was zero for the three months ended March 31, 2026, as no borrowings were outstanding during that period. Interest expense related to the Ogilvie Loan for the three months ended March 31, 2025, was approximately $ 0.2 million. Interest expenses for the nine months ended March 31, 2026, and 2025 were $ 0.2 and $ 0.8 million, respectively. B&D Capital Partners, LLC B&D Capital Partners, LLC (“BDCP”) is a financial advisory firm whose parent company is majority owned by W. Tom Donaldson III, a member of the Company’s board of directors. During the fiscal year ended June 30, 2024, the Company paid BDCP approximately $ 1.8 million in advisory fees in connection with the Company’s former credit facility with White Oak Commercial Finance, LLC, which were capitalized as deferred financing costs. The White Oak credit facility was repaid in full and terminated on October 1, 2025. During the three and nine months ended March 31, 2026, the Company did not incur any related-party fees with BDCP; however, upon termination of the facility, the Company expensed $ 1.6 million of the remaining unamortized deferred financing costs associated with that facility. There were no amounts payable to BDCP as of March 31, 2026 and June 30, 2025. Note 15: Leases The Company leases offices, warehouses, computer equipment, and vehicles. Certain leases include options to renew, which may extend the lease term from 1 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. Leasehold improvements and assets are depreciated over the shorter of their useful life or the lease term unless the lease includes a purchase option or title transfer that is reasonably certain to occur. Our lease agreements do not include material residual value guarantees or restrictive covenants. Lease payments generally include fixed payments, with some leases requiring variable payments. These variable payments typically cover the Company’s proportionate share of property taxes, insurance, and common area maintenance and are recognized as incurred rather than being included in the lease liability. On the condensed consolidated 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. 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. 17 Table of Contents Components of lease expense were as follows for the three and nine months ending March 31, 2026, and 2025: Schedule of Components of Lease Expense Three Months Three Months Nine Months Nine Months Ended Ended Ended Ended Lease Cost ($ in thousands) March 31, 2026 March 31, 2025 March 31, 2026 March 31, 2025 Finance Lease Cost: Amortization of Right of Use Assets 372 364 1,116 1,103 Interest on lease liabilities 61 116 225 389 Capitalized Operating Lease Cost 1,066 1,104 3,199 3,228 Short – Term Lease Cost 19 24 59 55 Variable Lease Cost 251 297 720 800 Total Lease Cost 1,769 1,905 5,319 5,575 Other Information Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from Capitalized Operating leases 1,074 717 3,152 2,074 Financing cash flows from finance leases 774 718 2,280 2,138 March 31, 2026 June 30, 2025 Right of use assets obtained in exchange for new operating lease liabilities - - Net Right of use asset remeasurement - - Weighted average remaining lease term - finance leases (in Years) 0.77 1.58 Weighted average remaining lease term - operating leases (in Years) 4.81 5.52 Weighted average discount rate - finance leases 7.6 % 7.1 % Weighted average discount rate – Capitalized operating leases 5.7 % 5.7 % Maturities of operating and finance lease liabilities as of March 31, 2026 are as follows: Schedule of Maturities of Lease Liabilities ($ in thousands) Operating Leases Finance Leases Remaining in fiscal 2026 $ 1,074 $ 836 2027 4,160 1,987 2028 4,249 - 2029 4,362 - 2030 4,493 - Thereafter 2,680 - Total Lease Payments 21,018 2,823 Less Imputed Interest ( 2,652 ) ( 96 ) Present Value Obligation 18,366 2,727 Short-term Liability 3,314 2,720 Total $ 15,052 $ 7 Finance ROU leases are recorded in Property and Equipment, net on the condensed consolidated balance sheets and is as follows: Schedule of Finance leases in Property and Equipment March 31, 2026 June 30, 2025 Cost $ 13,831 $ 13,831 Additions 10 10 Accumulated Depreciation ( 4,519 ) ( 3,403 ) Net Book Value $ 9,322 $ 10,438 18 Table of Contents Note 16: Merger As disclosed in Note 1, on February 10, 2023, the Company completed the Merger with Alliance and a Merger Sub, resulting in the Company becoming a publicly traded company. While Adara was the legal acquirer in the Merger, for financial accounting and reporting purposes under U.S. GAAP, Legacy Alliance was the accounting acquirer, and the Merger was accounted for as a “reverse recapitalization.” A reverse recapitalization (i.e., a capital transaction involving the exchange of stock by Alliance for Legacy Alliance’s stock) does not result in a new basis of accounting, and the consolidated financial statements of the combined entity represent the continuation of the consolidated financial statements of Legacy Alliance. Accordingly, the consolidated assets, liabilities, and results of operations of Legacy Alliance became the historical consolidated financial statements of the combined company, and Alliance’s assets, liabilities and results of operations were consolidated with Legacy Alliance beginning on the acquisition date. Operations prior to the Merger are presented as those of Legacy Alliance in future reports. The net assets of Alliance were recognized at historical cost (which was consistent with carrying value), with no goodwill or other intangible assets recorded. At the closing of the Merger, each of the then issued and outstanding shares of Alliance common stock were cancelled and automatically converted into the right to receive the number of shares of Alliance common stock equal to the exchange ratio (determined in accordance with the Business Combination Agreement). The Company’s 900 shares of previously outstanding common stock were exchanged for 47,500,000 shares of Class A Common Stock. In addition, the treasury stock was cancelled. This change in equity structure has been retroactively reflected in the financial statements for all periods presented. The following table summarizes the shares of Class A outstanding following consummation of the Merger: Schedule of Consummation of Merger Alliance Public Shares 167,170 Alliance Sponsor Shares 1,500,000 Legacy Alliance Shares 47,500,000 Total Shares of Common Stock Outstanding after Merger 49,167,170 Up to 60 million additional Class E shares may be issued to the Legacy Alliance shareholders at no cost based on future performance of the company’s stock price, and 9.9 million warrants (Class A) that can be exercised for common shares at $ 11.50 per share (See Note 21). The 60 million Class E shares are set aside in an escrow account as additional consideration contingent on triggering events occurring within 10 years after the Merger. Upon reaching the following triggering events, the Class E shares will be released from the escrow account to the three major shareholders, and converted to Class A shares on a 1:1 basis: ● If the stock price increases to $ 20 per share within 5 years, 20 million Class E shares will be released. ● If the stock price increases to $ 30 per share within 7 years, 20 million Class E shares will be released. ● If the stock price increases to $ 50 per share within 10 years, 20 million Class E shares will be released. Each share of Class A and Class E common stock has one vote, and the common shares collectively will possess all voting power and will have the exclusive right to vote for the election of directors and on all other matters properly submitted to a vote of the stockholders. Since the Class E shares are subject to vesting conditions and meet the contingent exercise and settlement provisions to be considered indexed to the Company’s stock, they are accounted for as equity instruments, and are reflected as a reduction of retained earnings, at their fair value on the date of the Merger. During the fiscal year ended June 30, 2023, the Company incurred total transaction costs of approximately $ 5.0 million, including legal, financial advisory and other professional fees related to the Merger, which was recorded as an expense as the transaction costs exceeded the proceeds received in the Merger. In connection with the Merger, the Company’s 2023 Omnibus Equity Incentive Plan (the “2023 Plan”) became effective. The 2023 Plan is a comprehensive incentive compensation plan under which the Company can grant equity-based and other incentives awards to based officers, employees, and directors of, and consultants and advisers to, Alliance and its subsidiaries. The Company has reserved a total of 600,000 shares of Class A common stock for issuance as or under awards to be made under the 2023 Plan. To the extent that an award lapses, expires, is cancelled, 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), and the Board of Directors in its discretion may terminate it at any time with respect to any shares for which awards have not theretofore been granted, provided certain conditions are met, in accordance with the 2023 Plan. The price at which a share may be purchased upon exercise of a share option shall be determined by the Plan Committee; 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. On November 7, 2024, the Company’s stockholders approved an amendment to the 2023 Plan to increase the number of shares of Class A common stock for issuance as or under awards to be made under the 2023 Plan to 1,000,000 shares. As of March 31, 2026, 463,800 shares were awarded under the 2023 Plan. 19 Table of Contents Note 17: Asset Purchase On 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. The allocation of the purchase price was as follows: Schedule of Allocation of Purchase Price ($ in thousands) Inventory $ 753 Property and Equipment, tooling 124 Prepaid Assets 2 Accrued Liability ( 25 ) Total Identifiable net assets 854 Intangible assets (Trademark) (including capitalized costs) 6,800 Total Purchase Price (allocated) $ 7,654 Total Cash Consideration Paid to Seller $ 7,551 Capitalized Acquisition Costs (Legal and Shipping fees) 103 The 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). For the three and nine months ended March 31, 2026, and 2025, there was no impairment recorded. 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 $ 103 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 $ 7.7 million. Note 18: Reclassification of Private Warrants to Public Warrants Reclassification from Liability to Equity During the six months ended December 31, 2024, 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. As a result of this change in terms, the affected warrants, which had previously been accounted for as a liability, were reclassified to equity. 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 condensed consolidated statements of operations or cash flows. Prior period balances were not restated (See Note 21). 