What changed in this filing

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Item 1A. Risk Factors

2026-04-10 compared with 2025-04-17 · 68 added, 57 removed, 348 unchanged (26% of the section changed)

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• vendor and other supplier terms and related conditions, which may be less favorable to us as a smaller company in comparison to larger companies;

• consumer sentiment, general business conditions, including the high levels of inflation experienced in Fiscal 2024, macroeconomic uncertainties or slowdowns, the imposition of tariffs, and geopolitical conditions, including as a result of events such as acts of terrorism, effects of war, pandemics, or other health issues.

Most of these factors are beyond our control.

• consumer sentiment, general business conditions, including the high levels of inflation experienced in recent years, macroeconomic uncertainties or slowdowns, the imposition of tariffs, and geopolitical conditions, including as a result of events such as acts of terrorism, effects of war, pandemics, or other health issues.

Some of these factors are beyond our control.

It is difficult to predict the impact that general economic conditions, including the effects of inflation, tariffs and geopolitical conditions, will continue to have on consumer spending and our financial results.

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We require continued access to capital and our business and operating results have been and can be affected by factors such as the availability, terms of and cost of capital, increases in interest rates or a reduction in credit rating.

We are party to an Amended and Restated Credit Agreement dated May 9, 2019 (as amended from time to time, the “Credit Agreement”), with Wells Fargo, National Association (“Wells Fargo”), Bank of America, N.A., HSBC Bank (USA), N.A., JPMorgan Chase Bank, N.A., Truist Bank and PNC Bank, National Association, as lenders (collectively, the “Credit Agreement Lenders”), and Wells Fargo, as Administrative Agent, Collateral Agent and Swing Line Lender.

Under the Credit Agreement we use our asset-based revolving credit facility (the “ABL Credit Facility”) to finance our ongoing operations and our future growth, and some of the aforementioned factors have already affected our business, and could continue to:

cause our cost of doing business to increase, limit our ability to pursue business opportunities, reduce cash flow used for sales and marketing, and place us at a competitive disadvantage.

We are party to (i) an Amended and Restated Credit Agreement dated May 9, 2019 (as amended from time to time, the “Credit Agreement”), with Wells Fargo, National Association (“Wells Fargo”), as the sole lender party thereto, and as Administrative Agent, Collateral Agent and Swing Line Lender and (ii) a term loan agreement dated December 16, 2025 (the “SLR Loan Agreement”), with SLR Credit Solutions (“SLR”) and other affiliated SLR entities as the lenders party thereto, and SLR as Administrative Agent, and Collateral Agent.

Under the Credit Agreement, we use our asset-based revolving credit facility (the “ABL Credit Facility”) to finance our ongoing operations and our future growth, and some of the aforementioned factors have already affected our business, and could continue to cause our cost of doing business to increase, limit our ability to pursue business opportunities, reduce cash flow used for sales and marketing, and place us at a competitive disadvantage.

Further, the SLR Loan Agreement imposed new obligations for reserves and introduced additional restrictions on our ability to borrow funds under the ABL Credit Facility or to seek alternative financing options.

Our historical operating results, including the operational losses experienced in Fiscal 2025, macroeconomic uncertainties or slowdowns, volatility in the financial markets, significant losses in financial institutions’ U.S.

retail portfolios, or environmental and social concerns, are all factors that may lead to a contraction in credit availability impacting our ability to finance our operations or our ability to refinance our ABL Credit Facility or other outstanding indebtedness.

retail portfolios, or environmental, social and geopolitical concerns, are all factors that may lead to a contraction in credit availability impacting our ability to finance our operations or our ability to refinance our ABL Credit Facility or other outstanding indebtedness.

Separately, we have also entered into a commitment letter (the “Commitment Letter”) for a $40.0 million senior unsecured credit facility with Mithaq (the “Mithaq Credit Facility”), as an additional source of liquidity for the Company.

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Any increase in interest rates could increase our interest expense and materially adversely affect our financial condition.

These increased costs have, and could continue to, reduce our profitability and/or impair our ability to meet our debt obligations and to conduct ongoing operations.

