What changed in this filing

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Item 1. Financial Statements

2024-08-05 compared with 2024-05-07 · 630 added, 500 removed, 550 unchanged (67% of the section changed)

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Total current liabilities

Debt, net of current portion

Related party debt

Long-term debt, net of current portion

Accrued warranty liabilities, net of current portion

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$ 0.0001 par value, 210,000 shares authorized;

107,480 issued and outstanding at March 31, 2024 and 105,507 issued and outstanding at December 31, 2023

107,503 issued and outstanding at June 30, 2024 and 105,507 issued and outstanding at December 31, 2023

Class B common stock;

$ 0.0001 par value, 90,000 shares authorized;

205 issued and outstanding at March 31, 2024 and at December 31, 2023

205 issued and outstanding at June 30, 2024 and at December 31, 2023

Additional paid-in capital

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Three Months Ended

Six Months Ended

Revenues, net

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Change in fair value – warrant liabilities

Total other expense, net

Net loss before income taxes

Total other income (expense), net

Net income (loss) before income taxes

Income tax expense

Net income (loss)

Net loss attributable to noncontrolling interest

Net loss attributable to Purple Innovation, Inc.

Net loss per share:

Net income (loss) attributable to Purple Innovation, Inc.

Net income (loss) per share:

Weighted average common shares outstanding:

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$ ( 526,186 )

Net income (loss)

Stock-based compensation

Issuance of common stock under equity compensation plans

Impact of transactions affecting NCI

Balance – June 30, 2024

$ ( 526,159 )

Stockholders’

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$ ( 381,145 )

Stock-based compensation

Exchange of stock

Proportional Representation Preferred Linked Stock redemption

Additional costs associated with underwritten public stock offering

Issuance of stock under equity compensation plans

Impact of transactions affecting NCI

Balance – June 30, 2023

$ ( 421,632 )

The accompanying notes are an integral part of

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(unaudited – in thousands)

Three Months Ended

Six Months Ended

Cash flows from operating activities:

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Paid-in-kind interest

Change in fair value – warrant liabilities

Loss on extinguishment of debt

Change in fair value – warrant liabilities

Stock-based compensation

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Payments for public offering costs

Proportional Representation Preferred Linked Stock redemption fee

Tax receivable agreement payments

Net cash provided by financing activities

Net increase (decrease) in cash

Net decrease in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash, beginning of the year

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Notes to Condensed Consolidated Financial Statements

The Company’s mission

is to help people feel and live better through innovative comfort solutions.

Purple Innovation, Inc.’s

mission is to help people feel and live better through innovative comfort solutions.

Purple Innovation, Inc.

with its subsidiary (the “Company” or “Purple Inc.”) began as a digitally-native vertical brand founded on comfort

product innovation with premium offerings, and is now omni-channel.

The Company designs and manufactures a variety of innovative, branded

and premium comfort products, including mattresses, pillows, cushions, bases, sheets, and other products.

The Company markets and sells

its products through its e-commerce online channels, retail brick-and-mortar wholesale partners, Purple owned retail showrooms, and third-party

with its subsidiary (the “Company” or “Purple Inc.”) is an omni-channel Company that began as a digitally-native

vertical brand founded on comfort product innovation with premium offerings.

The Company designs and manufactures a variety of innovative,

branded and premium comfort products, including mattresses, pillows, cushions, bases, sheets, and other products.

The Company markets

and sells its products through its e-commerce online channels, retail brick-and-mortar wholesale partners, Purple showrooms, and third-party

online retailers.

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and Principles of Consolidation

The condensed

consolidated financial statements include the accounts of Purple Inc., its controlled subsidiary Purple LLC, and Purple LLC’s

wholly owned subsidiary Advanced Comfort Technologies, Inc., dba Intellibed (“Intellibed”).

All intercompany balances

and transactions have been eliminated in consolidation.

As of March 31, 2024, Purple Inc.

held 99.8 % of the common units of Purple

LLC and other Purple LLC Class B Unit holders held 0.2 % of the common units in Purple LLC.

The condensed consolidated

financial statements include the accounts of Purple Inc., its controlled subsidiary Purple LLC, and Purple LLC’s wholly owned subsidiary

Advanced Comfort Technologies, Inc., dba Intellibed (“Intellibed”).

All intercompany balances and transactions have been

eliminated in consolidation.

As of June 30, 2024, Purple Inc.

held 99.8 % of the common units of Purple LLC and Purple LLC Class B Unit

holders held 0.2 % of the common units in Purple LLC.

The accompanying unaudited

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the audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the

year ended December 31, 2023.

The unaudited condensed consolidated financial statements were prepared on the same basis as the audited

consolidated financial statements and, in the opinion of management, reflect all adjustments (all of which were considered of normal recurring

nature) considered necessary to present fairly the Company’s financial results.

The results of the three months ended March 31,

2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024 or for any other interim period

or other future year.

Variable Interest Entities

fiscal year ended December 31, 2023.

The unaudited condensed consolidated financial statements were prepared on the same basis as the

audited consolidated financial statements and, in the opinion of management, reflect all adjustments (all of which were considered of

normal recurring nature) considered necessary to present fairly the Company’s financial results.

The results of the three and six

months ended June 30, 2024 are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2024

or for any other interim period or other future year.

Variable Interest

Purple LLC is a variable interest

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benefits that are potentially significant.

At March 31, 2024, Purple Inc.

At June 30, 2024, Purple Inc.

had a 99.8 % economic interest in Purple LLC and consolidated

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statements contained herein.

The holders of Class B units held 0.2 % of the economic interest in Purple LLC as of March 31, 2024.

discussion see Note 16 – Stockholders’ Equity.

PURPLE INNOVATION, INC.

Notes to Condensed Consolidated Financial Statements

The holders of Class B Units of Purple LLC (“Class B Units”) held 0.2 % of the economic interest

in Purple LLC as of June 30, 2024.

For further discussion see Note 15 — Stockholders’ Equity.

Use of Estimates

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of which form the basis for making judgments about the carrying values of assets and liabilities.

The Company regularly makes significant

estimates and assumptions that affect revenue recognition, accounts receivable, allowance for credit losses, valuation of inventories,

sales returns, warranty returns, fair value of assets acquired and liabilities assumed in a business combination, impairment reviews of

long-lived assets and definite-lived intangible assets, warrant liabilities, stock based compensation, the recognition and measurement

of loss contingencies, estimates of current and deferred income taxes, deferred income tax valuation allowances, and amounts associated

with the Company’s tax receivable agreement with InnoHold, LLC (“InnoHold”).

Predicting future events is inherently

an imprecise activity and, as such, requires the use of judgment.

The Company regularly makes estimates

and assumptions including, but not limited to, estimates that affect revenue recognition, accounts receivable and the allowance for credit

losses, valuation of inventories, sales returns, warranty returns, fair value of assets acquired and liabilities assumed in business combinations,

impairment reviews of long-lived assets and definite-lived intangible assets, warrant liabilities, stock based compensation, the recognition

and measurement of loss contingencies, estimates of current and deferred income taxes, deferred income tax valuation allowances, and amounts

associated with the Company’s tax receivable agreement with InnoHold, LLC (“InnoHold”).

Predicting future events is

inherently an imprecise activity and, as such, requires the use of judgment.

Actual results could differ materially from those estimates.

PURPLE INNOVATION, INC.

Notes to Condensed Consolidated Financial Statements

Reclassification

Certain amounts in the prior year condensed consolidated balance sheet

have been reclassified to conform to the current year’s presentation with no effect on previously reported net (loss)

income, cash flows or stockholders’ equity.

Accrued compensation, previously included in the condensed consolidated balance sheet

within other current liabilities, is now presented separately.

Recent Accounting Pronouncements

Certain amounts in the prior

year condensed consolidated balance sheet have been reclassified to conform to the current year’s presentation with no effect

on previously reported net (loss) income, cash flows or stockholders’ equity.

Accrued compensation, previously included in the

condensed consolidated balance sheet within other current liabilities, is now presented separately.

Recent Accounting

Pronouncements

Enhanced Segment Disclosures

In November 2023, the Financial Accounting Standards Board (the “FASB”)

issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, which requires public entities,

including those that have a single reportable segment, to provide enhanced disclosures about significant expenses.

This ASU requires disclosure

to include significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”), a description

of other segment items by reportable segment, and any additional measures of a segment’s profit or loss used by the CODM when deciding

how to allocate resources.

This ASU also requires all annual disclosures currently required by Topic 280 to be included in interim periods.

The update is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December

15, 2024, with early adoption permitted and requires retrospective application to all prior periods presented in the financial statements.

The Company is currently analyzing the impact this ASU will have on its disclosures.

to Income Tax Disclosures

In December 2023, the FASB issued

ASU 2023-09, Income Taxes (Topic 740):

In November 2023, the Financial

Accounting Standards Board (the “FASB”) issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable

Segment Disclosures, which requires public entities, including those that have a single reportable segment, to provide enhanced disclosures

about significant expenses.

This ASU requires disclosure to include significant segment expenses that are regularly provided to the chief

operating decision maker (“CODM”), a description of other segment items by reportable segment, and any additional measures

of a segment’s profit or loss used by the CODM when deciding how to allocate resources.

This ASU also requires all annual disclosures

currently required by Topic 280 to be included in interim periods.

The update is effective for fiscal years beginning after December

15, 2023 and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted and requires retrospective

application to all prior periods presented in the financial statements.

The Company is currently analyzing the impact this ASU will have

on its disclosures.

Improvements to Income

Tax Disclosures

In December 2023, the FASB

issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.

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disclosure guidance, primarily requiring more detailed disclosures for income taxes paid and the effective tax rate reconciliation.

ASU is effective for fiscal years beginning after December 15, 2024, may be applied prospectively or retrospectively, and allows for early

ASU is effective for fiscal years beginning after December 15, 2024, may be applied prospectively or retrospectively, and allows for

early adoption.

The Company is currently evaluating the impact this update will have on its income tax disclosures in the consolidated

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in subsequent periods.