20 Table of Contents Note 19: Stock-Based Compensation As part of the Merger on February 10, 2023, 600,000 shares were authorized for a one-time employee stock plan. The compensation committee approved 463,800 shares of restricted stock awards to employees on June 15, 2023. The shares fully vest on October 4, 2023. The company does not have an annual stock-based compensation plan. In 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, bringing the total reserved under the 2023 Plan to 1,000,000 shares of Class A common stock. On November 7, 2024, the Company’s stockholders approved the amendment to the 2023 Plan. During the three months ended March 31, 2026, the Company granted restricted stock awards to certain employees pursuant to employment offer letters executed in December 2025. Although the employment offer letters reference a December 31 grant date, the Company determined that, for accounting purposes under ASC 718, the grant date was January 1, 2026, as this was the date on which all requisite terms of the awards were finalized, requisite approvals were obtained, and the employees commenced service. Accordingly, the fair value of these awards was measured as of January 1, 2026, and stock-based compensation expense is recognized over the requisite service period beginning on that date. During the three and nine months ended March 31, 2026, 2,000 shares of restricted stock vested under the 2023 Plan. In connection with awards granted, the Company recognized $ 0.1 and $ 0 and $ 0.1 and $ 0 in stock-based compensation expense during the three and nine months ended March 31, 2026, and March 31, 2025. Note 20: Impact of Warrant Liabilities on Earnings Per Share (EPS) Certain 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 condensed consolidated statements of operations, which resulted in fluctuations in the Company’s reported net income and earnings per share (EPS). For the nine months ended March 31, 2026 and 2025, changes in the fair value of warrant liabilities reduced reported EPS by $ 0.03 and $ 0.02 per share, respectively. These changes were primarily driven by movements in the market price of our common stock and changes in the volatility assumptions used in the valuation model. For the three and nine months ended March 31, 2026 and 2025, the Company recorded (i) gains of $ 0.9 million and $ 1.7 million and (ii) losses of $ 1.4 million and $ 0.9 million, respectively, related to the fair value measurement of warrant liabilities. Reported EPS benefited by $ 0.02 and $ 0.03 for the three months ended March 31, 2026 and 2025, respectively. The fair value of the warrant liabilities at March 31, 2026, and June 30, 2025, was a reduction of $ 0.9 and $ 0.6 million, respectively, and is recorded under warrant liabilities on the condensed consolidated balance sheets. Investors 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, transferred to public warrants or expire. Additional details on the fair value assumptions and measurement techniques are provided in Note 22 – Fair Value. Note 21: Warrants At March 31, 2026, and June 30, 2025, there were 6,519,083 Public Warrants, and 3,357,667 Private Placement Warrants, and 43,340 Representatives Warrants issued and outstanding, each exercisable to purchase one share of Class A common stock at an exercise price of $ 11.50 (the “Warrants”). The Company will not be obligated to deliver any shares of Class A common stock pursuant to the exercise of a warrant. It will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act covering the issuance of the shares of Class A common stock underlying the Warrants is then effective. A prospectus relating thereto is current, subject to the Company satisfying its obligations with respect to registration. Additionally, no warrant will be exercisable, and the Company will not be obligated to issue shares of Class A common stock upon exercise of a warrant unless Class A common stock issuable upon such warrant exercise has been registered, qualified, or deemed to be exempt under the securities laws of the state of residence of the registered holder of the Warrants. 21 Table of Contents The Company filed with the SEC on April 11, 2023, its registration statement covering the shares of Class A common stock issuable upon exercise of the Warrants, to cause such registration statement to become effective and to maintain a current prospectus relating to those shares of Class A common stock until the warrants expire or are redeemed, as specified in the warrant agreement. The registration, as amended, became effective June 29, 2023. Public Warrants: The Public Warrants qualify for the derivative scope exception under ASC 815 and are therefore classified as equity on the consolidated balance sheets. They may only be exercised for a whole number of shares. The Public Warrants are currently exercisable at $ 11.50 per share and will expire five years after the completion of the Merger or earlier upon redemption or liquidation. The Company may redeem for cash the outstanding Public Warrants: ● in whole and not in part. ● at a price of $ 0.01 per Public Warrant. ● upon not less than 30 days’ prior written notice of redemption after the warrants become exercisable to each warrant holder; and ● if, and only if, the reported last sale price of the Class A common stock equals or exceeds $ 18 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations, and the like) for any 20 trading days within a 30 -trading day period commencing once the Public Warrants become exercisable and ending three business days before the Company sends the notice of redemption to the warrant holders. If and when the Public Warrants become redeemable by the Company, the Company may exercise its redemption right. Even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws. If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of shares of Class A common stock issuable upon exercise of the Public Warrants may be adjusted in certain circumstances including in the event of a stock dividend, or recapitalization, reorganization, merger, or consolidation. However, the Public Warrants will not be adjusted for issuances of Class A common stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the Public Warrants. Private Placement Warrants: The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering but are classified as liabilities on the condensed consolidated balance sheet as they are not considered indexed to the company’s own stock. Additionally, the Private Placement Warrants are exercisable on a cashless basis and are non-redeemable, so long as they are held by the initial purchasers or their permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants as described above. Representative Warrants The Company issued Representative Warrants, for minimal consideration to ThinkEquity, a division of Fordham Financial Management, Inc. (and/or its designees), in a private placement simultaneously with the closing of Alliance’s initial public offering, which are also classified as liabilities on the condensed consolidated balance sheet. The Representative Warrants are identical to the Private Warrants except that so long as the Representative Warrants are held by ThinkEquity (and/or its designees) or its permitted transferees, the Representative Warrants (i) will not be redeemable by the Company, (ii) may be exercised by the holders on a cashless basis, (iii) are entitled to registration rights and (iv) are not exercisable more than five years from the effective date of the Merger. 22 Table of Contents Note 22: Fair Value The Company complies with the provisions of ASC 820, Fair Value Measurements , for its financial and non-financial assets and liabilities. ASC 820 defines fair value, establishes a framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. The Company accounts for certain assets and liabilities at fair value. The hierarchy below lists three levels of fair value based on the extent to which inputs used in measuring fair value are observable in the market. The company categorizes each of its fair value measurements in one of these three levels based on the lowest level input that is significant to the fair value measurement in its entirety. As of March 31, 2026 and June 30, 2025, 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. The estimated fair value of cash, trade receivables, accounts payable, accrued expenses and other current liabilities are based on Level 1 inputs as the fair values approximate carrying amounts as of March 31, 2026, and June 30, 2025, based on the short-term nature and maturity of these instruments. The estimated fair values of subordinated shareholder debt and the credit facility is based on Level 2 inputs, which consist of interest rates that are currently available to the Company for issuance of debt with similar terms and remaining maturities. As of March 31, 2026, and June 30, 2025 the estimated fair value of the Company’s short and long-term debt approximates it carrying value due to market interest rates charged on such debt or their short-term maturities. The Company recomputes the fair value of the Private and the Representative Warrants at the issuance date and the end of each quarterly reporting period. Such value computation includes subjective input assumptions that are consistently applied each period. If the Company were to alter its assumptions or the numbers input based on such assumptions, the resulting fair value could be materially different. The Company utilized the following assumptions to estimate fair value of the Private Warrants and Representative Warrants as of: Schedule of Estimate Fair Value of Private Warrants and Representative Warrants March 31, 2026 June 30, 2025 Stock Price $ 6.55 $ 3.77 Exercise price per share $ 11.50 $ 11.50 Risk-free interest rate 3.71 % 3.63 % Expected term (years) 1.87 2.62 Expected volatility 45.4 % 47.1 % Expected dividend yield - — Warrants and rights outstanding measurement input - — The significant assumptions using the Lattice model approach for valuation of the Private Placement Warrants and Representative Warrants were determined in the following manner: (i) Risk-free interest rate: the risk-free interest rate is based on the U.S. Treasury rate with a term matching the time to expiration. (ii) Expected term: the expected term is estimated to be equivalent to the remaining contractual term. (iii) Expected volatility: expected stock volatility is based on daily observations of the Company’s historical stock value and implied by market price of the Public Warrants, adjusted by guideline public company volatility. (iv) Expected dividend yield: expected dividend yield is based on the Company’s anticipated dividend payments. As the Company has never issued dividends, the expected dividend yield is 0 %, and this assumption will be continued in future calculations unless the Company changes its dividend policy. 