What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2025-03-14 compared with 2024-03-12 · 1875 added, 1908 removed, 887 unchanged (81% of the section changed)

and Procedures

Controls and Procedures

As a non-accelerated filer,

we are exempt from the auditor attestation requirements with respect to internal control over financial reporting under Section 404(b)

of the Sarbanes Oxley Act of 2002.

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management,

including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO” and together with the CEO, the

“Certifying Officers”), we evaluated the effectiveness of the design and operation of our disclosure controls and procedures

(as such term is defined in Rule 13a-15(e) under the Exchange Act).

Our disclosure controls and procedures are designed to provide reasonable

assurance that the information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed,

summarized and reported within the time periods specified in the SEC’s rules and forms.

Because of its inherent limitations,

internal control over financial reporting may not prevent or detect misstatements.

Therefore, even those systems determined to be effective

can provide only reasonable assurance of achieving their control objectives.

Disclosure controls and procedures include, without limitation,

controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange

Act is accumulated and communicated to management, including our Certifying Officers, or persons performing similar functions, as appropriate,

to allow timely decisions regarding required disclosure.

Based upon this evaluation, and the above criteria, our Certifying

Officers concluded that the Company’s disclosure controls and procedures were not effective as of December 31, 2023, due to the

material weakness in our internal control over financial reporting, described below.

Under the supervision and

with the participation of our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”

and together with the CEO, the “Certifying Officers”), we evaluated the effectiveness of the design and operation of our disclosure

controls and procedures (as such term is defined in Rule 13a-15(e) under the Exchange Act).

Our disclosure controls and procedures are

designed to provide reasonable assurance that the information required to be disclosed in our reports filed or submitted under the Exchange

Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Therefore, even those

systems determined to be effective can provide only reasonable assurance of achieving their control objectives.

Disclosure controls and

procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports

filed or submitted under the Exchange Act is accumulated and communicated to management, including our Certifying Officers, or persons

performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

Based upon this evaluation,

and the above criteria, our Certifying Officers concluded that the Company’s disclosure controls and procedures were effective as

of December 31, 2024.

Management’s Annual Report on Internal

Controls Over Financial Reporting

Our management is responsible for establishing and maintaining adequate

internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act).

Our management is responsible

for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the

Exchange Act).

The Company’s internal

4 unchanged sentences

Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions of the Company;

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

with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorization of management and

the directors of the Company;

● Provide reasonable assurance regarding prevention or timely detection of unauthorized use or disposition of the Company’s assets

that could have a material effect on the financial statements.

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorization of management and the directors of the Company;

Provide reasonable assurance regarding prevention or timely detection of unauthorized use or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations,

6 unchanged sentences

misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

Under the supervision and with the participation of our management, including our Certifying Officers, we conducted

an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2023, based on the criteria established

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

Based on this evaluation, our management concluded that our internal control over financial reporting was not effective as of December

31, 2023 due to the previously reported material weakness that continued to exist at December 31, 2023.

Under the supervision and

with the participation of our management, including our Certifying Officers, we conducted an evaluation of the effectiveness of our internal

control over financial reporting as of December 31, 2024, based on the criteria established in Internal Control — Integrated Framework

(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on this evaluation, our management concluded

that our internal control over financial reporting was effective as of December 31, 2024.

Previously Reported Material Weakness

As previously reported, we identified a material weakness related to

the review and evaluation of wholesale customer contracts, specifically as it relates to variable consideration, including wholesale warranty

Specifically, we did not design and maintain effective controls over the review and evaluation of the accounting relating

to contract terms agreed upon with our wholesale customers and the identification and calculation of the related wholesale accrued warranty

The effectiveness of the Company’s internal control over financial reporting as of December 31, 2023 has

been audited by BDO USA, P.C., an independent registered public accounting firm, as stated in their report included herein.

Plans for Remediation

of Material Weakness

In response to the

material weakness, we have designed and implemented a control over the review of all wholesale customer contracts to ensure the

terms contained therein are appropriately evaluated and recorded.

This control includes increased rigor and participation among our

legal and accounting personnel regarding the appropriate consideration and application of contractual terms.

implementing a new control over credit memo review and approval.

Further, we are implementing a new control over the evaluation and

review of accrued wholesale warranty liabilities.

The Company will not be able to fully remediate this material weakness until these

steps have been completed and have been operating effectively for a sufficient period of time.

The Company may also identify

additional measures that may be required to remediate the material weakness in the Company’s internal control over financial

reporting, necessitating further action.

As previously reported, we

identified a material weakness related to the review and evaluation of wholesale customer contracts, specifically as it relates to variable

consideration, including wholesale warranty obligations.

Specifically, we did not design and maintain effective controls over the review

and evaluation of the accounting relating to contract terms agreed upon with our wholesale customers and the identification and calculation

of the related wholesale accrued warranty liabilities.

In response to this material

weakness, management, with oversight of the Audit Committee of the Board, designed and effectively implemented a control over the review

of all wholesale customer contracts to ensure the terms contained therein are appropriately evaluated and recorded.

This control includes

increased rigor and participation among our legal and accounting personnel regarding the appropriate consideration and application of

contractual terms.

We also implemented new controls over credit memo review and approval and the evaluation and review of accrued wholesale

warranty liabilities.

Based on these measures, management has tested the new controls, found them effective, and concluded that the previously

reported material weakness described above has been remediated as of June 30, 2024 .

Changes in Internal Control over Financial Reporting

Other than the remediation efforts described above, there were no changes

in our internal control over financial reporting during the quarter ended December 31, 2023 that have materially affected, or are reasonably

There were no changes in our

internal control over financial reporting during the quarter ended December 31, 2024 that have materially affected, or are reasonably

likely to materially affect, our internal control over financial reporting.

Report of Independent Registered Public Accounting

Shareholders and Board of Directors

Purple Innovation, Inc.

Opinion on Internal Control over Financial

We have audited Purple

Innovation, Inc.’s (the “Company’s”) internal control over financial reporting as of December 31, 2023, based

on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations

of the Treadway Commission (the “COSO criteria”).

In our opinion, the Company did not maintain, in all material respects,

effective internal control over financial reporting as of December 31, 2023, based on the COSO criteria.

We do not express

an opinion or any other form of assurance on management’s statements referring to any corrective actions taken by the Company after

the date of management’s assessment.

We also have audited,

in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated

balance sheets of the Company as of December 31, 2023 and 2022, the related consolidated statements of operations, stockholders’

equity (deficit), and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively

referred to as “the financial statements”) and our report dated March 12, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective

internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included

in the accompanying Item 9A, Management’s Annual Report on Internal Controls over Financial Reporting.

Our responsibility is to

express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm

registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S.

federal securities laws

and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our

audit of internal control over financial reporting in accordance with the standards of the PCAOB.

Those standards require that we plan

and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained

in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk

that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed

Our audit also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audit

provides a reasonable basis for our opinion.

A material weakness

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

that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely

A material weakness regarding management’s failure to design and maintain controls over review and evaluation of wholesale

customer contracts, specifically as it relates to variable consideration, including wholesale warranty obligations, has been identified

and described in management’s assessment.

This material weakness was considered in determining the nature, timing, and extent of

audit tests applied in our audit of the 2023 financial statements, and this report does not affect our report dated March 12, 2024 on

those financial statements.

Definition and Limitations of Internal Control

over Financial Reporting

internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial

reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance

of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

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

generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations

of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized

acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal

control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future

periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance

with the policies or procedures may deteriorate.

/s/ BDO USA, P.C.

Salt Lake City, Utah

March 12, 2024

Other Information

During the quarter ended December 31, 2023, none of our directors or

executive officers adopted , modified or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement”

as such terms are defined under Item 408 of Regulation S-K.

Disclosure Regarding Foreign Jurisdictions

that Prevent Inspections

10b5-1 Trading Arrangements

During the quarter ended December 31, 2024, none

of our directors or executive officers adopted , modified or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule

10b5-1 trading arrangement” as such terms are defined under Item 408 of Regulation S-K.

Special Incentive Bonus

Equity Grants

March 12, 2025, the Board unanimously approved special incentive bonus equity grants to certain members of the Company’s senior

leadership team, including, among others, Todd Vogensen, Chief Financial Officer, John J.

Roddy, Chief Human Resources Officer, and Eric

Haynor, Chief Operating Officer.

Vogensen, Mr.

Roddy, and Mr.

Haynor will receive grants of 450,000, 175,000, and 350,000 restricted

stock units, respectively, pursuant to the terms of restricted stock unit grant agreements and the Company’s 2017 Equity Incentive

Such restricted stock units will vest at the sooner of (a) a change in control, as defined in the award agreements, or (b) March

12, 2028, provided that if the recipient’s employment with the Company is involuntarily terminated other than for cause, a pro rata

number of restricted stock units will vest as of such termination date.

The foregoing summary of the restricted stock units does not purport

to be complete and is qualified in its entirety by reference to the full text of the form of restricted stock unit grant agreement, a

copy of which will be filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ending March 31, 2025.

Amendment to 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, including, among others, Todd Vogensen, Chief Financial Officer, John J.

Roddy, Chief People Officer, and Eric S.

Chief Operating Officer.

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

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.

March 12, 2025, the Board amended the special recognition bonus payments and entered into letter agreements (the “Letter

Agreements”) with the participants to provide that if a change in control occurs prior to August 1, 2025 and the participant

remains employed with the Company until the consummation of the change in control, then 100% of the remaining special recognition

bonus payment for such participant shall vest and become payable upon the consummation of such change in control.

The foregoing

description of the Letter Agreements does not purport to be complete and is qualified in its entirety by reference to the full text

of the form of Letter Agreements, a copy of which will be filed as an exhibit to the Company’s Quarterly Report on Form 10-Q

for the quarter ending March 31, 2025.

Amendment to Chief Executive

Officer Special Recognition Bonus

January 26, 2024, the Board unanimously approved an amendment to the amended and restated employment agreement of Robert T.

the Company’s Chief Executive Officer (the “2024 CEO Amendment”).

Under the 2024 CEO Amendment, the Company agreed that,

among other things, Mr.

DeMartini will be eligible to earn an incremental aggregate cash bonus equal to $850,000 that will vest 10% on

August 1, 2024, 20% on February 1, 2025, and 70% on August 1, 2025, provided he continues to be employed by the Company and subject to

DeMartini’s obligation to repay any such bonus actually received in the event his employment is terminated other than by the

Company without cause prior to June 30, 2026, subject to certain conditions.

March 12, 2025, the Board adopted an amendment (the “2025 CEO Amendment”) to Mr.

DeMartini’s amended and restated employment

agreement, as amended by the 2024 CEO Amendment (the “Amended and Restated Employment Agreement”), to provide that if a change

in control occurs prior to August 1, 2025 and Mr.

DeMartini remains employed by the Company until the consummation of the change in control,

then 100% of the unpaid cash bonus payment for Mr.

DeMartini shall vest and become payable upon the consummation of such change in control

and the bonus repayment condition tied to his employment with the Company until June 30, 2026 shall no longer be applicable.

the changes provided by the 2025 CEO Amendment, no other changes were made to Mr.

DeMartini’s Amended and Restated Employment Agreement.

The foregoing description of the 2025 CEO Amendment does not purport to be complete and is qualified in its entirety by reference to the

full text of the 2025 CEO Amendment, a copy of which will be filed as an exhibit to the Company’s Quarterly Report on Form 10-Q

for the quarter ending March 31, 2025.

Departure of Chief Marketing

On March 7, 2025, Keira Krausz, the Company’s Chief Marketing

Officer, and the Company agreed that Ms.

Krausz’ last day of employment with the Company was March 11, 2025.

departure is the result of a termination without cause, the Company expects to pay approximately $237,865.57 in termination payments to

Krausz, subject to the Company and Ms.

Krausz entering into a mutually agreeable release.

Disclosure Regarding Foreign Jurisdictions that Prevent

Not applicable.

Executive Officers and Corporate Governance

information required under the captions “Directors” and “Corporate Governance” is incorporated herein by reference

to the Company’s definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the SEC not later

than 120 days after the close of the Company’s year ended December 31, 2023.

Information concerning our executive officers

is included in Part I of this report under the caption “Information About Our Executive Officers.”

We have adopted a Code of Ethics that applies to all officers, directors,

employees and contractors.

The Code of Ethics is posted on our website at https://investors.purple.com/governance.

We intend to disclose

on our website any amendments, or waiver from, a provision to the Code of Ethics by posting the information on our website at the address

specified above.

Directors, Executive Officers and

Corporate Governance

concerning our executive officers is included in Part I of this report under the caption “Information About Our Executive Officers.”

have adopted a Code of Ethics that applies to all officers, directors, employees and contractors.

The Code of Ethics is posted on our

website at https://investors.purple.com/governance.

We intend to disclose on our website any amendments, or waiver from, a provision to

the Code of Ethics by posting the information on our website at the address specified above.

The remaining information

required under this item will be included under the captions “Directors and Corporate Governance” and “Delinquent Section

16(a) Reports” in the Company’s definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed

with the SEC not later than 120 days after the close of the Company’s year ended December 31, 2024, and is incorporated herein

by reference thereto.

Executive Compensation

The information required under this item is incorporated herein by

reference to the Company’s definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the SEC

not later than 120 days after the close of the Company’s year ended December 31, 2023.

Security Ownership of Certain

Beneficial Owners and Management and Related Stockholder Matters

The information required under this item is incorporated herein by

reference to the Company’s definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the SEC

not later than 120 days after the close of the Company’s year ended December 31, 2023.

Certain Relationships

and Related Transactions, and Director Independence

The information required under

1 unchanged sentence

statement will be filed with the SEC not later than 120 days after the close of the Company’s year ended December 31, 2024.

Principal Accountant Fees

Security Ownership of Certain Beneficial Owners and Management

and Related Stockholder Matters

The information required under

1 unchanged sentence

statement will be filed with the SEC not later than 120 days after the close of the Company’s year ended December 31, 2024.

and Financial Statement Schedules

Certain Relationships and Related

Transactions, and Director Independence

The information required under

this item is incorporated herein by reference to the Company’s definitive proxy statement pursuant to Regulation 14A, which proxy

statement will be filed with the SEC not later than 120 days after the close of the Company’s year ended December 31, 2024.

Principal Accountant Fees and Services

The information required under

this item is incorporated herein by reference to the Company’s definitive proxy statement pursuant to Regulation 14A, which proxy

statement will be filed with the SEC not later than 120 days after the close of the Company’s year ended December 31, 2024.

Exhibits and Financial Statement Schedules

The following documents are filed as part of this Report:

2 unchanged sentences

are included in Part II, Item 8 of this Form 10-K:

of Independent Registered Public Accounting Firm (BDO USA, P.C., Salt Lake City, Utah;

Report of Independent Registered Public Accounting Firm (BDO USA, P.C., Salt Lake City, Utah;

PCAOB ID#243)

Consolidated Balance

Consolidated Statements

of Operations

Consolidated Statements

of Stockholders’ Equity (Deficit)

Consolidated Statements

of Cash Flows

Notes to the Consolidated

Financial Statements

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statements of Stockholders’ Equity (Deficit)

Consolidated Statements of Cash Flows

Notes to the Consolidated Financial Statements

Financial Statements Schedule

All other financial statement schedules are omitted because they are

not applicable or the amounts are immaterial and not required, or the required information is presented in our consolidated financial

statements and notes thereto in Item 15 of Part IV below.

All other financial statement

schedules are omitted because they are not applicable or the amounts are immaterial and not required, or the required information is presented

in our consolidated financial statements and notes thereto in Item 15 of Part IV below.

We hereby file as part of

this report the exhibits listed in the attached Exhibit Index.

Exhibits which are incorporated herein by reference can be inspected and

copied at the public reference facilities maintained by the SEC, 100 F Street, N.E., Room 1580, Washington, D.C.

20549 at prescribed

rates or on the SEC website at www.sec.gov .

EXHIBIT INDEX

Agreement, dated as of August 31, 2022, by and among Purple Innovation, Inc., Gelato Intermediate, LLC, Gelato Merger Sub, Inc.,

Advanced Comfort Technologies, Inc., and D.

Scott Peterson (incorporated by reference to Exhibit 2.1 to the Current Report on Form

8-K (File No.

Merger Agreement, dated as of August 31, 2022, by and among Purple Innovation, Inc., Gelato Intermediate, LLC, Gelato Merger Sub, Inc., Advanced Comfort Technologies, Inc., and D.

Scott Peterson (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K (File No.

001-37523) filed with the SEC on September 1, 2022).

Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Quarterly Report on Form 10-Q

Second Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Quarterly Report on Form 10-Q (File No.

001-37523) filed with the SEC on November 6, 2019) .

Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K (File No.

001-37523) filed

with the Commission on April 21, 2023).

of Designation of the Preferred Stock of the Company, dated September 26, 2022 (incorporated by reference to Exhibit 3.1 to the Current

Report on Form 8-K (File No.

Third Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K (File No.

001-37523) filed with the Commission on April 21, 2023).

Certificate of Designation of the Preferred Stock of the Company, dated September 26, 2022 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K (File No.

001-37523) filed with the SEC on September 27, 2022).

of Designation of Proportional Representation Preferred Linked Stock of the Company, dated February 14, 2023 (incorporated by reference

to Exhibit 3.1 to the Current Report on Form 8-K (File No.

001-37523) filed with the SEC on February 14, 2023).

of Elimination of the Series A Junior Participating Preferred Stock, dated April 27, 2023 (incorporated by reference to Exhibit 3.1

to the Company’s Current Report on Form 8-K filed April 27, 2023).

of Elimination of the Proportional Representation Preferred Linked Stock, dated April 27, 2023 (incorporated by reference to Exhibit

3.2 to the Company’s Current Report on Form 8-K filed April 27, 2023).

of Class A Common Stock certificate (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K (File No.

Certificate of Designation of Proportional Representation Preferred Linked Stock of the Company, dated February 14, 2023 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K (File No.

001-37523) filed with the SEC on February 14, 2023).

Certificate of Elimination of the Series A Junior Participating Preferred Stock, dated April 27, 2023 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed April 27, 2023).

Certificate of Elimination of the Proportional Representation Preferred Linked Stock, dated April 27, 2023 (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed April 27, 2023).

Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K (File No.

001-37523) filed with the SEC on October 16, 2024).

Certificate of Designation of the Preferred Stock of the Company, dated June 28, 2024 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K (File No.

001-37523) filed with the SEC on June 28, 2024).

Form of Class A Common Stock certificate (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K (File No.

001-37523) filed with the SEC on October 16, 2024).

Description of Registered Securities.

Stockholder Rights Agreement, dated as of September 25, 2022, by and between the Company and Pacific Stock Transfer Company, as rights agent (which includes the Form of Rights Certificate as Exhibit B thereto) (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K (File No.

001-37523) filed with the SEC on September 27, 2022).

First Amendment to Stockholder Rights Agreement, dated April 27, 2023, by and between Purple Innovation, Inc.

and Pacific Stock Transfer Company (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed April 27, 2023).

of Option Award Agreement (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q (File No.

001-37523) filed

with the SEC on May 15, 2018)

of Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q (File No.

Stockholder Rights Agreement, dated June 27, 2024, by and between the Company and Pacific Stock Transfer Company, as rights agent (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K (File No.

001-37523) filed with the SEC on June 28, 2024).

Form of Option Award Agreement (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q (File No.

001-37523) filed with the SEC on May 15, 2018) .

of Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q (File No.

Form of Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q (File No.

001-37523) filed with the SEC on May 15, 2018) .

of Stock Appreciation Right Award Agreement (incorporated by reference to Exhibit 10.4 to the Quarterly Report on Form 10-Q (File

Form of Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q (File No.

001-37523) filed with the SEC on May 15, 2018) .

of Stock Bonus Award Agreement (incorporated by reference to Exhibit 10.5 to the Quarterly Report on Form 10-Q (File No.

Form of Stock Appreciation Right Award Agreement (incorporated by reference to Exhibit 10.4 to the Quarterly Report on Form 10-Q (File No.

001-37523) filed with the SEC on May 15, 2018) .

Agreement, dated February 1, 2018, between Global Partner Acquisition Corp., Global Partner Sponsor I LLC, Coliseum Capital Partners,

and Blackwell Partners LLC – Series A (incorporated by reference to Exhibit 10.15 to the Current Report on Form 8-K (File

001-37523) filed with the SEC on February 8, 2018)

Agreement, dated February 2, 2018, by and between Purple Innovation, Inc., Purple Innovation, LLC and InnoHold, LLC (incorporated

by reference to Exhibit 10.1 to the Current Report on Form 8-K (File No.

001-37523) filed with the SEC on February 8, 2018)

Agreement to Assign Sponsor Warrants, dated February 2, 2018, between Global Partner Acquisition Corp., Global Partner Sponsor I LLC, Continental Stock Transfer and Trust Company, Coliseum Capital Partners, L.P., Blackwell Partners, LLC and Coliseum Co-Invest Debt Fund, L.P.

(incorporated by reference to Exhibit 10.16 to the Current Report on Form 8-K (File No.

Form of Stock Bonus Award Agreement (incorporated by reference to Exhibit 10.5 to the Quarterly Report on Form 10-Q (File No.

001-37523) filed with the SEC on May 15, 2018) .

Subscription Agreement, dated February 1, 2018, between Global Partner Acquisition Corp., Global Partner Sponsor I LLC, Coliseum Capital Partners, L.P.

and Blackwell Partners LLC – Series A (incorporated by reference to Exhibit 10.15 to the Current Report on Form 8-K (File No.

001-37523) filed with the SEC on February 8, 2018) .

Agreement to Assign Founder Shares, dated February 2, 2018, between Global Partner Acquisition Corp., Global Partner Sponsor I LLC, Continental Stock Transfer and Trust Company and Coliseum Capital Partners, L.P., Blackwell Partners, LLC (incorporated by reference to Exhibit 10.17 to the Current Report on Form 8-K (File No.

Exchange Agreement, dated February 2, 2018, by and between Purple Innovation, Inc., Purple Innovation, LLC and InnoHold, LLC (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K (File No.

001-37523) filed with the SEC on February 8, 2018) .

6 unchanged sentences

Purple Innovation, Inc.

2017 Equity Incentive Plan (incorporated by reference to Exhibit 10.8 to the Current Report on Form 8-K (File No.

001-37523) filed with the SEC on February 8, 2018)

Amendment to Purple Innovation, Inc.

2017 Equity Incentive Plan dated July 12, 2021 (incorporated by reference to Exhibit 99.1 to the Current Report on Form 8-K (File No.

001-37523) filed with the SEC on July 13, 2021)

Second Amendment to Purple Innovation, Inc.

2017 Equity Incentive Plan dated June 2, 2022 (incorporated by reference to Exhibit 99.1 to the Current Report on Form 8-K (File No.

001-37523) filed with the SEC on June 3, 2022).

Purple Innovation, Inc.

Amended and Restated 2017 Equity Incentive Plan (incorporated by reference to Exhibit 99.1 to the S-8 (File No.

8 unchanged sentences

001-37523) filed with the SEC on May 7, 2019).

Registration Rights Agreement dated February 26, 2019 between and among Purple Innovation, Inc., Coliseum Capital Partners, L.P., Blackwell Partners LLC – Series A and Coliseum Co-Invest Debt Fund, L.P.

(incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K (File No.

001-37523) filed with the SEC on February 27, 2019)

Purple Innovation, Inc.

2019 Long-Term Equity Incentive Plan (incorporated by reference to Exhibit 99.1 to the Current Report on Form 8-K (File No.

001-37523) filed with the SEC on May 14, 2019)

Restated and Amended Purple Innovation, Inc.

5 unchanged sentences

001-37523) filed with the SEC on November 25, 2019).

First Amendment to Amended and Restated Credit Agreement by and among Purple Innovation, LLC, Purple Innovation, Inc., Coliseum Capital Partners, L.P., Blackwell Partners LLC-Series A, and Coliseum Co-Invest Debt Fund, L.P.

dated March 27, 2020 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K (File No.

001-37523) filed with the SEC on March 30, 2020)

Second Amendment to Amended and Restated Credit Agreement by and among Purple Innovation, LLC, Purple Innovation, Inc., Coliseum Capital Partners, L.P., Blackwell Partners LLC-Series A, and Coliseum Co-Invest Debt Fund, L.P.

dated May 15, 2020 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K (File No.

37523) filed with the SEC on May 18, 2020)

Waiver and Consent to Amended and Restated Credit Agreement by and among Purple Innovation, LLC, Purple Innovation, Inc., Coliseum Capital Partners, L.P., Blackwell Partners LLC-Series A, and Coliseum Co-Invest Debt Fund, L.P.

dated August 20, 2020 (incorporated by reference into Exhibit 10.1 to the Current Report on Form 8-K (File No.

001-37523) filed with the SEC on August 21, 2020)

Amendment to TNT Holdings Amended and Restated Lease Agreement dated April 23, 2020 (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q (File No.

4 unchanged sentences

001-37523) filed with the SEC on November 10, 2020).

Credit Agreement dated September 3, 2020 between and among Purple Innovation, LLC, Purple Innovation, Inc., KeyBank National Association, and the other lenders party thereto (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K (File No.

001-37523) filed with the SEC on September 3, 2020)

Pledge and Security Agreement dated September 3, 2020 (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K (File No.

001-37523) filed with the SEC on September 3, 2020)

Guaranty dated September 3, 2020 (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K (File No.

001-37523) filed with the SEC on September 3, 2020)

Collateral Assignment of Patents dated September 3, 2020 (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K (File No.