During March 2024, the Company issued 1.5 million contingent shares to Intellibed security holders since the

Company’s stock price did not meet any of the indicated thresholds during the contingency period.

During March 2024, the Company issued 1.5 million shares of Class A common stock to Intellibed security holders

since the Company’s stock price did not meet any of the indicated thresholds during the contingency period.

PURPLE INNOVATION, INC.

Notes to Condensed Consolidated Financial Statements

Fair Value Measurements

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The levels of the fair value hierarchy are:

Level 1—Quoted market prices in

active markets for identical assets or liabilities;

Level 1—Quoted market prices

in active markets for identical assets or liabilities;

Level 2—Significant other observable

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which there is little or no market data, which require the reporting unit to develop its own assumptions.

PURPLE INNOVATION, INC.

Notes to Condensed Consolidated Financial Statements

The classification of fair

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The estimated fair value of the Company’s

debt arrangement is based on Level 2 inputs, which include observable inputs approximated using

discounted cash flows and market-based expectations for interest rates, credit risk and the contractual terms of debt instruments.

of March 31, 2024, the estimated fair value of the Company’s debt arrangement was $ 41.1 million.

debt arrangement is based on Level 2 inputs, which include observable inputs approximated using discounted cash flows and market-based

expectations for interest rates, credit risk and the contractual terms of debt instruments.

As of June 30, 2024, the estimated fair value

of the Company’s debt arrangement was $41.7 million.

The warrant liabilities (see

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these unobservable inputs may have a significant impact on fair value.

Such inputs include risk free interest rate, expected average life,

expected dividend yield, and expected volatility.

These Level 3 liabilities generally decrease (increase) in value based upon an

increase (decrease) in the risk-free interest rate and expected dividend yield.

Such inputs include risk free interest rate, expected average

life, expected dividend yield, and expected volatility.

These Level 3 liabilities generally decrease (increase) in value based upon

an increase (decrease) in risk free interest rate and expected dividend yield.

Conversely, the fair value of these Level 3 liabilities

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The following table summarizes

the Company’s total Level 3 liability activity for the three months ended March 31, 2024.

the Company’s total Level 3 liability activity for the six months ended June 30, 2024.

(In thousands)

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Initial measurement at time of issuance

Change in valuation inputs (1)

Fair value as of March 31, 2024

in valuation inputs (1)

Fair value as of June 30, 2024

(1) Changes in valuation inputs are recognized as the change in fair value – warrant liabilities in the condensed consolidated statement of operations.

PURPLE INNOVATION, INC.

Notes to Condensed Consolidated Financial Statements

Revenue from Contracts with Customers

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direct-to-consumer (“DTC”) and wholesale.

The DTC category is comprised of the e-commerce channel

that sells directly to consumers who purchase online and through our contact center, and the Purple showrooms channel that sells directly

to consumers who purchase at a showroom location.

The wholesale channel includes all product sales to our retail brick and mortar wholesale

partners where consumers make purchases at their retail locations or through their online channels.

The Company classifies products into

two major types:

The DTC category is comprised of the Company’s

e-commerce channel that sells directly to consumers who purchase online and through our contact center, and the Purple showrooms channel

that sells directly to consumers who purchase at a showroom location.

The wholesale channel includes all product sales to our retail

brick and mortar wholesale partners where consumers make purchases at their retail locations or through their online channels.

classifies products into two major types:

sleep products and other.

Sleep products include mattresses, platforms, adjustable bases, mattress protectors, pillows

Sleep products include mattresses, platforms, adjustable bases, mattress

protectors, pillows and sheets.

Other products include cushions and various other products.

PURPLE INNOVATION, INC.

Notes to Condensed Consolidated Financial Statements

The following tables present

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Three Months Ended

Six Months Ended

Sales Category

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Three Months Ended

Six Months Ended

Sleep products

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Contract Balances

Payments for the sale of products

Payments for sale of products

through the e-commerce online channel, third-party online retailers, Purple showrooms and contact center are collected at point of sale

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Customer prepayments

totaled $ 4.0 million and $ 5.7 million at March 31, 2024 and December 31, 2023, respectively.

During the three months ended March 31, 2024

and 2023, the Company recognized all revenue that was deferred in customer prepayments at December 31, 2023 and 2022, respectively.

Inventories consisted of the

following (in thousands):

totaled $ 4.7 million and $ 5.7 million at June 30, 2024 and December 31, 2023, respectively.

During the three months ended June 30, 2024

and 2023, the Company recognized all revenue that was deferred in customer prepayments at March 31, 2024 and 2023, respectively.

Inventories consisted of

the following (in thousands):

Raw materials

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Equipment in progress reflects

equipment, primarily related to mattress manufacturing, which is being constructed and was not in service at March 31, 2024 or December

Interest capitalized on borrowings during the active construction period of major capital projects totaled $ 0.4 million during

each of the three months ended March 31, 2024 and 2023.

Depreciation expense totaled $ 5.2 million and $ 4.8 million during the three months

ended March 31, 2024 and 2023, respectively.

The Company leases its manufacturing and distribution facilities, corporate

offices, Purple showrooms and certain equipment under non-cancelable operating leases with various expiration dates through 2036.

Company’s office and manufacturing leases provide for initial lease terms up to 16 years, while Purple showrooms have initial lease

terms of up to 10 years.

equipment, primarily related to mattress manufacturing, which is being constructed and was not in service at June 30, 2024 or December

Interest capitalized on borrowings during the active construction period of major capital projects totaled $ 0.3 million and

$ 0.7 million during the three and six months ended June 30, 2024, respectively and totaled $ 0.1 million and $ 0.5 million during the three

and six months ended June 30, 2023, respectively.

Depreciation expense was $ 5.1 million and $ 10.3 million during the three and six months

ended June 30, 2024, respectively, and totaled $ 4.9 million and $ 9.7 million during the three and six months ended June 30, 2023, respectively.

The Company leases its manufacturing

and distribution facilities, corporate offices, Purple showrooms and certain equipment under non-cancelable operating leases with various

expiration dates through 2036.

The Company’s office and manufacturing leases provide for initial lease terms up to 16 years, while

Purple showrooms have initial lease terms of up to 10 years.

Certain leases may contain options to extend the term of the original lease.

The exercise of lease renewal options

is at the Company’s discretion.

Any lease renewal options are included in the lease term if exercise is reasonably certain at lease

commencement.

The Company also leases vehicles and other equipment under both operating and finance leases with initial lease terms of

three to five years .

The right of use (“ROU”) asset for finance leases was $ 0.6 million and $ 0.7 million at March 31, 2024

and December 31, 2023, respectively.

The exercise of lease renewal options is at the Company’s discretion.

Any lease renewal options are included in the lease term

if exercise is reasonably certain at lease commencement.

The Company also leases vehicles and other equipment under both operating and

finance leases with initial lease terms of three to five years .

The right-of-use asset (“ROU”) for finance leases totaled

$ 0.6 million and $ 0.7 million at June 30, 2024 and December 31, 2023, respectively.

The following table presents

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Three Months Ended

Six Months Ended

Operating lease costs

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the undiscounted cash flows for each of the first five years and total remaining years to the operating lease liabilities recorded on

the condensed consolidated balance sheet at March 31, 2024 (in thousands):

2024 (excluding the three months ended March 31, 2024) (a)

the condensed consolidated balance sheet at June 30, 2024 (in thousands):

2024 (excluding the six months ended June 30, 2023) (a)

Total operating lease payments

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Present value of operating lease payments

(a) Amount consists of $ 16.1 million of undiscounted cash flows offset by $ 0.7 million of tenant improvement allowances which are expected to be fully utilized in 2024.

As of March 31, 2024 and December

31, 2023, the weighted-average remaining term of operating leases was 7.8 years and 8.0 years, respectively, and the weighted-average

discount rate of operating leases was 5.76 % and 5.77 %, respectively.

(a) Amount consists of $ 10.8 million of undiscounted cash flows offset by $ 0.7 million of tenant improvement allowances which are expected to be fully utilized in fiscal 2024.

As of June 30, 2024 and December 31, 2023, the weighted-average remaining

term of operating leases was 7.7 years and 8.0 years, respectively, and the weighted-average discount rate of operating leases was 5.81 %

and 5.77 %, respectively.

The following table provides

supplemental information related to the Company’s condensed consolidated statement of cash flows for the three months ended March

31, 2024 and 2023:

Three Months Ended

Cash paid for amounts included in present value of operating lease liabilities (b)

ROU assets obtained in exchange for operating lease liabilities

supplemental information related to the Company’s condensed consolidated statement of cash flows for the six months ended June

30, 2024 and 2023 (in thousands):

Six Months Ended

Cash paid for

amounts included in present value of operating lease liabilities (b)

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

(b) Operating cash flows paid for operating leases are included within the change in operating leases, net within the condensed consolidated statement of cash flows offset by non-cash ROU asset amortization and lease liability accretion.

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Accrued sales returns

Accrued sales tax and use tax

Insurance financing

Accrued sales and use tax

Long-term debt and unamortized issuance costs – current portion

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unamortized debt issuance costs

Current portion of debt and unamortized issuance costs (c)

portion of debt and unamortized issuance costs (c)

Debt, net of current portion

condensed consolidated balance sheet.

2024 Credit Agreement

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“Amended and Restated Credit Agreement”), which amended and restated the then existing term loan agreement (“Term Loan

Agreement”), with Coliseum Capital Partners (“CCP”) and other lenders (collectively the “Lenders”) and Delaware

Trust Company, as administrative agent.

The Lenders agreed to assume the Loan Parties’ obligations under the Term Loan Agreement

and refinance their existing obligations.

A term loan in the amount of $ 61.0 million (the “Related Party Loan”) was funded

by the Lenders that repaid in full the $ 25.0 million of term loans outstanding, repaid in full the $ 5.0 million of asset based lending

loans outstanding, paid fees, premiums and expenses incurred in connection with this transaction, and provided net proceeds to the Company

(after payments of outstanding debt, unpaid accrued interest, and expenses) equal to approximately $ 27.0 million.