23 Table of Contents The table below presents the balances of assets and liabilities measured at fair value on a recurring basis by level within the hierarchy as follows (in thousands) Schedule of Assets and Liabilities Measured at Fair Value on Recurring Basis As of March 31, 2026 Total Level 1 Level 2 Level 3 Private Placement and Representative Warrants $ 2,075 $ - $ - $ 2,075 As of June 30, 2025 Total Level 1 Level 2 Level 3 Private Placement and Representative Warrants $ 646 $ — $ — $ 646 The table below presents the change in the number and fair value of the Private and Representative Warrants for the period ended March 31, 2026, and March 31, 2025 (in thousands, except the number of shares) Schedule of Change in Number and Fair Value of Private and Representative Warrants Private Warrants Representative Warrants Total Shares Value Shares Value Shares Value June 30, 2025 3,356,767 $ 638 43,340 $ 8 3,401,007 $ 646 Exercised - - - - - - Change in value - $ 1,444 - 19 - $ 1,463 September 30, 2025 3,356,767 $ 2,082 43,340 $ 27 3,401,007 $ 2,109 Exercised - - - - - - Change in classification from Private to Public - - Change in value - $ 839 - $ 11 - $ 850 December 31, 2025 3,356,767 $ 2,921 43,340 $ 38 3,401,007 $ 2,959 Exercised - - - - - - Change in value - $ ( 873 ) - $ ( 11 ) - $ ( 884 ) March 31, 2026 3,356,767 $ 2,048 43,340 $ 27 3,401,007 $ 2,075 Private Warrants Representative Warrants Total Shares Value Shares Value Shares Value June 30, 2024 4,120,000 $ 244 50,090 $ 3 4,170,090 $ 247 Exercised - - - - - - Change in value - $ 41 - - - $ 41 September 30, 2024 4,120,000 $ 285 50,090 $ 3 4,170,090 $ 288 Exercised - - - - - - Change in classification from Private to Public ( 762,333 ) ( 450 ) ( 6,750 ) ( 4 ) ( 769,083 ) ( 454 ) Change in value - $ 2,509 - $ 36 - $ 2,545 December 31, 2024 3,357,667 $ 2,344 43,340 $ 35 3,401,007 $ 2,379 Exercised - - - - - - Change in value - $ ( 1,650 ) - $ ( 26 ) - $ ( 1,676 ) March 31, 2025 3,357,667 $ 694 43,340 $ 9 3,401,007 $ 703 Note 23: Business Combinations - Endstate On December 31, 2025, Alliance Entertainment Holding Corporation (the “Company”), through a wholly owned subsidiary, completed the acquisition of substantially all of the assets of Endstate (the “Acquisition”). The Acquisition was accounted for as a business combination under ASC 805, Business Combinations . The Acquisition was completed to enhance the Company’s technology capabilities and expand its digital and direct-to-consumer product offerings. The results of operations of the acquired business were included in the Company’s condensed consolidated financial statements at March 31, 2026, since the acquisition date was not material. 24 Table of Contents Purchase Consideration The total consideration transferred in connection with the Acquisition was $ 7.9 million, which consisted of the following (in thousands): Schedule of Purchase Consideration Amount Cash paid at closing $ 1,150 Deferred payment payable one year after closing 1,300 Fair value of contingent consideration 5,500 Total consideration transferred $ 7,950 Certain payments to the founders, including guaranteed payments and sign-on bonuses that were not contingent on continued employment, were determined to represent consideration transferred in exchange for the acquired business and were included in purchase consideration. Payments contingent on continued employment were excluded from purchase consideration and will be recognized as compensation expense over the requisite service period. Preliminary Purchase Price Allocation The allocation of the purchase consideration is preliminary and subject to adjustment during the measurement period as the Company finalizes its valuation of acquired assets and assumed liabilities. The preliminary allocation of the consideration transferred is as follows (in thousands): Schedule of Preliminary Purchase Price Allocation Asset / (Liability) Amount Identifiable intangible assets: Technology $ 1,550 Trademarks 800 Customer relationships 900 Total identifiable intangible assets 3,250 Goodwill 4,965 Net liabilities assumed ( 265 ) Total consideration transferred $ 7,950 Identifiable intangible assets are being amortized on a straight-line basis over an estimated useful life of ten years . Goodwill represents the excess of the consideration transferred over the estimated fair value of the identifiable net assets acquired and reflects expected synergies, future technology enhancements, and the assembled workforce. Goodwill is deductible through amortization over 15 years for income tax purposes. Contingent Consideration The Acquisition includes contingent consideration arrangements consisting of earnout payments based on future financial performance during the 2026 through 2028 periods. The contingent consideration was recorded at an estimated fair value of $ 5.5 million as of the acquisition date and is included in accrued liabilities on the accompanying condensed consolidated balance sheets. The fair value was determined using a probability-weighted discounted cash flow model and includes significant unobservable inputs. Accordingly, the contingent consideration liability is classified as Level 3 within the fair value hierarchy. Contingent consideration is remeasured at each reporting date, with changes in fair value recognized in earnings. Acquisition-Related Costs Transaction costs incurred in connection with the Acquisition were expensed as incurred and included in transaction costs. Note 24: Subsequent Events The Company evaluated subsequent events occurring through May 14, 2026, the date these condensed consolidated financial statements were issued (or available to be issued). Based on this evaluation, the Company did not identify any non-recognized subsequent events that requires disclosure. 25 Table of Contents Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The objective for the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” is to provide information that the Company’s management team believes is necessary to achieve an understanding of its financial condition and the results of business operations with particular emphasis on the Company’s future and should be read in conjunction with the Company’s audited consolidated financial statements and related notes thereto for the year ended June 30, 2025, which are included in the Company’s Annual Report on Form 10-K filed with the SEC on September 10, 2025. This analysis contains forward-looking statements concerning the Company’s performance expectations and estimates. Other than statements with historical context, commentary should be considered forward-looking and carries with it risks and uncertainties. See “Statement Regarding Forward-Looking Statements” and Part I, Item 1A. Risk Factors, of this Form 10-Q for a discussion of other uncertainties, risks and assumptions associated with these statements. Alliance is a leading global wholesaler and distributor of collectibles, physical media, entertainment products, hardware, and accessories across multiple platforms. Through an established multi-channel strategy, the Company serves as a key link between leading content producers and manufacturers and top-tier retail partners, both domestically and internationally. Alliance partners with premier suppliers, including Universal Pictures, Nintendo, Warner Bros. Home Entertainment, Walt Disney Studios, Sony Pictures, Lionsgate, Universal Music Group, Sony Music Entertainment (including The Orchard), Warner Music Group, Microsoft, Take-Two Interactive, Electronic Arts, Funko, and Mattel. The Company maintains an in-stock assortment of over 340,000 SKUs, including vinyl records, video games, compact discs, DVDs, Blu-ray titles, and collectibles. In addition to its wholesale operations, Alliance distributes exclusive content through AMPED Distribution and Alliance Home Entertainment, and operates as a value-added wholesale distributor, direct-to-consumer (“DTC”) distributor, and e-commerce provider. Its customer base includes leading retailers such as Walmart, Amazon, Barnes & Noble, Target, Verizon, BJ’s Wholesale Club, Costco, eBay, Best Buy, and Kohl’s, among others. The Company sells export-permitted products to customers in more than 70 countries worldwide. Additionally, Alliance manages a diverse portfolio of owned e-commerce brands through its DirectToU LLC division, catering to various entertainment and collectible markets. Notable brands include CDWow, Vinyl Unlimited, DeepDiscount, PopMarket, Collectibles Unlimited, Critics’ Choice Video, Collectors’ Choice Music, Movies Unlimited and WowHD. Alliance provides advanced distribution and technology platforms that enable the efficient sale and fulfillment of physical entertainment products and collectibles across retail and e-commerce channels. These capabilities are further enhanced by Handmade by Robots, which expands the Company’s portfolio of premium licensed collectibles, and Alliance Authentic (formerly Endstate), which delivers NFC-enabled authentication and digital product identity technology to support product verification and authenticated resale. Together, these capabilities strengthen Alliance’s position in the collectibles market by enabling secure, traceable, and scalable distribution of high-value physical products. In addition, Alliance supports its retail partners with integrated back-office services, including fully operational EDI and logistics infrastructure, to facilitate both ongoing operations and new product launches. License Agreements In January 2025, Alliance entered into an exclusive home entertainment distribution agreement with Paramount Pictures, designating Alliance as the sole distributor of Paramount’s physical media – including DVDs, Blu-rays, and 4K UHD titles, across the United States and Canada. This strategic partnership significantly enhances Alliance’s leadership in home entertainment distribution by providing direct access to Paramount’s extensive library of blockbuster films and iconic TV series. The collaboration has already yielded positive results. This partnership not only strengthens relationships with major retailers and collectors but also reinforces Alliance’s commitment to delivering high-quality entertainment products to consumers. In January 2026, Alliance Entertainment entered into an exclusive home entertainment license agreement with Amazon MGM Studios Distribution for physical media distribution in the United States and Canada. Under the agreement, the Company acts as the exclusive distributor of Amazon MGM Studios’ physical media titles, including new releases and select catalog content, across wholesale, e-commerce, and brick-and-mortar retail channels. The partnership broadens the Company’s physical media portfolio, particularly in higher-value and collectible offerings, while leveraging its scale, marketing capabilities, and omnichannel fulfillment platform to drive distribution and category growth. 