001-37523) filed with the SEC on September 3, 2020)

Collateral Assignment of Trademarks dated September 3, 2020 (incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K (File No.

001-37523) filed with the SEC on September 3, 2020)

Collateral Assignment of Copyrights dated September 3, 2020 (incorporated by reference to Exhibit 10.6 to the Current Report on Form 8-K (File No.

001-37523) filed with SEC on September 3, 2020)

Amendment to Lease Agreement between Purple Innovation, LLC and PNK S2, LLC dated March 4, 2021 (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q (File No.

13 unchanged sentences

001-37523) filed with the SEC on July 13, 2021).

First Amendment to the 2020 Credit Agreement dated February 28, 2022 between and among Purple Innovation, LLC, Purple Innovation, Inc., KeyBank National Association, and the other lenders party thereto (incorporated by reference to Exhibit 10.60 to the Annual Report on Form 10-K (File No.

001-37523) filed with the SEC on March 1, 2022).

Second Amendment to the 2020 Credit Agreement dated March 23, 2022 by and among Purple Innovation, LLC, Purple Innovation, Inc., KeyBank National Association, and the other lenders party thereto (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K (File No.

001-37523) filed with the SEC on March 24, 2022).

Fifth Amendment to the 2020 Credit Agreement dated February 17, 2023 by and among Purple Innovation, LLC, Purple Innovation, Inc., KeyBank National Association, and the other lenders party thereto (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K (File No.

001-37523) filed with the SEC on February 21, 2023).

Sixth Amendment to the 2020 Credit Agreement dated May 10, 2023 by and among Purple Innovation, LLC, Purple Innovation, Inc., Intellibed, LLC and KeyBank National Association (incorporated by reference to Exhibit 10.13 to the Company’s Quarterly Report on Form 10-Q (File No.

001-37523) filed on May 10, 2023).

Amended and Restated Employment Agreement, dated as of March 19, 2022, by and among Robert T.

4 unchanged sentences

001-37523) filed with the SEC on May 3, 2022).

Separation Agreement entered into between Purple Innovation, LLC and Patrice Varni dated November 5, 2022 (incorporated by reference to Exhibit 99.1 to the Current Report on Form 8-K (File No.

001-37523) filed with the SEC on November 8, 2022).

Amended and Restated Option Grant Agreement dated March 15, 2023, between the Company and Robert T.

9 unchanged sentences

and Coliseum Capital Management, LLC, dated April 19, 2023 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed April 21, 2023).

Term Loan Credit Agreement dated as of August 7, 2023 between and among Purple Innovation, LLC, Purple Innovation, Inc., Intellibed, LLC, the Term Loan Agent and the Term Loan Lenders (incorporated by reference to Exhibit 10.8 to the Company’s Quarterly Report on Form 10-Q (File No.

001-37523) filed on August 9, 2023).

Term Loan Pledge and Security Agreement dated as of August 7, 2023 (incorporated by reference to Exhibit 10.9 to the Company’s Quarterly Report on Form 10-Q (File No.

001-37523) filed on August 9, 2023).

First Amendment to Term Loan Credit Agreement and Limited Waiver, dated November 6, 2023, between and among Purple Innovation, LLC, Purple Innovation, Inc., Intellibed, LLC, the Term Loan Agent, and the Term Loan Lenders (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K (File No.

001-37523) filed on November 9, 2023).

ABL Credit Agreement dated as of August 7, 2023 between and among Purple Innovation, LLC, Purple Innovation, Inc., Intellibed, LLC, the ABL Agent, the Swing Line Lender, the Letter of Credit Issuer and the ABL Lenders (incorporated by reference to Exhibit 10.10 to the Company’s Quarterly Report on Form 10-Q (File No.

001-37523) filed on August 9, 2023).

ABL Pledge and Security Agreement dated as of August 7, 2023 (incorporated by reference to Exhibit 10.11 to the Company’s Quarterly Report on Form 10-Q (File No.

001-37523) filed on August 9, 2023).

First Amendment to Credit Agreement and Limited Waiver, dated November 6, 2023, between and among Purple Innovation, LLC, Purple Innovation, Inc., Intellibed, LLC, the ABL Lenders, the ABL Agent, the Swing Line Lender, and the Letter of Credit Issuer (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No.

001-37523) filed on November 9, 2023).

Amended and Restated Credit Agreement, dated January 23, 2024, by and among Purple Innovation, Inc., Purple Innovation, LLC, Intellibed, LLC, Coliseum Capital Partners, L.P., Blackwell Partners LLC – Series A, Harvest Small Cap Partners Master, Ltd., Harvest Small Cap Partners, L.P., HSCP Strategic IV, L.P., and Delaware Trust Company (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No.

13 unchanged sentences

001-37523) filed on January 26, 2024).

Separation Agreement, dated February 2, 2024, between the Company and Casey McGarvey (incorporated by reference to Exhibit 99.1 to the Current Report on Form 8-K (File No.001-37523) filed with the SEC on February 5, 2024)

Offer Letter, dated as of September 21, 2023, between Purple Innovation, LLC and Tricia McDermott, dated September 21, 2023 (incorporated by reference to Exhibit 99.1 to the Company’s Registration Statement on Form S-8 (File No.

001-37523) filed with the SEC on March 14, 2024).

Amendment to Amended and Restated Credit Agreement, dated as of March 12, 2025, by and among Purple Innovation, Inc., Purple Innovation, LLC, Intellibed, LLC, Coliseum Capital Partners, L.P., Blackwell Partners LLC – Series A, and CSC Delaware Trust Company.

Form of Warrant.

Second Amended and Restated Registration Rights Agreement, dated as of March 12, 2025, by and among Purple Innovation, Inc., Coliseum Capital Partners, L.P., Blackwell Partners LLC – Series A and Coliseum Capital Co-Invest III, L.P.

Insider Trading Policy.

List of Subsidiaries of the Registrant.

5 unchanged sentences

Certification of the Principal Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C.

Compensation Clawback Policy

Compensation Clawback Policy (incorporated by reference to Exhibit 97.1 to the Company’s Annual Report on Form 10-K (File No.

001-37523) filed with the SEC on March 12, 2024).

Inline XBRL Instance Document.

6 unchanged sentences

Filed herewith

Schedules and exhibits to the Merger Agreement have been omitted pursuant

to Item 601(b)(2) of Regulation S-K.

The Company hereby undertakes to furnish supplementally a copy of any omitted schedules and

exhibits to the Securities and Exchange Commission upon request.

Schedules and exhibits to the Merger Agreement have been omitted pursuant to Item 601(b)(2) of Regulation S-K.

The Company hereby undertakes to furnish supplementally a copy of any omitted schedules and exhibits to the Securities and Exchange Commission upon request.

Indicates management contract or compensatory plan.

Confidential treatment of certain provisions has been granted by the

Securities and Exchange Commission.

Confidential treatment of certain provisions has been granted by the Securities and Exchange Commission.

Certain schedules and exhibits to this agreement have been omitted pursuant to Item 601(a)(5) of Regulation S-K.

A copy of any omitted exhibit or schedule will be furnished supplementally to the SEC or its staff upon request.

Form 10-K Summary

PURPLE INNOVATION, INC.

1 unchanged sentence

Report of Independent Registered Public Accounting Firm (BDO USA, P.C., Salt Lake City, Utah;

PCAOB ID#243)

Consolidated Balance

Sheets as of December 31, 2023 and 2022

Consolidated Statements

of Operations for the years ended December 31, 2023, 2022 and 2021

Consolidated Statements

of Stockholders’ Equity (Deficit) for the years ended December 31, 2023, 2022 and 2021

Consolidated Statements

of Cash Flows for the years ended December 31, 2023, 2022 and 2021

Notes to Consolidated

Financial Statements

Report of Independent

Registered Public Accounting Firm

PCAOB ID# 243 ) F-2

Balance Sheets as of December 31, 2024 and 2023 F-4

Consolidated Statements of Operations for the years ended December 31, 2024, 2023 and 2022 F-5

Consolidated Statements of Stockholders’ Equity (Deficit) for the years ended December 31, 2024, 2023 and 2022 F-6

Consolidated Statements of Cash Flows for the years ended December 31, 2024, 2023 and 2022 F-7

Notes to Consolidated Financial Statements F-8

Report of Independent Registered Public Accounting Firm

Shareholders and Board of Directors

Purple Innovation, Inc.

Opinion on the Consolidated

Financial Statements

We have audited the accompanying

consolidated balance sheets of Purple Innovation, Inc.

(the “Company”) as of December 31, 2023 and 2022, the related consolidated

statements of operations, stockholders’ equity (deficit), and cash flows for each of the three years in the period ended December

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated

balance sheets of Purple Innovation, Inc.

(the “Company”) as of December 31, 2024 and 2023, the related consolidated statements

of operations, stockholders’ equity (deficit), and cash flows for each of the three years in the period ended December 31, 2024,

and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the

consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023

and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 ,

in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards

of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial

reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued

by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated March 12, 2024 expressed

an adverse opinion thereon.

In our opinion, the consolidated

financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and

the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024 , in conformity

with accounting principles generally accepted in the United States of America.

Basis for Opinion

3 unchanged sentences

statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect

to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange

Commission and the PCAOB.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United

States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and

the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the

2 unchanged sentences

financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures

to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures

The Company is not required to have, nor were we

engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding

of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s

internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess

the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures

that respond to those risks.

32 unchanged sentences

this critical audit matter included:

management’s ability to estimate future warranty claims by comparing management’s

prior-year assumption of expected claims to actuals claims incurred during the year.

management’s process used to estimate accrued warranty liabilities, including the appropriateness

of the methodology, the mathematical accuracy of the calculation, and the sources of data

from which the assumptions were derived.

the reasonableness of estimated future warranty claims and the estimated costs to remedy

warranty claims by:

the key inputs that served as the basis for the estimate, including the historical claims made and actual warranty costs incurred.

of operational management regarding their knowledge of any existing product warranty claims or product issues and evaluating whether

management appropriately considered these issues in the estimation of accrued warranty liabilities.

management’s ability to estimate future warranty claims by comparing management’s prior-year assumption of expected claims

to actuals claims incurred during the year.

management’s process used to estimate accrued warranty liabilities, including the appropriateness of the methodology, the mathematical

accuracy of the calculation, and the sources of data from which the assumptions were derived.

the reasonableness of estimated future warranty claims and the estimated costs to remedy warranty claims by:

o Testing the key inputs that served as the basis for the estimate,

including the historical claims made, actual warranty costs incurred and costs expected to be reimbursed by the customer.

o Inquiring of operational management regarding their knowledge

of any existing product warranty claims or product issues and evaluating whether management appropriately considered these issues in

the estimation of accrued warranty liabilities.

/s/ BDO USA, P.C.

3 unchanged sentences

PURPLE INNOVATION, INC.

Consolidated Balance

Consolidated Balance Sheets

(In thousands, except for par value)

Current assets:

Cash, cash equivalents and restricted cash

Cash and cash equivalents

Accounts receivable, net

9 unchanged sentences

Accounts payable

Accrued compensation

Customer prepayments

4 unchanged sentences

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

Operating lease obligations, net of current portion

Asset retirement obligations

Warrant liabilities

Other long-term liabilities

Total liabilities

3 unchanged sentences

$ 0.0001 par value, 210,000 shares authorized;

105,507 issued and outstanding at December 31, 2023 and 91,380 issued and outstanding at December 31, 2022

107,545 and 105,507 issued and outstanding at December 31, 2024 and 2023, respectively

Class B common stock;

$ 0.0001 par value, 90,000 shares authorized;

205 issued and outstanding at December 31, 2023 and 448 issued and outstanding at December 31, 2022

165 and 205 issued and outstanding at December 31, 2024 and 2023, respectively

Additional paid-in capital

Accumulated deficit

Total stockholders’ equity attributable to Purple Innovation,

Total stockholders’ equity attributable to Purple Innovation, Inc.

Noncontrolling interest

Total stockholders’ equity

Total liabilities and stockholders’

Total liabilities and stockholders’ equity

The accompanying notes are an integral part of

1 unchanged sentence

PURPLE INNOVATION, INC.

Consolidated Statements

of Operations

Consolidated Statements of Operations

(In thousands, except per share amounts)

2 unchanged sentences

Cost of revenues:

Cost of revenues

Cost of revenues – restructuring related charges

Total cost of revenues

Operating expenses:

2 unchanged sentences

Research and development

Restructuring, impairment and other related charges

Loss on impairment of goodwill

3 unchanged sentences

Interest expense

Other (expense) income, net

Other income (expense), net

Loss on extinguishment of debt

1 unchanged sentence

Tax receivable agreement income

Total other (expense) income, net

Total (expense) other income, net

Net (loss) income before income taxes

Income tax (expense) benefit

Net (loss) income

Income tax expense

Net loss attributable to noncontrolling interest

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

Net loss attributable to Purple Innovation, Inc.

$ ( 120,757 )

Net (loss) income per share:

Net loss per share:

Weighted average common shares outstanding:

2 unchanged sentences

PURPLE INNOVATION, INC.

Consolidated Statements

of Stockholders’ Equity (Deficit)

Consolidated Statements of Stockholders’

Equity (Deficit)

(In thousands)

1 unchanged sentence

Noncontrolling

Balance — December 31, 2020

— December 31, 2021

$ ( 262,742 )

Net (loss) income

Stock-based compensation

Exchange of stock

Exercise of warrants

Exercise of stock options

Tax receivable agreement liability

Deferred income taxes

Accrued tax distributions

Issuance of stock

InnoHold indemnification payment

Impact of transactions affecting NCI

Balance – December 31, 2021

of stock options

of stock upon underwritten offering, net of costs

of stock for Intellibed acquisition

distributions

of stock under equity compensation plans

of transactions affecting NCI

– December 31, 2022

$ ( 355,212 )

Stock-based compensation

Exercise of stock options

Issuance of stock upon underwritten offering, net of costs

Issuance of stock for acquisition

Accrued distributions

Issuance of stock under equity compensation plans

Impact of transactions affecting NCI

Balance – December 31, 2022

Representation Preferred Linked Stock redemption fee

of stock upon underwritten offering, net of costs

shares cancelled in connection with Intellibed acquisition

of stock under equity compensation plans

of transactions affecting NCI

– December 31, 2023

$ ( 475,969 )

Stock-based compensation

Exchange of stock

Proportional Representation Preferred Linked Stock redemption

Issuance of stock upon underwritten offering, net of costs

Escrow shares cancelled in connection with Intellibed acquisition

Issuance of stock under equity compensation plans

Impact of transactions affecting NCI

Balance – December 31, 2023

of stock for Intellibed acquisition

of stock under equity compensation plans

of transactions affecting NCI

– December 31, 2024

$ ( 573,866 )

2 unchanged sentences

PURPLE INNOVATION, INC.

Consolidated Statements

of Cash Flows

Consolidated Statements of Cash Flows

(In thousands)

Years Ended December 31,

Ended December 31,

Cash flows from operating activities:

Net (loss) income

$ ( 121,215 )

Adjustments to reconcile net (loss) income to net cash used in operating activities:

Adjustments to reconcile net

loss to net cash used in operating activities:

Depreciation and amortization

Non-cash interest

Paid-in-kind interest

Non-cash restructuring, impairment

and other related charges

Loss on impairment of goodwill

Loss on extinguishment of debt

Loss on disposal of property and equipment

Change in fair value – warrant liabilities

Loss on disposal of property and

Change in fair value – warrant

Tax receivable agreement income

Stock-based compensation

Gain from effective settlement of preexisting relationship

Gain from effective settlement

of preexisting relationship

Deferred income taxes

Changes in operating assets and liabilities:

Changes in operating assets

and liabilities:

Accounts receivable

2 unchanged sentences

Accounts payable

Accrued compensation

Customer prepayments

1 unchanged sentence

Accrued warranty liabilities

Other accrued liabilities

Net cash used in operating activities

Other accrued

used in operating activities

Cash flows from investing activities:

Cash, cash equivalents and restricted cash acquired from acquisition, net of cash paid

Excess restricted cash returned to acquiree

Cash, cash equivalents and restricted

cash acquired from acquisition, net of cash paid

Excess restricted cash returned

Purchase of property and equipment

Investment in intangible assets

Net cash used in investing activities

in intangible assets

used in investing activities

Cash flows from financing activities:

Proceeds from term loan

Proceeds from revolving line of credit

Proceeds from revolving line

Proceeds from related party

Payments on term loan

Payments on revolving line of credit

Proceeds from stock offering

Payments for stock offering costs

Proceeds from exercise of warrants

Proceeds from exercise of stock options

Payments on revolving line of

Payments for debt issuance costs

Proportional Representation Preferred Linked Stock redemption fee

Tax receivable agreement payments

Proceeds from InnoHold indemnification payment

Distributions to members

Net cash provided by financing activities

Net decrease in cash, cash equivalents and restricted cash

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

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

Supplemental disclosures of cash flow information:

Cash paid during the year for interest, net of amounts capitalized

Cash paid during the year for income taxes

Supplemental schedule of non-cash investing and financing activities:

Property and equipment included in accounts payable

Issuance of stock for acquisition

Escrow shares cancelled in connection with Intellibed acquisition

Non-cash leasehold improvements

Accrued distributions

Tax receivable agreement liability

Deferred income taxes

Exercise of liability warrants

Proceeds from stock offering

Payments for stock offering

Proceeds from exercise of stock

Proportional Representation

Preferred Linked Stock redemption fee

Tax receivable

agreement payments

provided by financing activities

Net increase (decrease) in cash,

cash equivalents and restricted cash

cash equivalents and restricted cash, beginning of the year

equivalents and restricted cash, end of the year

Supplemental disclosures of cash

flow information:

during the year for interest, net of amounts capitalized

Cash paid during the year for

Supplemental schedule of non-cash

investing and financing activities:

and equipment included in accounts payable

of stock for acquisition

shares cancelled in connection with Intellibed acquisition

distributions

The accompanying notes are an integral part of

1 unchanged sentence

PURPLE INNOVATION, INC.

Notes to the Consolidated

Financial Statements

Notes to the Consolidated Financial Statements

The Company’s mission

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

Purple Innovation, Inc., collectively 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.

Purple Innovation, Inc., collectively

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 direct-to-consumer e-commerce channels, retail brick-and-mortar wholesale partners, Purple showrooms,

and third-party online retailers.

The Company was incorporated

11 unchanged sentences

acquired all the issued and outstanding stock of Advanced Comfort Technologies, Inc., dba Intellibed (“Intellibed”) pursuant

to an Agreement and Plan of Merger (the “Merger Agreement”), in which Gelato Merger Sub, Inc., a wholly owned subsidiary

of Purple Inc., merged with and into Intellibed, with Intellibed continuing as a wholly owned subsidiary of Purple Inc.

to an Agreement and Plan of Merger (the “Merger Agreement”), in which Gelato Merger Sub, Inc., a wholly owned subsidiary of

Purple Inc., merged with and into Intellibed, with Intellibed continuing as a wholly owned subsidiary of Purple Inc.

On October 3, 2022,

2022, Purple Inc.

contributed 100 % of the membership interest in Intellibed to Purple LLC and Intellibed became a wholly owned subsidiary

of Purple LLC.

For further discussion see Note 4 — Acquisition.

contributed 100 % of the membership interest in Intellibed to Purple LLC and Intellibed became a wholly owned subsidiary of

Refer to Note 4 — Acquisition for more information .

of Significant Accounting Policies

5 unchanged sentences

Consolidation

The consolidated financial statements include the accounts of Purple

Inc., its controlled subsidiary Purple LLC, and Intellibed, Purple LLC’s wholly owned subsidiary, from the date of acquisition.

The consolidated financial

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

subsidiary, from the date of acquisition.

All intercompany balances and transactions have been eliminated in consolidation.

As of December 31, 2023, 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 Company’s

consolidated financial statements did not include consolidated statements of comprehensive income since it had no items of other comprehensive

income in any of the periods presented.

As of December

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 Company’s consolidated financial statements did not include consolidated statements of comprehensive income since

it had no items of other comprehensive income in any of the periods presented.

The accompanying financial

statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets

and liabilities and commitments in the normal course of business.

In connection with the preparation of the consolidated financial statements

for the year ended December 31, 2024, the Company conducted an evaluation as to whether there were conditions and events, considered

in the aggregate, which raised substantial doubt as to its ability to continue as a going concern within one year after the date of the

issuance of such financial statements.

The Company had cash and cash equivalents of

approximately $ 29.0 million and an accumulated deficit of $ 573.9 million at December 31, 2024,

and a net loss of $ 97.9 million and net cash used in operating and investing activities of $ 25.4 million for the year ended

December 31, 2024.

T he Company entered into an Amendment to the Amended and Restated Credit Agreement (the “2025

Amendment”), pursuant to which it received $ 19.0 million on March 12, 2025 in additional term loan proceeds from the 2025 Term Loan

Lenders pursuant to the 2025 Amendment (see Note 23— Subsequent Events ).

The Company has also taken a number of other actions to increase cash flow.

In August 2024, the Company

implemented the Restructuring Plan to consolidate manufacturing operations to create efficiencies and cost savings.

The Company has

realized and plans to continue to realize direct material cost savings through supply chain initiatives and supplier diversification

The Company has taken additional cost-saving initiatives in 2025 to maintain liquidity to support our operations and

Accordingly, the Company

has concluded that it will have sufficient liquidity to fund its operations

for at least one year from the date these consolidated financial statements are issued.

Although the Company currently

expects its sources of capital to be sufficient to meet its near-term liquidity needs, there can be no assurance that such sources will

be sufficient to satisfy its liquidity requirements in the future.

If the Company cannot generate or obtain needed funds, it might be

forced to make substantial reductions in its operating and capital expenses or pursue restructuring plans, which could adversely affect

its business operations and ability to execute its current business strategy.

Variable Interest Entities

Purple LLC is a variable

interest entity.

The Company determined that it is the primary beneficiary of Purple LLC as it is the sole managing member and has the

power to direct the activities most significant to Purple LLC’s economic performance as well as the obligation to absorb losses

and receive benefits that are potentially significant.

Purple LLC is a variable interest

The Company determined that it is the primary beneficiary of Purple LLC as it is the sole managing member and has the power to

direct the activities most significant to Purple LLC’s economic performance as well as the obligation to absorb losses and receive

benefits that are potentially significant.

At December 31, 2024, Purple Inc.

had a 99.8% economic interest in Purple LLC

and consolidated 100% of Purple LLC’s assets, liabilities and results of operations in the Company’s consolidated financial

statements contained herein.

had a 99.8 % economic interest in Purple LLC and consolidated

100 % of Purple LLC’s assets, liabilities and results of operations in the Company’s consolidated financial statements contained

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

further discussion see Note 15— Stockholders’ Equity .

Refer to Note 17— Stockholders’

Equity for more information.

Reclassification

1 unchanged sentence

in the consolidated financial statements have been reclassified to conform to the current year presentation with no effect on

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

Accrued warranty liabilities, previously included in

the consolidated balance sheet within other current liabilities and other long-term liabilities, net of current portion, are now presented

Also, the change in accrued warranty liabilities, previously reflected in the consolidated statement of cash flows within

the change in other accrued liabilities, is now presented separately.

In addition, accrued sales returns, accrued compensation and accrued

sales and use tax, previously presented separately in the consolidated balance sheet, are now included within other current liabilities.

Correspondingly, the changes in accrued sales returns and accrued compensation, previously reflected separately in the consolidated statement

of cash flows, are now presented within the change in other current liabilities.

previously reported net loss, cash flows or stockholders’ equity.

Accrued compensation, previously included in the consolidated

balance sheets within other current liabilities, is now presented separately.

Also, the change in accrued compensation, previously reflected

in the consolidated statement of cash flows within the change in other accrued liabilities, is now presented separately.

Use of Estimates

10 unchanged sentences

The Company regularly makes estimates and assumptions including, but not limited to, estimates that affect revenue recognition, accounts

receivable and 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 whenever events

or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, 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

Cash, Cash Equivalents and Restricted Cash

receivable and the 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, the recognition and measurement of restructuring

and related charges, 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.

Restructuring

Restructuring actions may

result in various costs, including employee-related costs, accelerated depreciation expense, write-downs of long-lived assets and inventory,

impairment of long-lived and indefinite-lived assets, contract termination costs and other associated costs.

Employee-related costs represent

one-time termination benefits for severance and other post-employment costs that are recognized as incurred upon communication of the

plan to the identified employees.

If the employee must provide future service beyond a minimum retention period, the benefits are expensed

ratably over the future service period.

Accelerated depreciation expense represents additional expense resulting from shortening the useful

lives of production and other assets to coincide with the end of production and other activities under an approved restructuring plan.

Write-downs of long-lived assets represent losses on assets expected to be disposed of or equipment in progress that will not be put in

Costs to terminate contracts are recognized upon entering a termination agreement with the provider.

Other associated restructuring

costs are expensed as incurred.

Any impairment or write-down of assets resulting from restructuring activities are recognized immediately

in the period the related plan is approved.

Refer to Note 5 –Restructuring, Impairment and Other Related Charges for more

Business Combinations

The Company accounts for business

combinations using the acquisition method of accounting, in accordance with ASC 805, Business Combinations.

The Company records

an acquisition based on the fair value of the consideration transferred and then allocates the purchase price to the identifiable

assets acquired and liabilities assumed based on their respective preliminary estimated fair values as of the acquisition date.

on the acquisition date is measured as the excess of the fair value of consideration transferred over the net of the acquisition date

fair values of the assets acquired and the liabilities assumed.