These increased costs could reduce our profitability and/or impair our ability to meet our debt obligations and to conduct ongoing operations.

An increase in interest rates also could limit our ability to refinance existing debt upon maturity or cause us to pay higher rates upon refinancing.

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These losses may be caused by error or misconduct of associates, customers, vendors or other third parties, including through organized retail crime and professional theft.

Since the occurrence of the COVID-19 pandemic, the retail industry has generally experienced an increase in inventory shrinkage, and there can be no assurance that the measures we are taking will effectively reduce inventory shrinkage.

There can be no assurance that the measures we are taking will effectively reduce inventory shrinkage.

Although some level of inventory shrinkage is an unavoidable cost of doing business, if we were to experience higher rates of inventory shrinkage or incur increased security costs to combat inventory theft, it could have a material adverse effect on our business, financial condition, results of operations and cash flows.

We may not be able to successfully execute our business strategies.

Our strategic initiatives currently involve a focus on (i) delivery of product of a quality and value that resonates with our customers, (ii) scaling and optimizing our infrastructure to support our e-commerce business given the continued shift in our customers’ shopping patterns to online shopping, and (iii) expanding and refurbishing our North American retail store fleet.

Our strategic initiatives currently involve a focus on (i) delivery of product of a quality and value that resonates with our customers, (ii) optimizing our infrastructure to support our e-commerce business, and (iii) expanding and refurbishing our North American retail store fleet.

We will continue to implement and refine our business systems transformation initiatives designed to increase sales and profitability.

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digital expansion and inventory management.

With respect to digital expansion, we continue to implement a personalized customer contact strategy and are scaling our digital infrastructure to support increased digital demand.

These initiatives require the execution of complex projects involving significant systems and operational changes, which place considerable demands on our management and our information and other systems.

Our ability to successfully implement and capitalize on these projects is dependent on management’s ability to manage these projects effectively and implement and operate them successfully, without adversely affecting the subject and/or other systems, and on our employees’ ability to operationalize the required changes.

If we fail to implement these projects effectively, including aligning them with our sourcing, distribution and logistics operations, if we experience significant delay, cost overruns, or unforeseen costs, or if the necessary operational changes and change management are not enacted properly, we may not realize the return on our investments that we anticipate, and we may adversely affect the operation of other systems, and our business, financial position, results of operations, and cash flows could be materially adversely affected.

Our ability to successfully implement and capitalize on these business transformation projects is dependent on management’s ability to manage these projects effectively and implement and operate them successfully, without adversely affecting the subject and/or other systems, and on our employees’ ability to operationalize the required changes.

If we fail to implement these projects effectively, including aligning them with our sourcing, distribution and logistics operations;

if we experience significant delay or cost overruns;

or if the necessary operational changes and change management are not enacted properly, we may not realize the return on our investments, and such failure could disrupt our existing systems and have a material adverse effect on our business, financial position, results of operations, and cash flows.

Failure to properly identify or measure underperforming retail stores, failure to achieve anticipated sales transfer rates from closed stores to remaining retail stores and/or e-commerce sales, and failure to properly identify and analyze customer segmentation and spending patterns could have a material adverse effect on our business, financial position, results of operations, and cash flows.

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If a determination is made that the carrying value of a long-lived asset is not recoverable over its estimated useful life, the asset is written down to its estimated fair value.

On the other hand, failure to achieve anticipated sales targets in newly-opened stores, and failure to properly identify customer segmentation and spending patterns to select optimal locations for the opening of new stores, could also have a material adverse effect on our business, financial position, results of operations, and cash flows.

Consumer demand, behavior, taste, and purchasing trends, as well as geopolitical conflicts and economic and political stability may differ in international markets and/or in the distribution channels through which our wholesale customers sell products, and, as a result, sales of our products may not be successful or meet our expectations, or the margins on those sales may not be in line with those we currently anticipate.

On the other hand, failure to achieve anticipated sales targets in newly-opened stores, and failure to properly identify customer segmentation and spending patterns for our new store locations, could also have a material adverse effect on our business, financial position, results of operations, and cash flows.