26 Table of Contents Merger, Asset Purchase and Business Acquisition Alliance has a proven history of successfully acquiring and integrating competitors and complementary businesses. The Company will continue to evaluate opportunities to identify targets that meet strategic and economic criteria. On December 31, 2025, Alliance completed its strategic acquisition of Endstate Authentic LLC and established Endstate Authentic LLC (“Endstate”) as a wholly owned subsidiary focused on authentication and resale technology. The acquisition supports the launch of Alliance Authentic, a new premium platform designed to create authenticated, certified vinyl collectibles and a trusted global marketplace for buying, selling, and trading investment-grade physical media. Endstate’s patented NFC-enabled authentication and digital product identity technology enables real-time product verification, counterfeit prevention, and authenticated resale services, forming the technological foundation of the Alliance Authentic platform. As part of the transaction, Endstate co-founders Bennett Collen and Stephanie Howard joined Alliance’s leadership team as President and Senior Vice President of Operations, respectively. The acquisition resulted in the recognition of $5 million of goodwill and $3.3 million of identifiable intangible assets as of March 31, 2026, primarily related to Endstate’s proprietary technology and digital identity systems. Management believes the acquisition strengthens Alliance’s strategic position in the growing authenticated collectibles market and supports the development of new technology-enabled and recurring revenue opportunities. On December 17, 2024, Alliance acquired Handmade by Robots from Bensussen Deutsch & Associates, LLC, for $7.6 million. Handmade by Robots produces licensed vinyl figures that mimic the look of knitted or crocheted plush toys. These figures feature characters from popular franchises such as DC Comics, Ghostbusters, Harry Potter, Star Trek, and Stranger Things, and have become favorites among fans and collectors. The acquisition included inventory, tooling equipment, and a trademark associated with the product line. This addition has diversified our product offerings by adding an exclusive line to our portfolio. On 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 “Merger”). The recapitalization has been retroactively reflected in all periods presented. The 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 16 and 21. On July 1, 2022, Alliance purchased the assets and liabilities of Think3Fold, LLC, a collectibles distribution company. This acquisition resulted in increased shelf space at our largest customers and expanded our product offerings. Upon consummation of the Merger, the most significant change in Legacy Alliance’s future reported financial position and results of operations was a decrease in net Equity of $787,000 as compared to Legacy Alliance’s consolidated balance sheet. As a result of the Merger, Alliance Entertainment became the successor to an SEC-registered company, which requires us to hire additional personnel and implement procedures and processes to address public company regulatory requirements and customary practices. We expect to incur additional annual expenses as a public company for, among other things, directors’ and officers’ liability insurance, director fees and additional internal and external accounting, legal and administrative resources, including increased audit and legal fees. Macroeconomic Uncertainties The Company continues to operate amid macroeconomic uncertainty during the period ended March 31, 2026, including inflationary pressures, evolving trade policies, and geopolitical instability related to ongoing global conflicts. While inflation has moderated compared to prior periods, consumer discretionary spending remains uneven, impacting demand across certain product categories. The Company continues to experience cost pressures associated with existing and potential tariffs on imported goods, particularly for internationally sourced physical media and collectibles. In response, management continues to actively manage pricing, product mix, and sourcing strategies to mitigate the effects of economic and trade-related volatility. While these conditions may persist, the Company believes its diversified product portfolio and focus on higher-value and collectible offerings position it to effectively navigate the current environment. For further discussion of the potential impacts of macroeconomic events on our business, financial condition, and operating results, see the section titled Part I “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025, including the risk factor titled “Unstable market and economic conditions have had and may continue to have serious adverse consequences on our business, financial condition and share price.” 27 Table of Contents Tariffs and Trade Policy The U.S. trade policy environment has undergone significant change since early 2025. From February 4, 2025, through February 24, 2026, the U.S. government-imposed tariffs on a broad range of imported goods under IEEPA. These tariffs affected certain products distributed by the Company. The impact of IEEPA tariffs on the Company’s cost of sales during the three months ended March 31, 2026, was not material. On February 20, 2026, the U.S. Supreme Court held in Learning Resources, Inc. v. Trump that IEEPA does not authorize the President to impose tariffs, invalidating all IEEPA-based tariff orders. The President subsequently revoked the IEEPA tariff orders effective February 24, 2026. Following litigation before the U.S. Court of International Trade, CBP launched the CAPE portal on April 20, 2026, to process IEEPA refund applications. Based on its internal analysis of CBP entry records, the Company estimates it may be entitled to refunds of approximately $1.5 million in IEEPA tariffs previously paid. This amount has not been recognized in the financial statements as of March 31, 2026, due to uncertainties surrounding the refund process, including potential government appeal and administrative implementation. See Note 13 to the condensed consolidated financial statements. Despite the invalidation of IEEPA-based tariffs, other tariff authorities remain in effect. The administration has imposed a 10% temporary import surcharge under Section 122 of the Trade Act of 1974, effective February 24, 2026, and currently scheduled to expire July 24, 2026, along with continuing Section 301 tariffs on goods of Chinese origin and Section 232 tariffs on steel and aluminum products. The Company continues to evaluate the impact of the evolving trade policy environment on its sourcing, cost structure, and product distribution arrangements. While the Company’s exposure to currently effective tariffs has not been material to date, a further escalation of tariffs or the imposition of new tariff measures could adversely affect the Company’s cost of sales, gross margin, or supply chain in future periods.” Key Performance Indicators Management monitors and analyzes key performance indicators to evaluate financial performance, including: Net Revenue: To derive Net Revenue, the Company reduces total gross sales by customer returns, returns reserve, and allowances, including discounts. Cost of Revenues (excluding depreciation and amortization): Our cost of revenue reflects the total costs incurred to market and distribute products to customers. Changes in cost are impacted primarily by sales volume, product mix, product obsolescence, freight costs, and market development funds. Operating Expenses: Our Operating Expenses are the direct and indirect costs associated with the distribution and fulfillment of products and services. They include both Distribution and Fulfillment and Selling, General and Administrative Expenses. The Distribution and Fulfillment Expenses are the payroll and operating expenses associated with the receipt, warehousing, and distribution of product. Margins: To analyze profitability, the Company reviews gross and net margins in dollars and as a percent of revenue by line of business and product line. Selling, General and Administrative Expenses: The Selling, General and Administrative Expenses are payroll and operating costs for Information Technology, Sales & Marketing, and General & Administrative functions. In addition, we include Depreciation and Amortization expenses and Transaction Costs, if applicable. Balance Sheet Indicators: The Company views cash, product inventory, accounts payable, and working capital as key indicators of its financial position. 28 Table of Contents Alliance Entertainment Holding Corporation Results of Operations Three Months Ended March 31, 2026, Compared to Three Months Ended March 31, 2025 Three Months Ended Three Months Ended ($ in thousands) March 31, 2026 March 31, 2025 Net Revenues $ 258,201 $ 213,045 Cost of Revenues (excluding depreciation and amortization) 225,180 183,984 Operating Expenses Distribution and Fulfillment Expense 11,120 9,989 Selling, General and Administrative Expense 16,878 14,187 Depreciation and Amortization Expense 1,392 1,352 Transaction Costs 313 - Restructuring Costs - 4 Total Operating Expenses $ 29,703 $ 25,532 Operating Income 3,318 3,529 Other Expenses Change in Fair Value of Warrants (884 ) (1,676 ) Interest Expense 1,568 2,435 Total Other Expenses 684 759 Income Before Income Tax Expense 2,634 2,770 Income Tax Expense 323 919 Net Income $ 2,311 $ 1,851 Net Revenue: Year over year, total net revenues increased from $213.0 million to $258.2 million (+$45.2 million, +21.2%) for the three months ended March 31, 2026. The increase was driven by broad-based growth across several key product categories, most notably CDs, vinyl records, collectibles, and electronics. CD sales increased significantly, rising approximately 90% year-over-year, while vinyl remained the largest category, growing by 14.7%, supported in part by increased demand ahead of Record Store Day in April. Collectibles and electronics also delivered strong growth, reflecting continued consumer demand for higher-value and premium physical products. Video (DVD/Blu-ray/UltraHD) and gaming revenues increased by 4.6% and 12.4%, respectively, contributing to overall growth, though at a more moderate pace. Digital downloads declined by $1.1 million (-31.4%), consistent with the Company’s strategic focus on physical media and collectibles. Overall, revenue performance during the quarter reflected strong demand across core physical product categories and a continued shift in mix toward higher-value offerings, partially offset by declines in digital formats. In addition, our unique DTC suite of distribution and inventory solutions for the e-commerce retail industry, including our consumer direct subsidiary DirectToU LLC, accounted for approximately 30.4% of gross revenue for the three months ended March 31, 2026. Year over year, vinyl record sales increased from $86 million to $99 million for the three months ended March 31, 2026, representing an increase of $13 million, or 15%, compared to the prior-year period. The increase was primarily driven by higher unit sales volume, reflecting continued consumer demand for vinyl records. Growth during the quarter benefited from several notable vinyl releases, including major pop and rock comeback albums, high-profile pop titles, and early-year metal and industrial releases, as well as continued interest in collectible and limited-edition offerings. Sales were also supported by retailer and consumer purchasing in advance of Record Store Day in April 2026. Vinyl continued to perform well as a preferred physical music format among both established and emerging audiences, and increased demand more than offset relatively stable pricing during the period, resulting in overall year-over-year revenue growth. Music Compact Disc (CD) sales increased from $21 million to $39 million for the three months ended March 31, 2026, representing an increase of $19 million, or 90%, compared to the prior-year period. The increase in revenue was primarily driven by a 39% increase in unit sales volume, along with a 37% increase in average selling price. The growth in unit volume reflects sustained demand for physical music products tied to select high-profile releases and catalog strength, as well as continued consumer interest in collectible and value-priced CD formats. While the broader music market continues to shift toward streaming and digital consumption, CD performance during the quarter ended March 31, 2026, was supported by loyal fan purchasing behavior, particularly for major artist releases and genre-driven demand in pop and international music segments, with K-pop remaining a key driver of incremental volume, helping to offset long-term category decline pressures. 