Interest on the Related

Party Loan is payable each month and the principal outstanding matures and is due on December 31, 2026.

The Company may elect for interest

to be capitalized and added to the principal amount.

The Related Party Loan bears interest at a rate equal to (i) the secured overnight

financing rate as administered by the Federal Reserve Bank of New York plus 0.10 %, with a floor of 3.5 % per annum, plus (ii) 8.25 % per

annum (or, if Purple LLC elects to pay interest in kind to reduce it cash obligations, 10.25 % per annum).

Any prepayments on or after

August 7, 2024 but before August 7, 2025 are subject to a prepayment penalty of 1.25 %, and any prepayments on or after August 7, 2025

Agreement”), with Coliseum Capital Partners (“CCP”) and other lenders (collectively, the “Lenders”) and

Delaware Trust Company, as administrative agent.

The Lenders agreed to assume the Loan Parties’ obligations under the Term Loan

Agreement and refinance their existing obligations.

A term loan in the amount of $ 61.0 million (the “Related Party Loan”)

was funded by the Lenders that repaid in full the $ 25.0 million of term loans outstanding, repaid in full the $ 5.0 million of asset based

lending loans outstanding, paid fees, premiums and expenses incurred in connection with this transaction, and provided net proceeds to

the Company (after payments of outstanding debt, unpaid accrued interest and expenses) equal to approximately $ 27.0 million.

on the Related Party Loan is payable each month and the principal outstanding matures and is due on December 31, 2026.

The Company may

elect for interest to be capitalized and added to the principal amount.

The Related Party Loan bears interest at a rate equal to (i) the

secured overnight financing rate as administered by the Federal Reserve Bank of New York plus 0.10 %, with a floor of 3.5 % per annum, plus

(ii) 8.25 % per annum (or, if Purple LLC elects to pay interest in kind to reduce it cash obligations, 10.25 % per annum).

Any prepayments

on or after August 7, 2024 but before August 7, 2025 are subject to a prepayment penalty of 1.25 %, and any prepayments on or after August

7, 2025 are subject to a prepayment penalty of 2.50 %.

The Loan Parties may request an additional term loan from the Lenders in an aggregate amount

not to exceed $ 19.0 million on terms requested by them to the extent agreed to by the Lenders at their discretion.

The Loan Parties may request an additional term loan from the Lenders in an aggregate

amount not to exceed $ 19.0 million on terms requested by them to the extent agreed to by the Lenders at their discretion.

and Restated Credit Agreement also removed restrictions and requirements typically associated with an asset-based loan.

In connection with the Amended

and Restated Credit Agreement, the Company issued 20.0 million warrants to the Lenders (see Note 11 – Warrant Liabilities )

and incurred fees and expenses of $ 3.5 million that were recorded as debt issuance costs in the first quarter of 2024.

Interest expense

under the Related Party Loan was $ 4.3 million and $ 7.7 million for the three and six months ended June 30, 2024, respectively.

The Amended and Restated

Credit Agreement also removed restrictions and requirements typically associated with an asset-based loan.

Pursuant to entering into

the Amended and Restated Credit Agreement, the Company incurred fees and expenses of $ 3.5 million that were recorded as debt issuance

costs in the first quarter of 2024.

Interest expense under the Related Party Loan was $ 3.3 million for the three months ended March 31,

The Amended and Restated Credit

Agreement granted a security interest to the Lenders in substantially all of the assets (subject to certain limited exceptions) of the

Loan Parties to secure the Loan Parties’ loans and other obligations under the Amended and Restated Credit Agreement, including

Credit Agreement granted a security interest to the Lenders in substantially all of the assets (subject to certain limited exceptions)

of the Loan Parties to secure the Loan Parties’ loans and other obligations under the Amended and Restated Credit Agreement, including

a security interest in the intellectual property owned by the Loan Parties.

The Loan Parties (other than

Purple LLC) provided an unconditional guaranty of the payment of all obligations and liabilities of Purple LLC under the Amended and Restated

Purple LLC) provided an unconditional guaranty of the payment of all obligations and liabilities of Purple LLC under the Amended and

Restated Credit Agreement.

The Amended and Restated

Credit Agreement also provides for standard indemnification of the Lenders and contains representations, warranties and certain covenants

of the Loan Parties.

While any amounts are outstanding under the Amended and Restated Credit Agreement, the Loan Parties are subject

to a number of affirmative and negative covenants, including covenants regarding dispositions of property, investments, forming or acquiring

subsidiaries, business combinations or acquisitions, incurrence of additional indebtedness and transactions with affiliates, among other

customary covenants.

The Loan Parties are also restricted from paying dividends or making other distributions or payments on their capital

stock, subject to limited exceptions.

As of June 30, 2024, the Company was in compliance with all covenants under the Amended and Restated

Credit Agreement.

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Notes to Condensed Consolidated Financial Statements

The Amended and Restated Credit Agreement also provides for standard

indemnification of the Lenders and contains representations, warranties and certain covenants of the Loan Parties.

While any amounts are

outstanding under the Amended and Restated Credit Agreement, the Loan Parties are subject to a number of affirmative and negative covenants,

including covenants regarding dispositions of property, investments, forming or acquiring subsidiaries, business combinations or acquisitions,

incurrence of additional indebtedness and transactions with affiliates, among other customary covenants.

The Loan Parties are also restricted

from paying dividends or making other distributions or payments on their capital stock, subject to limited exceptions.

As of March 31,

2024, the Company was in compliance with all covenants under the Amended and Restated Credit Agreement.

2023 Credit Agreements

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the Company incurred fees and expenses of $ 3.1 million that were recorded as debt issuance costs in the third quarter of 2023.

The Term Loan Agreement provided for up to $ 25.0 million of term loans,

with up to $ 5.0 million of incremental term loans available, subject to certain conditions (collectively, the “Term Loans”).

The Term Loan Agreement provided

for up to $ 25.0 million of term loans, with up to $ 5.0 million of incremental term loans available, subject to certain conditions (collectively,

the “Term Loans”).

Proceeds from the Term Loans were used for general corporate purposes.

The borrowing rates under the Term Loan Agreement were based on

SOFR, plus a credit spread adjustment of 0.15 % per annum, plus 8.5 % per annum, with a SOFR floor of 2.0 % per annum.

The Term Loans were

to be repaid at the earlier of (i) a three-year amortization schedule ending on August 7, 2026 or (ii) the payment in full of the ABL

The Term Loans could be prepaid in whole or in part at any time, but subject to a prepayment premium.

There were also potential

mandatory prepayment obligations based on certain asset dispositions, casualty events and extraordinary receipts.

Once repaid, no portion

of the Term Loans could be reborrowed.

The borrowing rates under the Term

Loan Agreement were based on SOFR, plus a credit spread adjustment of 0.15 % per annum, plus 8.5 % per annum, with a SOFR floor of 2.0 %

The Term Loans were to be repaid at the earlier of (i) a three-year amortization schedule ending on August 7, 2026 or (ii)

the payment in full of the ABL Agreement.

The Term Loans could be prepaid in whole or in part at any time, but subject to a prepayment

There were also potential mandatory prepayment obligations based on certain asset dispositions, casualty events and extraordinary

Once repaid, no portion of the Term Loans could be reborrowed.

The ABL Agreement provided

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for swing line loans and the issuance of letters of credit), with incremental increases available up to $ 20.0 million (the “ABL

Loans”), subject to certain conditions, availability reserves, minimum availability requirements, borrowing base calculations, and

restrictive covenants.

Loans”), subject to certain conditions, availability reserves, minimum availability requirements, borrowing base calculations,

and restrictive covenants.

In October 2023, the ABL Lenders implemented an availability reserve of $ 5.0 million, which reduced the amount

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Outstanding principal and accrued interest on the ABL Loans were to be repaid on August 7, 2026.

Term loans totaling $ 25.0

million were fully drawn at closing and, subsequent to the closing in August 2023, the Company executed $ 17.0 million in ABL loan draws

and then repaid $ 12.0 million of those borrowings prior to the end of 2023.

The outstanding balance of ABL Loans totaled $ 5.0 million

at December 31, 2023.

In connection with the Amended and Restated Credit Agreement, all obligations under the 2023 Credit Agreements were

paid in full and the agreements were terminated.

Term loans totaling $ 25.0 million

were fully drawn at closing and, subsequent to the closing in August 2023, the Company executed $ 17.0 million in ABL loan draws and then

repaid $ 12.0 million of those borrowings prior to the end of 2023.

The outstanding balance of ABL Loans totaled $ 5.0 million at December

In connection with the Amended and Restated Credit Agreement, all obligations under the 2023 Credit Agreements were paid in

full and the agreements were terminated.

The termination was accounted for as an extinguishment of debt and $ 3.4 million of unamortized

debt issuance costs related to the 2023 Credit Agreements were recorded as a loss on extinguishment of debt in the first quarter of 2024.

Interest expense under the 2023 Credit Agreements was $ 0.4 million for the three months ended March 31, 2024.

PURPLE INNOVATION, INC.

Notes to Condensed Consolidated Financial Statements

Interest expense under the 2023 Credit Agreements was $ 0.4 million for the six months ended June 30, 2024.

For the three months ended

June 30, 2024, there was no interest expense associated with the 2023 Credit Agreements.

2020 Credit Agreement

8 unchanged sentences

commitment fee was due quarterly based on the applicable margin applied to the unused total revolving commitment.

In connection with the

Company’s execution of the 2023 Credit Agreements, the Company terminated its 2020 Credit Agreement.

In connection with

the Company’s execution of the 2023 Credit Agreements, the Company terminated its 2020 Credit Agreement.

The Company had no outstanding

6 unchanged sentences

on the term loan plus accrued interest.

Pursuant to this amendment, the Company incurred fees and expenses of $ 2.9 million that were recorded

as debt issuance costs in the condensed consolidated balance sheet.

The amendment was accounted for as an extinguishment of debt and $ 1.2

million of unamortized debt issuance costs related to the term loan were recorded as loss on extinguishment of debt in the first quarter

On April 26, 2023, the Company

received consent under the 2020 Credit Agreement that allowed the Company’s redemption of Proportional Representation Preferred

Linked Stock (“PRPLS”) issued by the Company on February 24, 2023, in an aggregate amount not to exceed $ 0.2 million as agreed

by the Company in an April 19, 2023 Cooperation Agreement (the “Cooperation Agreement”) entered into with Coliseum.

16— Related Party Transactions — Coliseum Capital Management, LLC for information regarding events leading up to

the Company’s issuance of the PRPLS, and for information regarding terms of the Cooperation Agreement and redemption of the PRPLS.)

Pursuant to this amendment, the Company incurred fees and expenses of $ 2.9 million that were

recorded as debt issuance costs in the condensed consolidated balance sheet.

The amendment was accounted for as an extinguishment of

debt and $ 1.2 million of unamortized debt issuance costs related to the term loan were recorded as loss on extinguishment of debt in

the first quarter of 2023.

Interest expense under the

2020 Credit Agreement totaled $ 0.6 million for the three months ended March 31, 2023.

2020 Credit Agreement totaled $ 0.5 million and $ 1.1 million for the three and six months ended June 30, 2023, respectively.

PURPLE INNOVATION, INC.

21 unchanged sentences

included in earnings.

The Company uses the Monte

Carlo Simulation of a Geometric Brownian Motion stock path model to determine the fair value of the liability associated with the Warrants.

The model uses key assumptions and inputs such as exercise price, fair market value of common stock, risk free interest rate, warrant

life, expected volatility and the probability of a warrant re-price event.

The following are the assumptions used in calculating fair

value of the Warrants on the date of issuance:

The Company used a the Monte

Carlo Simulation model to determine the fair value of the liability associated with the Warrants.

The model uses key assumptions and inputs

such as exercise price, fair market value of common stock, risk free interest rate, warrant life, expected volatility and the probability

of a warrant re-price event.

The following are the assumptions used in calculating fair value of the Warrants on the date of issuance:

Trading price of common stock on measurement date

6 unchanged sentences

The following are the assumptions

used in calculating fair value of the Warrants on March 31, 2024:

used in calculating fair value of the Warrants on June 30, 2024:

Trading price of common stock on measurement date

5 unchanged sentences

Probability of an event causing a warrant re-price

During the three months ended

March 31, 2024, the Company recognized a loss of $ 23.6 million in its condensed consolidated statement of operations related to an increase

in the fair value of the Warrants outstanding at the end of the period.

The Warrants had a fair value

of $ 24.5 million as of June 30, 2024.

The Company recognized a gain of $ 18.7 million in its condensed consolidated statement of operations

for the three months ended June 30, 2024 related to a decrease in the fair value of the Warrants outstanding at the end of the period

compared to the fair value of the Warrants outstanding at the end of the first quarter of 2024.

For the six months ended June 30, 2024,

the Company recognized a loss of $ 4.9 million in its condensed consolidated statement of operations related to an increase in the fair

value of the Warrants outstanding at the end of the period compared to the fair value of the Warrants on the date of issuance.

Other Long-Term Liabilities

23 unchanged sentences

Cash Bonus Award

On January 26, 2024, the Company’s

board of directors (the “Board”) approved an amendment to the Chief Executive Officer’s employment agreement.

the amendment, the Company agreed that, among other things, the Chief Executive Officer will be eligible to earn a cash payment of up

to $ 5.0 million, less tax and other required withholdings, based on the volume weighted average price per share of the Company’s

Class A common stock on NASDAQ during the period from March 16, 2026 through June 30, 2026 subject to his continued employment with the

On January 26, 2024, the

Company’s board of directors (the “Board”) approved an amendment to the Chief Executive Officer’s employment

Under the amendment, the Company agreed that, among other things, the Chief Executive Officer will be eligible to earn a cash

payment of up to $ 5.0 million, less tax and other required withholdings, based on the volume weighted average price per share of the

Company’s Class A common stock on NASDAQ during the period from March 16, 2026 through June 30, 2026 subject to his continued employment

with the Company.

The amount earned will be payable in quarterly installments commencing with the first payroll period following June

For the three months ended March 31, 2024, the Company recorded compensation expense of $ 0.4 million related to this future bonus payment.

Partial Settlement

The Company determined the provisions surrounding the future bonus payment require it to be accounted for as a liability at

fair value on the date of the transaction, with changes in fair value recognized in earnings in the period of change.

The Company recorded

compensation expense of $ 0.2 million in its condensed consolidated statement of operations for the six months ended June 30, 2024 related

to this future bonus payment.

For the three months ended June 30, 2024, the Company recognized a compensation expense reduction of $ 0.2

million in its condensed consolidated statement of operations related to a decrease in the fair value of the future bonus payment.

Senior Leadership

Team Special Recognition Bonus

January 26, 2024, the Board unanimously approved a special recognition bonus payment to certain members of the Company’s senior

leadership team.

Each participant is eligible to earn a special recognition bonus payment equal to 15 months of their regular salary.

The special recognition bonus payment is payable, subject to the employee’s continued employment with the Company, 10 % on August

1, 2024, 20 % on February 1, 2025, and 70 % on August 1, 2025.

The Company recorded compensation expense of $ 1.5 million in its condensed

consolidated statement of operations for the six months ended June 30, 2024 related to this future bonus payment.

Cash Long-Term Incentive Award

June 20, 2024, the Board unanimously approved a performance cash long-term incentive award to those employees eligible to participate

in the Company’s Long-Term Incentive Plan.

The incentive award payment is based on a performance goal of the volume weighted average

price per share of the Company’s Class A common stock on NASDAQ on March 31, 2027.

The Company determined the provisions surrounding

the performance cash long-term incentive award require it to be accounted for as a liability at fair value at each reporting period,

with changes in fair value recognized in earnings in the period of change.

The Company recorded a de minimis compensation expense in

the consolidated statement of operations for the six months ended June 30, 2024 related to this future award payment.

of Insurance Claim

In January 2024, the Company

received $ 4.3 million for partial settlement of a previously filed business interruption claim.

The Company recorded the cash upon receipt

as other income, net in the condensed consolidated statement of operations for the three months ended March 31, 2024.

In January 2024, the Company received $ 4.3 million for partial settlement

of a previously filed business interruption claim.

The Company recorded the cash upon receipt as other income, net in the condensed consolidated

statement of operations for the six months ended June 30, 2024.

The remaining settlement amount of $ 7.3 million was received subsequent

to June 30, 2024, refer to Note 20 – Subsequent Events .

PURPLE INNOVATION, INC.

Notes to Condensed Consolidated Financial Statements

Rights of Securities

2 unchanged sentences

Rights Agreement”) with holders of the Warrants (the “Holders”), providing for the registration under the Securities

Act of 1933, as amended of the Warrants, the shares issuable upon the exercise of the Warrants and

Class A Stock held by the Holders as of such date (the “Registrable Securities”), subject to customary terms and conditions.

This agreement entitles the Holders to demand registration of the Registrable Securities and to piggyback on the registration of securities

by the Company and other Company securityholders.

The Company will be responsible for the payment of the Holders’ expenses in connection

with any offering or sale of Registrable Securities by the Holders, including underwriting discounts or selling commissions, placement

agent or broker fees or similar discounts, commissions or fees relating to the sale of certain Registrable Securities.

The Registration

Rights Agreement provided further that the Company was required to prepare and file with the SEC a registration statement to register

the resale of the Registrable Securities.

On March 21, 2024, the Company filed a registration statement registering the Registrable Securities.

The holders of certain warrants exercisable into Class A common stock,

including CCP, Blackwell Partners LLC – Series A (“Blackwell”) and Coliseum Co-Invest Debt Fund, L.P.

and collectively with CCP and Blackwell, the “Coliseum Investors”), were entitled to registration rights pursuant to certain

registration rights agreements of the Company as of the Business Combination date.

In March 2018, the Company filed a registration statement

registering these warrants (and any shares of Class A common stock issuable upon the exercise of the warrants), and certain unregistered

shares of Class A common stock.

The registration statement was declared effective on April 3, 2018.

Under the registration rights agreement

dated February 2, 2018, the Coliseum Investors have the right to make written demands for up to three registrations of certain warrants

and shares of Class A common stock held by them, including in underwritten offerings.

In an underwritten offering of such warrants and

shares of Class A common stock by the Coliseum Investors, the Company will pay underwriting discounts and commissions and certain expenses

incurred by the Coliseum Investors.

In May, 2021, the Coliseum Investors exercised the first of their three written demands for registration

in an underwritten offering.

Act of 1933, as amended of the Warrants, the shares issuable upon the exercise of the Warrants and Class A common stock held by the Holders

as of such date (the “Registrable Securities”), subject to customary terms and conditions.

The Registration Rights agreement

entitles the Holders to demand registration of the Registrable Securities and to piggyback on the registration of securities by the Company

and other Company securityholders.

The Company will be responsible for the payment of the Holders’ expenses in connection with any

offering or sale of Registrable Securities by the Holders, including underwriting discounts or selling commissions, placement agent or

broker fees or similar discounts, commissions or fees relating to the sale of certain Registrable Securities.

The Registration Rights

Agreement provided further that the Company was required to prepare and file with the SEC a registration statement to register the resale

of the Registrable Securities.

The registration statement filed by the Company on March 21, 2024 registering the Registrable Securities

became effective on June 4, 2024.

NOL Rights Plan

On June 27, 2024, the Board approved the adoption of a limited-duration

stockholder rights agreement (the “NOL Rights Plan”) with a stated expiration date of June 30, 2025.

The Board approved the

NOL Rights Plan to protect stockholder value by attempting to safeguard the Company’s ability to use its estimated $ 238 million

of net operating losses (the “Current NOLs”) to reduce potential future federal income tax obligations from becoming substantially

limited by future ownership changes in the Company’s common stock under Code Section 382.

See Note 15 – Stockholders’

Equity – NOL Rights Plan for further discussion of the NOL Rights Plan.