Consumer demand, behavior, taste, and purchasing trends, as well as geopolitical conflicts and economic and political stability may differ in international markets and/or in the distribution channels through which our franchise and wholesale partners sell products, and, as a result, sales of our products may not be successful or meet our expectations, or the margins on those sales may not be in line with those we currently anticipate.

We may also face difficulties integrating foreign business operations and/or wholesaling operations with our current sourcing, distribution, information technology systems, and other operations.

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and related entities, including worldwide rights to the name “Gymboree”.

We have relaunched the Gymboree brand to expand our business across our retail stores, e-commerce, international, and wholesale businesses, and in November 2024, we opened our first Gymboree stand-alone store in Paramus, New Jersey.

We also launched the Sugar & Jade brand in November 2021 and launched the PJ Place brand in October 2022.

The positioning of the Gymboree, Sugar & Jade and PJ Place brands and their products, relative to our existing products, the fashion choices we make with respect to our products, and our ability to integrate the Gymboree, Sugar & Jade and PJ Place brands and their products into our existing marketing, sourcing, inventory, sales/e-commerce, customer relations, and logistics operations and systems will be critical to our ability to leverage all of these brands to expand our business.

We relaunched the Gymboree brand to expand our business across our retail stores, e-commerce, international, and wholesale businesses.

In November 2024, we opened our first Gymboree stand-alone store in Paramus, New Jersey, with plans to open additional stores in Fiscal 2026.

The positioning of the Gymboree brand and its products, relative to our existing products, the fashion choices we make with respect to our products, and our ability to integrate the Gymboree brand and its products into our existing marketing, sourcing, inventory, sales/e-commerce, customer relations, and logistics operations and systems will be critical to our ability to leverage the brand to expand our business.

In addition, pursuant to U.S.

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If a determination is made that the carrying value of the Gymboree tradename asset is not recoverable, the asset is written down to its estimated fair value.

In Fiscal 2024, we recorded an impairment charge of $28.0 million on the Gymboree tradename, primarily due to reductions in Gymboree sales forecasts.

A failure to properly execute our plans and business strategies, delays in executing our plans and business strategies, increased costs associated with executing on our plans and business strategies, or failure to identify alternative strategies could have a material adverse effect on our business, financial position, results of operations, and cash flows.

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This is particularly true with our target customer who is a value-conscious, lower- to middle-income mother buying for infants and children based on need rather than based on fashion, trend, or impulse.

High inflation, high unemployment levels, increases in tariffs and tax rates, declines in real estate values, availability of credit, volatility in the global financial markets, and the overall level of consumer confidence have negatively impacted, and could in the future negatively impact, the level of consumer spending for discretionary items.

High inflation, high unemployment levels, increases in tariffs and tax rates, declines in real estate values, availability of credit, volatility in the global financial markets and geopolitical conditions, and the overall level of consumer confidence have negatively impacted, and could in the future negatively impact, the level of consumer spending for discretionary items.

This could adversely affect our business as it is dependent on consumer demand for our products.

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Our profitability and cash flows may decline as a result of increasing pressure on margins.

The apparel industry is subject to significant pricing pressure caused by many factors, including intense competition, the highly promotional retail environment, the financial health of competitors, changes in consumer demand, and macroeconomic conditions.

In particular, other countries may change their business and trade policies in anticipation of or in response to increased import tariffs and other changes in trade policy and regulations already enacted or that may be enacted in the future.

While some trade deals have been reached and trade negotiations are ongoing, some countries have also responded with retaliatory tariffs, and overall the global trade environment remains fluid and highly uncertain.

If these factors cause us to reduce our sales prices and we fail to sufficiently reduce our product costs or operating expenses, our profitability and cash flows could decline.

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corporate headquarters is located in Secaucus, New Jersey.

One of our company-operated distribution centers is located in Fort Payne, Alabama and supports our stores, wholesale, and e-commerce shipments both in the U.S and Canada.

Our company-operated distribution center is located in Fort Payne, Alabama and supports our stores, wholesale, and e-commerce shipments both in the U.S.