29 Table of Contents Physical movie sales, which include DVD, Blu-ray, and Ultra HD formats, increased from $58 million to $61 million for the three months ended March 31, 2026, representing growth of $3 million, or 5%, compared with the same period in the prior year. The increase was primarily driven by higher unit shipments, along with a modest 0.5% increase in average selling price, resulting in overall revenue growth. Performance during the quarter benefited from a steady cadence of theatrical releases and continued consumer demand for premium physical formats, including 4K Ultra HD and collectible SteelBook editions. The primary driver of the increase was the Paramount partnership, which was initially launched in January 2025 but began to meaningfully ramp in April 2025, contributing to stronger title availability, improved retail placement, and increased volume during the current period. In addition, the Amazon MGM Studios Distribution partnership introduced during the year provided incremental catalog depth and further supported assortment expansion across key retail channels. A favorable product mix shift toward higher-margin premium products also contributed to the increase in average selling price and partially offset softness in lower-priced catalog titles. For the quarter ended March 31, 2026, collectibles revenue increased from $5 million to $8 million, a gain of $3 million, or 48%, compared to the same period last year. While unit volume declined by 11%, this was more than offset by a 67% rise in average selling prices, which drove the overall increase in revenue. The improvement reflects a mix shift toward higher-priced collectibles, supported by expanded sourcing efforts and the addition of new vendors in the latter half of 2025, which contributed incremental sales during the quarter. Performance also benefited from the transition of Handmade by Robots from a distributed brand in 2024 to an owned brand in 2025, along with improved margins from certain legacy brands following inventory optimization initiatives implemented in the prior year. For the quarter ended March 31, 2026, electronics revenue increased from $2.6 million to $4.0 million, representing growth of $1.4 million, or 53%, compared to the prior-year period. The increase was driven by a 19% rise in unit sales volume, along with a 29% increase in average selling price, both of which contributed to the overall revenue growth. The higher average selling price reflects a shift in product mix toward higher-priced items, as well as competitive pricing dynamics. Electronics sales primarily consist of audio playback devices and accessories, including turntables, headphones, speakers, and related products, which are typically sold as complementary items alongside physical music and movie media. Growth in the category was also supported by continued strength in vinyl and physical media sales, which helped drive demand for playback devices and related accessories. Gaming product revenue increased from $29 million to $33 million for the three months ended March 31, 2026, representing an increase of $4 million, or 12%, compared to the prior-year period. The growth was driven by a 6% increase in unit sales volume and a 7% increase in average selling price. The improvement in performance was primarily attributable to steady demand for the Nintendo Switch II, which was released in June 2025 and therefore did not contribute to the prior-year quarter. Sales during the current period benefited from continued consumer interest in this next-generation console platform and related software titles, as well as improved product availability compared to the prior year. Gaming product sales primarily consist of consoles, physical game titles, and accessories. As a distributor of physical gaming products, the Company continues to align its product mix and distribution strategy with evolving consumer preferences, while monitoring supply chain conditions and broader industry trends. Cost of Revenues: Total cost of revenues, excluding depreciation and amortization, increased from $184 million to $225 million for the year-over-year period, representing an increase of $41 million, or 22%, primarily reflecting higher sales volume and the corresponding increase in product costs. Gross margin dollars increased by $4 million, driven by overall sales growth, partially offset by margin compression. For the quarter ended March 31, 2026, gross margin declined from 13.6% to 12.8%, a decrease of 80 basis points compared with the same period in the prior year. The decrease was primarily attributable to a lower mix of digital sales, which carry higher margins, as well as reduced trade spending and vendor rebates received during the period. Additional pressure on margins resulted from slightly higher freight costs and increased product returns processed during the quarter, which negatively impacted gross margin. 30 Table of Contents Operating Expenses: Total operating expenses for the quarter increased from $25.5 million to $29.7 million, an increase of 16.3% year over year, while declining as a percentage of net revenue from 12.0% to 11.5%. The increase in absolute dollars was driven primarily by higher selling, general and administrative (“SG&A”) expenses (excluding depreciation and amortization) and distribution and fulfillment costs. SG&A expenses increased from $14.2 million to $16.9 million, reflecting strategic investments in infrastructure, technology, and personnel to support the Company’s exclusive content partnerships and future growth initiatives. Despite the increase in dollars, SG&A as a percentage of net sales improved from 6.7% to 6.5% for the quarter ended March 31, 2026. Distribution and fulfillment expenses increased from $10.0 million to $11.1 million, or 11.3%, primarily due to higher shipping volumes, partially offset by improved operating leverage. However, these costs decreased as a percentage of net revenue from 4.7% to 4.3%. The Company continues to utilize a flexible labor model within its warehouse operations, with a higher proportion of temporary staffing to support seasonal and demand-driven fluctuations, while maintaining targeted investments in automation to enhance efficiency and scalability over time. Fulfillment payroll increased to $7.1 million from $6.2 million in the prior year, primarily driven by higher staffing levels to support increased demand; however, as a percentage of net revenue, it improved from 2.9% to 2.7%, reflecting improved labor productivity and operating leverage. This was further supported by a slight 0.3% decrease in average labor costs per hour. Depreciation and amortization expense remained consistent at $1.4 million compared with the prior-year period. Interest Expense: For the three months ended March 31, 2026, total interest expense decreased from $2.4 million to $1.6 million (-$.9 million, -35.6%) versus the prior year period. The decrease was primarily driven by a lower effective interest rate, which declined from 8.9% to 7.3%, following the transition of the Company’s revolving credit facility from White Oak to Bank of America. This reduction in borrowing costs was partially offset by an increase in the average revolver balance from $68.4 million to $81.4 million (+$15.7 million, +23%), reflecting increased utilization of the facility to support working capital needs and improved liquidity. Income Tax: For the three months ended March 31, 2026, an income tax expense of $0.3 million was recorded compared to $0.9 million for the prior year period. Alliance reported a pretax income of $2.6 million for the three months ended March 31, 2026, versus income of $2.8 million for the three months ended March 31, 2025. The effective tax rate was 12% and 33% for the three months ended March 31, 2026, and 2025, respectively. In accordance with ASC 740-270, the Company calculates its interim income tax provision using an estimated annual effective tax rate (“ETR”) applied to year-to-date ordinary income. This approach ensures that the interim tax expense reflects the best estimate of the annual tax rate, as required by U.S. GAAP. Items that are unusual, infrequent, or not expected to recur—such as discrete events—are recognized separately in the period in which they occur and are not included in the estimated annual ETR. The difference between the Company’s effective tax rate for the three months ended March 31, 2026, and the federal statutory rate primarily resulted from state income taxes, Foreign Derived Intangible Income, and fair value adjustments related to the Company’s warrant liability. Non-GAAP Financial Measures: For the three months ended March 31, 2026, we had non-GAAP Adjusted EBITDA of approximately $5.1 million compared with Adjusted EBITDA of approximately $4.9 million in the prior year period, or a year-over-year improvement of $0.2 million. We define Adjusted EBITDA as net income (loss) adjusted to exclude: (i) income tax expense; (ii) interest expense; (iii) depreciation and amortization; (iv) changes in the fair value of warrant liabilities; and (v) other non-recurring or non-cash items, including transaction costs and stock-based compensation. Our method of calculating Adjusted EBITDA may differ from other companies and accordingly, this measure may not be comparable to measures used by other companies. We use Adjusted EBITDA to evaluate our own operating performance and as an integral part of our planning process. We present Adjusted EBITDA as a supplemental measure because we believe such a measure is useful to investors as a reasonable indicator of operating performance. We believe this measure is a financial metric used by many investors to compare companies. This measure is not a recognized measure of financial performance under GAAP in the United States and should not be considered as a substitute for operating earnings (losses), net earnings (loss) from continuing operations or cash flows from operating activities, as determined in accordance with GAAP. See the table below for a reconciliation, for the periods presented, of our GAAP net income (loss) to Adjusted EBITDA. Three Months Ended Three Months Ended ($ in thousands) March 31, 2026 March 31, 2025 Net Income $ 2,311 $ 1,851 Add back: Interest Expense 1,568 2,435 Income Tax Expense 323 919 