NOL Protective Charter Amendment

In connection with the NOL Rights Plan, the Board adopted, and recommended

that the Company’s stockholders approve, an amendment to the Company’s Certificate of Incorporation (the “NOL Protective

Charter Amendment”) that adds an additional layer of protection of the Current NOLs until June 30, 2025 by voiding certain transfers

of common stock that could result in an ownership change under Code Section 382.

The NOL Protective Charter Amendment is not yet effective

and will be submitted for stockholder approval at the Company’s special meeting of the stockholders (the “Special Meeting”).

See Note 15 – Stockholders’ Equity – NOL Protective Charter Amendment for further discussion of the NOL Protective

Charter Amendment.

PURPLE INNOVATION, INC.

1 unchanged sentence

Non-Income Related

Supreme Court ruling in South Dakota v.

Supreme Court ruling

in South Dakota v.

Wayfair, Inc.

No.17-494, reversed a longstanding precedent that remote sellers are not required to collect state and local sales taxes.

cannot predict the effect of these and other attempts to impose sales, income or other taxes on e-commerce.

The Company currently collects

and reports on sales tax in all states in which it does business.

However, the application of existing, new or revised taxes on the Company’s

business, in particular, sales taxes, value-added tax and similar taxes would likely increase the cost of doing business online and decrease

the attractiveness of selling products over the internet.

The application of these taxes on the Company’s business could also create

significant increases in internal costs necessary to capture data and collect and remit taxes.

There have been, and will continue to be,

substantial ongoing costs associated with complying with the various indirect tax requirements in the numerous markets in which the Company

conducts or will conduct business.

, No.17-494, reversed a longstanding precedent that remote sellers are not required to collect

state and local sales taxes.

The Company cannot predict the effect of these and other attempts to impose sales, income or other taxes

on e-commerce.

The Company currently collects and reports on sales tax in all states in which it does business.

However, the application

of existing, new or revised taxes on the Company’s business, in particular, sales taxes, value-added tax and similar taxes would

likely increase the cost of doing business online and decrease the attractiveness of selling products over the internet.

The application

of these taxes on the Company’s business could also create significant increases in internal costs necessary to capture data and

collect and remit taxes.

There have been, and will continue to be, substantial ongoing costs associated with complying with the various

indirect tax requirements in the numerous markets in which the Company conducts or will conduct business.

Legal Proceedings

16 unchanged sentences

and intends to continue to vigorously defend against these claims in the course of the plaintiffs’ appeal.

On April 3, 2023, Purple’s founders filed a complaint against

Purple LLC in the Delaware Court of Chancery.

The complaint alleges that Purple LLC breached the limited liability company agreement of

Purple LLC by failing to pay the full amount of tax distributions owed under the agreement.

The plaintiffs seek damages of approximately

$ 3.0 million in allegedly unpaid tax distributions as well as legal fees and expenses incurred in connection with the litigation.

On June 13, 2023, Purple LLC filed an answer to the complaint denying the plaintiffs’ allegations, setting forth its affirmative

defenses, and requesting dismissal of all claims and entry of judgment in Purple LLC’s favor.

The outcome of the litigation cannot

be predicted at this early stage in the proceedings.

Purple LLC denies all allegations and intends to vigorously defend against these

On January 17,

2024, two customers filed a punitive class action lawsuit against Purple LLC in California Superior Court

On April 3, 2023, Purple’s

founders filed a complaint against Purple LLC in the Delaware Court of Chancery.

The complaint alleges that Purple LLC breached the limited

liability company agreement of Purple LLC by failing to pay the full amount of tax distributions owed under the agreement.

The plaintiffs

seek damages of approximately $ 3.0 million in allegedly unpaid tax distributions as well as legal fees and expenses incurred in connection

with the litigation.

On June 13, 2023, Purple LLC filed an answer to the complaint denying the plaintiffs’ allegations, setting

forth its affirmative defenses, and requesting dismissal of all claims and entry of judgment in Purple LLC’s favor.

of the litigation cannot be predicted at this early stage in the proceedings.

Purple LLC denies all allegations and intends to vigorously

defend against these claims.

On January 17, 2024, two customers

filed a punitive class action lawsuit (the “Class Action Lawsuit”) against Purple LLC in California Superior Court

in the County of San Francisco alleging unlawful marketing and pricing practices, fraud and unjust enrichment.

The suit seeks

damages and other relief on behalf of all persons who purchased Purple LLC products during the applicable statutory periods in

On February 22, 2024, Purple LLC removed the case to the United States District for the Northern District of

The suit seeks damages

and other relief on behalf of all persons who purchased Purple LLC products during the applicable statutory periods in California.

February 22, 2024, Purple LLC removed the case to the United States District Court for the Northern District of California.

LLC denies all allegations and intends to vigorously defend against these claims.

On April 16, 2024, Purple’s

founders, in their capacity as a former landlord of Purple LLC, brought a lawsuit against Purple LLC, as lessee, for amounts allegedly

owed under a real estate lease which the parties terminated effective September 30, 2023.

In the suit, the plaintiffs allege approximately

$ 2.5 million in damages, based primarily on a dispute regarding whether Purple LLC left the premises in the condition required by the

The plaintiffs further claim approximately $ 0.8 million in holdover rent, as well as unspecified amounts in interest, late fees,

liquidated damages, attorney fees and costs.

Purple LLC denies all allegations and intends to vigorously defend against these claims.

The Company is from time to

time involved in various other claims, legal proceedings and complaints arising in the ordinary course of business.

The Company does not

believe that adverse decisions in any such pending or threatened proceedings, or any amount that the Company might be required to pay

by reason thereof, would have a material adverse effect on the financial condition or future results of the Company.

The Company is from time

to time involved in various other claims, legal proceedings and complaints arising in the ordinary course of business.

The Company does

not believe that adverse decisions in any such pending or threatened proceedings, or any amount that the Company might be required to

pay by reason thereof, would have a material adverse effect on the financial condition or future results of the Company.

PURPLE INNOVATION, INC.

1 unchanged sentence

Related Party Transactions

The Company had various transactions

with entities or individuals which are considered related parties.

Company has engaged in various transactions with entities or individuals which are considered related parties.

Coliseum Capital Management,

Immediately following the

Business Combination, Adam Gray was appointed to the Company’s Board.

following the Business Combination, Adam Gray was appointed to the Board.

Gray is a manager of Coliseum Capital, LLC, which is the

general partner of CCP and CDF, and he is also a managing partner of CCM, which is the investment manager of Blackwell and also manages

investment funds and accounts.

general partner of CCP and Coliseum Co-Invest Debt Fund, L.P.

(“CDF”), and he is also a managing partner of CCM, which is

the investment manager of Blackwell Partners LLC – Series A (“Blackwell”) and also manages investment funds and accounts.

Gray has voting and dispositive control over securities held by CCP, CDF and Blackwell.

Lenders under

the Amended and Restated Credit Agreement included CCP and Blackwell.

See Note 10— Debt — 2024 Credit Agreement for

further discussion .

On September 17, 2022, the

Company received an unsolicited and non-binding proposal from Coliseum on behalf of certain investment funds and accounts to acquire the

remaining outstanding common stock of the Company not already beneficially owned by Coliseum.

At the time of the offer, Coliseum beneficially

owned approximately 44.7 % of the outstanding equity of the Company.

In response, the Board authorized the formation of a special committee

of independent and disinterested directors of the Company (the “Special Committee”) to evaluate the Coliseum proposal and

determine the course of action that was in the best interests of all the Company’s shareholders.

The Special Committee approved

the adoption of a limited-duration stockholder rights agreement to prevent a change of control without payment of an adequate control

On February 21, 2023, Coliseum on behalf of its funds and managed accounts,

filed a lawsuit against the Company and several members of the Board alleging the Company made an improper dividend of preferred stock

and interfered with Coliseum’s nomination of a competing slate of director candidates ahead of the 2023 Annual Meeting.

April 19, 2023, the Company entered into a Cooperation Agreement with Coliseum to resolve the litigation.

The Cooperation Agreement, which

became effective on April 27, 2023, included, among other things, the following:

Board was increased from seven directors to eight and Adam Gray was appointed Chairman of the Board.

● All shares of preferred stock previously designated as Series A Junior

Participating Preferred Stock were redeemed, eliminated and returned to the status of authorized but unissued shares of preferred stock,

without designation.

● The Company made a $ 0.1 million payment to redeem the PRPLS that was

reflected in the Company’s consolidated balance sheet as a reduction to additional paid-in capital.

Company agreed to reimburse Coliseum for up to $ 4.0 million of out-of-pocket fees, costs, and expenses incurred in connection with the

● Coliseum dismissed its litigation against the Company.

both the 2023 and 2024 annual meetings of stockholders, Coliseum agreed to cause all of the common stock that it or any of its affiliates

had the direct or indirect right to vote as of the applicable record date, to be present in person or by proxy for quorum purposes and

to be voted (i) in favor of each of the candidates for election on the Company’s slate of nominees for election to the Board, (ii)

against any stockholder nominations for any other directors, and (iii) against any proposals or resolutions to remove any member of the

Board other than for cause.

PURPLE INNOVATION, INC.

Notes to Condensed Consolidated Financial Statements

agreed to be bound by customary standstill restrictions, including, among others, agreements not to acquire additional shares of the

Company’s securities that would cause Coliseum’s ownership to exceed 44.7% of the total outstanding common stock (other than

acquisitions directly from the Company), engage in proxy solicitations and related matters, form or join any “group” with

respect to shares of the Company, encourage others to pursue a “contested solicitation,” or make any public proposals, subject

to certain exceptions.

agreed to condition any proposal from it or any of its affiliates to acquire the Company or all or substantially all of the outstanding

stock of the Company held by stockholders unaffiliated with Coliseum on (i) such transaction being negotiated by, and subject to the

approval of, a special committee of directors of the Board who are independent with respect to Coliseum and disinterested under Delaware

law and on (ii) a nonwaivable condition that such transaction be approved by the affirmative vote of the holders of a majority of the

Company’s outstanding common stock not beneficially owned by Coliseum or its affiliates or other parties with a material conflict

of interest in such transaction.

Cooperation Agreement will terminate on the day following the date on which the 2024 annual meeting of stockholders is held.

Lenders under the Amended and Restated Credit

Agreement included CCP and Blackwell.

See Note 10— Debt — 2024 Credit Agreement for further discussion .

April 2023, Adam Gray was appointed Chairman of the Board of the Company as part of an agreement to resolve litigation that had been

brought by Coliseum against the Company.

Purple Founder Entities

Purple LLC began leasing its

Alpine facility from entities controlled by Purple’s founders in 2010.

On September 3, 2021, in accordance with the terms of that

original lease, Purple LLC gave notice that it intended to exercise its right to an early termination of the lease to occur on September

On July 20, 2022, the Company entered into an amendment to its Alpine facility lease agreement that rescinded the Company’s

previous notice of termination and extended the lease term to remain in effect until September 30, 2023.

The Company vacated the Alpine

facility and returned the property back to its owner on September 30, 2023, in accordance with the terms of the lease agreement and notice

of termination.

In conjunction with leasing the Alpine facility, Purple LLC incurred rent expense of $ 0.3 million for the three months

ended March 31, 2023.

LLC began leasing its Alpine facility from entities controlled by Purple’s founders in 2010.

On September 3, 2021, in accordance

with the terms of that original lease, Purple LLC gave notice that it intended to exercise its right to an early termination of the lease

to occur on September 30, 2022.

On July 20, 2022, the Company entered into an amendment to its Alpine facility lease agreement that rescinded

the Company’s previous notice of termination and extended the lease term to remain in effect until September 30, 2023.

vacated the Alpine facility and returned the property back to its owner on September 30, 2023, in accordance with the terms of the lease

agreement and notice of termination.

In conjunction with leasing the Alpine facility, Purple LLC incurred rent expense of $ 0.3 million

and $ 0.6 million for the three and six months ended June 30, 2023, respectively (see Note 13— Commitments and Contingencies—Legal

Proceedings for information regarding a complaint filed by Purple’s founders regarding this matter).

Stockholders’ Equity

7 unchanged sentences

of the stockholders.

At March 31, 2024, 107.5 million shares of Class A common stock were outstanding.

At June 30, 2024, 107.5 million shares of Class A common stock were outstanding.

Class B Common Stock

Company has 90.0 million shares of Class B common stock authorized.

Holders of the Company’s Class B common stock will vote together

as a single class with holders of the Company’s Class A common stock on all matters properly submitted to a vote of the stockholders.

Shares of Class B common stock may be issued only to InnoHold, their respective successors and assigns, as well as any permitted transferees

A holder may transfer their shares of Class B common stock to any transferee (other than the Company) only if such holder

also simultaneously transfers an equal number of such holder’s Class B Units to such transferee.

The Class B common stock is not

entitled to receive dividends, if declared by the Board, or to receive any portion of any such assets in respect of their shares upon

liquidation, dissolution, distribution of assets or winding-up of the Company in excess of the par value of such stock.

At June 30, 2024,

0.2 million shares of Class B common stock were outstanding.

PURPLE INNOVATION, INC.

Notes to Condensed Consolidated Financial Statements

Class B Common Stock

The Company has 90.0 million

shares of Class B common stock authorized.

Holders of the Company’s Class B common stock will vote together as a single class with

holders of the Company’s Class A common stock on all matters properly submitted to a vote of the stockholders.

Shares of Class B

common stock may be issued only to InnoHold, their respective successors and assigns, as well as any permitted transferees of InnoHold.

A holder may transfer their shares of Class B common stock to any transferee (other than the Company) only if such holder also simultaneously

transfers an equal number of such holder’s Purple LLC Class B units to such transferee.

The Class B common stock is not entitled

to receive dividends, if declared by the Board, or to receive any portion of any such assets in respect of their shares upon liquidation,

dissolution, distribution of assets or winding-up of the Company in excess of the par value of such stock.

At March 31, 2024, 0.2 million

shares of Class B common stock were outstanding.

Preferred Stock

The Company has 5.0 million

shares of preferred stock authorized.

The preferred stock may be issued from time to time in one or more series.

The Board is expressly

authorized to provide for the issuance of shares of the preferred stock in one or more series and to establish from time to time the number

of shares to be included in each such series and to fix the voting rights, designations and other special rights or restrictions.

31, 2024, there were no shares of preferred stock outstanding.

On September 25, 2022, 0.3 million shares of the Company’s preferred

stock were designated as Series A Junior Participating Preferred Shares.

See Note 14— Related Party Transactions — Coliseum

Capital Management LLC for discussion regarding the Rights Agreement and the PRPLS.

The Company has 5.0 million shares of preferred stock authorized.

preferred stock may be issued from time to time in one or more series.

The Board is expressly authorized to provide for the issuance of

shares of the preferred stock in one or more series and to establish from time to time the number of shares to be included in each such

series and to fix the voting rights, designations and other special rights or restrictions.

At June 30, 2024, there were no shares of

preferred stock outstanding.

On June 27, 2024, 0.3 million shares of the Company’s authorized shares of preferred stock were designated

as Series C Junior Participating Preferred Stock, par value $ 0.0001 per share (“Series C Preferred Shares”).

NOL Rights Plan

On June 27, 2024, the Board

adopted, and the Company entered into the NOL Rights Plan, which is designed to preserve approximately $ 238 million of the “Current

NOLs under Section 382 of the of the Internal Revenue Code of 1986, as amended (“Code Section 382”).

The Company’s ability

to use the Current NOLs to offset future taxable income may be significantly limited if the Company experiences an “ownership change”

under Code Section 382, which occurs if one or more stockholders or groups of stockholders that is deemed to own at least 5% of the Company’s

common stock increases their aggregate ownership by more than 50 percentage points over its lowest ownership percentage within a rolling

three-year period.

The NOL Rights Plan is intended to prevent an ownership change by acting as a deterrent to any Person (as such term

is defined in the NOL Rights Plan) acquiring 4.9% or more of the outstanding common stock of the Company (or, in the case of a Grandfathered

Person (as such term is defined in the NOL Rights Plan), an additional one-half of one percentage point of the outstanding common Stock

of the Company above their current ownership percentage).

Any Person that acquires shares of the Company’s common Stock in violation

of the limitations of the NOL Rights Plan is known as an “Acquiring Person.” For purposes of the NOL Rights Plan, “common

stock” includes (i) the Class A common stock, (ii) the Class B common stock, and (iii) any interest that would be treated as “stock”

of the Company pursuant to Treasury Regulation § 1.382-2T(f)(18).

Notwithstanding the foregoing, the NOL Rights Plan allows for the

exercise of currently outstanding conversion rights, exchange rights, warrants or options, or otherwise, without triggering the NOL Rights

See Note 11 – Warrant Liabilities for further discussion of the Company’s outstanding warrants.

The NOL Rights Plan provides

for a dividend of one preferred share purchase right (a “Right”) for each share of common stock outstanding on July 26, 2024.

Each Right entitles the holder to purchase from the Company one one-thousandth of a share of Series C Preferred Share for a purchase price

of $ 2.75 , subject to adjustment as provided in the NOL Rights Plan.

Each Series C Preferred Share is designed to be the economic equivalent

of one share of common stock.

Unless the Board determines

to effect an exchange (as discussed below), each Right will become exercisable on the “Distribution Time”, which is the earlier

to occur of (i) the tenth day following a public announcement, or the public disclosure of facts indicating, that a Person has become

an Acquiring Person or (ii) the tenth business day (or such later date as may be determined by action of the Board prior to such time

as any Person becomes an Acquiring Person) following the commencement of a tender offer or exchange offer the consummation of which would

result in a Person becoming an Acquiring Person.

After the Distribution Time, any Rights held by an Acquiring Person will be void and

will not be exercisable.

As a result, any Acquiring Person will be subject to significant dilution upon the occurrence of the Distribution

At any time after a Person becomes an Acquiring Person, but before such Acquiring Person holds more than 50% of the common stock,

the Board, in its sole discretion, may instead extinguish the Rights by exchanging one share of Class A common stock for each Right, other

than Rights held by the Acquiring Person.

The Rights will expire on

the earliest to occur of (i) the close of business on the date of the Special Meeting if a majority of the Company’s stockholders

voting do not ratify the NOL Rights Plan, (ii) the close of business on June 30, 2025;

(iii) the time at which the Rights are redeemed

(as discussed below) or exchanged by the Company;

(iv) the repeal of Code Section 382, if the Board determines that this Agreement is

no longer necessary for the preservation of the Current NOLs;

or (v) the beginning of a taxable year of the Company to which the Board

determines that no Current NOLs may be carried forward.

At any time prior to the expiration of the NOL Rights Plan, the Company may redeem

the Rights in whole, but not in part, at a price of $0.0001 per Right (subject to adjustment and payable in cash, Class A common stock

or other consideration deemed appropriate by the Board).

Immediately upon the action of the Board authorizing any redemption or at a later

time as the Board may establish for the effectiveness of the redemption, the Rights will terminate and the only right of the holders of

Rights will be to receive the redemption price.

The initial issuance of the

Rights as a dividend will have no tax, financial accounting or reporting impact.

The fair value of the Rights will be nominal since the

Rights are not exercisable when issued and no value is attributable to them.

Additionally, the Rights do not meet the definition of a

liability under GAAP and will therefore not be accounted for as a long-term obligation.

Accordingly, unless the Rights become exercisable

upon the occurred of the Distribution Time as discussed above, the NOL Rights Plan and the Rights issued thereunder have no impact on

the Company’s consolidated financial statements.

The NOL Rights Plan is subject to stockholder ratification at the Special Meeting.

If the NOL Rights Plan is not ratified by the stockholders at the Special Meeting, the NOL Rights Plan will be terminated and the Rights

PURPLE INNOVATION, INC.

Notes to Condensed Consolidated Financial Statements

NOL Protective Charter

Concurrently with the adoption

of NOL Rights Plan, on June 27, 2024, the Board adopted, and recommended that the Company’s stockholders approve at the Special

Meeting, the NOL Protective Charter Amendment that adds an additional layer of protection of the Current NOLs until June 30, 2025 by voiding

any transfer of common stock that results in any Person holding 4.9% or more of the outstanding common stock of the Company (or, in the

case of a Person already holding more than 4.9% of the outstanding common stock of the Company as of the date of the NOL Protective Charter

Amendment, one-half of one percentage point of the outstanding common stock of the Company above their current ownership percentage).

Any acquisition of common

stock in violation of the NOL Protective Charter Amendment will be void as of the date it is attempted.

Upon the Company’s written

demand, the purported acquiring stockholder must transfer the excess acquired common stock to the Company’s transfer agent (along

with any dividends or other distributions paid with respect to such excess acquired common stock).

The Company’s transfer agent

is then required to sell such excess acquired common stock in an arm’s-length transaction (or series of transactions) that would

not constitute a violation under the NOL Protective Charter Amendment.

The net proceeds of the sale together with any other distributions

with respect to such excess acquired common stock received by the Company’s transfer agent, after deduction of all costs incurred

by the transfer agent, will be transferred first to the purported transferee in an amount, if any, up to the cost (or in the case of gift,

inheritance or similar transfer, the fair market value of the excess securities on the date of the prohibited transfer) incurred by the

purported transferee to acquire such excess securities, and the balance of the proceeds, if any, will be transferred to a charitable beneficiary.

Further, the Company may hold any stockholder liable, to the fullest extent of the law, for any intentional violation of the NOL Protective

Charter Amendment.

The NOL Charter Amendment will be submitted for stockholder approval

at the Special Meeting.

The NOL Protective Charter Amendment will not become effective unless and until it is approved by stockholders

at the Special Meeting.

In connection with the Amended

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purchase one share of the Company’s Class A common stock at a price of $ 1.50 per share, subject to adjustment.

While the Warrants are exercisable,

the Company may call the Warrants for redemption in whole and not in part at any time at a price of $ 0.01 per share of Class A common

stock issuable upon exercise of the Warrants upon not less than 45 days’ prior written notice of redemption to each holder, provided

that this redemption right is only available if the reported last sale price of the Class A common stock equals or exceeds $ 24.00 per

share on each of 20 trading days within a 30 -trading day period ending three business days before the Company sends the notice of redemption

to the holders.

A holder of the Warrants will

not have the right to exercise its Warrants, to the extent that after giving effect to such exercise, the holder (together with its affiliates)

would beneficially own in excess of 49.9 % of the shares of Class A common stock outstanding immediately after giving effect to such exercise.

While the Warrants

are exercisable, the Company may call the Warrants for redemption in whole and not in part at any time at a price of $ 0.01 per share

of Class A common stock issuable upon exercise of the Warrants upon not less than 45 days’ prior written notice of redemption to

each holder, provided that this redemption right is only available if the reported last sale price of the Class A common stock equals

or exceeds $ 24.00 per share on each of 20 trading days within a 30 -trading day period ending three business days before the Company sends

the notice of redemption to the holders.

A holder of the Warrants will not have the right to exercise its Warrants, to the extent that

after giving effect to such exercise, the holder (together with its affiliates) would beneficially own in excess of 49.9 % of the shares

of Class A common stock outstanding immediately after giving effect to such exercise.

Sponsor Warrants

There were 12.8 million sponsor

warrants issued pursuant to a private placement simultaneously with the Company’s initial public offering.

Unexercised sponsor warrants

totaling 1.9 million expired in February 2023 and were cancelled pursuant to the terms of the warrant agreement.

These sponsor warrants

had no fair value on the date of expiration.

There were no sponsor warrants exercised during the three months ended March 31, 2023.

were 12.8 million sponsor warrants issued pursuant to a private placement simultaneously with the Company’s initial public offering.

Unexercised sponsor warrants totaling 1.9 million expired in February 2023 and were cancelled pursuant to the terms of the warrant agreement.

These sponsor warrants had no fair value on the date of expiration.

Noncontrolling Interest

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is the membership interest in Purple LLC held by holders other than the Company.

At March 31, 2024 and December 31, 2023, the combined

At June 30, 2024 and December 31, 2023, the combined

NCI percentage in Purple LLC was 0.2 % and 0.2 %, respectively.

1 unchanged sentence

of Purple LLC and reflected the proportionate interest held by all such Purple LLC Class B Unit holders as NCI.

The Company’s sole

material asset is Purple LLC, which is treated as a partnership for U.S.

federal income tax purposes and for purposes of certain state

and local income taxes.

Purple LLC’s net taxable income and any related tax credits are passed through to its members and are included

in the members’ tax returns, even though such net taxable income or tax credits may not have actually been distributed.

Company consolidates Purple LLC for financial reporting purposes, the Company will be taxed on its share of earnings of Purple LLC not

attributed to the noncontrolling interest holders, which will continue to bear their share of income tax on its allocable earnings of

The income tax burden on the earnings taxed to the noncontrolling interest holders is not reported by the Company in its

consolidated financial statements under GAAP.

PURPLE INNOVATION, INC.

Notes to Condensed Consolidated Financial Statements

The Company’s sole material

asset is Purple LLC, which is treated as a partnership for U.S.

federal income tax purposes and for purposes of certain state and local

income taxes.

Purple LLC’s net taxable income and any related tax credits are passed through to its members and included in the

members’ tax returns, even though such net taxable income or tax credits may not have been distributed.

While the Company consolidates

Purple LLC for financial reporting purposes, the Company will be taxed on its share of earnings of Purple LLC not attributed to the noncontrolling

interest holders, which will continue to bear their share of income tax on their allocable earnings of Purple LLC.

The income tax burden

on the earnings taxed to the noncontrolling interest holders is not reported by the Company in its consolidated financial statements under

The Company reported income tax expense related to various state taxes

of $ 0.1 million on a pretax loss of $ 50.2 million for the three months ended March 31, 2024 as compared to income tax expense of $ 0.1

million on a pretax loss of $ 26.0 million for the three months ended March 31, 2023.

This resulted in an effective tax rate of - 0.12 %

for the three months ended March 31, 2024 as compared to 0.28 % for the three months ended March 31, 2023.

The Company’s effective

tax rate differs from the statutory federal rate of 21 % primarily due to the impact of the full valuation allowance recorded against the

Company’s deferred tax assets at March 31, 2024.

Company reported income tax expense related to various state taxes of $ 0.1 million on a pretax loss of $ 50.2 million for the six months

ended June 30, 2024 as compared to various state taxes of $ 0.1 million on a pretax loss of $ 66.6 million for the six months ended June

This resulted in an effective tax rate of ( 0.22 )% for the six months ended June 30, 2024 as compared to ( 0.22 )% for the six

months ended June 30, 2023.

The Company’s effective tax rate for the six months ended June 30, 2024 differs from the statutory

federal rate of 21 % primarily due to the impact of the full valuation allowance recorded against the Company’s deferred tax assets

at June 30, 2024.

In connection with the Business

1 unchanged sentence

of 80 % of the net cash savings, if any, in U.S.

federal, state and local income tax that the Company actually realizes (or is deemed to

realize in certain circumstances) in periods after the Closing as a result of (i) any tax basis increases in the assets of Purple LLC

resulting from the distribution to InnoHold of the cash consideration, (ii) the tax basis increases in the assets of Purple LLC resulting

federal, state and local income tax that the Company actually realizes (or is deemed

to realize in certain circumstances) in periods after the Closing as a result of (i) any tax basis increases in the assets of Purple

LLC resulting from the distribution to InnoHold of the cash consideration, (ii) the tax basis increases in the assets of Purple LLC resulting

from the redemption by Purple LLC or the exchange by the Company, as applicable, of Class B Paired Securities or cash, as applicable,

and (iii) imputed interest deemed to be paid by the Company as a result of, and additional tax basis arising from, payments it makes under

the agreement.

and (iii) imputed interest deemed to be paid by the Company as a result of, and additional tax basis arising from, payments it makes

under the agreement.

As noncontrolling interest

5 unchanged sentences

Class A common stock at the time of the relevant redemption or exchange.

PURPLE INNOVATION, INC.

Notes to Condensed Consolidated Financial Statements

The effects of uncertain tax

7 unchanged sentences

balance sheet.

As of March 31, 2024, the Company had unrecognized tax benefits of $ 0.9 million.

As of June 30, 2024, the Company had unrecognized tax benefits of $ 0.9 million.

Net Loss Per Common Share

Basic net income (loss) per

common share is calculated by dividing net income (loss) attributable to common stockholders by the weighted average number of shares

of Class A common stock outstanding during each period.

Diluted net income (loss) per share reflects the weighted-average number of common

shares outstanding during the period used in the basic net income (loss) computation plus the effect of common stock equivalents that

are dilutive.

The following table sets forth

the calculation of basic and diluted weighted average shares outstanding and net loss per share for the periods presented (in thousands,

net income (loss) per common share is calculated by dividing net income (loss) attributable to common stockholders by the weighted average

number of shares of Class A common stock outstanding during each period.

Diluted net income (loss) per share reflects the weighted-average

number of common shares outstanding during the period used in the basic net income (loss) computation plus the effect of common stock

equivalents that are dilutive.

The following table sets

forth the calculation of basic and diluted weighted average shares outstanding and net loss per share for the periods presented (in thousands,

except per share amounts):

Three Months Ended

Net loss attributable to Purple Innovation, Inc.

Six Months Ended

Net income (loss) attributable to Purple Innovation, Inc.

Less – net loss attributed to noncontrolling interest

Net loss attributable to Purple Innovation, Inc.

Net income (loss) attributable to Purple Innovation, Inc.

Weighted average shares—basic

Add – dilutive effect of Class B shares

Add – dilutive effect of equity securities

Weighted average shares—diluted

Net loss per common share:

For the three months ended March 31, 2024, the Company excluded 24.8

million shares of Class A common stock issuable upon conversion of certain warrants, stock options, restricted stock and exchange of Class

B common stock as the effect was anti-dilutive.