We also use a third-party warehouse provider, with distribution centers located in Brownsburg, Indiana, to support our U.S.

e-commerce operations, and Mississauga, Ontario to support our Canadian e-commerce operations Our international franchise partners receive the vast majority of shipments of merchandise from our third-party warehouse provider located in Asia.

e-commerce operations, and Mississauga, Ontario to support our Canadian e-commerce operations.

Our international franchise partners receive the vast majority of shipments of merchandise from our third-party warehouse provider located in Asia.

On occasion, we may utilize additional facilities to support our seasonal warehousing needs.

Damage to, or prolonged interruption of operations at, any of the Company-operated or third-party facilities due to a work stoppage, pandemics or other health issues, weather conditions such as a tornado, hurricane or flood, other natural disaster, fire, or other event could have a material adverse effect on our business, financial position, results of operations, and cash flows.

Damage to, or prolonged interruption of operations at, any of the Company-operated or third-party facilities due to a work stoppage, war, pandemics or other health

issues, weather conditions such as a tornado, hurricane or flood, other natural disaster, fire, or other event could have a material adverse effect on our business, financial position, results of operations, and cash flows.

We depend on our relationships with unaffiliated manufacturers, suppliers, and transportation companies, both domestically and internationally.

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We have no exclusive or long-term contracts with our manufacturers.

We compete with other companies for manufacturing facilities, many of which have greater financial resources than we have or pay a higher unit price than we do.

We compete with other companies for manufacturing facilities, many of which have greater financial resources and could afford higher unit prices compared to us.

If an existing manufacturer of merchandise must be replaced for any reason, we will have to find alternative sources of manufacturing or increase purchases from our other third-party manufacturers, and there is no assurance we will be able to do so or do so on terms that are acceptable to us.

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Additionally, given that virtually all of our merchandise is purchased from foreign suppliers, we are subject to various risks of doing business in foreign markets and importing merchandise from abroad, including from less politically or socially stable and/or less developed countries, such as:

• new or higher tariffs or imposition of duties, taxes, and other charges on or costs of relying on imports;

• new or higher tariffs and/or any resulting retaliatory tariffs, or imposition of duties, taxes, and other charges on or costs of relying on imports;

• foreign governmental regulations, including, but not limited to, changing requirements in the course of dealing with regard to product safety, product testing, environmental matters, employment, taxation, and language preference;

• the failure of a direct or indirect vendor or supplier to comply with local laws or industry standards or ethical business practices, including worker safety ( e.g.

, fire safety and building codes), worker rights of association, freedom from harassment and coercion, unauthorized subcontracting or use of forced, indentured or child labor, social compliance with health and welfare standards, and environmental matters;

• the failure of a direct or indirect vendor or supplier to comply with local laws or industry standards or ethical business practices, including worker safety (e.g., fire safety and building codes), worker rights of association, freedom from harassment and coercion, unauthorized subcontracting or use of forced, indentured or child labor, social compliance with health and welfare standards, and environmental matters;

• financial, political, or societal instability, or military action, war or other conflict;

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• changes to, or repeal, suspension or discontinuation of, trade agreements, trade legislation and/or trade preferences;

• significant delays in the manufacture, transportation and delivery of cargo due to epidemics or pandemics, port security considerations, political unrest, war, weather conditions, or cyber-security events;

• disruption of imports by labor disputes and local business or unethical practices;

• regulations under the United States Foreign Corrupt Practices Act;

• adherence to regulations under the United States Foreign Corrupt Practices Act;

• increased costs of or shortages of equipment, containers for shipments, or transportation.

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Consequently, any such disruption could undermine consumer confidence, which could negatively impact consumer spending patterns or customer traffic, and thus have a material adverse effect on our business, financial position, results of operations, and cash flows.

We have franchise partners located in Middle-Eastern countries.

When the current Israel-Palestine conflict began, our franchise partner in Israel had to shutter its stores temporarily, and we provided a temporary hiatus on the collection of royalty payments from this franchise partner until December 2024.

If the conflict continues or expands further into other countries, it could adversely affect our sales with this franchise partner and all other franchise partners in Middle-Eastern countries, and it could have a material adverse effect on our business, financial position, results of operations, and cash flows.