Depreciation and Amortization Expense 1,392 1,352 EBITDA $ 5,594 $ 6,557 Adjustments Stock-based Compensation Expense 55 - Transaction Costs 313 - Change In Fair Value of Warrants (884 ) (1,676 ) Restructuring Cost - 4 Adjusted EBITDA $ 5,078 $ 4,885 31 Table of Contents Alliance Entertainment Holding Corporation Results of Operations Nine Months Ended March 31, 2026, Compared to Nine Months Ended March 31, 2025 Nine Months Ended Nine Months Ended ($ in thousands) March 31, 2026 March 31, 2025 Net Revenues $ 880,886 $ 835,707 Cost of Revenues (excluding depreciation and amortization) 763,590 738,821 Operating Expenses Distribution and Fulfillment Expense 33,161 31,425 Selling, General and Administrative Expense 48,545 41,092 Depreciation and Amortization Expense 3,966 3,865 Transaction Costs 909 - Restructuring Costs 2 73 Insurance Claim Recovery (408 ) - Gain on Disposal of Fixed Assets (24 ) (15 ) Total Operating Expenses $ 86,151 $ 76,440 Operating Income 31,145 20,446 Other Expenses Interest Expense 7,369 8,101 Change in Fair Value of Warrants 1,428 910 Total Other Expenses 8,797 9,011 Income Before Income Tax Expense 22,346 11,435 Income Tax Expense 5,769 2,116 Net Income $ 16,579 $ 9,319 Net Revenue: Year over year, total net revenues increased from $836 million to $881 million for the nine months ended March 31, 2026 (+$45 million, +5%). The increase reflected broad-based growth across the Company’s core physical entertainment categories, partially offset by softness in gaming and digital downloads. Overall performance benefited from continued demand for physical media, collectibles, and related services, as well as the Company’s broad distribution platform, deep inventory positions, and exclusive content arrangements. Alliance Entertainment remains a leading distributor of entertainment products and content across music, video, gaming hardware, electronics and pop culture collectibles. With exclusive distribution rights for approximately 150 studios and labels in the film and music industry, the Company is well positioned to serve both business-to-business and direct-to-consumer channels. In addition, the acquisition of Handmade by Robots and the Paramount and newly obtained Amazon MGM Studios Distribution licensing contracts further expand the Company’s portfolio of exclusive and differentiated content. In addition, our unique DTC suite of distribution and inventory solutions for the e-commerce retail industry, including our consumer direct subsidiary DirectToU LLC, accounted for approximately 34.8% of gross revenue for the nine months ended March 31, 2026. Year over year, vinyl record sales increased from $266 million to $287 million (+$21 million, +8%) for the nine months ending March 31, 2026. The increase in revenue was driven by a 4% increase in unit sales volume and a 4% increase in average selling price. The growth in unit volume reflects continued consumer demand for physical music formats, particularly among collectors and enthusiasts seeking premium and limited-edition releases. Volume growth during the period was also supported by strong pre-orders and early purchasing activity ahead of Record Store Day in April 2026, as retailers and consumers prepared for anticipated limited-edition releases. In addition, higher average selling prices were driven by a favorable shift in product mix toward premium and specialty vinyl formats, including colored vinyl, boxed sets, and collectible editions. Overall, vinyl performance benefited from strong new release activity, expanded retail distribution, and sustained demand for vinyl as a preferred format among both established and emerging artists. 32 Table of Contents Music Compact Disc (CD) sales increased from $94 million to $114 million for the nine months ended March 31, 2026, representing an increase of $20 million, or 21%, year over year. The increase was driven by a 14% increase in unit volume and a 6% increase in average selling price. The growth reflects strengthening demand for physical music products, supported by continued consumer interest in tangible and collectible formats despite the broader industry shift toward streaming and digital consumption. Sales during the period were supported in part by the release of The Life of a Showgirl , the twelfth studio album by Taylor Swift, which was released on October 3, 2025, and generated significant physical sales activity throughout the nine-month period ended March 31, 2026. In addition, sustained demand for K-pop releases continued to be a meaningful contributor to CD performance, driven by strong fan engagement and collectible multi-version purchasing behavior. Continued consumer interest in select physical releases and collectible CD editions also contributed to revenue growth, as fans continued to prioritize special editions and packaged formats even as broader industry trends favor streaming and digital formats. Physical movie sales, encompassing DVD, Blu-ray, and Ultra HD formats, increased from $197 million to $260 million for the nine months ended March 31, 2026, representing an increase of $63 million, or 31%, compared with the same period in the prior year, and accounted for approximately 30% of total net sales during the period. The increase in revenue was driven by a 3% increase in average selling price, together with a 28% increase in unit shipments, resulting in significant year-over-year growth. Performance during the period benefited from a consistent flow of theatrical releases and sustained consumer demand for premium formats, including 4K Ultra HD and collectible SteelBook editions. Growth was supported by the continued ramp of the Paramount exclusive content partnership, which was launched in January 2025, and contributed to expanded title availability, improved retail placement, and stronger unit performance throughout the period. In addition, the newly launched Amazon MGM Studios Distribution partnership in January 2026 further expanded the Company’s film portfolio and enhanced assortment breadth across key retail channels. A favorable shift in sales mix toward premium, higher-margin content supported the increase in average selling price and partially offset softness in lower-priced catalog titles. For the nine months ended March 31, 2026, collectibles revenue rose from $16 million to $22 million (+$6 million, +37%) compared with the prior-year period. Although unit volume declined 20%, a 71% increase in average selling price more than offset lower volumes and drove revenue growth. Results were supported by the addition of over 20 new collectibles vendors that began contributing sales in the latter part of 2025, generating more than $1.5 million in incremental revenue. Existing vendors also delivered higher sales driven by new product lines and Handmade by Robots’ transition from a distributed brand in 2024 to an owned brand in 2025 contributed meaningfully to year-over-year performance. For the nine months ended March 31, 2026, electronics revenue increased from $11 million to $12 million, representing growth of $1 million, or 6%, compared to the prior-year period. The increase was driven by an 8% rise in unit sales volume, partially offset by a 2% decline in average selling price. The decrease in average selling price primarily reflects changes in product mix and competitive pricing dynamics, reflecting continued demand for entry-level and mid-tier audio playback devices alongside premium accessory offerings. Electronics sales primarily consist of audio playback devices and related accessories, including turntables, headphones, speakers, and other ancillary products that complement physical music and movie media. Gaming product revenue declined from $226 million to $158 million, a decrease of $68 million, or 30%, for the nine months ended March 31, 2026. The decline was driven by a 29% decrease in average selling price, together with a slight 1% decrease in unit sales volume year-over-year. The reduction in average selling price primarily reflected a pause in higher-priced arcade hardware purchases following a reassessment of vendor partnerships, as well as limited availability of certain hardware products and delays in major game releases during the period. While unit volumes were supported in part by strong demand for the Nintendo Switch II following its release in June 2025, this was not sufficient to offset declines in other higher-value product categories, resulting in a slight overall decline in unit sales volume. As a result, overall revenue decreased during the period. As a distributor of physical gaming products, the Company continues to adjust its product mix and sourcing strategies to align with evolving consumer demand and to manage profitability. 33 Table of Contents Cost of Revenues: Total cost of revenues, excluding depreciation and amortization, increased from $739 million to $764 million (+$25 million, +3%) year-over-year, primarily reflecting higher overall sales volume. The increase was partially offset by a more favorable product mix and the impact of exclusive content partnerships, which supported higher-margin physical media sales. For the nine months ended March 31, 2026, gross margin increased from 11.6% to 13.3%, an expansion of 170 basis points compared with the prior-year period. The improvement was driven by higher average selling prices, a favorable shift toward premium and exclusive content, including the continued ramp of the Paramount partnership and the launch of Amazon MGM Studios Distribution in January 2026, as well as improvements in distribution-related economics, all of which contributed to enhanced overall profitability. Operating Expenses: Total operating expenses for the nine months ended March 31, 2026, increased from $76.4 million to $86.2 million (+$9.7 million, +12.7%), and rose as a percentage of net revenue from 9.1% to 9.8% compared with the same period in the prior year. The increase was primarily driven by higher selling, general, and administrative expenses, which grew from $41.1 million to $48.5 million (+$7.4 million, +18.1%) reflecting strategic investments in infrastructure, technology, and personnel to support exclusive content partnerships and ongoing growth initiatives. These increases also include costs associated with various operational and strategic projects undertaken during the period. Distribution and fulfillment expenses increased modestly from $31.4 million to $33.2 million (+$1.7 million, +5.5%) and remained consistent as a percentage of net revenue at 3.8% year over year. The Company continues to invest in warehouse automation initiatives while utilizing a flexible labor model, including a higher proportion of temporary staffing, to support demand variability and project-based activities. As a result, fulfillment payroll increased slightly from $20.7 million to $21.4 million (+$.7 million, +3.1%) however, it declined as a percentage of net revenue from 2.5% to 2.4%, reflecting improved labor productivity and operating leverage, despite an approximately 2% increase in average hourly labor costs driven by market conditions. The Company continues to identify and implement process improvements to enhance operational efficiency