While best estimates and assumptions are used to accurately value assets

acquired and liabilities assumed at the acquisition date as well as contingent consideration, where applicable, the Company’s estimates

are inherently uncertain and subject to refinement.

If the Company obtains new information within the measurement period (up to one year

from the acquisition date) about facts and circumstances that existed as of the acquisition date that, if known, would have affected the

measurement of the amounts recognized as of that date, the Company records adjustments to the assets acquired and liabilities assumed

with the corresponding offset to goodwill.

Upon the conclusion of the measurement period or final determination of the values of assets

acquired or liabilities assumed, whichever comes first, any subsequent adjustments are reflected in the consolidated statement of operations.

In the event an acquisition

involves an entity with which the Company has a preexisting relationship, the Company will generally recognize a gain or loss

within the consolidated statement of operations to settle that relationship as of the acquisition date.

Transaction costs associated with

business combinations are expensed as incurred.

Cash and Cash Equivalents

The Company considers all

highly liquid investments with an original maturity of three months or less to be cash equivalents.

The carrying value of cash, cash

equivalents and restricted cash approximates fair value because of the short-term maturity of those instruments.

At December 31,

2022, cash, cash equivalents and restricted cash included $ 1.7 million of restricted cash deposited by Intellibed in a separate account

pursuant to an escrow agreement with the Company.

There was no restricted cash included in cash, cash equivalents and restricted cash

at December 31, 2023.

For further discussion regarding restricted cash, see Note 4 — Acquisition.

The carrying value of cash and cash

equivalents approximates fair value because of the short-term maturity of those instruments.

Accounts Receivable and Allowance for Credit

6 unchanged sentences

losses based on historical experience, customer payment practices and current economic trends.

Actual credit losses could differ from those estimates .

Account balances are charged off against the allowance when management

believes it is probable the receivable will not be recovered.

The allowance for credit losses at both December 31, 2023 and 2022 was

not material.

credit losses could differ from those estimates .

Account balances are charged-off against the allowance when management believes

it is probable the receivable will not be recovered.

The Company had the following

activity in its allowance for credit losses (in thousands):

Years Ended December 31,

Balance at beginning of period

Additions charged to expense

Reductions to allowance, net

Balance at end of period

Inventories are comprised

11 unchanged sentences

stated at cost, net of depreciation.

Property and equipment are depreciated using the straight-line method over the estimated useful

lives of the respective assets, ranging from 1 to 17 years, as follows:

Property and equipment are depreciated using the straight-line method over the estimated useful lives

of the respective assets, ranging from 1 to 17 years, as follows:

Furniture and fixtures

5 unchanged sentences

assets used in the manufacturing process, and within each line item of operating expenses for all other long-lived assets.

improvements are amortized over the shorter of the useful life of the leasehold improvements or the contractual term of the lease,

with consideration of lease renewal options if exercise is reasonably certain.

The cost and related accumulated depreciation of assets

sold or retired is removed from the accounts with any resulting gain or loss included in the consolidated statement of operations.

Leasehold improvements

are amortized over the shorter of the useful life of the leasehold improvements or the contractual term of the lease, with consideration

of lease renewal options if exercise is reasonably certain.

The cost and related accumulated depreciation of assets sold or retired is

removed from the accounts with any resulting gain or loss included in the consolidated statement of operations.

Estimated useful lives

of property and equipment are periodically reviewed and, when appropriate, changes are made and accounted for prospectively.

events or changes in operating conditions occur, asset lives may be adjusted and an impairment assessment may be performed on the recoverability

of the carrying amounts.

As a result of initiating

closure of its two Utah manufacturing facilities in August 2024, the Company shortened the estimated useful lives of the production equipment

at these two facilities to reflect the remaining period these assets will remain in service.

Closure of these two facilities is expected

to be completed during the first quarter of 2025.

Reducing the estimated useful lives of these assets increased both depreciation expense

and the Company’s net loss in 2024 by $ 11.2 million.

Refer to Note 5 –Restructuring, Impairment and Other Related Charges

for more information.

The Company capitalizes interest

10 unchanged sentences

For leases with an initial term greater than 12 months, a related lease

liability is recorded on the balance sheet at the present value of future payments discounted at the estimated fully collateralized incremental

liability is recorded on the balance sheets at the present value of future payments discounted at the estimated fully collateralized incremental

borrowing rate (discount rate) corresponding with the lease term.

6 unchanged sentences

present value of future payments using its incremental borrowing rate when the discount rate implicit in the lease is not known.

incremental borrowing rate is the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar

term at an amount equal to the lease payments in a similar economic environment.

The Company determines the applicable incremental borrowing

rate at the lease commencement date based on the rates of its secured borrowings, which is then adjusted for the appropriate lease term

and risk premium.

In determining the Company’s ROU assets and corresponding lease liabilities, the Company applies these incremental

borrowing rates to the minimum lease payments within each lease agreement.

The incremental

borrowing rate is the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term at an amount

equal to the lease payments in a similar economic environment.

The Company determines the applicable incremental borrowing rate at the

lease commencement date based on the rates of its secured borrowings, which is then adjusted for the appropriate lease term and risk premium.

In determining the Company’s ROU assets and corresponding lease liabilities, the Company applies these incremental borrowing rates

to the minimum lease payments within each lease agreement.

Lease expense is recognized

9 unchanged sentences

is performed whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable.

Business Combinations

The Company accounts for

business combinations using the acquisition method of accounting, in accordance with ASC 805, Business Combinations.

the Company completes an acquisition, the assets acquired and the liabilities assumed are recognized separately from goodwill at their

acquisition date fair values.

Goodwill as of the acquisition date is measured as the excess of the fair value of consideration transferred

over the net of the acquisition date fair values of the assets acquired and the liabilities assumed.

While best estimates and assumptions

are used to accurately value assets acquired and liabilities assumed at the acquisition date as well as contingent consideration, where

applicable, the Company’s estimates are inherently uncertain and subject to refinement.

If the Company obtains new information

within the measurement period (up to one year from the acquisition date) about facts and circumstances that existed as of the

acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date, the Company records adjustments

to the assets acquired and liabilities assumed with the corresponding offset to goodwill.

Upon the conclusion of the measurement period

or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are

reflected in the consolidated statement of operations.

In the event an acquisition

involves an entity with which the Company has a preexisting relationship, the Company will generally recognize a gain or loss

within the consolidated statement of operations to settle that relationship as of the acquisition date.

Transaction costs associated

with business combinations are expensed as incurred.

Company accounts for goodwill in a business combination as the excess of the cost over the fair value of net assets acquired and is assigned

4 unchanged sentences

goodwill, to the fair value of the reporting unit.

The Company may elect to perform a qualitative assessment to determine whether it

is more likely than not that a reporting unit is impaired.

If the qualitative assessment is not performed or if the Company determines

that it is not more likely than not that the fair value of the reporting unit exceeds the carrying value, the Company determines the

fair value of its reporting units based on an average weighting of both projected discounted future results and the use of comparative

market multiples.

If the carrying amount of the reporting unit exceeds its fair value, goodwill is considered impaired and a loss recognized

in the amount equal to that excess.

During the year ended December 31, 2023, the Company determined goodwill was impaired and

recorded an impairment charge to write off the entire $ 6.9 million balance of goodwill.

For further discussion see Note 4— Acquisition.

The Company may elect to perform a qualitative assessment to determine whether it is

more likely than not that a reporting unit is impaired.

If the qualitative assessment is not performed or if the Company determines that

it is not more likely than not that the fair value of the reporting unit exceeds the carrying value, the Company determines the fair value

of its reporting units based on an average weighting of both projected discounted future results and the use of comparative market multiples.

If the carrying amount of the reporting unit exceeds its fair value, goodwill is considered impaired and a loss recognized in the amount

equal to that excess.

During the year ended December 31, 2023, the Company determined goodwill was impaired and recorded an impairment

charge to write off the entire $ 6.9 million balance of goodwill.

Refer to Note 4— Acquisition for more information .

Intangible Assets

6 unchanged sentences

internal-use software.

In addition, the Company capitalizes certain payroll and payroll-related costs for employees who are directly

involved with the development of such applications.

Capitalized costs related to internal-use software under development are treated

as construction-in-progress until the program, feature or functionality is ready for its intended use, at which time amortization commences.

Capitalized software costs are amortized on a straight-line basis over three years .

In addition, the Company capitalizes certain payroll and payroll-related costs for employees who are directly involved

with the development of such applications.

Capitalized costs related to internal-use software under development are treated as construction-in-progress

until the program, feature or functionality is ready for its intended use, at which time amortization commences.

Capitalized software

costs are amortized on a straight-line basis over three years .

Asset Impairment Charges

17 unchanged sentences

cost basis and will be depreciated (amortized) over the remaining useful life of that asset.

The Company concluded that as of December

31, 2023, there were indicators of impairment and a recoverability test was required.

Based on the results of the recoverability test,

the Company concluded that the long-lived assets and definite-lived assets were not impaired as of December 31, 2023 and no impairment

The Company concluded there were indicators

of impairment that existed at December 31, 2024 and a recoverability test was required.

Based on the results of this recoverability test,

the Company determined its long-lived and definite-lived assets were not impaired as of December 31, 2024 and no resultant impairment

charges were recorded.

There were no impairment charges realized on long-lived assets and definite-lived intangible assets during the

years ended December 31, 2023, 2022 or 2021.

years ended December 31, 2023 and 2022.

In conjunction with a restructuring

action initiated in August 2024, the Company recorded impairment charges of $ 2.5 million on various long-lived assets associated with

entering into a sublease on one of the Utah manufacturing facilities that is expected to close during the first quarter of 2025.

to Note 5 –Restructuring, Impairment and Other Related Charges for more information.

Indefinite-lived Intangible

6 unchanged sentences

qualitative assessment before calculating the fair value of an asset.

For its indefinite lived intangibles assets, the Company elected

the unconditional option to bypass the qualitative assessment and proceed directly to performing the quantitative assessment to determine

if their carrying values exceed their fair value.

Based on the quantitative assessment, the Company concluded that the indefinite-lived

intangible assets were not impaired as of December 31, 2023.

In the future, if events or market conditions affect the estimated fair value

to the extent that an indefinite-lived intangible asset is impaired, the Company will adjust the carrying value of these assets in the

period in which the impairment occurs.

Other than goodwill as discussed above, there were no impairment charges realized on indefinite-lived

intangible assets during the years ended December 31, 2023, 2022 or 2021.

Cooperative Advertising, Rebate and Other

Promotion Programs

The Company enters into programs

with certain wholesale partners to provide funds for advertising and promotions as well as volume and other rebate programs.

are made to these customers, the Company records liabilities pursuant to these programs.

The Company periodically assesses these liabilities

based on actual sales to determine whether all of the cooperative advertising earned will be used by the customer or whether the customer

will meet the requirements to receive rebate funds.

Estimates are required at any point in time with regard to the ultimate reimbursement

to be claimed by the customers.

Subsequent revisions to the estimates are recorded and charged to earnings in the period in which they

are identified.

Rebates and certain cooperative advertising amounts are classified as a reduction of revenue and presented within net

revenues in the accompanying consolidated statements of operations.

Cooperative advertising expenses that can be identified as a distinct

good or service and for which the fair value can be reasonably estimated are recorded, when incurred, as components of marketing and sales

expenses in the accompanying consolidated statements of operations.

Marketing and sales expense in 2023, 2022 and 2021 included $ 2.0 million,

$ 4.1 million and $ 2.7 million, respectively, related to shared advertising costs that the Company incurred under its cooperative advertising

Advertising Costs

The Company incurs advertising

costs associated with print, digital and broadcast advertisements.

Advertising costs are expensed when the advertisements are run for

the first time and included in marketing and selling expenses in the accompanying consolidated statements of operations.

expense was $ 63.8 million, $ 61.0 million and $ 149.8 million for the years ended December 31, 2023, 2022 and 2021, respectively.

If events or market conditions affect the estimated fair value to

the extent that an indefinite-lived intangible asset is impaired, the Company will adjust the carrying value of these assets in the period

in which impairment occurs.

The restructuring action initiated

by the Company in August 2024 was determined to be a triggering event for potential impairment of intellectual property that was being

accounted for as an indefinite-lived intangible asset.

The resultant impairment assessment performed by the Company determined this asset

no longer had any supportable value and an $ 8.5 million impairment charge to write off the entire balance of the asset was recorded in

Revenue Recognition

The Company markets and sells its products through e-commerce online

channels, retail brick-and-mortar wholesale partners, Purple showrooms, and third-party online retailers.

Revenue is recognized when the

Company satisfies its performance obligations under the contract which involves transferring the promised products to the customer.

principle is achieved in the following steps:

The Company markets and sells

its products through the DTC channel, which includes Purple.com (direct-to-consumer e-commerce), Purple showrooms, their customer contact

center and online marketplaces, and the wholesale channel through retail brick-and-mortar and online wholesale partners.

Revenue is recognized

when the Company satisfies its performance obligations under the contract which involves transferring the promised products to the customer.

This principle is achieved in the following steps:

Identify the contract with the customer.

A contract with a customer exists when (i) the Company enters into an enforceable contract with a customer that defines each party’s

rights regarding the goods to be transferred and identifies the payment terms related to these goods, (ii) the contract has commercial

substance and, (iii) the Company determines that collection of substantially all consideration for the goods that are transferred is

probable based on the customer’s intent and ability to pay the promised consideration.

The Company does not have significant costs

to obtain contracts with customers.

A contract exists when (i) the Company enters into an enforceable contract with a customer that defines each party’s rights

regarding the goods to be transferred and identifies the payment terms related to these goods, (ii) the contract has commercial substance

and, (iii) the Company determines that collection of substantially all consideration for the goods that are transferred is probable based

on the customer’s intent and ability to pay the promised consideration.

The Company does not have significant costs to obtain contracts

with customers.

Identify the performance obligations

7 unchanged sentences

The Company does not offer extended warranty or service plans.

The Company does not provide an option to its customers to

purchase future products at a discount and therefore there are no material option rights.

The Company does not provide an option to its customers to purchase

future products at a discount and therefore there are no material option rights.

Determine the transaction price .

Payment for sale of products through the e-commerce online channel,

Purple showrooms and third-party online retailers is collected at point of sale in advance of shipping the products.

Amounts received

for unshipped products are recorded as customer prepayments.

Payment by traditional wholesale customers is due under customary fixed payment

Payment for sale of products through the direct-to-consumer e-commerce channel and Purple showrooms is collected at point of sale in advance

of shipping the products.

Amounts received for unshipped products are recorded as customer prepayments.

Payment by traditional wholesale

customers is due under customary fixed payment terms.

None of the Company’s contracts contain a significant financing component.

Revenue is recorded at the net sales price, which

includes estimates of variable consideration such as product returns, volume rebates, wholesale warranty returns, and other adjustments.

The estimates of variable consideration are based on historical return experience, historical and projected sales data, and current contract

Variable consideration is included in revenue only to the extent that it is probable that a significant reversal of the revenue

recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

Taxes collected from

customers relating to product sales and remitted to governmental authorities are excluded from revenues.

Revenue is recorded at the net sales price, which includes estimates of variable consideration such as product returns, volume rebates,

wholesale warranty returns, and other adjustments.

The estimates of variable consideration are based on historical return experience,

historical and projected sales data, and current contract terms.

Variable consideration is included in revenue only to the extent that

it is probable that a significant reversal of the revenue recognized will not occur when the uncertainty associated with the variable

consideration is subsequently resolved.

Taxes collected from customers relating to product sales and remitted to governmental authorities

are excluded from revenues.

Allocate the transaction price to

2 unchanged sentences

Therefore, the Company recognizes revenue upon transfer of the product to the customer’s control at contractually stated pricing.

Recognize revenue when or as we

satisfy a performance obligation.

The Company satisfies performance obligations at a point in time upon either shipment or delivery

of goods, in accordance with the terms of each contract with the customer.

With the exception of third-party “white glove”

delivery and certain wholesale partners, revenue generated from product sales is recognized at shipping point, the point in time the

customer obtains control of the products.

Revenue generated from sales through third-party “white glove” delivery is recognized

at the point in time when the product is delivered to the customer.

Revenue generated from certain wholesale partners is recognized at

a point in time when the product is delivered to the wholesale partner’s warehouse.

Recognize revenue when or as we satisfy

a performance obligation.

The Company satisfies performance obligations at a point in time upon either shipment or delivery of goods,

in accordance with the terms of each contract with the customer.

With the exception of third-party “white glove” delivery

and certain wholesale partners, revenue generated from product sales is recognized at shipping point, the point in time the customer obtains

control of the products.

Revenue generated from sales through third-party “white glove” delivery is recognized at the point

in time when the product is delivered to the customer.

Revenue generated from certain wholesale partners is recognized at a point in time

when the product is shipped or when it is delivered to the wholesale partner’s warehouse.

The Company does not have service revenue.

Cost of Revenues

Costs associated with net

revenues are recorded in cost of revenues in the same period in which related sales have been recorded.

Cost of revenues includes the

costs of receiving, producing, inspecting, warehousing, insuring, and shipping goods during the period, as well as depreciation and amortization

of long-lived assets used in these processes.

Cost of sales also includes shipping and handling costs associated with the delivery of

goods to customers.

Sales Returns

The Company’s policy

provides customers up to 100-days to return a mattress, pet bed or pillow and up to 30-days to return all other products (except power

bases) for a full refund.

Estimated sales returns, which are recorded as a reduction of revenue at the time of sale and recorded

in other current liabilities on the consolidated balance sheet, are based on historical trends and product return rates and are adjusted

for any current or expected trends as appropriate.

The Company’s policy provides customers up to 100-days to return

a mattress, pet bed or pillow and up to 30-days to return all other products (except power bases) for a full refund.

Estimated sales

returns, which are recorded as a reduction of revenue at the time of sale and recorded in other current liabilities on the consolidated

balance sheets, are based on historical trends and product return rates and are adjusted for any current or expected trends as appropriate.

Actual sales returns could differ from these estimates.

The Company regularly assesses

and adjusts the estimate of accrued sales returns by updating the return rates for actual trends and projected costs.

The Company classifies

the estimated sales returns as a current liability as they are expected to be paid out in less than one year.

The Company regularly assesses and adjusts the estimate of accrued sales returns

by updating the return rates for actual trends and projected costs.

The Company classifies the estimated sales returns as a current liability

as they are expected to be paid out in less than one year.

The Company had the following

activity for accrued sales returns:

activity for accrued sales returns (in thousands):

Years Ended December 31,

(in thousands)

Balance at beginning of period

3 unchanged sentences

Accrued Warranty Liabilities

The Company provides a limited warranty on most of the products it

The estimated warranty costs associated with products sold through DTC channels are expensed at the time of sale and included in

cost of revenues.

The estimated warranty return costs associated with products sold through the wholesale channel are recorded at the

time of sale and included as an offset to net revenues.

Estimates for warranty costs are based on the results of historical trends and

warranty claim rates incurred, and are adjusted for any current or expected trends as appropriate.

Actual warranty claim costs could differ

from these estimates.

The Company regularly assesses and adjusts the estimate of accrued warranty claims by updating claims rates for

actual trends and projected claim costs.

The Company expects the estimated warranty liability to continue to increase as the Company

has not reached a full 10 years of history on its 10-year mattress warranty.

The Company classifies estimated warranty costs expected

to be paid beyond a year as a long-term liability.

The Company provides a limited

warranty on most of the products it sells.

The estimated warranty costs associated with products sold through DTC channels are expensed

at the time of sale and included in cost of revenues.

The estimated warranty return costs associated with products sold through the wholesale

channel are recorded at the time of sale and included as an offset to net revenues.

Estimates for warranty costs are based on the results

of historical trends and warranty claim rates incurred, and are adjusted for any current or expected trends as appropriate.

Actual warranty

claim costs could differ from these estimates.

The Company regularly assesses and adjusts the estimate of accrued warranty claims by updating

claims rates for actual trends and projected claim costs.

The Company expects the estimated warranty liability to continue to increase

as the Company has not reached a full 10 years of history on its 10-year mattress warranty.

The Company classifies estimated warranty

costs expected to be paid beyond a year as a long-term liability.

The Company had the following

activity for accrued warranty liabilities:

activity for accrued warranty liabilities (in thousands):

Years Ended December 31,

(in thousands)

Balance at beginning of period

3 unchanged sentences

Balance at end of period

In its Form 10-Q for the quarterly

period ended September 30, 2023, the Company disclosed that it had not properly accounted for the warranty terms specified in contracts

with its wholesale customers when estimating the liability for warranty related returns.

Based on this determination, the Company concluded

that its consolidated financial statements should be revised to properly reflect the estimated liability associated with the warranty

provisions in its wholesale contracts.

The Company evaluated the error and determined that the related impact was not material to its

results of operations or financial position for any prior annual or interim period.

However, the Company corrected such errors in its

consolidated financial statements as of and for the years ended December 31, 2022 and 2021.

Debt Issuance Costs and Discounts

Cost of Revenues

Costs associated with net

revenues are recorded as cost of revenues in the same period in which related sales have been recorded.

Cost of revenues includes the

costs of receiving, producing, inspecting, warehousing, insuring, and shipping goods during the period, as well as depreciation and amortization

of long-lived assets used in these processes.

Cost of sales also includes shipping and handling costs associated with the delivery of

goods to customers.

In conjunction with a restructuring

action initiated in August 2024, the Company recorded restructuring charges of $ 15.4 million in cost of revenues for accelerated depreciation

of production equipment and inventory write-downs.

Refer to Note 5 –Restructuring, Impairment and Other Related Charges for

more information.

Cooperative Advertising, Rebate and Other

Promotion Programs

The Company enters into programs

with certain wholesale partners to provide funds for advertising and promotions as well as volume and other rebate programs.

are made to these customers, the Company records liabilities pursuant to these programs.

The Company periodically assesses these liabilities

based on actual sales to determine whether all the cooperative advertising earned will be used by the customer or whether the customer

will meet the requirements to receive rebate funds.

Estimates are required at any point in time regarding the ultimate reimbursement to

be claimed by the customers.

Subsequent revisions to the estimates are recorded and charged to earnings in the period in which they are

Rebates and certain cooperative advertising amounts are classified as a reduction of revenue and presented within net revenues

in the accompanying consolidated statements of operations.

Cooperative advertising expenses that can be identified as a distinct good

or service and for which fair value can be reasonably estimated are recorded, when incurred, as components of marketing and sales expense

in the accompanying consolidated statements of operations.

Marketing and sales expense in 2024, 2023 and 2022 included $ 2.3 million, $ 2.0

million and $ 4.1 million, respectively, related to shared advertising costs that the Company incurred under its cooperative advertising

Advertising Costs

The Company incurs advertising

costs associated with print, digital and broadcast advertisements.

Advertising costs are expensed when the advertisements are run for

the first time and included in marketing and selling expenses in the accompanying consolidated statements of operations.

Advertising expense

was $ 65.2 million, $ 72.4 million and $ 66.6 million for the years ended December 31, 2024, 2023 and 2022, respectively.

Debt Issuance Costs and Discounts

that relate to borrowings are presented in the consolidated balance sheet as a direct reduction from the carrying amount of the related

debt liability and are amortized into interest expense using an effective interest rate over the duration of the debt.

Debt issuance

costs that relate to revolving lines of credit are carried as an asset in the consolidated balance sheet and amortized to interest expense

on a straight-line basis over the term of the related line of credit facility.

Debt issuance costs and discounts that relate to borrowings are presented

in the consolidated balance sheets as a direct reduction from the carrying amount of the related debt liability and are amortized into

interest expense using an effective interest rate over the duration of the debt.

Debt issuance costs that relate to revolving lines of

credit are carried as an asset in the consolidated balance sheets and amortized to interest expense on a straight-line basis over the

term of the related line of credit facility.

Refer to Note 12 – Debt for more information.

Warrant Liabilities

The Company issued warrants

to purchase 20.0 million shares of the Company’s Class A common stock to the lenders associated with a related party credit agreement

entered into in January 2024.

These warrants contain a repurchase provision which, upon the occurrence of a fundamental transaction as

defined in the warrant agreement, could give rise to an obligation of the Company to pay cash to the warrant holders.

In addition, other

provisions may lead to a reduction in the exercise price of the warrants.

The fundamental transaction provisions of the warrants resulted

in them being recorded as a liability at fair value on their issue date, with the corresponding offset included in debt issuance costs.

The initial liability is subsequently re-measured to fair value at each reporting date or exercise date with changes in the fair value

included in earnings.

The Company uses a Monte Carlo Simulation model to determine the fair value of the liability associated with these

The model uses various key assumptions and inputs, including exercise price of the warrants, fair market value of the Company’s

common stock, risk free interest rate, warrant life, expected volatility and the probability of a warrant re-price event.

Refer to Note

12 – Debt and Note 13 – Warrant Liabilities for more information.

The Company issued 12.8 million

sponsor warrants pursuant to a private placement conducted simultaneously with its initial public offering.

The Company accounted for

its sponsor warrants in accordance with ASC 815, under which these warrants did not meet the criteria for equity classification and were

recorded as liabilities.

Since the sponsor warrants met the definition of a derivative as contemplated in ASC 815, these warrants were

measured at fair value at inception and at each reporting date in accordance with ASC 820 with changes in fair value recognized in earnings

in the period of change.

The Company used the Black-Scholes model to determine the fair value of the liability associated with the sponsor

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

warrant life and expected volatility.

Unexercised sponsor warrants totaling 1.9 million expired in February 2023 and were cancelled pursuant

to the terms of the warrant agreement.

The Company recorded its sponsor

warrants as liabilities since they did not meet the criteria for equity classification.

Because the sponsor warrants met the definition

of a derivative, these warrants were measured at fair value at inception and at each reporting date thereafter with changes in fair value

recognized in earnings in the period of change.

The Company used the Black-Scholes model to determine the fair value of the liability

associated with the sponsor warrants.

The model used key assumptions and inputs such as exercise price, fair market value of common stock,

risk free interest rate, warrant life and expected volatility.

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.

6 unchanged sentences

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

9 unchanged sentences

receivable and accounts payable approximate fair value because of the short-term nature of these accounts.

The Company’s debt arrangements

are considered Level 2 instruments and fair value is estimated to be face value based on the contractual terms of the debt and market-based

expectations.

The sponsor warrant liabilities

(see Note 12 — Warrant Liabilities for more information) were Level 3 instruments and used internal models to estimate fair

value using certain significant unobservable inputs which required determination of relevant inputs and assumptions.

Accordingly, changes

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

Such inputs included risk free interest rate, expected

average life, expected dividend yield, and expected volatility.

These Level 3 liabilities generally decreased (increased) 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 generally increased (decreased) in value if the expected average life or expected volatility were to increase (decrease).

The estimated fair value of

the Company’s debt arrangements are based on Level 2 inputs, which include observable inputs estimated using discounted cash flows

and market-based expectations for interest rates, credit risk and the contractual terms of debt instruments is shown in the table below

(in thousands):

2023 Credit Agreement

2024 Credit Agreement

The warrants issued in 2024

and the sponsor warrants (refer to Note 12 – Warrant Liabilities for more information.) are Level 3 instruments and use internal

models to estimate fair value based on certain significant unobservable inputs which require determination of relevant inputs and assumptions.

Accordingly, changes in 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 risk free interest rate and expected dividend yield.

Conversely, the fair value of these

Level 3 liabilities generally increase (decrease) in value if the expected average life or expected volatility increases (decreases).

The following table presents

information about the Company’s liabilities that are measured at fair value on a recurring basis and indicates the fair value hierarchy

of the valuation inputs the Company utilized to determine such fair value (in thousands):

Unexercised sponsor warrants

2 unchanged sentences

had no fair value on the date of expiration.

The 1.9 million sponsor warrants outstanding at December 31, 2022 had a negligible fair

As a result, activity for the year ended December 31, 2023 was de minimis.

The following table summarizes

the Company’s total Level 3 liability activity for the years ended December 31, 2022 and 2021:

(In thousands)

Sponsor Warrants

the Company’s total Level 3 liability activity for the years ended December 31, 2024, 2023 and 2022 (in thousands):

Fair value as of December 31, 2021

Fair value of warrants exercised

Change in valuation inputs (1)

Fair value as of December 31, 2022

Fair value of warrants exercised

Change in valuation inputs (1)

Fair value as of December 31, 2023

Initial measurement at time of issuance

Change in valuation inputs (1)

Fair value as of December 31, 2024

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

Stock Based Compensation

The Company accounts for

stock-based compensation under the provisions of ASC 718, Compensation—Stock Compensation .

This standard requires the Company

to record an expense associated with the fair value of stock-based compensation over the requisite service period.

During 2023, 2022 and 2021,

the Company granted stock options under the Company’s 2017 Equity Incentive Plan (the “2017 Equity Incentive Plan”)

to certain officers, executives and employees of the Company.

The fair value for these awards was determined using the Black-Scholes

option valuation model at the date of grant.

Stock based compensation on these awards is expensed on a straight-line basis over the vesting

Option pricing models require the input of subjective assumptions including the expected term of the stock option, the expected

price volatility of the Company’s common stock over the period equal to the expected term of the grant, and the expected risk-free

Changes in these assumptions can materially affect the fair value estimate.

The Company recognizes forfeitures of stock option

awards as they occur.

During 2023, 2022 and 2021,

the Company granted stock awards under the 2017 Equity Incentive Plan to independent directors on the Company’s Board for services

Since all of these awards vested immediately, stock-based compensation was recorded on the grant date using the publicly quoted

closing price of the Company’s common stock on that date as fair value.

The Company accounts for stock-based

compensation under the provisions of ASC 718, Compensation—Stock Compensation .

This standard requires the Company to record

an expense associated with the fair value of stock-based compensation over the requisite service period.

During 2023 and 2022, the

Company granted stock options under the Company’s 2017 Equity Incentive Plan (the “2017 Equity Incentive Plan”) to certain

officers, executives and employees of the Company.

The fair value for these awards was determined using the Black-Scholes option valuation

model at the date of grant.

Stock based compensation on these awards is expensed on a straight-line basis over the vesting period.

pricing models require the input of subjective assumptions including the expected term of the stock option, the expected price volatility

of the Company’s common stock over the period equal to the expected term of the grant, and the expected risk-free rate.

in these assumptions can materially affect the fair value estimate.

The Company recognizes forfeitures of stock option awards as they

There were no stock options granted in 2024.

During 2023 and 2022, the

Company granted stock awards under the 2017 Equity Incentive Plan to independent directors on the Company’s board of directors (the

“Board”) for services performed.

Since all of these awards vested immediately, stock-based compensation was recorded on the

grant date using the publicly quoted closing price of the Company’s common stock on that date as fair value.

There were no stock

awards granted to independent directors in 2024.

During 2024, 2023 and 2022,

the Company granted restricted stock units under the Company’s 2017 Equity Incentive Plan to certain employees of the Company.

A portion of the restricted stock units granted included a market vesting condition.

The estimated fair value of the restricted stock

units that do not have the market vesting condition is recognized on a straight-line basis over the vesting period.

The estimated fair

value of the stock units that included a market vesting condition was measured on the grant date using a Monte Carlo Simulation of a

Geometric Brownian Motion stock path model and incorporated the probability of vesting occurring.

The estimated fair value of these awards

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.

portion of the restricted stock units granted included a market vesting condition.

The estimated fair value of the restricted stock units

that do not have the market vesting condition is recognized on a straight-line basis over the vesting period.

The estimated fair value

of the stock units that included a market vesting condition was measured on the grant date using a Monte Carlo Simulation of a Geometric

Brownian Motion stock path model and incorporated the probability of vesting occurring.

The estimated fair value of these awards 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.

Deferred tax assets and liabilities

8 unchanged sentences

enacted rate change.

The Company’s effective tax rate is primarily impacted by changes in our valuation allowance.

The Company accounts for

uncertainty in income taxes using a recognition and measurement threshold for tax positions taken or expected to be taken in a tax return,

which are subject to examination by federal and state taxing authorities.

The tax benefit from an uncertain tax position is recognized

when it is more likely than not that the position will be sustained upon examination by taxing authorities based on technical merits

of the position.

The amount of the tax benefit recognized is the largest amount of the benefit that has a greater than 50 % likelihood

of being realized upon ultimate settlement.

The effective tax rate and the tax basis of assets and liabilities reflect management’s

estimates of the ultimate outcome of various tax uncertainties.

The Company recognizes penalties and interest related to uncertain tax

positions within the provision (benefit) for income taxes line in the accompanying consolidated statements of operations.

The Company’s effective tax rate is primarily impacted by changes in its valuation allowance.

The Company accounts for uncertainty

in income taxes using a recognition and measurement threshold for tax positions taken or expected to be taken in a tax return, which are

subject to examination by federal and state taxing authorities.

The tax benefit from an uncertain tax position is recognized when it is

more likely than not that the position will be sustained upon examination by taxing authorities based on technical merits of the position.

amount of the tax benefit recognized is the largest amount of the benefit that has a greater than 50% likelihood of being realized

upon ultimate settlement.

The effective tax rate and the tax basis of assets and liabilities reflect management’s estimates of the

ultimate outcome of various tax uncertainties.

The Company recognizes penalties and interest related to uncertain tax positions within

the provision (benefit) for income taxes line in the accompanying consolidated statements of operations.

The Company files U.S.

7 unchanged sentences

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

6 unchanged sentences

The estimation of liability under the

agreement is by its nature imprecise and subject to significant assumptions regarding the amount and timing of future taxable income.

agreement is imprecise and subject to significant assumptions regarding the amount and timing of future taxable income.

Segment Information

2 unchanged sentences

The role of the CODM is to make decisions about allocating resources and assessing performance.

The Company’s operations are based on an omni-channel distribution strategy that allows the Company to offer a seamless shopping

experience to its customers across multiple sales channels.

The Company concluded its business operates in one operating segment as all

of the Company’s sales channels are complementary and analyzed in the same manner.

Also, the CODM reviews financial information

presented on a consolidated basis for the purpose of allocating resources and evaluating financial performance .

Since the Company operates in one operating segment, all required financial segment information can be found throughout the consolidated

Company’s operations are based on an omni-channel distribution strategy that allows the Company to offer a seamless shopping experience

to its customers across multiple sales channels.

The Company concluded its business operates in one operating segment as all the Company’s

sales channels are complementary and analyzed in the same manner.

Also, the CODM reviews financial information presented on a consolidated

basis for the purpose of allocating resources and evaluating financial performance as the Company does not accumulate discrete financial

information with respect to separate divisions and does not have distinct operating or reportable segments .

Since the Company operates in one operating segment, most of the required financial segment information can be found throughout the consolidated

financial statements.

The Company’s chief executive officer has been identified as its CODM.

Net (Loss) Income Per Share

Basic net (loss) income per

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

of Class A common stock outstanding during each period.

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

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

are dilutive.

The Company uses the “if-converted” method to determine the potential dilutive effect of conversions of its

outstanding Class B common stock, and the treasury stock method to determine the potential dilutive effect of its outstanding warrants

and share-based payment awards.

Refer to Note 21 – Segment

Information and Concentrations for more information.

Net Loss Per Share

Basic net loss per common

share is calculated by dividing net loss attributable to common stockholders by the weighted average number of shares of Class A common

stock outstanding during each period.

Diluted net loss per share reflects the weighted-average number of common shares outstanding during

the period used in the basic net loss computation plus the effect of common stock equivalents that are dilutive.

The Company uses the

“if-converted” method to determine the potential dilutive effect of conversions of its outstanding Class B common stock, and

the treasury stock method to determine the potential dilutive effect of its outstanding warrants and share-based payment awards.

Recent Accounting Pronouncements

of Credit Losses

In June 2016, the Financial

Accounting Standards Board issued ASU No.

2016-13, Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit

Losses on Financial Instruments (ASU 2016-13), which was further updated and clarified by the FASB through issuance of additional

related ASUs.

This guidance replaced the incurred loss impairment guidance and established a single allowance framework for financial

assets carried at amortized cost based on expected credit losses.

The estimate of expected credit losses requires the incorporation of

historical information, current conditions, and reasonable and supportable forecasts.

These updates were effective for public companies,

excluding Smaller Reporting Companies (“SRC”), for annual periods beginning after December 15, 2019, including interim periods

The standard became effective for all other entities for annual periods beginning after December 15, 2022, including interim

periods therein.

This standard is to be applied utilizing a modified retrospective approach.

The standard was adopted by the Company

on January 1, 2023 utilizing a modified retrospective approach.

The adoption of this standard did not have a material impact on the Company’s

consolidated financial statements and related disclosures.

Disclosure Improvements

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

issued ASU 2023-06 Disclosure Improvements:

Codification Amendments in Response to the SEC’s Disclosure Update and

Simplification Initiative .

This ASU amends the disclosure or presentation requirements related to various subtopics in the FASB Accounting

Standards Codification.

For SEC registrants, the effective date for each amendment will be the date on which the SEC’s removal of

that related disclosure requirement from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited.

will monitor the removal of various requirements from the current regulations in order to determine when to adopt the related amendments

but does not anticipate the adoption of the new guidance will have a material impact on the Company’s Consolidated Financial Statements.

The Company will continue to evaluate the impact of this guidance on its consolidated financial statements.

Enhanced Segment Disclosures

In November 2023, 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.

The ASU requires disclosure

to include significant segment expenses that are regularly provided to the 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.

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.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting

Improvements to Reportable Segment Disclosures, which requires public entities, including those that have a single reportable

segment, to provide enhanced disclosures about significant expenses.

The ASU requires disclosure to include significant segment expenses

that are regularly provided to the 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.

The 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.

This standard was adopted by the Company beginning with its 2024

consolidated financial statements.

The adoption of this standard resulted in the addition of required segment disclosures for 2024 and

all prior periods included in these consolidated financial statements.

to Income Tax Disclosures

6 unchanged sentences

The Company is currently evaluating the impact

this update will have on its income tax disclosures in the consolidated financial statements.

this update will have on the income tax disclosures in its consolidated financial statements.

Disaggregation Disclosures

In November 2024, the FASB

issued ASU No.

2024-03, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic

Disaggregation of Income Statement Expenses , which requires disclosure of certain costs and expenses on an interim and annual

basis in the notes to the consolidated financial statements.

The prescribed cost and expense categories requiring disaggregated

disclosures include purchases of inventory, employee compensation, depreciation and intangible asset amortization, along with certain

other expense disclosures already required by GAAP that would need to be integrated within the new tabular disaggregated expense disclosures.

Additionally, the amendments also require the disclosure of total selling expenses and an entity’s definition of those expenses.

is effective for annual reporting periods beginning after December 15, 2026 and interim periods within annual reporting periods beginning

after December 15, 2027.

Early adoption is permitted.

The guidance is to be applied either (1) prospectively to financial

statements issued for reporting periods after the effective date or (2) retrospectively to any or all prior periods presented in the financial

The Company is currently evaluating the potential impact this update will have on its expense disclosures in the notes

to the consolidated financial statements.

Underwritten Offerings of Class A Common

10 unchanged sentences

stock from the Company at a price of $ 5.65 per share, except that any shares sold by the underwriters to Coliseum Capital Partners, L.P.

and Blackwell Partners LLC – Series A, up to an aggregate of 29.81 % of the shares of Class A common stock pursuant to the offering,

were purchased from the Company by the underwriters at a price of $ 6.10 per share.

The aggregate net proceeds received by the Company

from the offering, after deducting offering fees and expenses of $ 5.3 million, totaled $ 92.9 million.

(“CCP”) and Blackwell Partners LLC – Series A (“Blackwell”), up to an aggregate of 29.81 % of the shares

of Class A common stock pursuant to the offering, were purchased from the Company by the underwriters at a price of $ 6.10 per share.

aggregate net proceeds received by the Company from the offering, after deducting offering fees and expenses of $ 5.3 million, totaled

$ 92.9 million.

On August 31, 2022, pursuant

to the Merger Agreement, the Company acquired Intellibed, a premium sleep and health wellness company, offering gel-based mattresses

scientifically designed for maximum back support, spinal alignment and pressure point relief.

The addition of Intellibed increased product

offerings to customers, expanded market opportunities, capitalized on synergies of the combined companies, and increased opportunities

for innovation.

In addition, the acquisition allowed the Company to consolidate ownership of its intellectual property licensed to Intellibed

and more fully capitalize on growing demand for products with gel technologies.

to the Merger Agreement, the Company acquired Intellibed, a premium sleep and health wellness company, offering gel-based mattresses scientifically

designed for maximum back support, spinal alignment and pressure point relief.

The addition of Intellibed increased product offerings

to customers, expanded market opportunities, capitalized on synergies of the combined companies, and increased opportunities for innovation.

In addition, the acquisition allowed the Company to consolidate ownership of its intellectual property licensed to Intellibed and more

fully capitalize on growing demand for products with gel technologies.

The acquisition date fair

7 unchanged sentences

Fair value of total purchase consideration

The fair value of common

stock issued at closing consisted of approximately 8.1 million shares of Class A common stock valued using the acquisition date closing

price of $2.86.

The fair value of common stock held in escrow consisted of 0.5 million shares of Class A common stock valued using the

acquisition date closing price of $2.86.

These shares were originally held in escrow pending resolution of net working capital adjustments

and certain indemnification matters.

The fair value of common stock

issued at closing consisted of approximately 8.1 million shares of Class A common stock valued using the acquisition date closing price

The fair value of common stock held in escrow consisted of 0.5 million shares of Class A common stock valued using the acquisition

date closing price of $ 2.86 .

These shares were originally held in escrow pending resolution of net working capital adjustments and certain

indemnification matters.

Contingent consideration represents

the fair value of 1.5 million shares of Class A common stock issuable to Intellibed security holders if the closing price of the Company’s

stock does not equal or exceed $ 5.00 for at least 10 trading days over any period of 30 consecutive trading days during the period beginning

on the six-month anniversary of the closing date and ending on the 18-month anniversary of the closing date.

The contingent shares were

valued using a Monte-Carlo simulation model.

Because the contingent consideration is payable with a fixed number of shares of the Company’s

Class A common stock, it is classified as equity and will not require remeasurement in subsequent periods.

The fair value of effective settlement of preexisting relationships

included $ 1.4 million related to the fair value of a preexisting legal matter with Intellibed that was effectively settled on the acquisition

date and $ 0.3 million related to the fair value of a preexisting royalty liability owed by Intellibed to the Company that was also effectively

settled on the acquisition date.

As a result of effectively settling the preexisting legal matter with Intellibed, the Company

recorded a gain of $ 1.4 million as other (expense) income, net in the consolidated statement of operations for the year ended December

As a result of effectively settling the preexisting royalty liability, the Company and Intellibed recorded a corresponding receivable

and payable, respectively, for the same $ 0.3 million amount that was eliminated in consolidation as of December 31, 2022.

The Company recorded the

acquisition based on the fair value of the consideration transferred and then allocated the purchase price to the identifiable assets

acquired and liabilities assumed based on their respective preliminary estimated fair values as of the acquisition date.

the fair value of assets acquired and liabilities assumed required management to use significant judgment and estimates including the

selection of valuation methodologies, estimates of future revenues and cash flows, discount rates, and asset lives, among other items.

While the Company used its best estimates and assumptions as a part of the purchase price allocation process to accurately value the

assets acquired, any intangible assets, and the liabilities assumed at the acquisition date, the Company’s estimates were inherently

uncertain and subject to refinement.

Consequently, during the measurement period, which could have extended up to one year from the acquisition

date, the Company was able record adjustments to the fair values of the assets acquired and the liabilities assumed, with a corresponding

offset to goodwill.

Upon the conclusion of the measurement period or final determination of the values of assets acquired or the liabilities

assumed, whichever came first, any subsequent adjustments were reflected in the Company’s consolidated statement of operations.

stock did not equal or exceed certain thresholds during the period beginning on the six-month anniversary of the closing date and ending

on the 18-month anniversary of the closing date.

The contingent shares were valued using a Monte-Carlo simulation model.

Because the contingent

consideration was payable with a fixed number of shares of the Company’s Class A common stock, it was classified as equity and did

not require remeasurement in subsequent periods.

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.

The fair value of effective

settlement of preexisting relationships included $ 1.4 million related to the fair value of a preexisting legal matter with Intellibed

that was effectively settled on the acquisition date and $ 0.3 million related to the fair value of a preexisting royalty liability owed

by Intellibed to the Company that was also effectively settled on the acquisition date.

As a result of effectively settling the preexisting legal

matter with Intellibed, the Company recorded a gain of $ 1.4 million as other income (expense), net in the consolidated statement

of operations for the year ended December 31, 2022.

As a result of effectively settling the preexisting royalty liability, the Company

and Intellibed recorded a corresponding receivable and payable, respectively, for the same $ 0.3 million amount that was then eliminated

in consolidation.

During the measurement period

that ended August 31, 2023, the Company finalized the determination of the working capital adjustments and the fair values allocated

to various assets and liabilities, income tax provision, intangible assets and the residual amount allocated to goodwill.

that ended August 31, 2023, the Company finalized the determination of the working capital adjustments and the fair values allocated to

various assets and liabilities, income tax provision, intangible assets and the residual amount allocated to goodwill.

The table below

3 unchanged sentences

measurement period adjustments was goodwill.

The $ 0.1 million decrease in the acquisition date fair value of net assets acquired and

liabilities assumed reflected the impact of certain Class A common shares initially held in escrow being returned to the Company upon

final determination of the working capital adjustments.

The following table summarizes the preliminary fair value of the assets acquired

and liabilities assumed as of the date of acquisition, the final measurement period adjustments and the final adjusted balances (in thousands):

The $ 0.1 million decrease in the acquisition date fair value of net assets acquired and liabilities

assumed reflected the impact of certain Class A common shares initially held in escrow being returned to the Company upon final determination

of the working capital adjustments.

The following table summarizes the preliminary fair value of the assets acquired and liabilities assumed

as of the date of acquisition, the final measurement period adjustments and the final adjusted balances (in thousands):

Net tangible assets (liabilities):

17 unchanged sentences

capabilities, increased offerings to customers, expanded market opportunities, and enhanced opportunities for growth and innovation.

Goodwill was not being amortized but instead tested for impairment at least annually or more frequently if certain indicators of impairment

were present.

was not being amortized but instead tested for impairment at least annually or more frequently if certain indicators of impairment were

The goodwill recorded was not deductible for income tax purposes.

30 unchanged sentences

excess escrow balance of $ 0.8 million was returned by the Company to the previous shareholders of Intellibed during the third quarter

The Company included the

financial results of Intellibed in its consolidated financial statements from the date of acquisition and recorded net revenues and pre-tax

income of $ 9.7 million and $ 1.6 million, respectively, for the period from August 31, 2022 through December 31, 2022.

The transaction

costs associated with the acquisition of $ 3.9 million were recorded as general and administrative expense in the consolidated statement

of operations for the year ended December 31, 2022.

The following table provides unaudited pro forma financial information

as if Intellibed had been acquired by the Company as of January 1, 2021.

The unaudited pro forma information reflects adjustments for

transaction and litigation expenses, immediate restructuring savings and additional depreciation and amortization resulting from the fair

value adjustments to assets acquired.

The pro forma results do not include any other anticipated cost synergies or effects of the combined

Accordingly, pro forma amounts are not necessarily indicative of the results to be expected had the acquisition been completed

on the date indicated, nor is it indicative of the future results of operations of the combined company (in thousands):

Year Ended December 31,

The Company included the financial

results of Intellibed in its consolidated financial statements from the date of acquisition and recorded net revenues and pre-tax income

of $ 9.7 million and $ 1.6 million, respectively, for the period from August 31, 2022 through December 31, 2022.

The $ 3.9 million of transaction

costs associated with the acquisition were recorded as general and administrative expense in the consolidated statement of operations

for the year ended December 31, 2022.

The following table provides

unaudited pro forma financial information as if Intellibed had been acquired by the Company as of January 1, 2022.

The unaudited pro forma

information reflects adjustments for transaction and litigation expenses, immediate restructuring savings and additional depreciation

and amortization resulting from the fair value adjustments to assets acquired.

The pro forma results do not include any other anticipated

cost synergies or effects of the combined companies.

Accordingly, the following pro forma amounts for the year ended December 31, 2022

are not necessarily indicative of the results to be expected had the acquisition been completed on the date indicated, nor is it

indicative of the future results of operations of the combined company (in thousands):

Net (loss) income

The unaudited pro forma amounts above include the following

● A decrease of operating expenses by $ 4.4 million during the year ended

December 31, 2022, to eliminate costs directly related to the acquisition that do not have a continuing impact on results of operations.

● A decrease of operating expenses by $ 1.5 million during the year ended

December 31, 2021 to eliminate litigation costs directly related to the lawsuit between the two Companies.

● A decrease of operating expenses by $ 1.5 million and $ 0.6 million during

the years ended December 31, 2022 and 2021, respectively, to eliminate costs directly related to immediate restructuring that do not have

a continuing impact on results of operations.

increase of operating expenses by $ 2.2 million and $ 1.8 million during the years ended December 31, 2022 and 2021, respectively, to reflect

the additional depreciation and amortization expense related to the increase in property and equipment assets and definite lived intangible

combined pro forma results were tax effected using the Company’s effective tax rate for the respective periods.

The unaudited pro forma amounts

above include the following adjustments:

● A $ 4.4 million decrease in operating expenses to eliminate costs directly related to the acquisition that do not have a continuing impact on results of operations.

● A $ 1.5 million decrease in operating expenses to eliminate costs directly related to immediate restructuring that do not have a continuing impact on results of operations.

● A $ 2.2 million increase in operating expenses to reflect the additional depreciation and amortization expense related to the increase in property and equipment assets and definite lived intangible assets.

The combined pro forma results were tax effected using the Company’s effective tax rate for the period.

Restructuring, Impairment and Other Related

In August 2024, the Company

initiated a restructuring plan to strategically realign the Company’s focus on the achievement of operational efficiencies

that are expected to improve profitability and provide for reinvesting in technology and marketing initiatives (the “Restructuring

The Company’s Restructuring Plan includes the permanent closure of its Grantsville and Salt Lake City, Utah manufacturing

facilities to consolidate mattress production in its Georgia plant, and a headcount reduction at the Company’s Utah headquarters

to drive additional operating efficiencies.

Closure of the two Utah manufacturing facilities will be completed by the end of the first

quarter of 2025 while consolidation into the Georgia facility was finalized in December 2024.

The reduction in workforce at the Utah headquarters

was completed in August 2024.

The following table summarizes

the restructuring, impairment and other related charges the Company recognized in the 2024 consolidated statement of operations (in thousands):

Restructuring,

Cash charges:

Employee-related costs

Total cash charges

Non-cash charges:

Accelerated depreciation

Inventory write-downs

Write-down of long-lived assets

Impairment of assets

Total non-cash charges

Total restructuring, impairment and other related charges

Accelerated depreciation primarily

represents $ 11.2 million of increased depreciation expense associated with shortening the useful lives of the production equipment at

the two Utah manufacturing facilities that are being closed to reflect the remaining period these assets will remain in service.

The $ 5.2 million write-down of long-lived assets represents the write-down

to salvage value of other property and equipment located at the two Utah manufacturing facilities that are being closed.

Impairment of assets included

impairment charges of $ 2.5 million associated with entering into a sublease for the Salt Lake City, Utah manufacturing facility that is

being closed and related impairment charges associated with certain leasehold improvements of the property.

The fair values of the impaired

assets were determined by the Company to be Level 3 under the fair value hierarchy (refer to Note 2— Fair Value Measurements

for the definition of Level 3 inputs) and were estimated based on internal expertise related to current marketplace conditions and

estimated future discounted cash flows.

These assets were adjusted to their estimated fair values at the time of impairment.

fair values subsequently decline, the carrying values of the assets will be adjusted accordingly.

Impairment of assets also

included the write-off of an $ 8.5 million indefinite-lived intangible asset.

Initiating the Restructuring Plan was determined to be a

triggering event for potential impairment of this asset.

As a result of the impairment assessment performed, the Company determined this

indefinite-lived intangible asset was impaired and recorded an impairment charge to write off the entire $ 8.5 million balance.

The lease for the Company’s

Grantsville, Utah manufacturing facility included a five-year renewal option that was reasonably certain of being exercised and included

in the lease term when the ROU asset and lease liability were originally measured.

Because of the expected closure of this facility as

part of the Restructuring Plan, the renewal option was no longer deemed reasonably certain of being exercised and a reassessment of the

lease terms was completed.

As a result, the original lease term was shortened and the Company recorded a $ 10.5 million reduction to the

ROU asset and corresponding lease liability in the 2024 consolidated balance sheet, using the applicable discount rate at the effective

date of the reassessment.

The following table summarizes

2024 activity associated with employee-related and other costs recorded pursuant to the Restructuring Plan, as presented in the indicated

line item of the consolidated statement of operations, that will be settled in cash and are included in accounts payable or accrued compensation

on the condensed consolidated balance sheets (in thousands):

Balance at December 31, 2023

Employee-related costs – cost of revenues

Employee-related costs – operating expenses

Employee-related costs – restructuring charges

Other costs – restructuring charges

Balance at December 31, 2024

The following table summarizes

the estimated restructuring and other related charges associated with the Restructuring Plan to be recognized in the future (in thousands):

Restructuring,

and Other Related

Non-cash charges

Total estimated charges to be recognized in future (a)

(a) These charges include certain estimates that are provisional and include management judgments and assumptions that could change materially as the Company completes the execution of the Restructuring Plan.

Actual results may differ from these estimates, and the completion of the plan could result in additional restructuring, impairment or other related charges not reflected above.

Revenue from Contracts with Customers

The Company markets and sells its products through e-commerce online

channels, retail brick-and-mortar wholesale partners, Purple showrooms, and third-party online retailers.

Revenue is recognized when the

Company satisfies its performance obligations under the contract which involves transferring the promised products to the customer, subject

to shipping terms, as described in Note 2 – Summary of Significant Accounting Policies .

The Company markets and sells

its products through direct-to-consumer e-commerce channels, retail brick-and-mortar wholesale partners, Purple showrooms, and third-party

online retailers.

Revenue is recognized when the Company satisfies its performance obligations under the contract which involves transferring

the promised products to the customer, subject to shipping terms, as described in Note 2 – Summary of Significant Accounting

Disaggregated Revenue

The Company classifies revenue into two categories:

direct-to-consumer

The Company classifies revenue

into two categories:

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 Company showroom

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 categories:

sleep products

Sleep products include mattresses, platforms, adjustable bases, mattress protectors, pillows and sheets.

Other products include

cushions and various other products.

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

at a Company showroom location.

The wholesale channel includes all product sales to the Company’s retail brick and mortar and online

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

The following tables present

the Company’s revenue disaggregated by sales channel and product category (in thousands):

Years Ended December 31,

Revenues, net

the Company’s revenue disaggregated by sales channel (in thousands):

Years Ended December 31,

Sleep products

Revenues, net

Contract Balances

Payments for the sale of products through the e-commerce online channel,

third-party online retailers, Purple showrooms and contact center are collected at point of sale in advance of shipping the products.

Amounts received for unshipped products are recorded as customer prepayments.

Customer prepayments totaled $ 5.7 million and $ 4.5 million

at December 31, 2023 and 2022, respectively.

During the years ended December 31, 2023, 2022 and 2021, the Company recognized all of the

Payments for the sale of products

through the direct-to-consumer e-commerce channel, Purple showrooms and our contact center are collected at point of sale in advance of

shipping the products.

The amounts received for unshipped products are recorded as customer prepayments.

Customer prepayments totaled

$ 6.4 million and $ 5.7 million at December 31, 2024 and 2023, respectively.

During 2024, 2023 and 2022, the Company recognized all of the

revenue that was deferred in customer prepayments at December 31, 2023, 2022 and 2021, respectively.

Inventories consisted of

the following:

Inventories consisted of the

following (in thousands):

As of December 31,

(in thousands)

Raw materials

3 unchanged sentences

Property and equipment consisted of the following

As of December 31,

(in thousands):

As of December 31,

Equipment in progress

11 unchanged sentences

million and $ 16.2 million for the years ended December 31, 2024, 2023 and 2022, respectively.

Included in depreciation expense for the

year ended December 31, 2024 was $ 11.3 million of accelerated depreciation recorded in conjunction with the Restructuring Plan.

to Note 5— Restructuring and Impairment Charges for more information.

The Company leases its manufacturing

25 unchanged sentences

Present value of operating lease payments

(a) – Amount consists of $ 21.5 million of undiscounted cash flows offset by $ 1.1 million of tenant improvement allowances which are expected to be fully utilized in fiscal 2024.

As of December 31, 2024 and

2023, the weighted-average remaining term of operating leases was 6.8 years and 8.0 years, respectively, and the weighted-average discount

rate was 5.77 % and 5.51 %, respectively, for operating leases recognized on the consolidated balance sheet.

rate was 6.09 % and 5.77 %, respectively, for operating leases recognized on the consolidated balance sheets.

The following table provides

1 unchanged sentence

Years Ended December 31,

Cash paid for

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

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

ROU 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 Consolidated Statements of Cash Flows offset by non-cash ROU asset amortization and lease liability accretion.

The Company initially recorded

$ 1.7 million for the present value of asset retirement obligations (ARO) to cover costs associated with the future restoration of two

leased properties.

During the years ended December 31, 2023, 2022 and 2021, the Company recorded accretion of the ARO liabilities totaling

$ 0.1 million, $ 0.4 million and $ 0.1 million, respectively.

The outstanding ARO liabilities totaled $ 2.2 million and $ 2.1 million at December

31, 2023 and 2022, respectively and are presented as asset retirement obligations in the consolidated balance sheets.

The following table provides the components of

2 unchanged sentences

31, 2024 As of December 31, 2023

Useful life Gross Accumulated Net Carrying Gross Accumulated Net

(years) Cost Amortization Impairment Value Cost Amortization Value

Indefinite-lived non-amortizing:

Intellectual property $ 8,456 $ —

$ ( 8,456 ) $ —

Trademarks 30 —

Definite-lived amortizing:

Internet domain 15 900 ( 430 ) —

470 900 ( 370 ) 530

Customer relationships 10 10,876 ( 4,492 ) —

6,384 10,876 ( 2,286 ) 8,590

Developed technology 2 644 ( 644 ) —

644 ( 429 ) 215

Internal-use software 3 7,746 ( 5,740 ) —

2,006 8,423 ( 4,048 ) 4,375

Intangible assets, net $ 28,652 $ ( 11,306 ) $ ( 8,456 ) $ 8,890 $ 29,329 $ ( 7,133 ) $ 22,196

Amortization expense for

intangible assets was $ 5.3 million, $ 1.2 million and $ 0.3 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Amortization expense for intangible

assets was $ 4.2 million, $ 5.3 million and $ 1.2 million for the years ended December 31, 2024, 2023 and 2022, respectively.

Estimated amortization expense for definite-lived

1 unchanged sentence

Year ended December 31,

Total future amortization for definite-lived intangible

Total future amortization for definite-lived intangible assets

Other Current Liabilities

3 unchanged sentences

Accrued sales returns

Accrued compensation

Long-term debt and unamortized issuance costs - current portion

Accrued sales and use tax

Long-term debt and unamortized issuance costs - current portion

Asset retirement obligation

Insurance financing

Accrued interest

Accrued sales tax liability assumed in acquisition

Tax Receivable Agreement Liability – current portion

Total other current liabilities

1 unchanged sentence

(in thousands):

As of December 31,

Related party loan

Revolving line of credit

2 unchanged sentences

Debt, net of current portion

Amount is included.in other current liabilities in the consolidated balance sheet.

2023 Credit Agreements

On August 7, 2023, Purple

2024 Credit Agreement

On January 23, 2024, Purple

LLC, Purple Inc.

and Intellibed, (collectively the “Loan Parties”) entered into a term loan credit agreement (the “Term

Loan Agreement”) with Callodine Commercial Finance, LLC and a group of financial institutions (the “Term Loan Lenders”).

Also, on August 7, 2023, the Loan parties entered into a separate financing arrangement with the Bank of Montreal and a group of financial

institutions (collectively the “ABL Lenders”) that provided for a revolving asset-based credit facility (the “ABL Agreement”).

Pursuant to entering into these agreements (the “2023 Credit Agreements”), the Company incurred fees and expenses of $ 3.1

million that were recorded as debt issuance costs in the third quarter of 2023.

Interest expense under the 2023 Credit Agreements was

$ 2.1 million for the year ended December 31, 2023.

See Note 21— Subsequent Events — Amended and Restated Credit Agreement

for discussion of new credit agreement entered into subsequent to year-end that resulted in the payoff of debt under the 2023 Credit

Term Loan Agreement and Term Loan Pledge

and Security Agreement

and Intellibed (collectively, the “Loan Parties”) entered into an amended and restated credit agreement (the

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

Agreement”), with CCP and other lenders (collectively, the “Lenders”) and Delaware Trust Company, as administrative

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 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 of principal

on or after August 7, 2024 but before August 7, 2025 are subject to a prepayment penalty of 1.25 %, and any prepayments of principal 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 Amended and Restated Credit Agreement also removed restrictions and requirements typically associated with an asset-based loan.

Amended and Restated Credit Agreement and agreements ancillary thereto provide for certain remedies to the Lenders in the event of customary

events of default.

There were no events of default at December 31, 2024 and therefore the debt is classified as long-term in the consolidated

balance sheets.

In connection with the Amended

and Restated Credit Agreement, the Company issued to the Lenders warrants to purchase 20.0 million shares of the Company’s Class

A common stock (Refer to Note 13 – Warrant Liabilities for more information) and incurred fees and expenses of $ 3.5 million

that were recorded as debt issuance costs in the first quarter of 2024.

The Company has elected for interest to be capitalized and added

to the principal amount of the loan.

For the year ended December 31, 2024, interest expense under the Related Party Loan consisted of

paid-in-kind interest of $ 9.7 million and debt issuance cost amortization of $ 7.2 million.

There was no interest expense incurred under

the Amended and Restated Credit Agreement in 2023 and 2022.

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

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

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 December 31, 2024, the Company was in compliance with all covenants under the Amended and

Restated Credit Agreement.

2023 Credit Agreements

On August 7, 2023, the Loan

Parties entered into the Term Loan Agreement.

Also, on August 7, 2023, the Loan parties entered into a separate financing arrangement

with a group of financial institutions (collectively the “ABL Lenders”) that provided for a revolving asset-based credit facility

(the “ABL Agreement”).

Pursuant to entering into these agreements (collectively, the “2023 Credit Agreements”),

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

1 unchanged sentence

the “Term Loans”).

Proceeds from the Term Loans, which were fully drawn at closing, 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 (a) a three-year amortization schedule

ending on August 7, 2026 or (b) 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 premium.

There were also potential mandatory prepayment obligations based on certain asset dispositions,

casualty events and extraordinary receipts.

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 %

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

Pursuant to a pledge and

security agreement, the Loan Parties’ obligations under the Term Loan Agreement were secured by a perfected second-priority security

interest in the cash, inventory and accounts receivable of the Loan Parties, and a perfected first-priority security interest in substantially

all other assets of the Loan Parties, including, without limitation, the intellectual property and equipment of the Loan Parties, subject

to certain exceptions.

The Term Loan Agreement provided

for customary events of default which included non-payment and failure to perform or observe covenants.

The Term Loan Agreement contained

customary indemnifications that benefited the Term Loan Lenders.

The Term Loan Agreement also

contained representations, warranties and certain covenants of the Loan Parties.

While any amounts were outstanding under the Term Loan

Agreement, the Loan Parties were 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, each of which were subject to certain exceptions.

In particular, the

Loan Parties were (i) restricted from incurring additional debt up to certain amounts, subject to limited exceptions, as set forth in

the Term Loan Agreement, and (ii) required to maintain a minimum revolving loan availability under the ABL Agreement.

Each Loan Party

was also restricted from paying dividends or making other distributions or payments on its respective capital stock, subject to limited

If the Loan Parties failed to perform their obligations under these and other covenants, or any event of default occurred,

the Term Loans, together with accrued interest, could have been declared immediately due and payable.

ABL Agreement and ABL Pledge and Security

The ABL Agreement provided

for up to $ 50.0 million of revolving loans subject to a borrowing base calculation and minimum availability requirements (with sub-facilities

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.

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

available under the borrowing base.

No funds were drawn under the ABL Agreement at closing and there was $ 5.0 million outstanding at

December 31, 2023.

The Company was able to use the funds drawn under the ABL Agreement to finance permitted acquisitions defined in the

agreement and for working capital, capital expenditures and other general corporate purposes.

Outstanding principal and accrued interest

on the ABL Loans were to be repaid on August 7, 2026.

The borrowing rates under

the ABL Agreement accrued on a three-tiered grid based on revolving availability, ranging from (i) SOFR, plus a credit spread adjustment

of 0.10% per annum, plus 2.75% per annum to (ii) SOFR, plus a credit spread adjustment of 0.10% per annum, plus 3.25% per annum, with

a SOFR floor of 0% per annum.

The ABL Loans could be prepaid in whole or in part at any time without premium or penalty, subject to reimbursement

of certain costs.

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

issuances and extraordinary receipts.

Pursuant to a pledge and

security agreement, the Loan Parties’ obligations under the ABL Agreement were secured by a perfected first-priority security interest

in the cash, inventory and accounts receivable of the Loan Parties, and a perfected second-priority security interest in substantially

all of the other assets of the Loan Parties, subject to certain exceptions.

The ABL Agreement provided

for customary events of default such as non-payment and failure to perform or observe covenants.

The ABL Agreement contained customary

indemnifications that benefited the ABL Lenders.

The ABL Agreement also contained

representations, warranties and certain covenants of the Loan Parties.

The Loan Parties were subject to 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, in each case, subject to certain

In particular, the Loan Parties were (i) restricted from incurring additional debt up to certain amounts, subject to limited

exceptions, as set forth in the ABL Agreement, and (ii) if revolving availability under the ABL Agreement was less than a specified amount,

required to maintain a minimum Consolidated Fixed Charge Coverage Ratio (as defined in the ABL Agreement), and (iii) required to maintain

a specified minimum revolving availability.

Each Loan Party was also restricted from paying dividends or making other distributions or

payments on its respective capital stock, subject to limited exceptions.

If the Loan Parties failed to perform their obligations under

these and other covenants, or if any event of default occurred, the revolving loan commitments under the ABL Agreement could have been

terminated and any outstanding ABL Loans, together with accrued interest, could have been declared immediately due and payable and any

outstanding letters of credit could have been made to be cash collateralized.

2023 Credit Agreement Defaults

The Company, as of September

30, 2023, was not in compliance with its debt covenants under each of the 2023 Credit Agreements due to (i) the Company’s failure

to (a) provide certain financial reporting and related materials on a timely basis and (b) complete certain post-closing deliverables

as required under the ABL Agreement and (ii) the Company drawing on the loan under the ABL Agreement while the above events of default

were in existence (collectively, the “Subject Events of Default”).

On November 6, 2023, the Company

entered into (i) a First Amendment and Waiver to the ABL Agreement (the “ABL Amendment”) and (ii) a First Amendment and Waiver

to the Term Loan Agreement (the “Term Loan Amendment”), with the Term Loan Lenders and ABL Lenders, respectively (collectively,

the “Lenders”), which included waivers of the Subject Events of Default.

These amendments, among other things, included additional

reporting obligations under the 2023 Credit Agreements, the appointment of a third-party consultant, and daily cash sweeps from the Loan

Parties’ accounts to an account maintained at the ABL Lender.

If the Company had not been able to comply with such additional requirements

it may have experienced future events of default, which could have limited its ability to access the ABL Loans and adversely affected

the Company’s financial position and results of operations.

As of December 31, 2023, the Company was in compliance with all of the

financial covenants related to the 2023 Credit Agreement, as amended.

ABL Agreement provided for up to $ 50.0 million of revolving loans subject to a borrowing base calculation and minimum availability requirements

(with sub-facilities 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.

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

reduced the amount available under the borrowing base.

Outstanding principal and accrued interest on the ABL Loans were to be repaid

on August 7, 2026.

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.

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 and $ 2.1 million for the years ended December

31, 2024 and 2023, respectively.

There was no interest expense incurred under the 2023 Credit Agreements in 2022.

Credit Agreement

On September 3, 2020, Purple

LLC entered into a financing arrangement with KeyBank National Association and a group of financial institutions (the “2020 Credit

September 3, 2020, Purple LLC entered into a financing arrangement with a group of financial institutions (the “2020 Credit Agreement”).

The 2020 Credit Agreement provided for a $ 45.0 million term loan and a $ 55.0 million revolving line of credit.

term loan was to be repaid in accordance with a five-year amortization schedule or prepaid in whole or in part at any time without premium

or penalty, subject to reimbursement of certain costs.

The revolving credit facility had a term of five years and carried the same interest

provisions as the term debt.

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

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

The Company had no outstanding borrowings under the 2020 Credit Agreement at the time of termination.

The term loan was to be

repaid in accordance with a five-year amortization schedule or prepaid in whole or in part at any time without premium or penalty, subject

to reimbursement of certain costs.

The revolving credit facility had a term of five years and carried the same interest provisions as

the term debt.

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

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

had no outstanding borrowings under the 2020 Credit Agreement at the time of termination.

On February 17, 2023, the

5 unchanged sentences

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 2023 condensed consolidated statement of operations.

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.

Note 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

In connection with the Company’s

execution of both the Term Loan Agreement and ABL Agreement, the Company terminated its 2020 Credit Agreement in August 2023.

had no outstanding borrowings under the 2020 Credit Agreement at the time of termination.

The termination was accounted for as an extinguishment

of debt and $ 3.1 million of unamortized debt issuance costs related to the 2020 Credit Agreement were recorded as a loss on extinguishment

of debt in the 2023 condensed consolidated statement of operations.

Interest expense under the 2020 Credit Agreement totaled $ 1.3 million,

$ 4.1 million and $ 2.4 million for the years ended December 31, 2023, 2022 and 2021, respectively.

As of December 31,

2023, the scheduled maturities of debt outstanding for each of the next five years and thereafter are as follows (in thousands):

recorded as debt issuance costs in the consolidated balance sheets.

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 2023

consolidated statement of operations.

expense under the 2020 Credit Agreement totaled $ 1.3 million and $ 4.1 million for the years ended December 31, 2023 and 2022, respectively.

There was no interest expense incurred under the 2020 Credit Agreement in 2024.

of December 31, 2024, the scheduled maturities of debt outstanding for each of the next five years and thereafter are as follows

(in thousands):

Year ended December 31,

Warrant Liabilities

The Company issued 12.8 million

sponsor warrants pursuant to a private placement conducted simultaneously with its initial public offering.

Each of these warrants entitled

the registered holder to purchase one-half of one share of the Company’s Class A common stock at a price of $ 5.75 per half share

($ 11.50 per full share), subject to adjustment pursuant to the terms of the warrant agreement.

These sponsor warrants contained certain

provisions that did not meet the criteria for equity classification and therefore were recorded as liabilities.

The liability for these

warrants was recorded at fair value on the date of the Business Combination and subsequently re-measured to fair value at each reporting

date or exercise date with changes in the fair value included in earnings.

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.

The 1.9 million sponsor warrants outstanding at December 31, 2022 had a negligible fair

value and no sponsor warrants were exercised in 2022.

In 2021, 6.6 million sponsor warrants were exercised resulting in the issuance

of 2.3 million shares of Class A common stock and cash proceeds to the Company of $ 0.1 million.

The Company determined the

fair value of the sponsor warrants using a Black-Scholes model with the following assumptions:

On January 23, 2024, in connection with the Amended and Restated Credit

Agreement, the Company issued to the Lenders warrants to purchase 20.0 million shares of the Company’s Class A common stock (the

Each Warrant entitles the registered holder to purchase one share of the Company’s Class A common stock

at a price of $ 1.50 per share, subject to adjustment.

The Warrants will expire on the 10 -year anniversary of issuance, or earlier upon

The holders do not have the rights or privileges of holders of Class A common stock or any voting rights until they exercise

their Warrants.

After the issuance of shares of Class A common stock upon exercise of the Warrants, each holder will be entitled to one

vote for each share of Class A common stock held on all matters to be voted on by stockholders generally.

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.

The Warrants contain a repurchase provision which, upon the occurrence of a fundamental transaction as defined in the warrant agreement,

could give rise to an obligation of the Company to pay cash to the warrant holders.

In addition, other provisions may lead to a reduction

in the exercise price of the Warrants.

The Warrants also include full-ratchet anti-dilution protections, subject to certain conditions,

which could result in the Warrants becoming exercisable for a significantly greater number of shares if we engage in a dilutive financing.

The Company determined the fundamental transaction provisions require the Warrants 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.

As a result, the liability for

these Warrants was recorded at fair value on the date of issuance with the offset included in debt issuance costs.

This liability is subsequently

re-measured to fair value at each reporting date or exercise date with changes in the fair value included in earnings.

Company used a Monte Carlo Simulation model to determine the fair value of the liability associated with the Warrants.

The model used

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

4 unchanged sentences

Expected dividend yield

During the years ended December

31, 2022 and 2021, the Company recognized gains of $ 4.3 million and $ 24.1 million, respectively, in its consolidated statements of operations

related to decreases in the fair value of the sponsor warrants exercised during the respective periods or that were outstanding at the

end of the respective periods.

and Contingencies

Required Member Distributions

Prior to the Business Combination

and pursuant to the then applicable First Amended and Restated Limited Liability Company Agreement (the “First Purple LLC Agreement”),

Purple LLC was required to distribute to its members an amount equal to 45 percent of Purple LLC’s net taxable income following

the end of each fiscal year.

The First Purple LLC Agreement was amended and replaced by the Second Amended and Restated Limited Liability

Company Agreement (the “Second Purple LLC Agreement”) on February 2, 2018 as part of the Business Combination.

Purple LLC Agreement was amended and replaced by the Third Amended and Restated Limited Liability Company Agreement (the “Third

Purple LLC Agreement”) on September 3, 2020.

The Second Purple LLC Agreement and the Third Purple LLC Agreement do not include

any mandatory distributions, other than tax distributions.

During the year ended December 31, 2021, the Company paid $ 1.2 million in

tax distributions under these agreements.

There were no tax distributions paid during the years ended December 31, 2023 and 2022.

Company’s consolidated balance sheets at both December 31, 2023 and 2022 had $ 0.1 million of accrued tax distributions included

in other current liabilities.

Subscription Agreement and Preemptive Rights

In February 2018, in

connection with the Business Combination, the Company entered into a subscription agreement with Coliseum Capital Partners (“CCP”)

and Blackwell Partners LLC – Series A (“Blackwell”), pursuant to which CCP and Blackwell agreed to purchase from the

Company an aggregate of 4.0 million shares of Class A common stock at a purchase price of $ 10.00 per share (the “Coliseum

Private Placement”).

In connection with the Coliseum Private Placement, the Sponsor assigned (i) an aggregate of 1.3 million

additional shares of Class A common stock to CCP and Blackwell and (ii) an aggregate of 3.3 million warrants to purchase 1.6

million shares of Class A common stock to CCP, Blackwell, and Coliseum Co-Invest Debt Fund, L.P.

The subscription

agreement provides CCP and Blackwell with preemptive rights with respect to future sales of the Company’s securities.

It also provides

them with a right of first refusal with respect to certain debt and preferred equity financings by the Company.

The Company also entered

into a registration rights agreement with CCP, Blackwell, and CDF, providing for the registration of the shares of Class A common

stock issued and assigned to CCP and Blackwell in the Coliseum Private Placement, as well as the shares of Class A common stock

underlying the warrants received by CCP, Blackwell and CDF.

The Company has filed a registration statement with respect to such securities.

Rights of Securities Holders

The holders of certain warrants

exercisable into Class A common stock, including CCP, Blackwell and CDF, 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 between the Company and CCP, Blackwell, and CDF (the “Coliseum Investors”), 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.

2021, the Coliseum Investors exercised the first of their three written demands for registration in an underwritten offering.

On May 21, 2021, 7.3 million

shares of Class A common stock were sold in a secondary offering by the Coliseum Investors at a price of $ 30.00 per share.

did not receive any of the proceeds from the secondary offering.

The underwriting discount, commission and other related costs incurred

by the Company for the secondary offering totaled $ 7.9 million and was recorded by the Company as general and administrative expense

in the consolidated statement of operations for the year ended December 31, 2021.

Purple LLC Class B Unit Exchange Right

On February 2, 2018, in connection with the closing of the Business

Combination, the Company entered into an exchange agreement with Purple LLC, InnoHold and Class B Unit holders who become a party thereto

(the “Exchange Agreement”), which provides for the exchange of Purple LLC Class B Units (the “Class B Units”)

and shares of Class B common stock (together with an equal number of Class B Units, the “Paired Securities”) for, at the Company’s

option, either (A) shares of Class A common stock at an initial exchange ratio equal to one Paired Security for one share of Class A common

stock or (B) a cash payment equal to the product of the average of the volume-weighted closing price of one share of Class A common stock

for the 10 trading days immediately prior to the date InnoHold or other Class B Unit holders deliver a notice of exchange multiplied by

the number of Paired Securities being exchanged.

In December 2018, InnoHold distributed Paired Securities to Terry Pearce and Tony Pearce

who agreed to become parties to the Exchange Agreement.

In June 2019, InnoHold distributed Paired Securities to certain current and former

employees who also agreed to become parties to the exchange agreement.

Holders of Class B Units may elect to exchange all or any portion

of their Paired Securities as described above by delivering a notice to Purple LLC.

In certain cases, adjustments

to the exchange ratio will occur in case of a split, reclassification, recapitalization, subdivision or similar transaction of or relating

to the Class B Units or the shares of Class A common stock and Class B common stock or a transaction in which the Class A common stock

is exchanged or converted into other securities or property.

The exchange ratio will also adjust in certain circumstances when the Company

acquires Class B Units other than through an exchange for its shares of Class A common stock.

The right of a holder of

Paired Securities to exchange may be limited by the Company if it reasonably determines in good faith that such restrictions are required

by applicable law (including securities laws), such exchange would not be permitted under other agreements of such holder with the Company

or its subsidiaries, including the Third Purple LLC Agreement, or if such exchange would cause Purple LLC to be treated as a “publicly

traded partnership” under applicable tax laws.

The Company and each holder

of Paired Securities shall bear its own expense regarding the exchange except that the Company shall be responsible for transfer taxes,

stamp taxes and similar duties.

During the years ended December

31, 2023 and 2021, 0.2 million and 0.1 million of Paired Securities were exchanged for shares of Class A common stock, respectively.

There were no Paired Securities exchanged for Class A common stock during the year ended December 31, 2022.

Maintenance of One-to-One Ratios.

The Third Purple LLC Agreement

includes provisions intended to ensure that the Company at all times maintains a one-to-one ratio between (a) (i) the number of outstanding

shares of Class A common stock and (ii) the number of Class A Units owned by the Company (subject to certain exceptions for certain rights

to purchase equity securities of the Company under a “poison pill” or similar stockholder rights plan, if any, certain convertible

or exchangeable securities issued under the Company’s equity compensation plan and certain equity securities issued pursuant to

the Company’s equity compensation plan (other than a stock option plan) that are restricted or have not vested thereunder) and

(b) (i) the number of other outstanding equity securities of the Company (including the warrants exercisable for shares of Class A common

stock) and (ii) the number of corresponding outstanding equity securities of Purple LLC.

These provisions are intended to result in non-controlling

interest holders having a voting interest in the Company that is identical to their economic interest in Purple LLC.

Non-Income Related Taxes

The Company complies with

current law and collects and reports on sales tax and other taxes and required fees in all states in which it does business.

The application

of existing, new or revised taxes and fees on the Company’s business, in particular, sales taxes, VAT 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 and fees on the Company’s business could also create significant increases in internal costs necessary to capture data

and collect and remit taxes and pay the fees.

Probability of an event causing a warrant re-price

following are the assumptions used in calculating fair value of the Warrants on December 31, 2024:

Trading price of common stock on measurement date

Exercise price

Risk free interest rate

Warrant life in years

Expected volatility

Expected dividend yield

Probability of an event causing a warrant re-price

Warrants had a fair value of $ 16.1 million as of December 31, 2024.

The Company recognized a gain of $ 3.5 million in its consolidated

statement of operations for the year ended December 31, 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 on the date of issuance.

Company issued 12.8 million sponsor warrants pursuant to a private placement conducted simultaneously with its initial public offering.

Each of these warrants entitled the registered holder to purchase one-half of one share of the Company’s Class A common stock at

a price of $ 5.75 per half share ($ 11.50 per full share), subject to adjustment pursuant to the terms of the warrant agreement.

sponsor warrants contained certain provisions that did not meet the criteria for equity classification and therefore were recorded as

The liability for these warrants was recorded at fair value on the date of the Business Combination and subsequently re-measured

to fair value at each reporting date or exercise date with changes in the fair value included in earnings.

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

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

The 1.9 million sponsor warrants outstanding at December 31, 2022 had a

negligible fair value and no sponsor warrants were exercised in 2022.

Company determined the fair value of the sponsor warrants on December 31, 2022 using a Black-Scholes model with the following assumptions:

Trading price of common stock on measurement date

Exercise price

Risk free interest rate

Warrant life in years

Expected volatility

Expected dividend yield

the year ended December 31, 2022, the Company recognized a gain of $ 4.3 million in its consolidated statement of operations related to

a decrease in the fair value of the sponsor warrants that were outstanding at the end of the period.

Other Long-Term Liabilities

long-term liabilities consist of the following (in thousands):

Asset retirement obligations

Total other long-term liabilities

Company’s asset retirement obligations (“ARO”) relate to two manufacturing facilities that are leased.

One of the properties

is the Company’s manufacturing facility in Grantsville, Utah which is expected to be closed in the first quarter of 2025 (For further

discussion see Note 5— Restructuring, Impairment and Other Related Charges ).

The ARO liabilities represent future estimated

costs associated with the restoration of the facilities to their original state at the end of the respective lease terms.

The fair value

of a liability for an ARO is recorded in the period in which it is incurred, discounted to its present value using a credit-adjusted-risk-free

interest rate, with a corresponding amount capitalized by increasing the carrying amount of the related long-lived asset.

liabilities are accreted each period, and the capitalized cost is depreciated over the useful life of the related asset.

to estimated ARO liabilities result in an adjustment to the related capitalized asset and corresponding liability.

Because the Company

utilizes unobservable inputs in the estimation of its ARO liabilities, the fair values were determined to be Level 3 under the fair

value hierarchy (For further discussion regarding the definition of Level 3 inputs see Note 2— Fair Value Measurements ).

Company had the following activity for its ARO liabilities (in thousands):

Years Ended December 31,

Balance at beginning of period

Revisions in estimated retirement obligations

Accretion expense

Balance at end of period

ARO liability classified as other current liabilities

ARO liability classified as other long-term liabilities

Commitments and Contingencies

Executive Officer Cash Bonus Award

January 26, 2024, the Board approved an amendment to the Chief Executive Officer’s employment agreement.

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.

earned will be payable in quarterly installments commencing with the first payroll period following June 30, 2026.

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 a de minimis amount of compensation expense

in its 2024 consolidated statement of operations related to the fair value of the future bonus payment.

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.

The bonus was awarded to incentivize retention and continued engagement with the Company during these challenging times

in the bedding industry.

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

The special recognition bonus payment is paid as follows, subject to the employee’s continued employment with the Company:

10 % was paid in August 2024, 20 % is to be paid in February 2025, and the remaining 70 % is to be paid in August 2025.

The Company recorded

compensation expense of $ 3.1 million in its 2024 consolidated statement of operations related to this special recognition bonus.

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 amount of compensation expense

in the 2024 consolidated statement of operations related to this future award payment.

of Insurance Claim

2024, the Company received two payments totaling $ 11.6 million for full settlement of a previously filed business interruption claim

which was recorded as other income, net in the 2024 consolidated statement of operations.

of Securities Holders

On January 23, 2024, in connection with the issuance of the 2024 Warrants,

the Company entered into an amended and restated registration rights agreement with holders of the Warrants (the “Holders”),

providing for the registration under the Securities Act of 1933, as amended, of the 2024 Warrants, the shares issuable upon the exercise

of the 2024 Warrants and Class A common stock held by the Holders as of such date, subject to customary terms and conditions.

12, 2025 in connection with the issuance of the 2025 Warrants, the Company entered into a Second Amended and Restated Registration Rights

Agreement (the “Registration Rights Agreement”) with the Holders, providing for the registration of the Warrants, the shares

of Common Stock issuable upon the exercise of the Warrants, and the Class A Common Stock held by the Holders as of such date (the “Registrable

Securities”).

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.

On June 27, 2024, the Board

adopted and the Company entered into a limited-duration stockholder rights agreement (the “NOL Rights Plan”) with a stated

expiration date of June 30, 2025.

The Board adopted the NOL Rights Plan to protect stockholder value by attempting to safeguard the Company’s

ability to use its June 30, 2024 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.

On October 15, 2024, at a special meeting of stockholders (the “Special Meeting”), the Company’s stockholders

ratified the NOL Rights Plan.

Refer to Note 17 – Stockholders’ Equity – NOL Rights Plan for more information.

Protective Charter Amendment

further safeguard the Company’s ability to use its Current NOLs, on July 27, 2024, 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.

At the Special Meeting, the Company’s stockholders approved the NOL

Protective Charter Amendment.

Refer to Note 17 – Stockholders’ Equity – NOL Protective Charter Amendment for

more information.

Related Taxes

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.

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

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

On October 13, 2020, Purple

LLC filed a lawsuit against Responsive Surface Technology, LLC and its parent company, PatienTech, LLC (collectively referred to as “ReST”)

District Court for the District of Utah.

Purple LLC seeks damages from ReST’s multiple breaches of its obligations to

Purple LLC, including infringing upon Purple LLC’s trademarks, patents, and trade dress, among other claims.

On October 21, 2020,

ReST filed a retaliatory lawsuit against Purple LLC, and some of the Company’s board members and former border members, also in

the United States District Court for the District of Utah.

Subsequently, the two cases were consolidated into one because the cases involve

many of the same facts and transactions.

ReST filed a motion to compel arbitration of most of the claims.

The Court granted

ReST’s motion and stayed the proceedings in the United States District Court for the District of Utah.

The Court also ruled that

ReST’s claims against the Company’s board members were not subject to arbitration, and the Court stayed the claims against

those individuals.

The parties’ claims and counterclaims subject to arbitration were then litigated before a single arbitrator

with the American Arbitration Association.

During the litigation, ReST was sanctioned for improper litigation conduct, and certain of

its defenses and claims were stricken, and costs were ordered to be paid by ReST to Purple LLC.

A two-week evidentiary arbitration

hearing was held in the summer of 2023.

On March 8, 2024, the Arbitrator issued his final award in Purple’s favor, awarding $ 3.3

million in damages and attorney’s fees on Purple’s affirmative claims, and only a de minimis amount to ReST on their counterclaims.

Purple LLC will immediately move to convert the award into a judgment against ReST in the United States District Court for the District

Purple LLC will then seek judicial enforcement of the judgment if ReST does not voluntarily pay.

On May 3, 2022, Purple LLC

filed a complaint against Photon Interactive UK Limited (“Photon”) in the U.S.

District Court for the District of Delaware

regarding a Master Professional Services Agreement with Photon dated on or around November 1, 2019.

Photon counter-sued, seeking payment

for the $ 0.1 million withheld by Purple LLC, and also advancing a vague claim for tortious interference.

On August 31, 2022, Purple LLC

filed an amended complaint adding additional claims pertaining to Photon’s failure to deliver a point-of-sale system pursuant to

the Master Professional Services Agreement.

Purple LLC is seeking judgment against Photon in the amount of $ 4.0 million.

stayed in September 2023 to allow the parties to mediate the dispute.

Mediation did not result in a settlement.

The parties are presently

negotiating an amended scheduling order to set this matter for trial in late 2024 or early 2025.

In December 2022, Terry and

Tony Pearce, Purple’s founders, filed a complaint against Purple Inc.

in the Fourth Judicial District Court in the State of Utah.

In that suit, the Pearces alleged that they each entered into employment agreements with Purple LLC in February 2018.

The Pearces contended

that certain corporate transactions reduced their “ownership interest and voting power in Purple” and that, as a result, they

should have continued to be paid a salary when they retired from Purple LLC.

The Pearces calculated that they were each owed “no

less than $ 500,000 ” in unpaid salary.

moved to dismiss the Pearces’ claims in full, arguing that the Pearces’

legal theories are flawed and that the amended pleading reflected the Pearces’ inability to rehabilitate their claims.

2023, the Fourth Judicial District Court granted Purple Inc.’s motion and ordered that the claims brought by the Pearces be dismissed

in full, with prejudice.

The Court entered a final judgment dismissing the case in January 2024.

The Pearces have filed a notice reflecting

their intent to appeal to either the Utah Court of Appeals or the Utah Supreme Court.

The Company maintains insurance to cover the costs

of defending against claims of this nature and intends to continue to vigorously defend against these claims in the course of the Pearces’

On April 3, 2023, InnoHold,

LLC, Terry Pearce, and Tony Pearce (collectively, the “InnoHold Parties”) filed a complaint against Purple LLC in the Delaware

Court of Chancery, captioned InnoHold, LLC et al.

Purple Innovation, LLC , Case No.

2023-0393-PAF (Del.

The complaint alleges that Purple LLC breached the Second Amended and Restated Limited Liability Company Agreement of Purple Innovation,

LLC, dated as of February 2, 2018 (the “LLC Agreement”), by failing to pay the full amount of tax distributions owed under

the LLC Agreement.

The InnoHold Parties seek damages of approximately $ 3.0 million in allegedly unpaid tax distributions as well as its

December 16, 2022, Purple’s founders filed a complaint against Purple Inc.

in the Fourth Judicial District Court in the State

In that suit, the plaintiffs alleged that they each entered into employment agreements with Purple LLC in February 2018.

The plaintiffs contended that certain corporate transactions reduced their “ownership interest and voting power in

Purple” and that, as a result, they should have continued to be paid a salary when they retired from Purple LLC.

plaintiffs calculated that they were each owed “no less than $ 500,000 ” in unpaid salary.

In October 2023, the Court

granted Purple Inc.’s motion and ordered that the claims brought by the plaintiffs be dismissed in full, with prejudice.

Court entered a final judgment dismissing the case in January 2024.

The plaintiffs have filed an appeal to the Utah Court of

The parties argued before the Utah Court of Appeals on January 23, 2025.

The Court’s decision is anticipated in the

second quarter of 2025.

The Company maintains insurance to cover the costs of defending against claims of this nature and intends to

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

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 InnoHold Parties’ allegations, setting forth its affirmative defenses, and requesting dismissal of all claims and entry of judgment

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.

intends to vigorously defend against these claims.

On March 24, 2023, Purple

LLC filed a complaint against Tempur Sealy International, Inc., Sealy Technology LLC and Sealy Mattress Manufacturing Co., LLC (collectively,

“Sealy”) in the U.S.

District Court for the Middle District of North Carolina for infringement of Purple LLC’s U.S.

11,317,733 entitled “Mattress Including an Elastomeric Cushioning Element and a Pocketed Coil Layer and Related Methods.”

On July 17, 2023, Purple LLC filed a First Amended Complaint further detailing Sealy’s infringement of the patent through Sealy’s

direct and indirect infringement by making, using, offering for sale, and/or importing into the United States Sealy FlexGrid Hybrid Construction

Purple seeks judgment of willful infringement, trebled damages, a permanent injunction, prejudgment and post-judgment interest,

costs, expenses, and attorneys’ fees.

Sealy filed its response to Purple’s First Amended Complaint on July 31, 2023.

is ongoing but was temporarily stayed for 30 days on March 6, 2024 to allow the parties to discuss settlement;

a claim construction hearing

has been scheduled for May 23, 2024.

On March 12, 2024, the parties entered into a confidential settlement agreement.

The parties will

take all necessary actions to ensure that the action and counterclaims are dismissed with prejudice.

On March 27, 2023, Sealy Technology,

LLC (“Sealy Technology”) filed a Petition for Cancellation with the U.S.

Patent and Trademark Office, Trademark Trial and

Appeal Board (“TTAB”), seeking cancellation of Purple LLC’s Trademark Registration No.

5,416,146 for HYPER-ELASTIC POLYMER

in Class 20 for “elastomeric polymer in pre-shaped form sold as an integral component of pillows” (the “Registration”).

On June 18, 2023, Sealy Technology filed an Amended Petition, which seeks cancellation of the Registration on the basis that the term

On September 25, 2023, the TTAB denied Purple LLC’s previously filed motion to dismiss and issued a new schedule.

October 16, 2023, Purple LLC filed its Answer to the Amended Petition.

Discovery opened on November 14, 2023, and is scheduled to conclude

on May 12, 2024.

On March 12, 2024, the parties entered into a confidential settlement agreement.

The parties will take all necessary

actions to ensure that the action and counterclaims are dismissed with prejudice.

On August 16, 2023, Sealy Technology filed a Notice of Opposition with

the TTAB, requesting that the U.S.

Patent and Trademark Office deny Purple LLC’s pending Trademark Application No.

97,650,658 for

HYPER-ELASTIC POLYMER in Class 20 for “mattresses;

seat cushions” (the “Application”), on the grounds that the

mark is merely descriptive or deceptively misdescriptive.

On September 25, 2023, Purple LLC filed a motion to dismiss all claims.

5, 2023, the TTAB suspended all deadlines in the proceeding, pending the outcome of the motion to dismiss.

On October 17, 2023, Sealy

Technology filed its opposition to the motion to dismiss.

Purple LLC filed its reply in support of its motion to dismiss on November 6,

2023, and also requested that the TTAB strike Sealy Technology’s opposition as untimely.

On January 1, 2024 the TTAB denied

Purple LLC’s motion to dismiss and consolidated the opposition and cancellation proceedings and issued a new schedule.

12, 2024, the parties entered into a confidential settlement agreement.

The parties will take all necessary actions to ensure that the

action and counterclaims are dismissed with prejudice.

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.

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

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

in California.

On July 15, 2024, the Company entered into a settlement agreement (the “Settlement Agreement”) with the plaintiffs

in connection with the Class Action Lawsuit.

On August 16, 2024 the United States District Court for the Northern District of California

dismissed the Class Action Lawsuit and approved the Settlement Agreement.

Upon receipt of the executed release of all claims by the plaintiffs,

the Company made a cash payment pursuant to the Settlement Agreement.

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.

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.

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 pay 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.

On September 30, 2024, the plaintiffs

filed an amended complaint adding a claim for penalties under California’s Private Attorneys General Act.

Subsequent to this, Purple

LLC and the plaintiffs agreed to mediate the claims and to stay formal discovery pending mediation, which is currently scheduled to take

place on May 8, 2025.

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

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.

Related-Party Transactions

The Company had various transactions

with entities or individuals which are considered related parties.

Coliseum Capital Management LLC

Immediately following the

Business Combination, Adam Gray was appointed to the Company’s 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 Coliseum Capital Management, LLC (“CCM”), which is the

investment manager of Blackwell and also manages investment funds and accounts.

Gray has voting and dispositive control over securities

held by CCP, CDF and Blackwell.

See Note 13— Commitments and Contingencies — Subscription Agreement and Preemptive

Rights 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 (the “Rights Agreement”).

Upon adopting the Rights

Agreement, 300,000 shares of the Company’s authorized shares of preferred stock, par value $ 0.0001 per share, were designated as

Series A Junior Participating Preferred Shares (the “Preferred Shares”).

In accordance with the Rights Agreement, on September

25, 2022, the Special Committee authorized and declared a dividend of one preferred share purchase right (a “Right”) for

each outstanding share of the Company’s Class A common stock and Class B common stock to stockholders of record at the close of

business on October 6, 2022.

The initial issuance of the

Rights as a dividend had no financial accounting or reporting impact.

The fair value of the Rights was nominal since the Rights were

not exercisable when issued and no value was attributable to them.

Additionally, the Rights did not meet the definition of a liability

under GAAP and was therefore not accounted for as a long-term obligation.

Accordingly, the Rights Agreement had no impact on the

Company’s consolidated financial statements .

On February 14, 2023, the

Company declared a dividend of one new PRPLS for each 100 shares of its common stock owned by the Company’s shareholders.

holders could have allocated all, none, or a portion of their votes to each director nominee up for election at the Company’s meetings

of shareholders.

On February 24, 2023, the Company issued 1.0 million PRPLS shares which traded along with the common stock.

PRPLS were outstanding, any new issuances of common stock would have automatically included a proportionate number of PRPLS.

On February 21, 2023, Coliseum

filed a lawsuit against the Company and several members of its Board alleging that the Company and the named directors authorized an

improper dividend of preferred stock in bad faith to impede stockholder voting rights and interfere with Coliseum’s nomination

of a competing slate of director candidates ahead of the Company’s 2023 annual meeting of stockholders.

On 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:

● The Board was increased

from seven directors to eight.

● Board member and

Coliseum managing partner Adam Gray was appointed Chairman of the Board.

● The Company terminated

the Rights Agreement and agreed not to adopt a new stockholder rights agreement prior to

the termination of the Cooperation Agreement without Coliseum’s prior consent.

result, all shares of preferred stock previously designated as Series A Junior Participating

Preferred Stock were eliminated and returned to the status of authorized but unissued shares

of preferred stock, without designation.

● The Company redeemed all outstanding shares of PRPLS and agreed not to issue any similar security or take any other action prior to the termination of the Cooperation Agreement that would change the stockholder voting standards from those in effect prior to the issuance of the PRPLS.

As a result, all shares of preferred stock previously designated as PRPLS were 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 based on a record date as of April 28, 2023.

The PRPLS redemption payment was reflected in the Company’s consolidated balance sheet as a reduction to additional paid-in capital.

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

● The Company terminated

the Special Committee and Coliseum dismissed its litigation against the Company.

● At 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

● Coliseum 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.

● Coliseum 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.

● The Cooperation

Agreement will terminate on the day following the date on which the 2024 annual meeting of

stockholders is held.

Purple Founder Entities

TNT Holdings, LLC (herein

“TNT Holdings”), EdiZONE, LLC, (herein “EdiZONE”, an entity wholly owned by TNT Holdings), and InnoHold (collectively

the “Purple Founder Entities”) were entities under common control with Purple LLC prior to the Business Combination.

Holdings and InnoHold are majority owned and controlled by Terry Pearce and Tony Pearce (the “Purple Founders”), who were

appointed to the Company’s Board following the Business Combination.

InnoHold was a majority shareholder of the Company until it

sold a portion of its interests in a secondary public offering in May 2020 and the remainder of its interests in a secondary public offering

in September 2020.

The Purple Founders resigned as employees of Purple LLC and retired from the Board in August 2020.

Purple LLC began leasing

the Alpine facility from entities controlled by the Purple 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 term such that the lease remained 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 $ 0.8 million, $ 1.0 million

and $ 0.9 million for the years ended December 31, 2023, 2022 and 2021, respectively.

In connection with the Business

Combination, to secure payment of a certain portion of specified post-closing indemnification rights of the Company under the Merger

Agreement, 0.5 million shares of Class B common stock and 0.5 million Class B Units otherwise issuable to InnoHold as equity consideration

were deposited in an escrow account for up to three years from the date of the Business Combination pursuant to a contingency escrow

In September 2020, an amendment to the escrow agreement was signed whereby the 0.5 million shares of Class B Stock and 0.5

million Class B Units held in escrow were exchanged for $ 5.0 million.

On February 3, 2021, the Company received $ 4.1 million from InnoHold

as reimbursement for amounts that qualified for indemnification from the $ 5.0 million being held in escrow.

The remaining $ 0.9 million

in escrow was returned to InnoHold.

The amount received from InnoHold was recorded as additional paid-in capital in the consolidated

balance sheet.

During the year ended December

31, 2021, Purple LLC paid InnoHold through withholding payments directly to various states, an aggregate of $ 0.6 million in required

tax distributions pursuant to the Third Purple LLC Agreement.

There were no such payments made by Purple LLC during the years ended December

31, 2023 and 2022.

Stockholders’

Class A Common Stock

The Company has 210.0 million

shares of Class A common stock authorized at a par value of $ 0.0001 per share.

Holders of the Company’s Class A common stock are

entitled to one vote for each share held on all matters to be voted on by the stockholders and participate in dividends, if declared

by the Board, or 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.

Holders of Class A common stock and holders of Class B common

stock voting together as a single class, have the exclusive right to vote for the election of directors and on all other matters properly

submitted to a vote of the stockholders.

Holders of Class A common stock and Class B common stock are entitled to one vote per share

on matters to be voted on by stockholders.

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

Capital Management LLC

Immediately 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 Coliseum Co-Invest Debt Fund, L.P.

(“CDF”), and he is also a managing partner of Coliseum Capital Management, LLC (“CCM”), which is the investment

manager of Blackwell and also manages investment funds and accounts.

Gray has voting and dispositive control over securities held

by CCP, CDF and Blackwell.

In 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.

Refer to Note 12— Debt — 2024 Credit Agreement

for more information on the Related Party Loan .

Founder Entities

Purple LLC began leasing its Alpine facility from entities controlled

by the Purple 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.

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 $ 0.8 million and $ 1.0 million for the years ended December 31, 2023 and 2022,

respectively.

Refer to Note 15— Commitments and Contingencies—Legal Proceedings for information regarding a complaint

filed by Purple’s founders regarding this matter.

Stockholders’ Equity

A Common Stock

Company has 210.0 million shares of Class A common stock authorized.