We have franchise partners located in the Middle-Eastern countries.

When the current Israel-Palestine conflict began, our franchise partner in Israel had to shutter its stores temporarily, and we had provided a temporary hiatus on the collection of royalty payments from this franchise partner until December 2024.

More recently, in February 2026, Israel and the United States initiated a coordinated military operation in Iran.

In response, Iran launched counter-attacks against Israel and other countries in the region, including the United Arab Emirates.

These conflicts in the Middle East have led to higher oil prices and created supply imbalances in the global market for oil and natural gas.

The extent and duration of these effects cannot be reliably predicted, and these conflicts may have other adverse effects on the global economy.

If these conflicts continue or expand further into other countries, not only could they adversely affect our sales with our franchise partners in the Middle-Eastern countries, but they could also lead to increased shipping costs, transportation delays, embargos, and other supply chain concerns, all of which could have a material adverse effect on our business, financial position, results of operations, and cash flows.

Our success depends upon the service and capabilities of our management team.

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We are subject to customer payment-related risks that could increase our operating costs, expose us to fraud or theft, subject us to potential liability and potentially disrupt our business.

We accept payments using a variety of methods, including cash, checks, credit and debit cards, Afterpay, ApplePay, PayPal, our private label credit card, and gift cards.

We accept payments using a variety of methods, including cash, checks, credit and debit cards, Afterpay, ApplePay, PayPal, Venmo, our private label credit card, and gift cards.

Acceptance of these payment options subjects us to rules, regulations, contractual obligations and compliance requirements, including payment card association operating rules, certification requirements and operating guidelines, data security standards and certification requirements, and rules governing electronic funds transfers.

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We self-insure certain risks and may be impacted by unfavorable claims.

We self-insure and purchase insurance policies to provide for workers’ compensation, general liability and property losses, cyber-security coverage, as well as director and officers’ liability, vehicle liability, and employee medical benefits.

We self-insure and purchase insurance policies to provide for workers’ compensation, general liability and property losses, cybersecurity coverage, as well as director and officers’ liability, vehicle liability, and employee medical benefits.

Claims are difficult to predict and may be volatile.

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Failure to address any of the above risks could have a material adverse effect on our business, financial position, results of operations, and cash flows.

Product liability costs, related claims, and the cost of compliance with consumer product safety laws in the U.S.

and in Canada or our inability to comply with such laws could have a material adverse effect on our business and reputation.

We are subject to regulation by the Consumer Product Safety Commission (“CPSC”) in the U.S., Health Canada in Canada, and similar state, provincial, and international regulatory authorities.

Product liability costs, related claims, and the cost of compliance with consumer product safety laws in the United States and in Canada or our inability to comply with such laws could have a material adverse effect on our business and reputation.

We are subject to regulation by the Consumer Product Safety Commission (“CPSC”) in the United States, Health Canada in Canada, and similar state, provincial, and international regulatory authorities.

Although we test the products sold in our stores, on our website, and to our international franchise partners and our wholesale customers, concerns about product safety, including, but not limited to, concerns about those manufactured in developing countries, may lead us to recall selected products, either voluntarily or at the direction of a governmental authority, and may lead to a lack of consumer acceptance or loss of consumer trust.

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Many of our competitors are larger than us and have access to significantly greater financial, marketing, and other resources than we have.

Increased competition, increased promotional activity, continuing economic pressure on and inflation affecting value-seeking consumers, and liquidation activities by bankrupt and other struggling retailers, including selling apparel, footwear, and accessory merchandise at substantial discounts, could also have a material adverse effect on our ability to compete successfully, and could have a material adverse effect on our business, reputation, financial position, results of operations, and cash flows.

Increased competition, increased promotional activity, continuing

economic pressure on and inflation affecting value-seeking consumers, and liquidation activities by bankrupt and other struggling retailers, including selling apparel, footwear, and accessory merchandise at substantial discounts, could also have a material adverse effect on our ability to compete successfully, and could have a material adverse effect on our business, reputation, financial position, results of operations, and cash flows.

We may not be able to continue to compete successfully against existing or future competition.