and support long-term scalability. Depreciation and amortization remained consistent at $3.9 million for the nine months ended March 31, 2026, compared with the prior-year period. Interest Expense: For the nine months ended March 31, 2026, total interest expense decreased from $8.1 million to $7.4 million (-$.7 million, -8.6%) compared with the prior-year period. Included in the $7.4 million for the current period is $1.6 million of non-recurring expense related to the amortization of deferred financing costs associated with the Company’s former White Oak credit facility, including advisory fees of $1.8 million previously paid to B&D Capital Partners, LLC, a firm partially owned by board member W. Tom Donaldson III. Excluding this non-recurring amortization, interest expense declined more significantly year-over-year, primarily due to a lower effective interest rate following the transition to Bank of America, which decreased from 9.4% to 7.7%, a reduction of 170 basis points. This benefit was achieved despite a modest increase in the average revolver balance to $81 million from $78 million, reflecting increased utilization of the facility to support working capital needs and improved cash flow flexibility. Income Tax: For the nine months ended March 31, 2026, an income tax expense of $5.8 million was recorded compared to $2.1 million for the prior year period. Alliance reported a pretax income of $22.3 million for the nine months ended March 31, 2026, versus $11.4 million for the nine months ended March 31, 2025. The effective tax rate was approximately 26% and 19% for the nine months ended March 31, 2026, and 2025, respectively. In accordance with ASC 740-270, the Company calculates its interim income tax provision using an estimated annual effective tax rate (“ETR”) applied to year-to-date ordinary income. This approach ensures that the interim tax expense reflects the best estimate of the annual tax rate, as required by U.S. GAAP. Items that are unusual, infrequent, or not expected to recur—such as discrete events—are recognized separately in the period in which they occur and are not included in the estimated annual ETR. The difference between the Company’s effective tax rate for the nine months ended March 31, 2026, and the federal statutory rate primarily resulted from state income taxes, Foreign Derived Intangible Income, and fair value adjustments related to the Company’s warrant liability. Non-GAAP Financial Measures: For the nine months ended March 31, 2026, we had non-GAAP Adjusted EBITDA of approximately $35.7 million compared with Adjusted EBITDA of approximately $24.4 million in the prior year period, or a year-over-year improvement of $11.3 million. We define Adjusted EBITDA as net gain or loss adjusted to exclude: (i) income tax expense; (ii) other income (loss); (iii) interest expense; (iv) depreciation and amortization expense; and (v) other non- recurring expenses. Our method of calculating Adjusted EBITDA may differ from other companies and accordingly, this measure may not be comparable to measures used by other companies. We use Adjusted EBITDA to evaluate our own operating performance and as an integral part of our planning process. We present Adjusted EBITDA as a supplemental measure because we believe such a measure is useful to investors as a reasonable indicator of operating performance. We believe this measure is a financial metric used by many investors to compare companies. This measure is not a recognized measure of financial performance under GAAP in the United States and should not be considered as a substitute for operating earnings (losses), net earnings (loss) from continuing operations or cash flows from operating activities, as determined in accordance with GAAP. See the table below for a reconciliation, for the periods presented, of our GAAP net income (loss) to Adjusted EBITDA. 34 Table of Contents Nine Months Ended Nine Months Ended ($ in thousands) March 31, 2026 March 31, 2025 Net Income $ 16,579 $ 9,319 Add back: Interest Expense 7,369 8,101 Income Tax Expense 5,769 2,116 Depreciation and Amortization Expense 3,966 3,865 EBITDA $ 33,683 $ 23,401 Adjustments Stock-based Compensation Expense 149 - Transaction Costs 909 Change In Fair Value of Warrants 1,428 910 Restructuring Cost 2 73 Insurance Claim Recovery (408 ) - Gain on Disposal of Property and Equipment (24 ) (15 ) Adjusted EBITDA $ 35,739 $ 24,369 LIQUIDITY AND CAPITAL RESOURCES Liquidity: On October 1, 2025, Alliance Entertainment Holding Corporation entered into a new Loan and Security Agreement providing for a $120 million senior secured revolving credit facility with Bank of America, N.A. (the “Revolving Credit Facility”), which replaced the Company’s prior asset-based credit facility with White Oak Commercial Finance, LLC (the “Prior Credit Facility”). The Revolving Credit Facility enhances the Company’s liquidity profile and provides increased financial flexibility to support working capital needs and ongoing operations. In addition, the Company continues to implement strategic initiatives focused on cost control and the sale of higher-value products. Based on the availability under the Revolving Credit Facility, cash on hand, cash generated from operations, and working capital, management believes the Company has sufficient liquidity to fund its operations and meet its obligations for at least twelve months from the issuance of these consolidated financial statements. Our primary sources of liquidity are cash on hand, cash provided by operating activities, and borrowings under our revolving credit facility. As of March 31, 2026, the Company had $1.2 million of cash on hand and $64 million outstanding under the Revolving Credit Facility. While working capital requirements increased during the period, reflecting higher inventory levels to support sales growth, period-end borrowings under the revolving credit facility decreased from $68 million under the Prior Credit Facility as of March 31, 2025, to $64 million as of March 31, 2026, primarily due to the timing of repayments and improved availability under the new facility. As a result, availability increased from $52 million to $56 million over the same period (+$4 million, +8%). Under the Revolving Credit Facility, the Company may request the issuance of letters of credit, which reduce availability under the borrowing base and increase outstanding borrowings. As of March 31, 2026, the Company had a $750,000 letter of credit outstanding, which reduced availability under the Revolving Credit Facility and increased borrowings outstanding by a corresponding amount. The letter of credit is collateralized under the terms of the credit agreement and does not represent restricted cash held by the Company. ($in millions) March 31, 2026 March 31, 2025 Revolver Balance $ 64 $ 68 Availability $ 56 $ 52 35 Table of Contents As of March 31, 2026, the Company intends to continue relying primarily on its borrowing capacity under the Revolving Credit Facility, as well as any renewal or replacement of such facility, to fund working capital and other operational requirements. The availability of additional cash proceeds from the potential exercise of outstanding Warrants is contingent upon the market price of the Company’s Class A common stock exceeding the Warrant exercise price of $11.50 per share. Given that the market price of the Class A common stock was $7.34 as of April 24, 2026, the Company does not currently expect Warrants to be exercised unless and until the market price exceeds the exercise price. Although the Company does not currently have any definitive plans to do so, it may seek to raise additional capital through the issuance of equity securities in the future, depending on market conditions, strategic opportunities, and liquidity needs. Cash Flow: The following table summarizes our net cash provided by or used on operating activities, investing activities and financing activities for the periods indicated and should be read in conjunction with our condensed consolidated financial statements for the nine months ended March 31, 2026, and 2025. Nine Months Ended ($ in thousands) March 31, 2026 March 31, 2025 Net Income $ 16,579 $ 9,319 Net Cash Provided By (Used In): Operating Activities $ 7,329 $ 16,081 Investing Activities $ (2,058 ) $ (7,588 ) Financing Activities $ (5,270 ) $ (7,592 ) For the nine months ended March 31, 2026, the Company generated $7.3 million of cash from operating activities, compared to $16.1 million generated in the prior-year period. The decrease in operating cash flow was primarily driven by working capital changes, most notably a use of cash in inventory of $23.8 million, compared to a $5.0 million increase in the prior-year period, reflecting higher purchasing activity and timing of inventory receipts to support sales growth and upcoming demand periods. Accounts payable increased by $3.2 million, compared to a $6.4 million increase in the prior year, indicating a lower level of vendor financing relative to the prior period and contributing to the reduction in operating cash flow. Partially offsetting these impacts, trade receivables increased by $1.0 million compared to a $3.3 million increase in the prior-year period, reflecting improved collections and more efficient receivables management. Overall, the change in operating cash flow reflects the Company’s investment in working capital to support growth, partially offset by improvements in receivables performance. Cash used in investing activities was $2.1 million for the nine months ended March 31, 2026, compared to $7.6 million used during the same period in the prior year. Cash used during the current period primarily reflects $1.0 million of capital expenditures related to facility improvements and warehouse automation, as well as $1.2 million of cash paid in connection with the Endstate acquisition completed on December 31, 2025, partially offset by minor proceeds from asset disposals. Cash used in the prior-year period was significantly higher and was primarily driven by $7.6 million of cash paid for the business acquisition relating to Handmade by Robots, with minimal capital expenditures in that period. The year-over-year decrease in investing cash outflows reflects lower acquisition-related spending in the current period compared to the prior year. Net cash used in financing activities was $5.3 million for the nine months ended March 31, 2026, compared with net cash used of $7.6 million in the prior-year period. Financing activities during the current period primarily reflected net repayments under the Company’s revolving credit facility and the repayment of $10.0 million of loans from Bruce Ogilvie, Executive Chairman of the Board and a principal stockholder of the Company, as well as $0.7 million of deferred financing costs associated with the transition to the Bank of America credit facility. This compared to the prior-year period, which primarily reflected net repayments under the revolving credit facility and higher acquisition-related financing activity. The lower level of net cash used in the current period reflects improved liquidity management and more efficient utilization of the Company’s revolving credit facility following its transition to Bank of America, which provides enhanced borrowing capacity and more favorable financing terms. Critical Accounting Policies and Estimates Our condensed consolidated financial statements have been prepared in accordance with U.S. GAAP. Our discussion and analysis of the financial condition and results of operations are based on these financial statements. The preparation of these financial statements requires the application of accounting policies in addition to certain estimates and judgments by our management. Our estimates and judgments are based on currently available information, historical results, and other assumptions we believe are reasonable. The actual results could differ materially from these estimates. No changes were made to the critical accounting estimates discussed in the 2025 Annual Report during the nine months ended March 31, 2026. 36 Table of Contents PART II - OTHER INFORMATION Item 1. Legal Proceedings Alliance is currently involved in, and may in the future be involved in, legal proceedings, claims, and government investigations in the ordinary course of business. These include proceedings, claims, and investigations relating to, among other things, regulatory matters, commercial matters, intellectual property, competition, tax, employment, pricing, discrimination, consumer rights, personal injury, and property rights. Depending on the nature of the proceeding, claim, or investigation, the Company may be subject to monetary damage awards, fines, penalties, or injunctive orders. Furthermore, the outcome of these matters could materially adversely affect Alliance’s business, results of operations, and financial condition. The outcomes of legal proceedings, claims, and government investigations are inherently unpredictable and subject to significant judgment to determine the likelihood and amount of loss related to such matters. Video Privacy Protection Act Matters. Beginning in August 2024, several putative class actions and related proceedings were filed against the Company and its subsidiary, DirectToU, LLC (“DirectToU”), in federal courts and arbitration alleging violations of the Video Privacy Protection Act (“VPPA”) and similar state laws. The complaints generally allege that the Company disclosed certain customer information and video viewing or purchasing data to third parties through the use of website tracking technologies. In June 2025, the parties reached a settlement resolving the VPPA-related claims, subject to court approval. The settlement provides for a cash payment of $1.577 million to the class. The Company expects a portion of the settlement payment to be covered by insurance and, accordingly, recorded an insurance receivable of $1.377 million. The Company recorded a settlement liability of $1.577 million and the related insurance receivable during the three months ended September 30, 2025, and such amounts remained recorded in the Company’s condensed consolidated financial statements as of March 31, 2026. The court granted preliminary approval of the settlement in October 2025. Final approval of the settlement remains pending. The Company believes the recorded accrual is adequate based on currently available information. Office Create Litigation. On June 6, 2024, Office Create Corporation filed a civil action against COKeM International Ltd. (“COKeM”) in the United States District Court for the District of Minnesota, alleging contributory trademark infringement, false designation of origin, unfair competition, unjust enrichment, and civil conspiracy arising from the alleged distribution of Cooking Mama: Cookstar. Office Create seeks monetary damages in excess of $40 million. No damages have been awarded. COKeM has denied the allegations and filed a third-party complaint against Planet Entertainment LLC and its principal seeking indemnification and contribution. Default has been entered against those third-party defendants. In January 2026, Office Create dismissed its claims against Plaion, Inc. and Plaion GmbH pursuant to a confidential settlement agreement, which is reflected in Office Create’s expert damages analysis. Discovery is ongoing. On March 9, 2026, Office Create served an expert report opining that total damages are approximately $37.9 million. Trial readiness is scheduled for October 2026. The Company maintains insurance coverage that may apply, subject to policy limits. The Company cannot reasonably estimate a possible loss, and no accrual has been recorded. Sparkle Pop Matter. On June 9, 2025, Sparkle Pop, LLC filed an adversary proceeding against the Company in the United States Bankruptcy Court for the District of Maryland in the matter In re Diamond Comic Distributors , alleging theft of trade secrets and tortious interference with contractual relations. The Company has moved to dismiss the amended complaint, and that motion remains pending. The Company denies the allegations. At this time, the Company cannot reasonably estimate the amount or range of any potential loss associated with this matter, and no accrual has been recorded. TCPA Demand. In November 2025, the Company received a demand letter asserting potential claims under the federal Telephone Consumer Protection Act against its subsidiary, DirectToU, LLC, relating to alleged marketing text messages. No complaint has been filed, and discussions between the parties are ongoing. At this time, the Company cannot reasonably estimate the amount or range of any potential loss associated with this matter, and no accrual has been recorded. 37 Table of Contents Other Matters From time to time, the Company is involved in other legal and regulatory matters arising in the ordinary course of business. In December 2024, DirectToU, LLC received a third-party tender of defense regarding a notice of alleged noncompliance with California Proposition 65 concerning a product supplied by a vendor and sold by the Company. The Company discontinued the product and tendered defense to the supplier, which has assumed responsibility for responding to the notice. The Company does not believe this matter is material. In July 2025, the Company received a cease-and-desist letter alleging a breach of a contractual non-solicitation provision. The Company disputes the allegations, has responded to the correspondence, and has not filed any litigation. The Company does not believe this matter is material. Item 1A. Risk Factors In addition to the risks described below, factors that could cause our actual results to differ materially from those in this Quarterly Report are any of the risks described in our Annual Report on Form 10-K for the year ending June 30, 2025, filed with the SEC on September 10, 2025. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. Risks Related to the Acquisition and Integration of Endstate On December 31, 2025, we completed the acquisition of Endstate Authentic LLC (“Endstate”). The acquisition introduces operational, financial, and strategic risks that could adversely affect our business if we are unable to successfully integrate or operate the acquired business. Endstate operates a digital authentication and loyalty-driven consumer brand that differs from our traditional wholesale and distribution operations. Successfully integrating Endstate requires, among other things, aligning technology platforms, operational processes, personnel, and corporate culture. We may experience challenges integrating Endstate’s systems and technology, retaining key employees, maintaining relationships with customers and partners, or achieving anticipated growth and synergies. If the integration of Endstate is delayed or unsuccessful, or if Endstate’s business does not perform as expected, our results of operations, cash flows, and financial condition could be materially adversely affected. The Endstate acquisition includes contingent consideration and other payment obligations that may adversely affect our liquidity and results of operations. As part of the Endstate acquisition, we assumed obligations that include contingent consideration arrangements, deferred consideration, and acquired royalty obligations. The contingent consideration is based on Endstate’s future financial performance and is subject to remeasurement at fair value each reporting period, with changes recognized in earnings. At March 31, 2026, we have accrued $5,500,000 under earnout. Actual amounts payable under these arrangements could exceed the currently estimated amounts and may require significant cash resources. In addition, changes in the estimated fair value of contingent consideration could negatively impact earnings and result in earnings volatility in future periods. These obligations could adversely affect our liquidity, financial flexibility, and results of operations. Our goodwill and intangible assets recorded in connection with the Endstate acquisition may become impaired. In connection with the Endstate acquisition, we recorded additional goodwill and finite-lived intangible assets, including technology, trademarks, and customer relationships. The purchase price allocation for the acquisition is preliminary and subject to adjustment as valuation analyses are finalized. Goodwill and intangible assets are subject to impairment testing, which requires significant judgment and estimates regarding future cash flows, growth rates, and market conditions. If Endstate’s operating performance, consumer adoption, or market conditions do not meet our expectations, we may be required to record impairment charges in future periods. Any such impairment could be material and would adversely affect our results of operations and financial condition. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. None. 38 Table of Contents Item 3. Defaults Upon Senior Securities None. Item 4. Mine Safety Disclosures Not applicable. Item 5. Other Information None. Item 6. Exhibits The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q. No. Description of Exhibit 31.1* Certification of Chief Executive Officer and Principal Executive Officer pursuant to Securities Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2** Certification of Chief Financial Officer and Principal Financial Officer pursuant to Securities Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1** Certification of Principal Executive Officer and Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2** Certification of Chief Financial 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 101.INS* Inline XBRL Instance Document 101.SCH* Inline XBRL Taxonomy Extension Schema Document 101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB* Inline XBRL Taxonomy Extension Labels Linkbase Document 101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase Document 104* Cover Page Interactive Data File (Embedded within the Inline XBRL document and included in Exhibit) * Filed herewith. ** Furnished herewith. 39 Table of Contents SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ALLIANCE ENTERTAINMENT HOLDING CORPORATION Date: May 14, 2026 By: /s/ Jeffrey Walker Name: Jeffrey Walker Title: Chief Executive Officer (Principal Executive Officer) 40