For the three months ended March 31, 2023, the Company excluded 2.4 million shares of

Class A common stock issuable upon conversion of certain warrants, stock options, restricted stock and Class A shares subject to vesting

as the effect was anti-dilutive.

The Company excludes certain shares issuable from equity awards, warrants

and exchange of Class B common stock from the diluted net loss per common share computation when their exercise or performance vesting

price is greater than the average market price of the Company’s common stock or they are otherwise anti-dilutive.

the three months ended June 30, 2024, the Company excluded 22.7 million shares of Class A common stock issuable upon conversion of certain

warrants, stock options and restricted stock.

For the six months ended June 30, 2024, the Company excluded 25.0 million shares of Class

A common stock issuable upon conversion of certain warrants, stock options restricted stock and exchange of Class B common stock.

the three and six months ended June 30, 2023, the Company excluded 3.0 million and 3.4 million, respectively, of Class A common stock

issuable upon conversion of certain warrants, stock options restricted stock and exchange of Class B common stock.

PURPLE INNOVATION, INC.

3 unchanged sentences

The Purple Innovation, Inc.

2017 Equity Incentive Plan (the “2017

Incentive Plan”) provides for grants of stock options, stock appreciation rights, restricted stock units and other stock-based awards.

Directors, officers and other employees, as well as others performing consulting or advisory services for the Company and its subsidiaries,

may be eligible for grants under the 2017 Incentive Plan.

As of March 31, 2024, an aggregate of 3.0 million shares remain available for

issuance or use under the 2017 Incentive Plan.

2017 Equity Incentive Plan (the “2017 Plan”) provides for grants of stock options, stock appreciation rights, restricted stock

units and other stock-based awards.

Directors, officers and other employees, as well as others performing consulting or advisory services

for the Company and its subsidiaries, will be eligible for grants under the 2017 Plan.

As of June 30, 2024, an aggregate of 2.2 million

shares remain available for issuance or use under the 2017 Plan.

Employee Stock Options

The following table summarizes the Company’s

total stock option activity for the three months ended March 31, 2024:

(in thousands)

total stock option activity for the six months ended June 30, 2024:

(in thousands) Weighted

Price Weighted

Years Intrinsic

(in thousands)

Options outstanding as of January 1, 2024 863 $ 8.13 2.2 $ —

Options outstanding as of March 31, 2024

Forfeited ( 309 ) 9.69 —

Options outstanding as of June 30, 2024 554 $ 7.27 2.6 $ —

Outstanding and exercisable stock options as of

March 31, 2024 are as follows:

Options Outstanding

Options Exercisable

Exercise Prices

(in thousands)

Remaining Life (Years)

(in thousands)

June 30, 2024 are as follows:

Options Outstanding Options Exercisable

Exercise Prices Number of

(in thousands) Weighted

Remaining Life

(Years) Number of

(in thousands) Weighted

Remaining Life

(Years) Intrinsic

(in thousands)

$ 6.82 500 2.8 333 2.8 $ —

7.99 19 0.4 19 0.4 —

13.12 35 0.9 35 0.9 —

The following table summarizes

the Company’s unvested stock option activity for the three months ended March 31, 2024:

the Company’s unvested stock option activity for the six months ended June 30, 2024:

(in thousands)

Weighted Average

Nonvested options as of January

Nonvested options as of March 31, 2024

The estimated fair value of

Company stock options is amortized over the options vesting period on a straight-line basis.

For the three months ended March 31, 2023,

the Company recognized stock option expense of $ 0.3 million.

Stock option expense was de minimis for the three months ended March 31,

Nonvested options as of June 30, 2024

The estimated fair value

of Company stock options is amortized over the options vesting period on a straight-line basis.

For the three and six months ended June

30, 2023, the Company recognized stock option expense of $ 0.1 million and $ 0.4 million, respectively.

Stock option expense was de minimis

for the three and six months ended June 30, 2024.

As of June 30, 2024, outstanding

stock options had a de minimis amount of unrecognized stock compensation cost with a remaining recognition period of 0.8 years.

value of stock options vested during the six months ended June 30, 2024 totaled $ 0.1 million.

PURPLE INNOVATION, INC.

Notes to Condensed Consolidated Financial Statements

As of March 31, 2024, outstanding

stock options had a de minimis amount of unrecognized stock compensation cost with a remaining recognition period of 1.1 years.

value of stock options vested during the three months ended March 31, 2024 totaled $ 0.1 million.

Employee Restricted

During the first quarter of

2024, the Company granted 0.7 million restricted stock units under the 2017 Incentive Plan to certain members of the Company’s management

the first six months of 2024, the Company granted 1.8 million restricted stock units under the 2017 Equity Incentive Plan to certain

members of the Company’s management team.

Of the restricted stock units granted, 0.4 million included a market vesting condition.

The restricted stock awards that did not

have a market vesting condition had a weighted average grant date fair value of $ 1.48 per share.

The estimated fair value of these awards

is recognized on a straight-line basis over the vesting period.

For those awards that include a market vesting condition, the estimated

fair value of the restricted stock was measured on the grant date and incorporated the probability of vesting occurring.

The estimated

fair value is recognized over the derived service period (as determined by the valuation model), with such recognition occurring regardless

of whether the market condition is met.

The Company determined the weighted average grant date fair value of the awards with the market

vesting condition to be $ 1.13 per share using a Monte Carlo Simulation of a Geometric Brownian Motion stock path model with the following

The restricted stock awards that did not have a market vesting condition had a weighted average grant date fair value of $ 1.00 per share.

The estimated fair value of these awards is recognized on a straight-line basis over the vesting period.

For those awards that include

a market vesting condition, the estimated fair value of the restricted stock was measured on the grant date and incorporated the probability

of vesting occurring.

The estimated fair value is recognized over the derived service period (as determined by the valuation model),

with such recognition occurring regardless of whether the market condition is met.

The Company determined the weighted average grant

date fair value of the awards with the market vesting condition to be $ 1.13 per share using a Monte Carlo Simulation model with the following

weighted average assumptions:

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The following table summarizes

the Company’s restricted stock unit activity for the three months ended March 31, 2024:

the Company’s restricted stock unit activity for the six months ended June 30, 2024:

(in thousands)

Nonvested restricted stock units as of January 1, 2024

Nonvested restricted stock units as of March 31, 2024

Nonvested restricted stock units as of June 30, 2024

The Company recorded restricted

stock unit expense of $ 0.5 million and $ 0.8 million during the three months ended March 31, 2024 and 2023, respectively.

As of March 31, 2024, outstanding

stock unit expense of $ 0.8 million and $ 1.3 million during the three and six months ended June 30, 2024, respectively, and $ 0.9 million

and $ 1.8 million during the three and six months ended June 30, 2023, respectively.

As of June 30, 2024, outstanding

restricted stock units had $ 5.2 million of unrecognized stock compensation cost with a remaining recognition period of 1.6 years.

11 unchanged sentences

Three Months Ended

Six Months Ended

Cost of revenues

4 unchanged sentences

Employee Retirement Plan

In July 2018 the Company established

a 401(k) plan that qualifies as a deferred compensation arrangement under Section 401 of the IRS Code.

All eligible employees over

the age of 18 and with 4 months’ service are eligible to participate in the plan.

The plan provides for Company matching of employee

contributions up to 5 % of eligible earnings.

July 2018, the Company established a 401(k) plan that qualifies as a deferred compensation arrangement under Section 401 of the

All eligible employees over the age of 18 and with 4 months’ service are eligible to participate in the plan.

provides for the Company to match employee contributions up to 5 % of eligible earnings.

Company contributions immediately vest.

The Company’s matching contribution

expense was $ 1.1 million and $ 0.9 million for the three months ended March 31, 2024 and 2023, respectively.

The Company’s matching contribution expense was $ 1.0 million and $ 2.1 million for the three and six months ended June

30, 2024, respectively, and $ 0.9 million and $ 1.8 million for the three and six months ended June 30, 2023, respectively.

Subsequent Events

On April 16, 2024, Purple’s founders, in their capacity as a

former landlord of Purple LLC, brought a lawsuit against Purple LLC, as lessee, for amounts allegedly owed under a real estate lease

which the parties terminated effective September 30, 2023.

In the suit, the plaintiffs allege approximately $ 2.5 million in damages,

based primarily on a dispute regarding whether Purple LLC left the premises in the condition required by the lease.

The plaintiffs

further claim approximately $ 0.8 million in holdover rent, as well as unspecified amounts in interest, late fees, liquidated damages,

attorney fees and costs.

Purple LLC denies all allegations and intends to vigorously defend against these claims.

Settlement of Insurance

In July 2024, pursuant to

a previously filed business interruption claim, the Company received the remaining settlement amount of $ 7.3 million.

The Company recorded

the payment received as other income, net in the third quarter of 2024.

Class Action Lawsuits

On July 15, 2024, the Company

entered into a settlement agreement (the “Settlement Agreement”) with the plaintiffs in connection with the Class Action Lawsuit.

Pursuant to the Settlement Agreement, the Company will make a cash payment upon the receipt of an executed release of all claims by the

The payment will have no material impact on results of operations, financial condition or cash flow of the Company.

The Settlement

Agreement is subject to approval by the United States District Court for the Northern District of California.

If the court does not grant

final approval of the Settlement Agreement, or the settlement does not otherwise become final or effective, proceedings in the Class Action

Lawsuit will continue.

See Note 13 - Commitments and Contingencies - Legal Proceedings for further discussion of the Class Action

On July 24, 2024, a former part-time employee filed a class

action lawsuit against Purple LLC in California Superior Court in the County of Alameda alleging failure to pall all wages,

failure to pay overtime pay rate, failure to provide all meal periods, and other employment-related causes of action.

The suit seeks damages,

interest, attorneys’ fees, costs and other relief on behalf of all non-exempt California employees of Purple LLC during the applicable

statutory periods.

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-Q

Item 1. Financial Statements