Holders of the Company’s Class A common stock are entitled

to one vote for each share held on all matters to be voted on by the stockholders.

Holders of Class A common stock and holders of Class

B common stock voting together as a single class have the exclusive right to vote for the election of directors and on all other matters

properly submitted to a vote of the stockholders.

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

Class B Common Stock

The Company has 90.0 million

shares of Class B common stock authorized at a par value of $ 0.0001 per share.

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

in compliance with the Third Purple LLC Agreement.

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.

In connection with the Business

Combination, approximately 44.1 million shares of Series B Stock were issued to InnoHold as part of the equity consideration.

subsequently transferred a portion of its shares to permitted transferees and exchanged its remaining shares for Class A common stock

that it sold.

All of the 0.2 million shares of Class B common stock outstanding at December 31, 2023 were held by other parties.

Preferred Stock

B Common Stock

The Company has 90.0 million

shares of preferred stock authorized at a par value of $ 0.0001 per share.

The preferred stock may be issued from time to time in one

or more series.

The directors are 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.

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 shares of Class B common stock 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 December 31, 2024, 0.2 million

shares of Class B common stock were outstanding.

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.

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

On September 25,

2022 the Rights Agreement was adopted and 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.

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 2023 or 2022.

In 2021, 6.6 million

sponsor warrants were exercised resulting in the issuance of 2.3 million shares of Class A common stock and cash proceeds to the Company

of $ 0.1 million.

Noncontrolling Interest

Noncontrolling interest (“NCI”)

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

At December 31, 2023 and 2022, the combined NCI percentage

in Purple LLC was 0.2 % and 0.5 %, respectively.

The Company has consolidated the financial position and results of operations of Purple

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

Income Per Common Share

The following table sets

forth the calculation of basic and diluted weighted average shares outstanding and earnings (loss) per share for the periods presented

(in thousands, except per share amounts):

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”).

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 Company’s

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

At the Special

Meeting, the Company’s stockholders ratified the NOL Rights Plan.

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

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

Refer to Note 13 – Warrant Liabilities for further discussion of the Company’s outstanding warrants.

NOL Rights Plan provided for the issuance of 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.

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 Time.

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.

Rights will expire on the earliest to occur of (i) the close of business on June 30, 2025;

(ii) the time at which the Rights are redeemed

(as discussed below) or exchanged by the Company;

(iii) the repeal of Code Section 382, if the Board determines that the NOL Rights Plan

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.

initial issuance of the Rights as a dividend had no tax, financial accounting or reporting impact.

The fair value of the Rights is nominal,

since the Rights were 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 therefore are not being accounted for as a long-term obligation.

Accordingly, unless the Rights become

exercisable upon the occurrence 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.

Protective Charter Amendment

June 27, 2024, concurrently with the adoption of NOL Rights Plan, 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).

At the Special Meeting, the Company’s stockholders approved the NOL Protective Charter Amendment.

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

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.

In connection with the Amended

and Restated Credit Agreement, the Company issued to the Lenders Warrants to purchase 20.0 million shares of the Company’s Class

A common stock.

Each Warrant entitles the registered holder to 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.

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 (“NCI”) is the membership interest in Purple LLC held by holders other than the Company.

At both December 31, 2024

and 2023, the combined NCI percentage in Purple LLC was 0.2 %.

The Company has consolidated the financial position and results of operations

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

Net Loss Per Common Share

following table sets forth the calculation of basic and diluted weighted average shares outstanding and loss per share for the periods

presented (in thousands, except per share amounts):

Years Ended December 31,

Net (loss) income attributable to Purple Innovation,

Net loss attributable to Purple Innovation, Inc.

$ ( 120,757 )

Dilutive effect of change in fair value – warrant

Net loss attributable to noncontrolling

Net loss attributable to Purple Innovation,

Net loss attributable to noncontrolling interest

Net loss attributable to Purple Innovation, Inc.

$ ( 121,215 )

Weighted average shares – basic

Dilutive effect of warrants

Dilutive effect of Class B shares

Weighted average shares – diluted

Net (loss) income per common share:

For the year ended December

31, 2023, the Company excluded 3.9 million shares of Class A common stock issuable upon conversion of certain warrants, stock options

and restricted stock as the effect was anti-dilutive.

For the year ended December 31, 2022, the Company excluded 3.5 million of Class

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

and 0.4 million of Paired Securities convertible into shares of Class A common stock as their effect was anti-dilutive.

ended December 31, 2021, the Company excluded 2.6 million shares of Class A common stock issuable upon conversion of certain stock options,

restricted stock and Class A shares subject to vesting as the effect was anti-dilutive.

Net loss per common share:

The Company excludes from

the diluted net loss per common share computation potentially dilutive securities related to warrants, equity awards and convertible shares

of Class B common stock 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.

Potentially dilutive securities that have been excluded from the calculation of diluted

net loss per common share are as follows (in thousands):

Years Ended December 31,

Sponsor warrants

Restricted stock units

Stock options

Class B common stock

Equity Compensation Plans

Equity Incentive Plan

The 2017 Equity Incentive Plan provides for grants of stock options,

stock appreciation rights, restricted stock and other stock-based awards.

Directors, officers and other employees and subsidiaries and

affiliates, as well as others performing consulting or advisory services for the Company and its subsidiaries, will be eligible for grants

under the 2017 Incentive Plan.

The aggregate number of shares of Common Stock which may be issued or used for reference purposes under

the 2017 Incentive Plan or with respect to which awards may be granted may not exceed 7.9 million shares.

As of December 31, 2023, 2.8

million shares remain available for issuance under the 2017 Incentive Plan.

During the years ended December 31, 2023, 2022 and 2021, stock-based

compensation associated with equity awards issued under the 2017 Incentive Plan totaled $ 4.9 million, $ 3.4 million and $ 3.4 million, respectively,

while the related tax benefits recognized on these awards were $ 1.5 million, $ 0.9 million and $ 3.9 million, respectively.

Class A Common Stock Awards

The 2017 Equity Incentive

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

Directors, officers

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

its subsidiaries, will be eligible for grants under the 2017 Equity Incentive Plan.

The aggregate number of shares of common stock which

may be issued or used for reference purposes under the 2017 Equity Incentive Plan or with respect to which awards may be granted may not

exceed 7.9 million shares.

As of December 31, 2024, 2.4 million shares remain available for issuance under the 2017 Equity Incentive Plan.

During the years ended December 31, 2024, 2023 and 2022, stock-based compensation associated with equity awards issued under the 2017

Equity Incentive Plan totaled $ 2.8 million, $ 4.9 million and $ 3.4 million, respectively, while the related tax benefits recognized on

these awards were $ 0.9 million, $ 1.5 million and $ 0.9 million, respectively.

A Common Stock Awards

There were no stock awards

granted in 2024.

In June 2023, the Company

granted stock awards under the 2017 Incentive Plan to non-executive directors on the Board.

The stock awards vested immediately and the

Company issued 0.2 million shares of Class A common stock and recognized $ 0.6 million in expense during the year ended December 31, 2023,

which represented the fair value of the stock awards on the grant date.

In May 2022, the Company

granted stock awards under the 2017 Equity Incentive Plan to independent directors on the Board.

granted stock awards under the 2017 Equity Incentive Plan to non-executive directors on the Board.

The stock awards vested immediately

1 unchanged sentence

31, 2023, which represented the fair value of the stock awards on the grant date.

In May 2021, the Company

granted stock awards under the Company’s 2017 Equity Incentive Plan to independent directors on the Board.

The stock awards vested

immediately and the Company recognized $ 0.6 million in expense during year ended December 31, 2021, which represented the fair value

of the stock award on the grant date.

Amended and Restated Grant Agreements

May 2022, the Company granted stock awards under the 2017 Equity Incentive Plan to independent directors on the Board.

The stock awards

vested immediately and the Company issued 0.1 million shares of Class A common stock and recognized $ 0.6 million in expense during the

year ended December 31, 2022, which represented the fair value of the stock awards on the grant date.

and Restated Grant Agreements

On March 15, 2023, in accordance

with the 2017 Incentive Plan, the Company entered into amended and restated grant agreements relating to stock options and restricted

with the 2017 Equity Incentive Plan, the Company entered into amended and restated grant agreements relating to stock options and restricted

stock unit awards previously granted to the Company’s chief executive officer in March 2022 and June 2022 .

3 unchanged sentences

and stock options fully vested on March 25, 2023, another 0.3 million of restricted stock units and stock options, which included conditionally

granted awards that were approved by shareholders at the 2023 Annual Meeting, will vest on March 25, 2024, and the remaining 0.3 million

granted awards that were approved by shareholders at the 2023 Annual Meeting, vested on March 25, 2024, and the remaining 0.3 million

of conditionally granted awards approved by shareholders at the 2023 Annual Meeting will vest in full on March 25, 2025.

These amendments

resulted in the acceleration of $ 0.8 million of stock-based compensation expense into fiscal 2023 compared to the expense that would

have been recorded based on vesting under the original agreements.

Employee Stock Options

In June 2023, the 0.3 million

of conditionally granted stock options to the Company’s chief executive officer were approved by shareholders.

These stock options

have an exercise price of $ 6.82 per option, expire in four years and vest over a two-year period.

The fair value of this award, which

was determined to be $ 0.1 million on the effective date, is being expensed over the vesting period on a straight-line basis.

In March and June 2022, the

Company granted 0.5 million and 0.1 million stock options, respectively, under the 2017 Equity Incentive Plan to its chief executive

officer at an exercise price of $ 6.82 per option.

The stock options expire in five years and were to vest over a three-year period.

April 2022, with the chief executive officer’s consent, the Company rescinded and cancelled 0.4 million of the stock options granted

in March 2022 because of annual limits set forth in the 2017 Equity Incentive Plan.

The Company determined the fair value of the net

award of 0.2 million stock options to be $ 0.4 million which was expensed on a straight-line basis over the vesting period.

During the year ended December

31, 2021, the Company granted 0.2 million stock options under the Company’s 2017 Equity Incentive Plan to certain management of

These stock options have exercise prices ranging from $ 22.57 to $ 32.28 .

The stock options expire in five years and vest

over a four-year period.

The estimated fair value of the stock options is amortized over the options vesting period on a straight-line

The Company determined the fair value of the 0.2 million options granted during the year ended December 31, 2021 to be $ 2.0 million

which will be expensed over the vesting period.

Included in that amount were 0.2 million stock options with a fair value of $ 1.4 million

that were subsequently forfeited in December 2021.

The following are the weighted

average assumptions used in calculating the fair value of the total stock options granted in 2023, 2022 and 2021 using the Black-Scholes

resulted in the acceleration of $ 0.8 million of stock-based compensation expense into fiscal 2023 compared to the expense that would have

been recorded based on vesting under the original agreements.

Stock Options

There were no employee stock

options granted in 2024.

June 2023, the 0.3 million of conditionally granted stock options to the Company’s chief executive officer were approved by shareholders.

These stock options have an exercise price of $ 6.82 per option, expire in four years and vest over a two-year period.

The fair value

of this award, which was determined to be $ 0.1 million on the effective date, is being expensed over the vesting period on a straight-line

March and June 2022, the Company granted 0.5 million and 0.1 million stock options, respectively, under the 2017 Equity Incentive Plan

to its chief executive officer at an exercise price of $ 6.82 per option.

The stock options expire in five years and were to vest over

a three-year period.

In April 2022, with the chief executive officer’s consent, the Company rescinded and cancelled 0.4 million

of the stock options granted in March 2022 because of annual limits set forth in the 2017 Equity Incentive Plan.

The Company determined

the fair value of the net award of 0.2 million stock options to be $ 0.4 million which was expensed on a straight-line basis over the

vesting period.

The following are the weighted average assumptions used in calculating

the fair value of the total stock options granted in 2023 and 2022 using the Black-Scholes method:

Year Ended December 31,

4 unchanged sentences

Expected term in years 2.58 3.45

In December 2021, 0.6 million

of vested stock options related to the former Chief Executive Officer had the post-termination exercise period extended from 90 days

to 352 days upon his resignation and departure from the Company.

The $ 0.5 million of additional cost associated with this modification

was recorded as stock-based compensation expense in the 2021 consolidated statement of operations.

The following table summarizes

the Company’s total stock option activity for the year ended December 31, 2023:

(in thousands)

following table summarizes the Company’s total stock option activity for the year ended December 31, 2024:

(in thousands) Weighted

Price Weighted

Years Intrinsic

(in thousands)

Options outstanding as of December 31, 2023 863 $ 8.13 2.2 $ —

Expired ( 334 ) 9.67 —

Options outstanding as of December 31, 2024 529 7.17 2.2 —

Outstanding and exercisable stock options as of

December 31, 2023 are as follows:

Options Outstanding

Options Exercisable

Exercise Prices

(in thousands)

and exercisable stock options as of December 31, 2024 are as follows:

Options Outstanding Options Exercisable

Exercise Prices Number of

(in thousands) Weighted

Remaining Life

(in thousands)

(Years) Number of

(in thousands) Weighted

Remaining Life

(Years) Intrinsic

(in thousands)

The following table summarizes

the Company’s unvested stock option activity for the year ended December 31, 2023:

$ 6.82 500 2.3 333 2.3 $ —

13.12 29 0.4 29 0.4 —

529 2.2 362 2.1 $ —

following table summarizes the Company’s unvested stock option activity for the year ended December 31, 2024:

(in thousands)

1 unchanged sentence

Nonvested options as of December 31, 2024

The Company recognized $ 0.5

million, $ 0.7 million and $ 2.1 million in stock-based compensation expense related to stock options during the years ended December 31,

2023, 2022 and 2021, respectively.

For stock options outstanding

as of December 31, 2023, there was $ 0.1 million of total unrecognized stock compensation cost with a remaining recognition period of 0.8

Cash received from the exercise of stock options was $ 0.2 million and

$ 1.4 million in 2022 and 2021, respectively.

The tax benefit associated with the exercise of these stock options was $ 0.4 million

and $ 1.6 million in 2022 and 2021, respectively.

The total intrinsic value of stock options exercised in 2022 and 2021 was $ 0.1 million

Company recognized $ 0.5 million and $ 0.7 million in stock-based compensation expense related to stock options during the years ended

December 31, 2023 and 2022, respectively.

For the year ended December 31, 2024, stock-based compensation expense related to stock

options was de minimis.

stock options outstanding as of December 31, 2024, there was a de minimis amount of unrecognized stock compensation cost with a remaining

recognition period of 0.3 years.

Cash received and the total

intrinsic value from the exercise of stock options in 2022 was $ 0.2 million and $ 0.1 million, respectively.

There were no stock options

exercised in 2024 and 2023.

The tax benefit associated with the exercise of these stock options in 2022 was $ 0.4 million.

There were no

stock options exercised in 2024 and 2023.

The fair value of stock options vested in 2024, 2023 and 2022 totaled $ 0.1 million, $ 0.6 million

and $ 0.7 million, respectively.

There were no stock options exercised in 2023.

The fair value of stock options vested in 2023, 2022 and

2021 totaled $ 0.6 million, $ 0.7 million and $ 1.9 million, respectively.

Employee Restricted Stock Units

In 2023, the Company granted

2.4 million restricted stock units under the 2017 Incentive Plan to certain members of the Company’s management team.

Approximately

one-half of the restricted stock units granted included a market vesting condition.

During 2022, the Company granted 1.1 million restricted

stock units under the 2017 Equity Incentive Plan to certain management of the Company.

Approximately one-half of these restricted stock

unit grants included a market vesting condition.

In 2021, the Company granted 0.2 million of restricted stock units under the Company’s

2017 Equity Incentive Plan to certain management of the Company.

Approximately one-third of these restricted stock unit grants included

a market vesting condition.

The restricted stock awards granted in 2023, 2022 and 2021 that did not have a market vesting condition had

weighted average grant date fair values of $ 2.75 , $ 5.53 and $ 19.25 per share, respectively.

The estimated fair value of these awards

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

In March and June 2022, the

Company granted 0.5 million and 0.1 million restricted stock units, respectively, under the 2017 Equity Incentive Plan to the Company’s

chief executive officer.

These restricted stock awards had a grant date fair value of $ 6.32 and $ 4.81 per share, respectively.

2022, with the chief executive officer’s consent, the Company rescinded and cancelled 0.4 million of the restricted stock units

granted in March 2022 because of annual limits set forth in the 2017 Equity Incentive Plan.

The Company determined the fair value of

the net award of 0.2 million restricted stock units to be $ 1.2 million which will be expensed on a straight-line basis over the vesting

The restricted stock awards

granted in 2023, 2022 and 2021 that did have a market vesting condition had weighted average grant date fair values of $ 1.92 , $ 3.71 and

Restricted Stock Units

2024, 2023 and 2022, the Company granted 1.8 million, 2.4 million and 1.1 million, respectively, of restricted stock units under the

2017 Equity Incentive Plan to certain members of the Company’s management team.

Of the restricted stock units granted in those

years, 0.4 million, 1.2 million and 0.6 million, respectively, included a market vesting condition.

The restricted stock awards granted

in 2024, 2023 and 2022 that did not have a market vesting condition had weighted average grant date fair values of $ 1.00 , $ 2.75 and $ 5.53

per share, respectively.

For these awards, the estimated fair value 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 these awards using a Monte Carlo Simulation of a Geometric Brownian Motion stock path model with the following weighted

average assumptions:

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

restricted stock awards granted in 2024, 2023 and 2022 that did have a market vesting condition had weighted average grant date fair

values of $ 1.13 , $ 1.92 and $ 3.71 per share, respectively.

For these awards, the estimated fair value 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 these awards using a Monte Carlo Simulation of a Geometric Brownian Motion stock path model

with the following weighted average assumptions:

Year Ended December 31,

2024 2023 2022

Trading price of common stock on measurement date $ 1.50 $ 2.72 $ 5.33

3 unchanged sentences

Expected dividend yield —

The following table summarizes

the Company’s restricted stock unit activity for the year ended December 31, 2023:

March and June 2022, the Company granted 0.5 million and 0.1 million restricted stock units, respectively, under the 2017 Equity Incentive

Plan to the Company’s chief executive officer.

These restricted stock awards had a grant date fair value of $ 6.32 and $ 4.81 per

share, respectively.

In April 2022, with the chief executive officer’s consent, the Company rescinded and cancelled 0.4 million

of the restricted stock units granted in March 2022 because of annual limits set forth in the 2017 Equity Incentive Plan.

determined the fair value of the net award of 0.2 million restricted stock units to be $ 1.2 million which is being expensed on a straight-line

basis over the vesting period.

following table summarizes the Company’s restricted stock unit activity for the year ended December 31, 2024:

(in thousands)

1 unchanged sentence

Nonvested restricted stock units as of December 31, 2024

The Company recorded restricted

stock unit expense of $ 3.7 million, $ 2.1 million and $ 0.5 million during the years ended December 31, 2023, 2022 and 2021, respectively.

For restricted stock units outstanding as of December 31, 2023, there

was $ 5.5 million of total unrecognized stock compensation cost with a remaining recognition period of 1.8 years.

The weighted average

grant date fair value of restricted stock units granted in 2022 and 2021 was $ 4.72 and $ 18.18 , respectively.

Aggregate Non-Cash Stock Compensation

The Company has accounted

for all stock-based compensation under the provisions of ASC 718 Compensation—Stock Compensation.

This standard requires the Company

to record a non-cash expense associated with the fair value of stock-based compensation over the requisite service period.

below summarizes the aggregate non-cash stock compensation recognized in the statement of operations for stock awards, employee stock

options and the distribution by InnoHold of Paired Securities (in thousands).

Company recorded restricted stock unit expense of $ 2.8 million, $ 3.7 million and $ 2.1 million during the years ended December 31, 2024,

2023 and 2022, respectively.

restricted stock units outstanding as of December 31, 2024, there was $ 3.3 million of total unrecognized stock compensation cost with

a remaining recognition period of 1.6 years.

Non-Cash Stock Compensation

Company has accounted for all stock-based compensation under the provisions of ASC 718 Compensation—Stock Compensation.

This standard

requires the Company to record a non-cash expense associated with the fair value of stock-based compensation over the requisite service

The table below summarizes the aggregate non-cash stock compensation recognized in the statement of operations for stock awards,

employee stock options and employee restricted stock units (in thousands).

Years Ended December 31,

5 unchanged sentences

Employee Retirement Plan

In 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.

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

Company contributions immediately vest.

The Company matching contribution expense was $ 3.8 million, $ 3.6 million and

$ 3.2 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Concentrations

The Company had the following disaggregated net

revenues by geographic region (in thousands):

Years Ended December 31,

United States

International

Total revenue, net

The Company had one individual

customer that accounted for approximately 23 % and 52 % of accounts receivable at December 31, 2023 and 2022, respectively, and approximately

10 %, 15 % and 15 % of net revenue during the years ended December 31, 2023, 2022 and 2021, respectively.

The Company currently obtains

materials and components used in production from outside sources.

As a result, the Company is dependent upon suppliers that in some instances,

are the sole source of supply.

Company matching contribution expense was $ 3.9 million, $ 3.8 million and $ 3.6 million for the years ended December 31, 2024,

2023 and 2022, respectively.

Segment Information and Concentrations

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 has one reportable segment that operates an omni-channel distribution strategy which

allows the Company to offer a seamless shopping experience to its customers across multiple sales channels.

The Company’s

one segment markets and sells products through its direct-to-consumer e-commerce channels, retail brick-and-mortar wholesale partners,

Purple showrooms, and third-party online retailers.

The accounting policies for

the Company’s one segment are the same as those described in Note 2, Summary of Significant Accounting Policies .

assesses performance for the segment and decides how to allocate resources based on consolidated net income or loss as reported in the

consolidated statement of operations.

The measure of segment assets is reported on the consolidated balance sheets as total consolidated

The Company does not have intra-entity sales or transfers.

The CODM uses consolidated net income (loss) to evaluate earnings generated

from segment assets (return on assets) in deciding whether to reinvest profits into its single reportable segment or into other parts

of the entity, such as for acquisitions.

Consolidated net income (loss) is also used to monitor budget versus actual results.

The monitoring

of budgeted versus actual results are used in assessing the segment’s performance and in establishing management’s compensation.

following table summarizes segment revenue, significant segment expenses, other segment items and segment profit or loss (in thousands):

Year Ended December 31,

Revenues, net

Reductions (additions):

Cost of revenues

Cost of revenues – restructuring related charges

Advertising expense

Marketing sales expense

Wholesale marketing and sales expense

Showroom marketing and sales expense

General and administrative expense

Research and development expense

Restructuring, impairment and other related charges

Loss on impairment of goodwill

Other segment items, net (d)

Tax receivable agreement income

Income tax expense

Net loss attributable to noncontrolling interest

Segment net loss

$ ( 120,757 )

(d) Other segment items, net include interest expense, other (income) expense, net, loss on extinguishment of debt, and change in fair value of warrant liabilities.

The Company classifies products

into two major categories:

sleep products and other.

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

pillows and sheets.

Other products include cushions and various other products.

In 2024, 2023 and 2022, sales of other products accounted

for less than 3 % of net revenues.

The Company defines international

revenues as sales to customers located outside of the United States.

In 2024, 2023 and 2022, international customers accounted for less

than 2 % of net revenues.

Company had one individual customer that accounted for approximately 29 % and 23 % of accounts receivable at December 31, 2024 and 2023,

respectively, and approximately 13 %, 10 % and 15 % of net revenue during the years ended December 31, 2024, 2023 and 2022, respectively.

Company currently obtains materials and components used in production from outside sources.

As a result, the Company is dependent upon

suppliers that in some instances, are the sole source of supply.

The Company is continuing efforts to dual-source key components.

The failure of one or more of the Company’s

suppliers to provide materials or components on a timely basis could significantly impact the results of operations.

The Company believes

that it can obtain these raw materials and components from other sources of supply in the ordinary course of business, although an unexpected

loss of supply over a short period of time may not allow for the replacement of these sources in the ordinary course of business.

The Company maintains its

cash balances in financial institutions based in the United States that are insured by the Federal Deposit Insurance Corporation (FDIC)

up to $ 250,000 for each financial institution per entity.

At times, the Company’s cash balance deposited at financial institutions

exceed the federally insured deposit limits.

The Company has not experienced any losses in such accounts and believes it is not exposed

to any significant credit risk related to these deposits.

failure of one or more of the Company’s suppliers to provide materials or components on a timely basis could significantly impact

the results of operations.

The Company believes that it can obtain these raw materials and components from other sources of supply in

the ordinary course of business, although an unexpected loss of supply over a short period of time may not allow for the replacement

of these sources in the ordinary course of business.

Company maintains its cash balances in financial institutions based in the United States that are insured by the Federal Deposit Insurance

Corporation (FDIC) up to $ 250,000 for each financial institution per entity.

At times, the Company’s cash balance deposited at

financial institutions exceed the federally insured deposit limits.

The Company has not experienced any losses in such accounts and believes

it is not exposed to any significant credit risk related to these deposits.

The Company’s (loss)

1 unchanged sentence

2022, respectively, consisted entirely of income earned in the United States.

Income tax (benefit) expense

for the years ended December 31, 2023, 2022 and 2021 consist of the following (in thousands):

Year ended December 31,

tax expense for the years ended December 31, 2024, 2023 and 2022 consist of the following (in thousands):

ended December 31,

Total current

Total deferred

Income tax (benefit) expense

Income tax (benefit) expense differs from the

amount computed at the federal statutory corporate income tax rate as follows (in thousands):

Year ended December 31,

Tax (provision) benefit at Federal statutory rate

State income tax provision (benefit), net of federal benefit

Income tax expense

tax expense differs from the amount computed at the federal statutory corporate income tax rate as follows (in thousands):

ended December 31,

Tax (provision) benefit at Federal

statutory rate

State income tax provision (benefit), net of federal

Noncontrolling interest

7 unchanged sentences

Stock-based compensation

Income tax (benefit) expense

Deferred income taxes at

December 31, 2023 and 2022 consisted of the following (in thousands):

Income tax expense

income taxes at December 31, 2024 and 2023 consisted of the following (in thousands):

Basis difference in Purple LLC investment

9 unchanged sentences

Net deferred income tax asset

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 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.

As a result, the Company’s effective tax rate differs materially from the statutory

The primary factors impacting expected tax are tax exempt income from the tax receivable agreement, remeasurement of the deferred

taxes associated with the investment in Purple LLC, and the impact of recording a valuation allowance.

At December 31, 2021, the

Company did not record a valuation allowance on its deferred tax assets except for the tax over book basis in capital contributions, which

was determined to not be realizable.

During 2022, the Company entered into a three-year cumulative loss position and determined that it

would not be able to generate sufficient taxable income to utilize its deferred tax assets.

Based on this and other negative evidence,

the Company concluded it was more likely than not that its deferred tax assets would not be realized and that a full valuation allowance

for its deferred tax assets was required.

As a result, $ 176.9 million of the valuation allowance associated with the Company’s federal

and state deferred tax assets was recorded along with an income tax expense in 2022.

Income tax expense in 2023 was de minimis and the

Company continues to maintain a full valuation allowance on its deferred tax assets based on its three-year cumulative loss position.

In connection with the Business

Combination, the Company entered into the Tax Receivable Agreement with InnoHold, which provides for the payment by the Company to InnoHold

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

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.

As noncontrolling interest

holders exercise their right to exchange or cause Purple LLC to redeem all or a portion of their Class B Units, a Tax Receivable Agreement

liability may be recorded based on 80 % of the estimated future cash tax savings that the Company may realize as a result of increases

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 actually 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 its allocable earnings of Purple LLC.

The primary factors impacting expected tax are tax exempt income from the tax receivable agreement, remeasurement of the deferred taxes

associated with the investment in Purple LLC, and the impact of recording a valuation allowance.

During 2022, the Company entered into a three-year cumulative loss

position and determined that it would not be able to generate sufficient taxable income to utilize its deferred tax assets.

Based on this

and other negative evidence, the Company concluded it was more likely than not that its deferred tax assets would not be realized and

that a full valuation allowance for its deferred tax assets was required.

At both December 31, 2024 and 2023, the Company continued to

maintain a full valuation allowance on its deferred tax assets based on its three-year cumulative loss position.

connection with the Business Combination, the Company entered into a tax receivable agreement with InnoHold, which provides for the payment

by the Company to InnoHold 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 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.

noncontrolling interest holders exercise their right to exchange or cause Purple LLC to redeem all or a portion of their Class B Units,

a liability may be recorded based on 80 % of the estimated future cash tax savings that the Company may realize as a result of increases

in the basis of the assets of Purple LLC attributed to the Company as a result of such exchange or redemption.

2 unchanged sentences

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

During 2022, the Company concluded

a tax receivable agreement liability was not probable and correspondingly reduced its tax receivable agreement liability to zero.

result, the Company recognized tax receivable agreement income of $ 162.0 million in the Company’s consolidated statement of operations

for the year ended December 31, 2022.

There was no tax receivable agreement liability recorded during 2023.

During 2022, the Company concluded that the tax receivable agreement

liability was not probable and correspondingly reduced its tax receivable agreement liability to zero .

As a result, the Company recognized

tax receivable agreement income of $ 162.0 million in the Company’s consolidated statement of operations for the year ended December

There was no tax receivable agreement liability recorded during 2024 or 2023.

As of December 31, 2024, the

Company estimates it will have approximately $ 65.2 million of tax-affected U.S.

net operating loss (“NOL”) carryforwards,

net operating loss carryforwards (“NOLs”),

of which $ 64.7 million do not have an expiration date and $ 0.5 million expire in 2037.

3 unchanged sentences

Under Section 382 and related provisions of the Internal Revenue Code of 1986, as amended

(the “Code”), if a corporation undergoes an “ownership change” generally defined as a greater than 50 percentage

point change (by value) in its equity ownership by certain stockholders over a three-year period), the corporation’s ability to

use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change income may be limited.

If finalized, Treasury Regulations currently proposed under Section 382 of the Code may further limit our ability to utilize our pre-change

NOLs or other tax attributes if we undergo a future ownership change.

Thus, our ability to utilize carryforwards of our net operating

losses, including net operating losses acquired from the Intellibed acquisition, and other tax attributes to reduce future tax liabilities

may be substantially restricted.

As of December 31, 2023, we have not completed a study to assess whether an ownership change has occurred,

as defined by IRC Sections 382 and 383, or whether there have been ownership changes since the Company's formation due to the complexity

and cost associated with such study, and the fact that there may be additional such ownership changes in the future.

The federal and state

net operating loss carryforwards and research and development credit carryforwards that can be utilized in the future could be significantly

There can be no assurance that the Company will ever be able to realize the benefit of some or all of the federal and state loss

carryforwards or credit carryforwards, either due to ongoing operating losses or due to ownership change limitations.

The Company estimates federal

research and development (“R&D”) tax credit carryforwards will be approximately $ 2.0 million as of December 31, 2023,

which begin to expire in 2042, if unused.

The Company also had approximately $ 1.3 million of state tax credit carryforwards to reduce

future state tax liability at December 31, 2023, which have various carryforward periods and begin to expire in 2030, if unused.

(the “Code”), if a corporation undergoes an “ownership change”, the corporation’s ability to use its pre-change

net operating loss carryforwards and other pre-change tax attributes to offset its post-change income may be limited.

Generally, an ownership

change is defined as a change in its equity ownership by certain stockholders over a three-year period of greater than 50 percentage points

If finalized, Treasury Regulations currently proposed under Section 382 of the Code may further limit our ability to utilize

our pre-change NOLs or other tax attributes if we undergo a future ownership change.

Thus, our ability to utilize carryforwards of our

net operating losses, including net operating losses acquired from the Intellibed acquisition, and other tax attributes to reduce future

tax liabilities may be substantially restricted.

As of December 31, 2024, we completed a study to assess whether an ownership change has

occurred, as defined by IRC Section 382, or whether there have been ownership changes since the Company’s formation.

of this study indicate that we experienced one ownership change on December 31, 2021.

We may also experience ownership changes in the

future as a result of subsequent shifts in our stock ownership.

As a result, if we generate taxable income, our ability to use our pre-change

NOL and tax credits carryforwards to reduce U.S.

federal and state taxable income may be subject to further limitations, which could result

in increased future tax liabilities to us.

Moreover, our federal NOLs from years prior to 2018 can be carried forward for a maximum of

20 years from the year in which the NOL was incurred, and our state NOLs are subject to carryforward limitations that vary from state

as a result, all or a portion of those carryforwards could expire before being available to reduce future income tax liabilities.

Refer to Note 17 – Stockholders’ Equity – NOL Rights Plan for information on plan adopted by the Board to preserve

Current NOLs.

Company estimates federal research and development (“R&D”) tax credit carryforwards will be approximately $ 2.6 million

as of December 31, 2024, which begin to expire in 2042, if unused.

The Company also had approximately $ 1.8 million of state tax credit

carryforwards to reduce future state tax liability at December 31, 2024, which have various carryforward periods and begin to expire

in 2030, if unused.

The effects of uncertain tax

6 unchanged sentences

Accrued interest and penalties would be included on the related tax liability line in the consolidated

balance sheet.

There were no unrecognized tax benefits recorded in the 2021 consolidated financial statements.

The following table summarizes

the Company’s unrecognized tax benefits for the years ended December 31, 2023 and 2022:

(In thousands)

balance sheets.

The following table summarizes the Company’s unrecognized tax

benefits for the years ended December 31, 2024, 2023 and 2022 (in thousands):

Unrecognized Tax

8 unchanged sentences

Unrecognized tax benefits as of December 31, 2023

The Company remains subject

to income tax examinations for its U.S.

Increase due to current year tax positions

Increase due to prior year tax positions

Decrease due to lapse of statute of limitations

Unrecognized tax benefits as of December 31, 2024

Company remains subject to income tax examinations for its U.S.

federal income taxes for 2018 through 2024.

The Company also remains subject to income

tax examinations for U.S.

The Company also

remains subject to income tax examinations for U.S.

state and local income taxes generally for 2018 through 2024.

Subsequent Events

Amended and Restated Credit Agreement

On January 23, 2024, the Loan

Parties entered into a Second Amendment to the Term Loan Agreement (the “Second Amendment”) and concurrently therewith an

Amended and Restated Credit Agreement (the “Amended and Restated Credit Agreement”), which amended and restated the Term Loan

Agreement, with CCP, Blackwell, Harvest Small Cap Partners Master, Ltd.

(“Harvest Master”), Harvest Small Cap Partners, L.P.

(“Harvest Partners”), and HSCP Strategic IV, L.P.

(“HSCP” and together with CCP, Blackwell, Harvest Master, and

Harvest Partners, the “Lenders”) and Delaware Trust Company, as administrative agent.

The Lenders agreed to assume the rights

and obligations of the Loan Parties under the Term Loan Agreement and, pursuant to the Second Amendment and the Amended and Restated Credit

Agreement, have agreed to refinance existing obligations with a new term loan to Purple LLC.

The Second Amendment and the Amended and

Restated Credit Agreement, among other things, included the following:

● A term loan in the amount of $ 61.0 million (the “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 ABL 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.

Pursuant to entering into these agreements, the Company incurred fees and expenses of $ 3.5 million.

In connection with the Amended and Restated Credit Agreement, all obligations under the ABL Agreement have been paid in full and the ABL Agreement has been terminated.

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

the maturity date of the Loan.

Purple LLC may elect for interest to be capitalized and added

to the principal amount.

● The 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 its 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 Amended and Restated Credit Agreement and agreements ancillary thereto provide for certain remedies to the Lenders in the event of customary events of default.

● The Company may request an additional term loan from the Lenders in an aggregate amount not to exceed $ 19.0 million on terms requested by Purple LLC to the extent agreed to by the lenders at their discretion.

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’ obligations under the Amended and Restated Credit Agreement and any other agreements contemplated thereby (including all outstanding loans as of the date of the Amended and Restated Credit Agreement), including a security interest in the intellectual property owned by the Loan Parties and the intellectual property licenses held by the Loan Parties pursuant to the Amended and Restated Credit Agreement and an Amended and Amended and Restated Pledge and Security Agreement among the Loan Parties and the Agent (the “Security Agreement”).

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 Credit Agreement.

restrictions and requirements typically associated with an asset-based loan.

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.

Warrants Issued

Also on January 23, 2024,

in connection with the Amended and Restated Credit Agreement, the Company issued warrants to the Lenders (the “Warrants”)

to purchase 20.0 million shares of the Company’s Class A common stock at a price of $ 1.50 per share, subject to certain adjustments.

The terms of the Warrants are described as follows:

● Each Warrant entitles the registered holder to purchase one share of

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

The Warrants will expire on the 10-year

anniversary of issuance, or earlier upon redemption.

do not have the rights or privileges of holders of Class A common stock or any voting rights until they exercise their Warrants.

After the issuance of shares of Class A common stock upon exercise of the Warrants, each holder will be entitled to one vote for

each share of Class A common stock held of record on all matters to be voted on by stockholders generally.

● 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 (the “45-day redemption period”) 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.

number of outstanding shares of Class A common stock is increased by a stock dividend payable in shares of Class A common stock,

or by a split-up of shares of Class A common stock or other similar event, then, on the effective date of such stock dividend, split-up

or similar event, the number of shares of Class A common stock issuable on exercise of each Warrant will be increased in proportion

to such increase in the outstanding shares of Class A common stock.

of the Warrants does not affect the rights of the Company’s existing security holders, other than with respect to potential

dilution as a result of an increase in the number of shares of Class A common stock outstanding if the Lenders exercise the Warrants.

Registration Rights Agreement

On January 23, 2024, in connection with the issuance of the Warrants,

the Company entered into an Amended and Restated Registration Rights Agreement (the “Registration Rights Agreement”) with

CCP, Blackwell, Coliseum Capital Co-Invest III, L.P., Harvest Master, Harvest Partners, and HSCP (the “Holders”), providing

for the registration under the Securities Act of 1933, as amended (the “Securities Act”) of the Warrants and the Registrable

Securities, subject to customary terms and conditions.

The Registration Rights Agreement entitles the Holders to demand registration of

the Registrable Securities and also to piggyback on the registration of Company 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.

New Lease Agreement

In January 2025, the Company

entered into a new lease agreement for a distribution and fulfilment center located in West Valley City, Utah.

The lease term

commenced in January 2025 and will expire in May 2030.

Using the applicable discount rate, the new lease resulted in an ROU asset

of $ 6.3 million and an increase to operating lease liabilities of $ 6.8 million.

The landlord provided the Company with a tenant improvement

allowance of $ 0.6 million in connection with the new lease agreement, for which the related expenditures to be paid by the Company

will be reimbursed by the landlord.

NASDAQ Listing Qualification

On February 4, 2025, the Company

received written notice from the Listing Qualifications Department of The NASDAQ Stock Market LLC (“Nasdaq”) that it had regained

compliance with Listing Rule 5550(a)(2) (“Bid Price Rule”) since the closing bid price of the Company’s common stock

was at or above the $ 1.00 minimum price per share for a period of ten consecutive business days, from January 21, 2025, to February 3,

As previously reported, the

Company was notified on November 11, 2024, that it had fallen out of compliance with the Bid Price Rule, because its common stock failed

to maintain the required minimum bid price of $ 1.00 per share for a period of 30 consecutive business days.

Class Action Lawsuits

On February 10, 2025, a

shareholder of the Company filed a class action lawsuit in the Court of Chancery of the State of Delaware against

and the individual members of the Board alleging that Section 29 of the NOL Rights Plan violates Delaware General Corporate

Law Sections 102(b)(7) and 141(a).

The suit seeks declaratory relief, attorneys’ fees, costs, and other relief on behalf of the

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

On February 26, 2025, a consumer

filed a class action lawsuit in the U.S.

District Court, Eastern District of New York, against Purple LLC alleging website accessibility

violations under the ADA and state law.

The lawsuit seeks declaratory relief, class certification, attorneys’ fees, costs, and other

relief on behalf of the class.

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

Amendment to Amended and Restated Credit Agreement

On March 12, 2025, the Loan

Parties entered into an Amendment to Amended and Restated Credit Agreement (the “Amendment”) with the 2025 Term Loan Lenders

(as defined in the Amendment), which amends the Amended and Restated Credit Agreement.

The Amendment, among other things, provides for

an increase in the initial principal amount of the senior secured term loan facility by $ 19.0 million (the “Incremental Loan”)

from an aggregate principal amount of up to $ 61.0 million (the “Initial Loan”) to an initial aggregate principal amount of

up to $ 80.0 million (the “Loan”), and allows the Loan Parties to request one or more additional term loans from the Lenders

in an initial aggregate principal amount not to exceed $ 20.0 million on terms to be agreed to by the parties and subject to the approval

of the Required Lenders (as defined in the Amended and Restated Credit Agreement).

The Incremental Loan will bear interest at the same

rate as the Initial Loan, which may be paid in cash or in kind at the Company’s option.

The Amendment also provides

that (i) the Incremental Loan shall be senior in right of repayment to the Initial Term Loan and (ii) in any voluntary or mandatory prepayment

in part or in full of the Incremental Loan for any reason, the Company will be required to pay an amount equal to the greater of (i) the

Make-Whole Premium (as defined below) and (ii) 2.50 % of the aggregate principal amount of the Incremental Loan so prepaid, replaced or

The “Make-Whole Premium” is determined as follows:

on the date of prepayment, the excess of (A) (x) 100 % of the

principal amount of such Incremental Loan, plus (y) the present value at such date of all remaining scheduled interest payments due on

such Incremental Loan from the prepayment date through the Maturity Date, assuming that all such interest accrues at the Make-Whole Premium

Rate (as defined in the Amendment), computed using a discount rate equal to the Treasury Rate as of such prepayment date plus 50 basis

points, over (B) the principal amount of such Incremental Loan on such prepayment date.

In addition, the Company also

paid fees of (i) 2 % of the outstanding principal and accrued and unpaid interest under the Initial Loan held by the 2025 Term Loan Lenders,

paid in kind and (ii) 2 % of the initial aggregate principal amount of the Incremental Loan paid to the 2025 Term Loan Lenders, deducted

from the proceeds at closing.

In connection with the Amendment,

the Company issued to the 2025 Term Loan Lenders warrants (the “Warrants”) to purchase 6,229,508 shares of the Company’s

Class A Stock at a price of $ 1.50 per share, subject to certain adjustments.

The warrants include full-ratchet anti-dilution protections,

subject to a floor of $ 0.6979 with respect to adjustments to the exercise price.

The Warrants expire on March 12, 2035 .

The foregoing

summary of the Warrants does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Warrants,

a form of which is attached as Exhibit 10.42 to this report and is incorporated by reference herein.

In connection with the issuance

of the Warrants, on March 12, 2025, the Company entered into a Second Amended and Restated Registration Rights Agreement (the “Registration

Rights Agreement”) with CCP, Blackwell, and Coliseum Capital Co-Invest III, L.P., (the “Holders”), providing for the

registration under the Securities Act of 1933, as amended (the “Securities Act”) of the Warrants, the shares issuable upon

the exercise of the Warrants, other warrants held by the Holders (and shares issuable upon exercise thereof) and the Class A 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 also to piggyback on the registration of

Company 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

provides further that on or prior to February 22, 2024, the Company will be required to prepare and file with the SEC pursuant to Rule

415 of the Securities Act a registration statement to register the resale of the Registrable Securities.

The Company received an extension

from the Holders to file the registration statement on or prior to March 22, 2024.

to Chief Executive Officer’s Employment Agreement

January 26, 2024, the Board unanimously approved an amendment to the amended and restated employment agreement of Robert T.

the Company’s Chief Executive Officer (the “Amendment”).

Under the Amendment, the Company agreed that, among other

DeMartini’s base salary will be increased, effective March 19, 2024, to $725,000;

DeMartini will be eligible

to earn an incremental aggregate cash bonus equal to $850,000 that will vest 10% on August 1, 2024, 20% on February 1, 2025, and 70%

on August 1, 2025, provided he continues to be employed by the Company and subject to Mr.

DeMartini’s obligation to repay any such

bonus actually received in the event his employment is terminated other than by the Company without cause prior to June 30, 2026, subject

to certain conditions;

DeMartini will be eligible to earn a cash payment of up to $5,000,000, less tax and other required

withholdings, based on the Volume Weighted Average Price per share of the Company’s common stock on NASDAQ during the period from

March 16, 2026 through June 30, 2026 subject to his continued employment with the Company, with the amount earned payable in quarterly

installments commencing with the first payroll period following June 30, 2026.

addition, under the Amendment, in the event of Mr.

DeMartini’s retirement, subject to certain conditions, all of Mr.

time-based vesting restricted stock units (“RSUs”) then outstanding and unvested will vest in accordance with the remaining

schedule as if Mr.

DeMartini remained employed for an additional twelve (12) months and all of Mr.

DeMartini’s outstanding performance-based

vesting RSUs (“PSUs”) then outstanding will be eligible to vest on a pro-rata basis, subject to the performance achieved

at the same time as active Company employees with the same type of PSUs.

Accordingly, the revised vesting terms in the Amendment amend

the terms in Mr.

DeMartini’s RSU and PSU grant agreements dated June 20, 2023.

provides that on or prior to April 10, 2025, or May 25, 2025 if Form S-3 is not then available to the Company, the Company will be required

to prepare and file with the SEC pursuant to Rule 415 of the Securities Act a registration statement to register the resale of the Registrable

Special Incentive Bonus

Equity Grants

March 12, 2025, the Board unanimously approved special incentive bonus equity grants to certain members of the Company’s senior

leadership team, including, among others, Todd Vogensen, Chief Financial Officer, John J.

Roddy, Chief Human Resources Officer, and Eric

Haynor, Chief Operating Officer.

Vogensen, Mr.

Roddy, and Mr.

Haynor will receive grants of 450,000 , 175,000 , and 350,000 restricted

stock units, respectively, pursuant to the terms of restricted stock unit grant agreements and the Company’s 2017 Equity Incentive

Such restricted stock units will vest at the sooner of (a) a change in control, as defined in the award agreements, or (b) March

12, 2028, provided that if the recipient’s employment with the Company is involuntarily terminated other than for cause, a pro

rata number of restricted stock units will vest as of such termination date.

Amendment to 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.

Shares Issued to Intellibed Security Holders

The consideration transferred for the acquisition of Intellibed included

contingent consideration of 1.5 million shares of Class A common stock issuable to Intellibed security holders if the closing price of

the Company’s stock did not equal or exceed $ 5.00 for at least 10 trading days over any period of 30 consecutive trading days during

the period beginning on the six-month anniversary of the closing date and ending on the 18-month anniversary of the closing date.

the Company’s stock price did not meet any of the indicated thresholds during the contingency period, the 1.5 million contingent

shares were issued to Intellibed security holders on March 4, 2024.

of Tempur Sealy Intellectual Property Litigation

March 12, 2024, the Company, Sealy and Sealy Technology mutually entered into a settlement agreement which settled all current

intellectual property litigation between the parties as described above in more detail under Note 13— Commitments and

Contingencies – Legal Proceedings .

The agreement provides for mutual releases, dismissals with prejudice and terminations

of all existing claims among the parties.

Pursuant to the requirements

of Section 13 or 15(d) of the Securities Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned,

thereunto duly authorized.

leadership team, including, among others, Todd Vogensen, Chief Financial Officer, John J.

Roddy, Chief People Officer, and Eric S.

Chief Operating Officer.

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

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.

March 12, 2025, the Board amended the special recognition bonus payments and entered into letter agreements (the “Letter Agreements”)

with the participants to provide that if a change in control occurs prior to August 1, 2025 and the participant remains employed with

the Company until the consummation of the change in control, then 100 % of the remaining special recognition bonus payment for such participant

shall vest and become payable upon the consummation of such change in control.

Amendment to Chief

Executive Officer Special Recognition Bonus

January 26, 2024, the Board unanimously approved an amendment to the amended and restated employment agreement of Robert T.

the Company’s Chief Executive Officer (the “2024 CEO Amendment”).

Under the 2024 CEO Amendment, the Company agreed that,

among other things, Mr.

DeMartini will be eligible to earn an incremental aggregate cash bonus equal to $ 850,000 that will vest 10 % on

August 1, 2024, 20 % on February 1, 2025, and 70 % on August 1, 2025, provided he continues to be employed by the Company and subject to

DeMartini’s obligation to repay any such bonus actually received in the event his employment is terminated other than by the

Company without cause prior to June 30, 2026, subject to certain conditions.

March 12, 2025, the Board adopted an amendment (the “2025 CEO Amendment”) to Mr.

DeMartini’s amended and restated employment

agreement, as amended by the 2024 CEO Amendment (the “Amended and Restated Employment Agreement”), to provide that if a change

in control occurs prior to August 1, 2025 and Mr.

DeMartini remains employed by the Company until the consummation of the change in control,

then 100 % of the unpaid cash bonus payment for Mr.

DeMartini shall vest and become payable upon the consummation of such change in control

and the bonus repayment condition tied to his employment with the Company until June 30, 2026 shall no longer be applicable.

the changes provided by the 2025 CEO Amendment, no other changes were made to Mr.

DeMartini’s Amended and Restated Employment Agreement.

to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the Registrant has duly caused this report to be signed on

its behalf by the undersigned, thereunto duly authorized.

Purple Innovation, Inc.

March 13, 2025

/s/ Robert T.

Chief Executive Officer

(Principal Executive Officer)

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE

PRESENTS, that each person whose signature appears below constitutes and appoints

PRESENTS, that each person whose signature appears below constitutes and appoints Robert T.

DeMartini and Tricia S.

McDermott, jointly and severally, as his or her true and lawful attorneys-in-fact and agents, with full

power of substitution and resubstitution, for him or her, and in his or her name, place and stead, in any and all capacities, to sign

any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in

connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority

to do and perform each and every act and thing requisite or necessary to be done in and about the premises hereby ratifying and confirming

all that said attorneys-in-fact and agents, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements

of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant and in

the capacities and on the dates indicated.

/s/ Robert T.

Chief Executive Officer and Director

March 12, 2024

McDermott-Spikes,

jointly and severally, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution,

for him or her, and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report

on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and

Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and

thing requisite or necessary to be done in and about the premises hereby ratifying and confirming all that said attorneys-in-fact and

agents, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the

registrant and in the capacities and on the dates indicated.

Chief Executive Officer

(Principal Executive Officer)

Chief Financial Officer

March 12, 2024

(Principal Financial Officer)

/s/ George T.

Vice President, Accounting and Financial Reporting

March 12, 2024

Vice President, Accounting

and Financial Reporting

(Principal Accounting Officer)

Chairman of the Board of Directors

March 12, 2024

/s/ Claudia Hollingsworth

March 12, 2024

Chairman of the Board of

Claudia Hollingsworth

March 12, 2024

Claudia Hollingsworth

Scott Peterson

March 12, 2024

Scott Peterson

/s/ Erika Serow

March 12, 2024

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

What changed 10-K

Item 9A. Controls and Procedures