Rapidly evolving technological and regulatory developments related to artificial intelligence (“AI”) and related technologies may also increase competitive, legal, and security risks facing the Company.

While we are utilizing AI and machine learning capabilities across our business, our competitors or other third parties may incorporate AI into their products, services and operations more successfully, which could impair our ability to compete effectively, or adversely affect our results of operations or our ability to improve operational efficiency.

To effectively compete, we may need to increase investments to innovate new capabilities and processes incorporating AI as well as to develop appropriate protections, safeguards, and policies for handling data and mitigating information security, data privacy and legal risks.

Furthermore, the regulatory and legal landscape regarding AI is rapidly evolving and we may be challenged to timely comply in a cost-effective manner.

AI also presents emerging ethical, regulatory and environmental issues and if our use or perceived use of AI becomes controversial, we may experience brand or reputational harm, competitive harm, or legal liability.

If our landlords should suffer financial difficulty or if we are unable to successfully negotiate acceptable lease terms, it could have a material adverse effect on our business, financial position, results of operations, and cash flows.

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Following any such change in the price of our common stock, we have, and could in the future, be subject to litigation from our stockholders.

For example, in February 2024, a putative class action was filed against us for violations of federal securities laws in the United States District Court of New Jersey.

The complaint purported to assert claims under the federal securities laws, alleging that we had made materially false and/or misleading statements, and failed to disclose material adverse facts to our investors such that the price of our common stock dropped as a result.

As of November 20, 2024, this case has been dismissed in its entirety, with prejudice.

Legal Proceedings” of this Form 10-K for further information.

Any adverse results and/or settlements from such litigation could have a material adverse effect on our business, financial position, results of operations, and cash flows.

We have a controlling stockholder who owns a majority of our outstanding shares of common stock, and as a result controls all matters requiring stockholder approval.

Mithaq owns and controls the voting power of 62.2% of our outstanding shares of common stock as of February 6, 2025, subsequent to the completion of our recent rights offering.

Mithaq owns and controls the voting power of 61% of our outstanding shares of common stock as of January 31, 2026.

As long as Mithaq continues to control a majority of our outstanding shares of common stock, it will be able to determine the outcome of all corporate actions requiring stockholder approval.

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Other stockholders will not be able to affect the outcome of any stockholder vote while Mithaq controls the majority of the voting power of our outstanding shares of common stock.

As a result, Mithaq will be able to control, directly or indirectly and subject to applicable law, the composition of our Board of Directors, which in turn will be able to control all matters over which we have control, including, among others:

As a result, Mithaq will be able to control, directly or indirectly and subject to applicable law, the composition of our Board, which in turn will be able to control all matters over which we have control, including, among others:

• any determination with respect to our business direction and policies, including the appointment and removal of officers and directors;

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Purchasers of our common stock during periods of volatility, including as a result of “short covering” when the price of our common stock may rise rapidly, could later experience a significant decrease in stock price, eventually leading to a significant loss in value.

Declarations of quarterly cash dividends, and the establishment of future record and payment dates, are at the discretion of our Board of Directors based on a number of factors, including future financial performance, general business and market conditions, and other investment priorities.

If payment of dividends is resumed, any subsequent reduction or discontinuance by us of the payment of quarterly cash dividends could cause the market price of our common stock to decline.

We have no current plans to pay regular cash dividends on our common stock for the foreseeable future.

Declarations of cash dividends, and the establishment of future record and payment dates, are at the discretion of our Board of Directors based on a number of factors, including future financial performance, general business and market conditions, and other investment priorities.

We have no current plans to pay regular cash dividends on our common stock for the foreseeable future pursuant to the terms of our Credit Agreement and SLR Loan Agreement, which impose certain restrictions on our ability to pay dividends.

Declarations of cash dividends, and the establishment of future record and payment dates, are at the discretion of our Board based on a number of factors, including future financial performance, general business and market conditions, and other investment priorities.

If payment of dividends is resumed, any subsequent reduction or discontinuance by us of the payment of quarterly cash dividends could cause the market price of our common stock to decline.

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Such changes in fees and operational requirements may result in our failure to comply with PCI security standards, as well as significant unanticipated expenses.

Additionally, the development, adoption, and use of AI by us, our international franchise partners or our wholesale and retail customers, could result in unintended consequences, including exposing us to additional risks related to cybersecurity, privacy, and data security, such as the risk of increased vulnerability to cybersecurity threats and exposure or theft of proprietary or sensitive information (which could result in such information being made available to our competitors and other members of the public).

The misuse of AI could also affect the stability of our operations, the generation of factually incorrect or biased outputs, reliance on outdated or unverified data, potential intellectual property infringements, the inability to protect generated content while facing unfavorable licensing terms, and the inability to attract and retain key personnel.

Any of the above risks, individually or in aggregation, could result in significant costs and/or materially damage our reputation and result in lost sales, governmental and payment card industry fines, and/or class action and other lawsuits, which in turn could have a material adverse effect on our business, financial position, results of operations, and cash flows.

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Risks associated with our e-commerce business include:

• risks associated with the failure of the computer systems that operate our website or the failure or disruption of our information technology and other business systems, including, but not limited to, inadequate system capacity, security breaches, computer viruses, human error, changes in programming, failure of third-parties to continue to support older systems or system upgrades, or unintended disruptions occasioned as a result of such upgrades, or migration of these services to new systems, including to the cloud;

• the failure of the computer systems that operate our website or the failure or disruption of our information technology and other business systems, including, but not limited to, inadequate system capacity, security breaches, computer viruses, human error, changes in programming, failure of third-parties to continue to support older systems or system upgrades, or unintended disruptions occasioned as a result of such upgrades, or migration of these services to new systems, including to the cloud;

• increased or unplanned costs associated with order fulfillment and delivery of merchandise to our customers;

• inadequacy of disaster recovery processes and the failure to align these processes with business continuity plans;

• the integration of the Gymboree brand in our stores and via our e-commerce website, the continued progress of our Sugar & Jade and PJ Place brands;

• the integration of the Gymboree brand in our stores and via our e-commerce website;

• the ability to thoughtfully utilize and integrate AI and machine learning technologies, products, and services into our business operations;

• consumer privacy and information security concerns and regulation;

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Problems in any one or more of these areas, individually or in aggregation, could have a material adverse effect on our business, financial position, results of operations, and cash flows, and could damage our reputation and brands.

In addition, profitability or other intended benefits, if any, in our newer activities (including development and adoption of automation, AI, and machine learning technologies for customer and internal use), may not meet our expectations, and we may not be successful enough in these newer activities to recoup our investments in them, which investments are often significant.

Failure to realize the benefits of amounts we invest in new technologies, products, or services could result in the value of those investments being written down or written off.

A material disruption in, failure of, inability to upgrade, or inability to properly implement disaster recovery plans for, our information technology or other business systems could have a material adverse effect on our business, financial position, results of operations, and cash flows.

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We are subject to the requirements of Section 203 of the DGCL, which limits our ability to engage in certain transactions with Mithaq.

We are subject to the requirements of Section 203 of the Delaware General Corporation Law (the “DGCL”), which provides that a corporation shall not engage in any business combination with any interested stockholder for a period of three years following the time that such stockholder became an interested stockholder, unless (1) prior to such time the Board of Directors of the corporation approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder;

We are subject to the requirements of Section 203 of the Delaware General Corporation Law (the “DGCL”), which provides that a corporation shall not engage in any business combination with any interested stockholder for a period of three years following the time that such stockholder became an interested stockholder, unless (1) prior to such time the Board of the corporation approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder;

(2) upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the voting stock outstanding (but not the outstanding voting stock owned by the interested stockholder) those shares owned (i) by persons who are directors and also officers and (ii) employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer;

or (3) at or subsequent to such time the business combination is approved by the Board of Directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66.67% of the outstanding voting stock which is not owned by the interested stockholder.

or (3) at or subsequent to such time the business combination is approved by the Board and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66.67% of the outstanding voting stock which is not owned by the interested stockholder.

These restrictions are subject to certain exceptions specified in Section 203(b) of the DGCL.

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The term “business combination” is broadly defined under Section 203 of the DGCL to include mergers, asset sales and other transactions in which the interested stockholder receives or could receive a financial benefit on other than a pro rata basis with other stockholders, as further described in the section entitled “Description of Capital Stock”.

Without having obtained the prior approval of our Board of Directors or meeting the other conditions described above, Mithaq became an “interested stockholder” with respect to the Company upon its acquisition of more than 15% of our shares of common stock in February 2024.

As a result, prior to February 2027, Mithaq will generally be prevented from engaging in any business combination (as defined for purposes of Section 203 of the DGCL) with us, in the absence of the approval of our Board of Directors and the affirmative vote of at least two-thirds of our outstanding shares of common stock not owned by Mithaq.

Without having obtained the prior approval of our Board or meeting the other conditions described above, Mithaq became an “interested stockholder” with respect to the Company upon its acquisition of more than 15% of our shares of common stock in February 2024.

As a result, prior to February 2027, Mithaq will generally be prevented from engaging in any business combination (as defined for purposes of Section 203 of the DGCL) with us, in the absence of the approval of our Board and the affirmative vote of at least two-thirds of our outstanding shares of common stock not owned by Mithaq.

We may be unable to protect our trademarks and other intellectual property rights.

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Also, others may assert proprietary rights in our intellectual property, or may assert that we are engaging in activities that infringe on their own intellectual property, and we may not be able to successfully resolve these types of claims, any of which could have a material adverse effect on our business, financial position, results of operations, and cash flows.

In particular, the recent proliferation of the use of AI increases the potential for claims of infringement or other claims, including those based on unauthorized use of third-party technology or content.

In addition, the laws of certain foreign countries may not protect our proprietary rights to the same extent as do the laws of the United States, and we may not be successful in obtaining our trademarks in foreign countries where we plan to conduct business.

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Our failure to comply with federal, state or local law, and litigation involving such laws, or changes in such laws, could materially increase our expenses and expose us to legal risks and liability.

If we fail to comply with applicable laws and regulations, particularly wage and hour, accessibility, privacy and information security, product safety, and pricing, children’s online privacy protection, advertising, sweepstakes, contests, and marketing laws, we could be subject to legal and reputational risk, government enforcement action, and class action civil litigation, which could have a material adverse effect on our business, financial position, results of operations, and cash flows.

If we fail to comply with applicable laws and regulations, particularly wage and hour, accessibility, privacy and information security, AI technologies and services, product safety, and pricing, children’s online privacy protection, advertising, sweepstakes, contests, and marketing laws, we could be subject to legal and reputational risk, government enforcement action, and class action civil litigation, which could have a material adverse effect on our business, financial position, results of operations, and cash flows.

Changes in regulation and how regulations are enforced, such as taxes, tariffs, privacy and information security, product safety, trade, consumer credit, pricing, advertising, and marketing, healthcare or environmental protection, among others, could cause our expenses to increase, margins to decrease, or tax deductible expenses to decrease, which could lead to a material adverse effect on our business, financial position, results of operations, and cash flows.

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If we have difficulty implementing and maintaining effective internal controls over financial reporting, or if we identify a material weakness in our internal controls over financial reporting in the future, we may not detect errors on a timely basis, such that it could harm our operating results, adversely affect our reputation, cause our stock price to decline, or result in inaccurate financial reporting or material misstatements in our annual or interim financial statements.

We may be unable to maintain compliance with securities laws, stock exchange listing requirements and debt instruments’ covenants regarding the timely filing of accurate periodic reports, which could lead to investigations by Nasdaq, the SEC or other regulatory authorities or litigations with our creditors and/or stockholders, hence requiring additional management attention and impairing our ability to operate our business.

We may be unable to maintain compliance with securities laws, stock exchange listing requirements and debt instruments’ covenants regarding the timely filing of accurate periodic reports, which could lead to investigations by Nasdaq, the SEC or other regulatory authorities or litigation with our creditors and/or stockholders, hence requiring additional management attention and impairing our ability to operate our business.

Our liquidity, access to capital markets and perceptions of our creditworthiness may be adversely affected.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors