What changed in this filing

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Item 1A. Risk Factors

2026-03-31 compared with 2025-03-14 · 438 added, 470 removed, 531 unchanged (63% of the section changed)

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flexibility and adversely affect our business if we breach such covenants or default on such indebtedness.

January 23, 2024, to refinance existing obligations, we entered into a Second Amendment to Term Loan Agreement (the “Second Amendment”)

and an Amended and Restated Credit Agreement (the “Amended and Restated Credit Agreement) with Coliseum Capital Partners, L.P.

Blackwell Partners LLC – Series A (“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”).

Upon entry into the Amended and Restated Credit Agreement,

we received a term loan in the amount of $61.0 million.

The Amended and Restated Credit Agreement imposes various affirmative and negative

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

or acquisitions, incurrence of additional indebtedness, paying dividends or making distributions and transactions with affiliates, among

other customary covenants.

January 23, 2024, to refinance existing obligations, Purple LLC, Purple Inc.

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 Coliseum Capital Partners (“CCP”) and other

lenders (collectively, the “Lenders”) and Delaware Trust Company, as administrative agent.

Upon entry into the Amended and

Restated Credit Agreement, we received a term loan in the amount of $61.0 million.

The Amended and Restated Credit Agreement imposes various

affirmative and negative covenants, including covenants regarding dispositions of property, investments, forming or acquiring subsidiaries,

business combinations or acquisitions, incurrence of additional indebtedness, paying dividends or making distributions and transactions

with affiliates, among other customary covenants.

These restrictions may prevent

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which could materially adversely affect our financial condition and results of operations, including possible acceleration of our debt,

and, as well as other cross-defaulting debt obligations.

as well as other cross-defaulting debt obligations.

Additionally, defaults could significantly impair our ability to secure alternative

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Our compliance with these covenants will depend on successfully implementing our business

strategy, as breaches could lead to defaults and acceleration of our debt, potentially forcing us into bankruptcy or liquidation.

strategies, as breaches could lead to defaults and acceleration of our debt, potentially forcing us into bankruptcy or liquidation.

In addition, on March 12,

2025, we entered into an Amendment to the Amended and Restated Credit Agreement (the “2025 Amendment”), pursuant to which

the Lenders agreed to provide us with an incremental term loan of $19.0 million.

The 2025 Amendment also amended the Amended and Restated

Credit Agreement to (i) provide for an additional term loan from the 2025 Term Loan Lenders (as defined in the 2025 Amendment) in an aggregate

amount not to exceed $20.0 million, subject to the approval of the Required Lenders in their discretion, (ii) provide for the payment

of substantial make-whole payments in the event we prepay the loans prior to their maturity, and (iii) provide that the incremental term

loan will be senior in right of repayment to the initial term loan.

2025, the Loan Parties, entered into the First Amendment to the Amended and Restated Credit Agreement (the “2025 Amendment,”

and the Amended and Restated Credit Agreement as so amended, the “Amended A&R Credit Agreement) with CCP and Blackwell Partners

LLC – Series A (“Blackwell”) (collectively the “2025 Lenders”), pursuant to which the 2025 Lenders agreed

to provide us with an incremental term loan of $19.0 million pursuant to Section 2.18 of the Amended and Restated Credit Agreement.

May 2, 2025, the Loan Parties entered into a Second Amendment to the Amended and Restated Credit Agreement (the “ Second 2025Amendment”),

$20.0 million pursuant to Section 2.18 of the Amended A&R Credit Agreement.

On March 24, 2026, the Loan Parties entered into a Third

Amendment to the Amended and Restated Credit Agreement (the “Third Amendment”), which revised the maturity date under the

Amended and Restated Credit Agreement from December 31, 2026, to April 30, 2027, and waived certain requirements and events of default

relating to the going concern qualification in our December 31, 2025 financial statements.

The 2025 Amendment also amended the Amended

A&R Credit Agreement to (i) provide for an additional term loan from the 2025 Term Loan Lenders (as defined in the 2025 Amendment)

in an aggregate amount not to exceed $20.0 million, subject to the approval of the Required Lenders in their discretion, (ii) provide

for the payment of substantial make-whole payments in the event we prepay the loans prior to their maturity, and (iii) provide that the

incremental term loan will be senior in right of repayment to the initial term loan.

Under the Amended and Restated

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In addition, such payments could result in holders of

our Class A Stock not receiving any consideration in a sale of our business, or if we were to liquidate, dissolve, or wind-up, either

voluntarily or involuntarily.

our Class A common stock not receiving any consideration in a sale of our business, or if we were to liquidate, dissolve, or wind-up,

either voluntarily or involuntarily.

is substantial doubt about our ability to continue as a going concern, and we may need additional financing to execute our business plan,

to fund our operations and to continue as a going concern.

independent registered public accounting firm has expressed in its auditors’ report on our 2025 financial statements, included in

this Annual Report on Form 10-K, an emphasis of matter paragraph relating to our ability to continue as a “going concern,”

meaning that our recurring losses from operations and negative cash flows from operations raise substantial doubt regarding our ability

to continue as a going concern.

We have prepared our financial statements on a going concern basis, which contemplates the realization

of assets and the satisfaction of liabilities and commitments in the normal course of business.

Our financial statements do not include

any adjustment to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification

of liabilities that may result from the outcome of this uncertainty.

with our current sources of capital, we may need to raise additional funds to support operations and our business initiatives, and such

funding may not be available in sufficient amounts or on acceptable terms to us, or at all.

If we are unable to raise additional capital

when needed or on acceptable terms, we may be required to:

● reduce, delay, or reprioritize capital expenditures (including

manufacturing investments and showroom build-outs);

scale back growth initiatives or marketing activities;

seek amendments or waivers under our Amended and Restated Credit Agreement and/or accept more restrictive financing terms (including increased make-whole or prepayment obligations);

● pursue other measures to address liquidity needs, including

restructuring initiatives.

actions could adversely affect our operations, relationships with suppliers and partners, and our ability to execute our strategy, which

would have a material adverse impact on our business, results of operations and financial condition and could ultimately require us to

consider broader restructuring alternatives if liquidity becomes insufficient.

may need additional funds to execute our business plan, maintain our liquidity, repay our debt and fund our operations.

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As of December 31, 2025, we had unrestricted cash and cash equivalents of $24.3 million

and borrowings of $70.7 million under our Amended and Restated Credit Agreement (as defined below), which will become due on December

and borrowings of $111.3 million under our Amended and Restated Credit Agreement, which pursuant to the Third Amendment will become due

on April 30, 2027.

March 12, 2025, we borrowed an additional $19.0 million under the Amended and Restated Credit Agreement pursuant to the 2025 Amendment.

(as defined below), which will also become due on December 31, 2026.

The 2025 Amendment (as defined below) also added certain make-whole

payments with respect to our borrowings under the Amended and Restated Credit Agreement, which would require substantial payments in connection

On May 2, 2025, we borrowed an additional $20 million under the Amended and Restated Credit Agreement, pursuant to the Second 2025 Amendment.

Pursuant to the Third Amendment these amounts will become due on April 30, 2027.

The 2025 Amendment also added certain make-whole payments

with respect to our borrowings under the Amended and Restated Credit Agreement, which would require substantial payments in connection

with certain pre-payments or refinancing of our outstanding borrowings.

connection with the preparation of our 2024 financial statements, we undertook a going concern assessment and concluded the Company will

have sufficient liquidity for its operations for at least one year from the date these consolidated financial statements are issued.

there can be no assurance that we will be able to maintain the liquidity necessary to fund our long-term operations and growth strategies,

or repay our debt obligations when due.

As a result, we may need to secure additional sources of liquidity to fund our long-term operating

activities and capital expenditures.

However, there can be no assurance that we will be able to obtain additional financing as needed

on terms favorable to us, or at all.

If we fail to meet liquidity and capital requirements, we may need to scale back or halt our growth

plans, risking slower growth, losing suppliers, failing to meet customer demands, and losing employees.

We may also need to restructure

our obligations or pursue other measures to address any liquidity deficiency.

connection with the preparation of our 2025 financial statements, we undertook a going concern assessment and concluded we will

have sufficient liquidity for its operations for at least one year from the date those consolidated financial statements were issued.

However, there can be no assurance that we will be able to maintain the liquidity necessary to fund our long-term operations and growth

strategies, or repay our debt obligations when due.

As a result, we may need to secure additional sources of liquidity to fund our long-term

operating activities and capital expenditures.

However, there can be no assurance that we will be able to obtain additional financing

as needed on terms favorable to us, or at all.

If we fail to meet liquidity and capital requirements, we may need to scale back or halt

our growth plans, risking slower growth, losing suppliers, failing to meet customer demands, and losing employees.

We may also need to

restructure our obligations or pursue other measures to address any liquidity deficiency.

In addition, future equity or debt financings

are likely to be dilutive to our existing stockholders, including through the issuance of common stock purchase warrants.

the Amended and Restated Credit Agreement, we can request additional loans, but the Lenders may deny requests, limiting our access to

future funds and adversely affecting our liquidity, financial condition and results of operations.

equity or debt financings may involve issuing securities likely to be dilutive to our existing stockholders, such as warrants, as we did

on January 23, 2024 when we issued to the Lenders, as partial consideration for their entering into the Amended and Restated Credit Agreement,

warrants (the “2024 Warrants”) to purchase 20.0 million shares of our Common Stock (approximately 19% of our currently outstanding

Common Stock) at a price of $1.50 per share, subject to certain adjustments.

In addition, on March 12, 2025, we issued to the Lenders,

as partial consideration for their entering into the 2025 Amendment, warrants (the “2025 Warrants” and together with the 2024

Warrants, the “Warrants”) to purchase 6.2 million shares of our Common Stock (approximately 6% of our currently outstanding

Common Stock) at a price of $1.50 per share, subject to certain adjustments.

The exercise of such warrants and/or any additional similar

securities in the future would dilute the value and amount of our Common Stock.

Similarly, any new securities we may issue may carry preferences,

superior voting rights, or additional terms that could adversely affect shareholders of our Common Stock.

Future capital raising efforts

may incur substantial costs, such as investment banking, legal, and accounting fees, and could lead to non-cash expenses that negatively

impact our financial condition.

may not realize all the intended benefits of our Restructuring Plan and other cost-saving initiatives, which could adversely affect our

results of operations and our financial condition.

2024, we implemented our Restructuring Plan to consolidate our Utah manufacturing operations into our McDonough, Georgia plant, and we

plan to undertake further cost-saving initiatives in 2025.

However, the remaining costs under our Restructuring Plan may exceed estimates,

and we may not achieve all the expected financial benefits or savings.

Relocating equipment to Georgia and expanding our workforce there

could be challenging.

Replacing experienced Utah employees with less experienced Georgia staff may lead to a loss of knowledge, lower

productivity, and decreased efficiency and quality.

Manufacturing in a single U.S.

region could increase our distribution costs.

Consolidating

plants may cause disruptions in our inventory and raw material supply.

We may not fully sublease our Utah facilities, impacting our financial

The Restructuring Plan, as well as past and future restructurings, including workforce reductions, could harm employee morale,

disrupt business operations, result in the loss of institutional knowledge, damage our reputation, and impair our ability to attract skilled

talent, negatively affecting the business.

addition, we plan to implement additional cost savings measures in 2025 beyond those implemented pursuant to our 2024 Restructuring Plan.

We may not achieve the expected financial benefits or savings from these additional cost savings measures, which could further adversely

affect our results of operations and financial condition.

Additionally, such cost saving measures may adversely affect our ability to

generate additional revenue in the future.

As a condition to providing future

funds, the Lenders may require other revisions to the Amended and Restated Credit Agreement, such as increasing prepayment or make-whole

payments or including additional restrictive covenants, which could adversely affect our business and financial condition.

have in the past experienced and may in the future experience significant fluctuations in our results of operations, which could make

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Coliseum Capital Management,

LLC is our largest stockholder and Lender, and exercises substantial control over our Board composition, management team members and strategies.

LLC (“Coliseum”) is our largest stockholder and Lender, and exercises substantial control over our Board of Directors (“Board”)

composition, management team members and strategies.

As reported by Coliseum in

its Schedule 13D/A filed on January 23, 2024, Coliseum Capital Management LLC (“Coliseum”) beneficially owns 58.5 million

shares of Common Stock (which includes 46.9 million shares of Common Stock currently owned and 11.6 million shares of Common Stock that

could be acquired upon exercise of its Warrants).

Coliseum will only have the right to exercise its Warrants to the extent that it (together

with its affiliates) would not beneficially own in excess of 49.9% of the shares of Common Stock outstanding immediately after such exercise

(the “Beneficial Ownership Cap”).

its Schedule 13D/A filed on May 6, 2025, Coliseum beneficially owns 61.1 million shares of Common Stock (which includes 46.9 million shares

of Common Stock currently owned and 14.2 million shares of Common Stock that could be acquired upon exercise of its warrants).

will only have the right to exercise its warrants to the extent that it (together with its affiliates) would not beneficially own in excess

of 49.9% of the shares of Common Stock outstanding immediately after such exercise (the “Beneficial Ownership Cap”).

as of December 31, 2025, Coliseum holds $81.8 million of our debt, which represents 64.6% of all our debt.

As a result of its significant

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control over us as the primary Lender under the Amended and Restated Credit Agreement.

2022, Coliseum delivered to us an unsolicited bid to acquire the remaining outstanding shares of our Common Stock, submitted a notice

of its intent to nominate a slate of directors, which slate would have constituted a majority of the Board, and filed a lawsuit challenging

our issuance of a dividend of shares of preferred stock (the “Action”).

On April 19, 2023, Coliseum and the Company entered

into a cooperation agreement (the “Cooperation Agreement”) settling the Action, which included among other items the appointment

of certain new directors and agreement to certain standstill provisions, as discussed further in Note 16 – Related Party Transactions

Coliseum Capital Management, LLC of the Notes to the Condensed Consolidated Financial Statements.

The Cooperation Agreement terminated

on the date following our 2024 annual meeting of stockholders.

Under the terms of the Cooperation Agreement, our current Chair of the

Gray, and four of our other current directors, Mr.

Peterson and Ms.

Serow, were appointed or nominated

to serve on our Board.

can be no assurance that Coliseum will not make another unsolicited bid to acquire the remaining outstanding shares of our Common Stock

or attempt to nominate additional or replacement members to the Board.

Such future actions by Coliseum may require us to devote significant

additional resources and time that would otherwise be directed at our business and operations or may demotivate current executives and

discourage other executives from joining the Company.

In addition, such actions could cause the price of our Common Stock to change based

on investors’ perceptions of Coliseum’s actions and Coliseum’s influence over the Company and our Board.

the past, Coliseum has made an unsolicited bid to acquire the remaining outstanding shares of our Common Stock and has taken other related

actions, which resulted in Coliseum and the Company entering into a cooperation agreement (the “Cooperation Agreement”).

the terms of the Cooperation Agreement, our current Chair of the Board, Mr.

Gray, and some of our other current directors were appointed

or nominated to serve on our Board.

There can be no assurance that Coliseum will not make another unsolicited bid to acquire the remaining

outstanding shares of our Common Stock or attempt to nominate additional or replacement members to the Board.

Such future actions by Coliseum

may require us to devote significant additional resources and time that would otherwise be directed at our business and operations or

may demotivate current executives and discourage other executives from joining the Company.

In addition, such actions could cause the

price of our Common Stock to change based on investors’ perceptions of Coliseum’s actions and Coliseum’s influence over

the Company and our Board.

We have engaged in significant

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results of operations and the value of our business.

We have engaged in numerous related-party transactions with significant

stockholders, directors, and their affiliated entities.

For example, under the Amended and Restated Credit Agreement, as amended by the

2025 Amendment, the Lenders, which include Coliseum, have loaned to us an aggregate of $80.0 million and we have issued Warrants to Coliseum

and the other Lenders to purchase an aggregate of 26.2 million shares of our common stock at $1.50 per share.

Coliseum, our largest stockholder,

has appointed or nominated a total of five directors to serve on our Board, each of whom continues to serve on our Board, including, Adam

Gray, who continues to serve as Chairman.

Any future transactions with the Lenders or any other related parties may give rise to conflicts

of interest or otherwise adversely affect our business.

Our preliminary exploration

of potential strategic alternatives may not be successful, which may adversely affect our ability to compete with larger, including combined,

We have engaged in numerous

related-party transactions with significant stockholders, directors, and their affiliated entities.

For example, under the Amended and

Restated Credit Agreement, as amended by the 2025 Amendment, the Second 2025 Amendment, and the Third Amendment, the Lenders, which include

Coliseum, have loaned to us an aggregate of $100.0 million and we have issued Warrants to Coliseum and the other Lenders to purchase an

aggregate of 32.8 million shares of our common stock at $1.50 per share.

Coliseum, our largest stockholder, has appointed or nominated

a total of five directors to serve on our Board, each of whom continues to serve on our Board, including, Adam Gray, who continues to

serve as Chairman.

Any future transactions with the Lenders or any other related parties may give rise to conflicts of interest or otherwise

adversely affect our business.

Our exploration of potential

strategic alternatives may not be successful, which may adversely affect our ability to compete with larger, including combined, competitors.

We regularly engage in dialogue

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any such strategic alternative transaction will result in favorable terms and conditions for us or our shareholders.

If we are unsuccessful

in engaging in a favorable strategic alternative, then our ability to grow our business and compete with larger, including combined, competitors

may be adversely affected.

As a result, we may face liquidity challenges in the long-term and our ability to achieve consistent profitability

may be adversely affected.

may not be able to successfully anticipate consumer trends and demand and our failure to do so may lead to a loss of consumer acceptance

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our product mix and distribution strategy could adversely affect our business and results of operations.

For example, as retail stores

reopened following the COVID-19 pandemic, consumers shifted away from online retail purchases towards brick-and-mortar shopping.

profit margins for sales through wholesale customers are lower than those in our DTC channel, so that shift adversely affected our gross

profit margins.

If we fail to identify and respond to emerging trends, consumer acceptance of the products we manufacture and sell and

our image with current or potential customers may be harmed, which could reduce our net sales.

If we misjudge market trends, we may significantly

overstock inventory and be forced to take significant inventory markdowns, which would have a negative impact on our gross profit and

Conversely, shortages of inventory or increases in time for fulfillment of our products that prove popular could also reduce

Our gross profit margins for

sales through wholesale customers are lower than those in our DTC channel.

If we fail to identify and respond to emerging trends, consumer

acceptance of the products we manufacture and sell and our image with current or potential customers may be harmed, which could reduce

our net sales.

If we misjudge market trends, we may significantly overstock inventory and be forced to take significant inventory markdowns,

which would have a negative impact on our gross profit and cash flow.

Conversely, shortages of inventory or increases in time for fulfillment

of our products that prove popular could also reduce our sales.

We operate in the highly

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margins, and new customer acquisition.

We have introduced new products in the luxury mattress market but have limited experience in this

If we fail to compete effectively with other manufacturers and retailers of our products, our sales, profitability, cash flow,

and financial condition may be materially adversely affected.

If we fail to compete effectively with other manufacturers and retailers of our products, our sales,

profitability, cash flow, and financial condition may be materially adversely affected.

Many of our significant competitors,

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This increasing competition

from both domestic and international sources, including competitors that source from low-cost locations such as China and Vietnam, could

adversely affect our business, financial condition and results of operations.

Competitors are expanding their distribution channels, with

many offering direct-to-consumer sales online.

from both domestic and international sources, including competitors that source from low-cost locations, could adversely affect our business,

financial condition and results of operations.

Competitors are expanding their distribution channels, with many offering direct-to-consumer

sales online.

Major retailers like Mattress Firm, Amazon, and Walmart also sell competing products.

Additionally,

foreign retailers may vertically integrate by acquiring U.S.

Additionally, foreign retailers may

vertically integrate by acquiring U.S.

mattress manufacturers or other retailers.

Many of our competitors

have greater financial resources, technical expertise, larger customer bases, established industry relationships, and more mature distribution

They may aggressively pursue market share with new or existing products, and we cannot guarantee we will have the resources

or expertise to compete successfully.

Many of our competitors have greater financial

resources, technical expertise, larger customer bases, established industry relationships, and more mature distribution channels.

may aggressively pursue market share with new or existing products, and we cannot guarantee we will have the resources or expertise to

compete successfully.

Additionally, competitors with better e-commerce platforms could hurt our sales.

We have limited

ability to predict competitors’ actions, such as new product launches, pricing strategies, or marketing campaigns, which could impact

our market share and product margins.

Competitors may also secure better terms from vendors, adopt more aggressive pricing, and invest

more in technology and marketing.

With many competitors offering a wide range of products, it may be difficult for us to differentiate

through value, style, or functionality.

Additionally, our products are often heavier, and some markets may not support affordable delivery,

limiting our reach.

The retail sleep product industry has low barriers to entry, allowing new or existing retailers to increase competition.

This could delay or prevent us from gaining market share and negatively impact our growth and future results of operations.

We have limited ability to predict

competitors’ actions, such as new product launches, pricing strategies, or marketing campaigns, which could impact our market share

and product margins.

Competitors may also secure better terms from vendors, adopt more aggressive pricing, and invest more in technology

and marketing.

With many competitors offering a wide range of products, it may be difficult for us to differentiate through value, style,

or functionality.

Additionally, our products are often heavier, and some markets may not support affordable delivery, limiting our reach.

retail sleep product industry has low barriers to entry, allowing new or existing retailers to increase competition.

This could delay

or prevent us from gaining market share and negatively impact our growth and future results of operations.

Sleep products industry has experienced significant consolidation in recent years, including vertical integrations, with competitors acquiring

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with suppliers, enhance brand recognition, advance research and development, and extend marketing and retail distribution channels.

Consolidation

among retailers may result in fewer sales channels or more restrictive terms for standalone brands.

If we are unable to adapt to these

industry shifts, our growth, results of operations, and market share could be adversely impacted.

example, the industry leader has recently made an offer to purchase one of our important suppliers.

Consolidation among retailers may

result in fewer sales channels or more restrictive terms for standalone brands.

If we are unable to adapt to these industry shifts, our

growth, results of operations, and market share could be adversely impacted.

Technological

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may depend on our ability to innovate and adapt to these changes and failure to keep pace may adversely affect our results of operations.

Timely product delivery affects

our competitiveness.

Failure to maintain or enhance our delivery processes and infrastructure could negatively impact our ability to compete.

Disruptions, delays, or increased freight costs with our carriers and freight forwarders could harm sales, increase cancellations, damage

our brand, and adversely affect our results of operations and our financial condition.

If we fail to deliver products on time, our DTC

and wholesale customers may reduce or stop future orders, and we may face late charges from wholesale partners.

Production or shipment

issues that lead to lower demand could materially impact our business and results of operations

Timely product delivery

affects our competitiveness.

Failure to maintain or enhance our delivery processes and infrastructure could negatively impact our

ability to compete.

Disruptions, delays, or increased freight costs with our carriers and freight forwarders could harm sales,

increase cancellations, damage our brand, and adversely affect our results of operations and our financial condition.

If we fail to

deliver products on time, our DTC and wholesale customers may reduce or stop future orders, and we may face late charges from

wholesale partners.

Production or shipment issues that lead to lower demand could materially impact our business and results of

Lack of availability

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concerns, or price fluctuations could raise costs and hinder our ability to meet customer demand.

These issues or concerns may be magnified

to the extent we rely on a limited number of suppliers or a sole supplier.

Competitive pressures may also limit our ability to pass on

price increases, potentially leading to lost sales.

Shortages of widely used components like foam and spring units, due to

factors like increased demand, weather events, or supply chain issues, could impact our production and operations.

If a supplier fails

to deliver, we will need to find replacements, potentially on unfavorable terms.

Any disruption in component supply could significantly

interrupt production and raise costs.

Oil price increases from conflicts in

the Middle East or elsewhere could increase the cost of freight or raw materials.

These issues or concerns may be magnified to the extent

we rely on a limited number of suppliers or a sole supplier.

Competitive pressures may also limit our ability to pass on price increases,

potentially leading to lost sales.

Shortages of widely used components like foam and spring units, due to factors like increased

demand, weather events, or supply chain issues, could impact our production and operations.

If a supplier fails to deliver, we will need

to find replacements, potentially on unfavorable terms.

Any disruption in component supply could significantly interrupt production and

Even with timely access to

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Shipping costs and delays have in the past risen and may again in the future rise

due to port closures, congestion, and shortages of containers and ships.

Future disruptions, such as pandemics, geopolitical conflicts,

and increased duties and tariffs, could worsen delays and increase material costs.

These issues may impact our ability to maintain inventory,

meet demand, and affect our operations.

Any significant supply chain interruptions or inability to source materials at acceptable prices

could harm our business.

due to regional conflicts, port closures, congestion, and shortages of containers and ships.

Future disruptions, such as pandemics, geopolitical

conflicts, and increased duties and tariffs, could worsen delays and increase material costs.

These issues may impact our ability to maintain

inventory, meet demand, and affect our operations.

Any significant supply chain interruptions or inability to source materials at acceptable

prices could harm our business.

Our information technology

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issues, cyberattacks, natural disasters, power losses, fraud, political conflicts, or other events.

Some systems may lack sufficient redundancy,

and our disaster recovery planning may not cover all scenarios.

They are also vulnerable to natural disasters, security breaches, sabotage,

and data theft.

Some systems may lack sufficient

redundancy, and our disaster recovery planning may not cover all scenarios.

They are also vulnerable to natural disasters, security breaches,

sabotage, and data theft.

Any such issues could negatively impact our results of operations.

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or business partners could also intentionally or unintentionally compromise security.

For example, we previously experienced an unauthorized

intrusion involving a former contractor’s credentials, though no personal information was accessed.

Future breaches could occur

if there are weaknesses in our internal controls over financial reporting related to information technology systems.

We and third-party

partners have experienced and, in the future, may experience various cyber-attacks, including phishing, malware, and ransomware attacks.

In 2022, we experienced a spear-phishing attack that led to a $140,000 loss due to unauthorized changes to a vendor’s bank account.

expect continued exposure to similar threats.

Additionally, increasing use of artificial intelligence by us and our third-party partners

may increase these risks.

A breach releasing sensitive data could harm our reputation, result in financial losses, and increase our security

Successful ransomware attacks could disrupt our operations, and while our insurance may cover some losses, it may not be sufficient

for all liabilities.

We are subject to evolving data privacy and breach laws, both at the state level (e.g., the California Consumer Privacy

Act), the federal level, and internationally as we expand.

These laws’ rapid changes and potential inconsistencies increase compliance

costs and non-compliance risks.

While we aim to comply, failure to do so could result in fines, administrative actions, and reputational

Changes in economic

conditions, including the housing market and tariffs, have or will adversely affect our business, results of operations and financial

We have experienced and may

continue to experience volatility due to global and U.S.

market conditions including the housing market, mortgage interest rates, tariffs,

and inflation.

Future breaches could occur if there are weaknesses

in our internal controls over financial reporting related to information technology systems.

We and third-party partners have experienced

and, in the future, may experience various cyber-attacks, including phishing, malware, and ransomware attacks.

We expect continued exposure

to similar threats.

Additionally, increasing use of artificial intelligence by us and our third-party partners may increase these risks.

A breach releasing sensitive data could harm our reputation, result in financial losses, and increase our security costs.

Successful ransomware

attacks could disrupt our operations, and while our insurance may cover some losses, it may not be sufficient for all liabilities.

are subject to evolving data privacy and breach laws, both at the state level (e.g., the California Consumer Privacy Act), the federal

level, and internationally as we expand.

These laws’ rapid changes and potential inconsistencies increase compliance costs and non-compliance

While we aim to comply, failure to do so could result in fines, administrative actions, and reputational damage.

in economic conditions, including the housing market and tariffs, have or will adversely affect our business, results of operations and

financial condition.

have experienced and may continue to experience volatility due to global and U.S.

market conditions including the housing market, mortgage

interest rates, tariffs, and inflation.

These market conditions impact demand for mattresses and related products.

We have experienced and may continue to experience

a negative impact on our demand as a result of the current housing market.

The impact of newly implemented or threatened tariffs is uncertain

but will increase our costs and may negatively impact the demand for our products.

We may not be able to pass along the costs of such

tariffs to our customers, which could adversely affect our results of operations and financial condition.

Continued inflation may reduce

consumer discretionary spending, negatively affecting demand for our products.

Disruption of our manufacturing

has and could increase our costs of doing business or lead to delays in shipping and could materially adversely affect our business, our

results of operations, and our financial condition.

Disruptions to our manufacturing

operations, whether from the Restructuring Plan, a pandemic, natural disasters, lease issues, or equipment failures, could increase costs,

We have experienced

and may continue to experience a negative impact on our demand as a result of the current housing market.

The impact of newly implemented

or threatened tariffs is uncertain but will increase our costs and may negatively impact the demand for our products.

We may not be able

to pass along the costs of such tariffs to our customers, which could adversely affect our results of operations and financial condition.

Continued inflation may reduce consumer discretionary spending, negatively affecting demand for our products.

trade policy including the impact of tariffs are having and may continue to have a material adverse effect on our business and

results of operations.

Our business and results

of operations are being and may continue to be adversely affected by uncertainty and changes in U.S.

trade policies, including tariffs,

trade agreements or other trade restrictions which may be imposed by the U.S.

or other governments with little or no advance notice.

For example, the recent U.S.

Supreme Court ruling invalidating certain IEEPA tariffs resulted in the imposition of new replacement tariffs

and created uncertainty with respect to recovering amounts paid for the invalidated tariffs.

In the recent past, U.S.

trade policy has

resulted in retaliatory measures on U.S.

goods and may result in further retaliatory measures.

Further changes to trade policy may result

in additional retaliatory measures.

If we are unable to navigate further these unpredictable changes in U.S.

or international trade policy,

it could have a material adverse impact on our business and results of operations.

of our products require materials that may be subject to these recent tariffs, especially our products requiring textiles.

some U.S manufacturers have asked the U.S.

government to extend increased steel tariff protections to mattress springs.

Any imposition

of or increase in tariffs on imports of these products or components, as well as corresponding price increases for such materials available

domestically, could increase our costs.

To the extent that we are unsuccessful in finding alternative suppliers that are subject to smaller

or no tariffs, negotiating sharing these costs with our suppliers, or failing to pass cost increases on to our customers, such cost increases

could adversely affect our business and results of operations.

Higher costs could also inhibit our ability to develop new products and

or other trade restrictions may lead to continuing uncertainty and volatility in U.S.

and global financial and economic conditions and

commodity markets, declining consumer confidence, significant inflation, and diminished expectations for the economy, and ultimately

may reduce demand for our products.

Such conditions could have a material adverse impact on our business, results of operations and cash

Also, disruptions and volatility in the financial markets may lead to adverse changes in the availability, terms and cost of capital.

Such adverse changes could increase our costs of capital and limit our access to financing sources, which could in turn reduce our cash

flow and limit our ability to pursue growth opportunities.

of our manufacturing has and could increase our costs of doing business or lead to delays in shipping and could materially adversely

affect our business, our results of operations, and our financial condition.

to our manufacturing operations, whether from a pandemic, natural disasters, lease issues, or equipment failures, could increase costs,

delay production and shipping, and negatively impact our business, operations, and financial condition.

Workplace injuries, industrial

accidents, or violence could also lead to production suspensions and delays, affecting customer satisfaction, results of operations, financial

condition including our cash flow.

The Restructuring Plan, which consolidated our manufacturing operations into one plant, may heighten

the risk of disruption, particularly from regional economic downturns, hurricanes, pandemics, utility shortages, or other events affecting

our Georgia plant, potentially harming our business.

Future growth and profitability

may depend on our ability to improve our product line, successfully introduce new products, and effectively and efficiently market our

products to attract and retain customers.

accidents, or violence could also lead to production suspensions and delays, affecting customer satisfaction, results of operations,

financial condition including our cash flow.

The consolidation of our manufacturing operations into one plant, may heighten the risk

of disruption, particularly from regional economic downturns, hurricanes, pandemics, utility shortages, or other events affecting our

Georgia plant, potentially harming our business.

growth and profitability may depend on our ability to improve our product line, successfully introduce new products, and effectively

and efficiently market our products to attract and retain customers.

mattress, pillow, bedding, bed base, and cushion industries are highly competitive.

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in research and development to improve and expand our products.

If these efforts fail to lead to meaningful improvements or consumer acceptance,

our results of operations, financial results, and reputation could suffer, potentially harming our business.

A large portion of our gross

profit comes from mattress products.

If we fail to develop or successfully market new models, such as those introduced in recent years,

our results of operations and business could be harmed.

If these efforts fail to lead to meaningful improvements or consumer

acceptance, our results of operations, financial results, and reputation could suffer, potentially harming our business.

A large portion

of our gross profit comes from mattress products.

If we fail to develop or successfully market new models, such as those introduced in

recent years, our results of operations and business could be harmed.

rely on effective marketing messages and efficient advertising to drive consumer awareness and sales.

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Advertising costs

on social media platforms such as Facebook have risen significantly, reducing efficiency, and we expect costs to keep increasing.

on social media platforms such as Meta have in the past and may in the future rise significantly, which could reduce efficiency.

rely on relationships with media partners, search engines, social media influencers, and e-commerce platforms to drive traffic and attract

If we can’t maintain or develop these relationships on favorable terms, or if our reputation suffers, our ability to grow could

If we can’t maintain or develop these relationships on favorable terms, or if our reputation suffers, our ability to

grow could be impacted.

If we can’t manage these costs or generate expected sales, our business could be adversely affected.

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could also negatively impact our results of operations and financial condition.

expansion into wholesale distribution and new sales channels, new products, market segments and geographic regions subjects us to additional

business, legal, financial, and competitive risks.

of our sales are through DTC channels, but we have expanded into wholesale distribution.

However, we cannot guarantee success with wholesale

We may struggle to generate additional sales through wholesale channels, and extending credit terms to wholesale partners could

expose us to the risk of unpaid or late invoices.

expansion into sales channels, new products, market segments and geographic regions subjects us to additional business, legal, financial,

and competitive risks.

addition to DTC channels, we continue to expand into wholesale distribution.

We cannot guarantee success with wholesale partners.

struggle to generate additional sales through wholesale channels, and extending credit terms to wholesale partners could expose us to

the risk of unpaid or late invoices.

Providing fixtures to wholesale partners could also pose challenges in recovery or reuse.

Wholesale customers may not purchase at expected volumes, and gross profit from wholesale sales are lower than DTC.

If these issues arise,

they could harm our reputation, limit growth, and negatively impact our results of operations.

may struggle to open additional Purple showrooms beyond those already established.

Operating showrooms involves risks such as inventory

shrinkage, increased expenses, lease obligations, distribution challenges, and employee management.

If we fail to operate these stores

profitably or if we close unprofitable stores, it could harm our reputation, limit growth, and negatively impact our business.

into new product offerings through e-commerce, wholesale, and Purple showrooms presents challenges, including potential service disruptions,

quality issues, and customer claims.

Expanding sales channels may also require new products to avoid conflicts between channels.

may introduce warranty and return risks.

Expanding into new markets or regions could expose us to additional regulations, leading to increased

compliance and distribution costs.

customers may not purchase at expected volumes, and gross profit from wholesale sales are lower than DTC.

If these issues arise, they

could harm our reputation, limit growth, and negatively impact our results of operations.

showrooms involves risks such as inventory shrinkage, increased expenses, lease obligations, distribution challenges, and employee management.

If we fail to operate these stores profitably or if we close unprofitable stores, it could harm our reputation, limit growth, and negatively

impact our business.

Expanding into new product offerings through e-commerce, wholesale, and Purple showrooms presents challenges, including

potential service disruptions, quality issues, and customer claims.

Expanding sales channels may also require new products to avoid conflicts

between channels.

New products may introduce warranty and return risks.

Expanding into new markets or regions could expose us to additional

regulations, leading to increased compliance and distribution costs.

business could suffer if we are unsuccessful in making, integrating and maintaining commercial agreements, strategic alliances and other

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relationships or strategic decisions by partners could negatively affect our business.

For example, (i) one of our competitors is purchasing

For example, (i) the industry leader has acquired

one of our wholesale partners, which could disrupt our relationship or prevent us from continuing to sell our products in favorable placements

alongside the competitor’s products or at all in the wholesale partner’s stores, and (ii) one of our competitors owns a manufacturing

alongside the competitor’s products or at all in the wholesale partner’s stores, (ii) the industry leader owns a manufacturing

company with which we have a manufacturing relationship, and that competitor could disrupt that relationship to harm our manufacturing

We may also struggle to maintain or develop these relationships and may not be able to secure new ones on favorable terms.

efforts, (iii) the industry leader is attempting to purchase one of our key suppliers, and (iv) the industry leader is attempting to get

Government to place import restrictions on an important international supplier.

We may also struggle to maintain or develop these

relationships and may not be able to secure new ones on favorable terms,

sell products through wholesale partnerships and may seek to expand these relationships.

However, these wholesale partnerships may not

be profitable and could incur additional costs compared to our DTC operations.

Wholesale relationships may be terminated or modified,

or wholesale partners may reduce orders or fail to meet their obligations, resulting in lost sales and adversely affecting our financial

However, these wholesale partnerships may

not be profitable and could incur additional costs compared to our DTC operations.

In addition, an expansion of these relationships

may concentrate our business with one customer resulting in greater reliance on that customer, which could adversely affect our

ability to grow our business and compete in our industry.

Wholesale relationships may be terminated or modified, or wholesale

partners may reduce orders or fail to meet their obligations, resulting in lost sales and adversely affecting our financial

performance, results of operations and financial condition.

Disputes with partners or the termination or amendment of agreements could

lead to expenses, delayed payments, liabilities, and distractions from our strategic objectives.

If we cannot renew or replace agreements

on favorable terms, it could harm our business.

Wholesale partners may also compete against us in key channels, harming our business.

Maintaining these relationships may require significant resources and could limit our sales channels, adversely affecting other areas

of our business.

Disputes with partners or the termination or amendment of agreements

could lead to expenses, delayed payments, liabilities, and distractions from our strategic objectives.

If we cannot renew or replace

agreements on favorable terms, it could harm our business.

Wholesale partners may also compete against us in key channels,

harming our business.

Maintaining these relationships may require significant resources and could limit our sales channels,

adversely affecting other areas of our business.

are expanding Purple showrooms across the U.S., which may compete with our wholesale partners for customers.

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credit to us.

use some third-party manufacturers to assemble certain of our products using Company-made Hyper-Elastic Polymer material.

our third-party manufacturers to maintain high levels of productivity and satisfactory delivery schedules.

These third-party manufacturers

may experience difficulties assembling our products, particularly in the early stages of their engagement as they develop expertise in

assembling our products to our standards.

For example, we previously experienced temporary issues with certain third-party manufacturers

assembling our mattresses and the occurrence of such issues in the future would materially harm our business.

The ability of our suppliers

to effectively satisfy our production requirements could also be impacted by their financial difficulty or damage to their operations

caused by fire, pandemic, terrorist attack, natural disaster, or other events.

The failure of any supplier to meet our expectations could

result in supply shortages or delays for certain products and components and harm our business.

A reduction in the availability

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Additionally, federal

regulations are placing more restrictions on consumer credit programs, including promotional credit offers.

Some of our agreements with

third-party finance companies, which offer financing to our customers, may be terminated by them with 30 days’ notice.

They control financing

offers and credit standards and may provide better terms to our competitors or in channels outside our focus.

Reduced credit availability

from economic changes, regulatory shifts, terminated agreements, or competitors offering better terms could negatively impact our results

of operations and financial condition.

regulations place restrictions on consumer credit programs, including promotional credit offers.

They control financing offers and credit

standards and may provide better terms to our competitors or in channels outside our focus.

Reduced credit availability from economic

changes, regulatory shifts, terminated agreements, or competitors offering better terms could negatively impact our results of operations

and financial condition.

Over or under supply

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could impact production and result in inadequate inventory levels.

Sourcing challenges, particularly from China, due to trade tensions,

tariffs or other geopolitical factors, will also increase costs and disrupt supply.

Any shortages or delays in meeting demand could harm

customer satisfaction, results of operations and financial condition.

Sourcing challenges due to trade tensions, tariffs or other geopolitical

factors, will also increase costs and disrupt supply.

Any shortages or delays in meeting demand could harm customer satisfaction, results

of operations and financial condition.

We rely on key suppliers,

some of which are our only sources for certain products, materials, or services.

While alternative suppliers may be available, disruptions

or cost increases in the supply of materials could negatively affect our results of operations and financial condition.

Additionally,

changes in a supplier’s financial condition could delay their product delivery to us.

Shipping delays from port closures, congestion,

and shortages of containers or ships could disrupt manufacturing, supply of materials, and inventory management.

These delays may hinder

our ability to meet product demand and deliver on time, negatively impacting our business and results of operations.

some of which are our only source or one of few sources for certain products, materials, or services.

While alternative suppliers may

be available, disruptions or cost increases in the supply of materials could negatively affect our results of operations and financial

Additionally, changes in a supplier’s financial condition could delay their product delivery to us.

Shipping delays from

port closures, congestion, and shortages of containers or ships could disrupt manufacturing, supply of materials, and inventory management.

These delays may hinder our ability to meet product demand and deliver on time, negatively impacting our business and results of operations.

If we lose members of

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Consumer Product

Safety Commission (CPSC) and other jurisdictions have fire retardancy standards for the mattress industry, with some states and Congress

considering stricter regulations.

These standards require fire retardant materials, quality assurance programs, random product testing,

and documentation retention, which can be costly.

If testing or inspections show our products don’t meet flammability standards,

we could face production halts, recalls, fines, or penalties, negatively impacting our operations and financial condition.

Safety Commission (CPSC) and other jurisdictions have fire retardancy standards for the mattress industry, and some jurisdictions may

consider stricter regulations.

These standards require fire retardant materials, quality assurance programs, random product testing, and

documentation retention, which can be costly.

If testing or inspections show our products don’t meet flammability standards, we

could face production halts, recalls, fines, or penalties, negatively impacting our operations and financial condition.

New legislation

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We may be involved in legal

proceedings arising in the ordinary course of business, including commercial, product liability, employment and intellectual property

Litigation is unpredictable, and it is possible that the outcome of future claims asserted, or adverse publicity resulting from

litigation, could adversely affect our business, reputation, results of operations or financial condition.

proceedings arising in the ordinary course of business, including commercial, product liability, employment, intellectual property claims,

and claims brought by shareholders.

Litigation is unpredictable, and it is possible that the outcome of future claims asserted, or adverse

publicity resulting from litigation, could adversely affect our business, reputation, results of operations or financial condition.

Risks Relating to our Intellectual Property

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property infringement, though we believe our products do not infringe others’ rights.

However, we cannot guarantee that such claims, including

claims of invalidity and indemnification, will not arise or negatively impact our business.

Defending against these claims could incur

costs and divert resources.

Infringement claims could also result in injunctions preventing distribution of our products or forcing us

to alter our designs if licensing terms are unavailable or unreasonable.

However, we cannot guarantee that such claims,

including claims of invalidity and indemnification, will not arise or negatively impact our business.

Defending against these claims could

incur costs and divert resources.

Infringement claims could also result in injunctions preventing distribution of our products or forcing

us to alter our designs if licensing terms are unavailable or unreasonable.

We previously licensed

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One of EdiZONE’s prior licenses grants exclusivity to a third party of an earlier technology that could prevent us from

selling a mattress made from that earlier technology in the European Union.

This risk could be mitigated by redesigning our Hyper-Elastic

Polymer material using existing or new technologies.

However, there is no guarantee that any of our future sales in the European Union

won’t be challenged by EdiZONE’s licensee, and any such redesigned mattresses may not succeed.

If challenged, we are required

to indemnify EdiZONE.

We have the right to enforce our intellectual property against licensees who violate their agreements or infringe

on our intellectual property.

We must indemnify EdiZONE and cover enforcement costs.

However, there is no guarantee that such enforcement

efforts would succeed, which could negatively impact our business.

selling a mattress made from that earlier technology in the European Union or in the medical industry.

This risk could be mitigated by

redesigning our Hyper-Elastic Polymer material using existing or new technologies.

However, there is no guarantee that any of our future

sales in the European Union or in the medical industry won’t be challenged by EdiZONE’s licensee, and any such redesigned

mattresses may not succeed.

If challenged, we are required to indemnify EdiZONE.

We have the right to enforce our intellectual property

against licensees who violate their agreements or infringe on our intellectual property.

We must indemnify EdiZONE and cover enforcement

However, there is no guarantee that such enforcement efforts would succeed, which could negatively impact our business.

Risks Relating to our Common Stock

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To continue listing our common stock on NASDAQ, we must maintain certain governance, financial, distribution and stock price levels.

we must maintain a minimum amount in stockholders’ equity, a minimum number of holders of our Common Stock, and a $1.00 minimum

per share bid price for our Common Stock.

If we fail to maintain a $1.00 minimum per share bid price for a period of 30 consecutive business

days, we have 180 calendar days to maintain our Common Stock at a $1.00 minimum per share bid price for 10 consecutive trading days.

we do not regain compliance within 180 calendar days, NASDAQ may grant a second compliance period of 180 calendar days or it may determine

to delist our Common Stock, at which point we would have an opportunity to appeal the delisting determination to a hearings panel.

November 11, 2024, we received written notice from NASDAQ that we were not in compliance with Nasdaq minimum share price rule, since the

closing price of our Common Stock had been below $1.00 per share for 30 consecutive business days.

However, we regained such compliance

on February 3, 2025.

It is possible that we may again fail to comply with such minimum bid price requirement in the future if our stock

price again falls below $1.00 for an extended period.

Currently, our stock price has been below $1.00 since February 19, 2025.

Generally, we must maintain a minimum amount in stockholders’ equity, a minimum number of holders of our common stock, and a $1.00

minimum per share bid price for our common stock.

If we fail to maintain a $1.00 minimum per share bid price for a period of 30 consecutive

business days, we have 180 calendar days to maintain our common stock at a $1.00 minimum per share bid price for 10 consecutive trading

If we do not regain compliance within 180 calendar days, NASDAQ may grant a second compliance period of 180 calendar days or it

may determine to delist our common stock, at which point we would have an opportunity to appeal the delisting determination to a hearings

On November 5, 2025, we received written notice from NASDAQ that we were not in compliance with Nasdaq minimum share price rule,

since the closing price of our Common Stock had been below $1.00 per share for 30 consecutive business days.

We have 180 calendar days,

or until May 4, 2026, to regain compliance with the Nasdaq minimum share price rule.

To regain compliance, the bid price of our Common

Stock must close at $1.00 or more for a minimum of ten consecutive business days.

While we intend to actively monitor the bid price of

our Common Stock and will consider available options to regain compliance, there can be no guarantee that we will be able to regain compliance

or otherwise comply with NASDAQ’s other continued listing requirements.

If we are unable to comply

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As reported by Coliseum in

its Schedule 13D/A filed on January 23, 2024, Coliseum beneficially owns 58.5 million shares of Common Stock (which includes 46.9 million

shares of Common Stock currently owned and 11.6 million shares of Common Stock that could be acquired upon exercise of its Warrants).

The existence of such a large stockholder may limit the potential for third party offers to acquire the Company.

its Schedule 13D/A filed on May 6, 2025, Coliseum beneficially owns 61.1 million shares of Common Stock (which includes 46.9 million shares

of Common Stock currently owned and 14.2 million shares of Common Stock that could be acquired upon exercise of its warrants).

The existence

of such a large stockholder may limit the potential for third party offers to acquire the Company.

Significant payment

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the price that investors might be willing to pay in the future for our Common Stock.

Our Second Amended and

Restated Certificate of Incorporation could make it very difficult for an investor to bring any legal actions against us, our directors,

Our Second Amended

and Restated Certificate of Incorporation could make it very difficult for an investor to bring any legal actions against us, our directors,

or our officers and may limit our stockholders’ ability to obtain a favorable judicial forum.

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and the performance of our business.

connection with the issuance of Warrants pursuant to the Amended and Restated Credit Agreement and the 2025 Amendment, the Company entered

into a Second Amended and Restated Registration Rights Agreement (the “Registration Rights Agreement”) with CCP, Blackwell,

Coliseum Capital Co-Invest III, L.P.

(“C-3”), Harvest Master, Harvest Partners, and HSCP (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 market price of our Common Stock could decline as

a result of sales by a few large stockholders, such as Coliseum or the Holders, or the perception that these sales could occur, including

as a result of the registration statement.

These sales might also make it more difficult for us to sell equity securities at a time and

price that we deem appropriate.

connection with the issuance of warrants pursuant to the Amended and Restated Credit Agreement and the 2025 Amendment, we entered into a Second Amended and Restated Registration Rights Agreement (the “Registration Rights Agreement”)

with CCP, Blackwell, Coliseum Capital Co-Invest III, L.P.

(“C-3”), Harvest Master, Harvest Partners, and HSCP (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”).

price of our Common Stock could decline as a result of sales by a few large stockholders, such as Coliseum or the Holders, or the

perception that these sales could occur, including as a result of the registration statement.

These sales might also make it more

difficult for us to sell equity securities at a time and price that we deem appropriate.

stockholders may experience substantial dilution in the value of their investment or may otherwise have their interests impaired if we

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could result in substantial dilution of existing stockholders.

For example, in February 2023 we issued 13.4 million shares of Common Stock

pursuant to a public offering, on January 23, 2024, we issued to the Lenders under the Amended and Restated Credit Agreement the 2024

Warrants to purchase 20.0 million shares of our Common Stock at a price of $1.50 per share, subject to adjustments, and on March 12, 2025,

we issued to the Lenders under the 2025 Amendment the 2025 Warrants to purchase 6.2 million shares of our Common Stock at a price of $1.50

per share, subject to adjustments.

The exercise of the Warrants will dilute the value of Class A common stock and stockholder voting power.

addition, the Warrants 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.

For example, on January 23, 2024, we issued to the Lenders under the Amended

and Restated Credit Agreement the warrants to purchase 20.0 million shares of our common stock at a price of $1.50 per share (the “2024

Warrants”), subject to adjustments, and on March 12, 2025, we issued to the 2025 Lenders under the 2025 Amendment the 2025 Warrants

to purchase 6.2 million shares of our common stock at a price of $1.50 per share, subject to adjustments.

In addition, on May 2, 2025,

we issued to the 2025 Lenders under the Second 2025 Amendment additional warrants (the “2025 Additional Warrants”) to purchase

6.6 million shares of our common stock at a price of $1.50 per share, subject to adjustments and on May 2, 2025, we issued to Somnigroup

International, Inc.

as partial consideration for their entering into various agreements with Somnigroup International, Inc.

warrants to purchase 8.0 million shares of our common stock at a price of $1.50 per share, subject to adjustments.

The exercise of warrants

will dilute the value of Class A common stock and stockholder voting power.

In addition, the warrants 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 event of our liquidation, holders of our debt would receive distributions of our assets before distributions to holders of our common

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detect all misstatements.

Any failure in internal controls or disclosure procedures could undermine the accuracy and timeliness of our

disclosures, potentially eroding investor confidence, requiring significant resources to fix, and exposing us to legal or regulatory actions.

For example, we identified a material weakness in our warranty reserve accounting during the preparation of our September 30, 2023, financial

However, as of June 30, 2024, we concluded that the material weakness has been remediated and that our internal controls over

financial reporting are effective.

We have in the past identified material weaknesses in our controls.

Any failure in internal controls or disclosure

procedures could undermine the accuracy and timeliness of our disclosures, potentially eroding investor confidence, requiring significant

resources to fix, and exposing us to legal or regulatory actions.

continue to evaluate, design and implement controls and procedures designed to avoid material weaknesses.

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legal costs, and exposing us to shareholder litigation.

We cannot guarantee against future material

weaknesses in our internal control.

Failure to maintain effective internal control could impact the accuracy and timeliness of our financial

reporting, potentially leading to sanctions from NASDAQ, the SEC, or other regulators.

Failure to timely file will cause us to be ineligible

to utilize short form registration statements on Form S-3, which may also impair our ability to raise capital, execute business strategies,

or issue shares for acquisitions.

We cannot guarantee against future material weaknesses in our internal

Failure to maintain effective internal control could impact the accuracy and timeliness of our financial reporting, potentially

leading to sanctions from NASDAQ, the SEC, or other regulators.

Failure to timely file will cause us to be ineligible to utilize short

form registration statements on Form S-3, which may also impair our ability to raise capital, execute business strategies, or issue shares

for acquisitions.

Additionally, it could erode investor confidence and negatively affect our stock price.

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tax benefits is uncertain.

Under Section 382 and related provisions of the Internal Revenue Code

of 1986, as amended (the “Code”), if a corporation undergoes an “ownership change”, the corporation’s ability

to use its pre-change net operating loss carryforwards (“NOLs”) 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 (by value).

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.

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.

Under Section 382 and related

provisions of the Internal Revenue Code of 1986, as amended (the “Code”), if a corporation undergoes an “ownership change”,

the corporation’s ability to use its pre-change net operating loss carryforwards (“NOLs”) 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 (by value).

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.

In 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.

The results of this study indicate that we experienced one ownership change on December 31, 2021.

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 to state;

as a result, all or a portion of those carryforwards could expire before being available to

reduce future income tax liabilities.

On June 27, 2024, our Board

approved the NOL Rights Plan to protect stockholder value by attempting to safeguard our ability to use Current NOLs of approximately

$310.7 million to reduce potential future federal income tax obligations from becoming substantially limited by future ownership of our

Common Stock.

At the Special Meeting, stockholders ratified the NOL Rights Plan.

Under the NOL Rights Plan, the Board authorized and declared

a dividend of one Right for each outstanding share of Common Stock to stockholders of record at the close of business on July 26, 2024.

Upon a stockholder acquiring greater than a 4.9% ownership percentage threshold (or, if a stockholder has beneficial ownership of in excess

of 4.9%, then the ownership percentage that is one-half of one percentage point greater than their current beneficial ownership percentage),

the Rights will become exercisable to significantly dilute any stockholder who violates the ownership limitations of the NOL Rights Plan.

In connection with the NOL Rights Plan, the Board adopted, and our stockholders approved at the Special Meeting, the NOL Protective Charter

Amendment that adds an additional layer of protection to our Current NOLs until June 30, 2025 by voiding any transfer of Common Stock

that results in a stockholder acquiring beyond a 4.9% ownership percentage threshold (or, if a stockholder has current beneficial ownership

of in excess of 4.9%, then the ownership percentage that is one-half of one percentage point greater than their current beneficial ownership

Use of our Current NOLs and

other tax benefits depends on our ability to generate taxable income in the future.

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 to state;

as a result, all or a portion of those carryforwards could expire before being

available to reduce future income tax liabilities.

Use of our Current NOLs

and other tax benefits depends on our ability to generate taxable income in the future.

We cannot ensure whether we will have future taxable

14 unchanged sentences

Protective Charter Amendment is in place.

There is continued risk

of ownership change under Code Section 382 .

Although the NOL Protective

Charter Amendment and NOL Rights Plan intend to reduce the likelihood of an ownership change under Code Section 382, we cannot ensure

that the NOL Protective Charter Amendment and the NOL Rights Plan will be effective.

The amount by which a future ownership interest under

Code Section 382 may change could, for example, be affected by purchases of our Common Stock by stockholders who are 5% stockholders (as

defined under Code Section 382) or by purchases of stock or other interests in corporations, partnerships or other legal entities that

own 4.9% or more of our Common Stock, over which we have no control.

Further, while the NOL Protective Charter Amendment and the NOL Rights

Plan allow for the exercise of currently outstanding conversion rights, exchange rights, warrants or options or otherwise, such exercises

may result in an ownership change under Code Section 382.

It may also be in our best interests, considering all relevant facts and circumstances

at the time, to permit the acquisition of our Common Stock in excess of the specified limitations or to issue new or redeem existing equity

in the future, all of which may increase the likelihood of an ownership change under Code Section 382.

The Current NOL protections

under the NOL Protective Charter Amendment and NOL Rights Plan will expire by their terms on June 30, 2025.

The NOL Protective Charter

Amendment and the NOL Rights Plan may potentially adversely affect the market for, and negatively impact the value of, our Common Stock .

The NOL Protective Charter

Amendment and the NOL Rights Plan intend to prohibit or deter a stockholder’s ability to acquire, directly, indirectly or constructively,

additional shares of our Common Stock in excess of specific limitations.

A stockholder’s ability to dispose of our Common Stock

may be limited by reducing potential acquirers for such shares.

A stockholder’s ownership of our Common Stock may become subject

to the restrictions of the NOL Protective Charter Amendment, or may trigger applicable thresholds under the NOL Rights Plan, upon actions

taken by Persons (as such term is defined in the NOL Protective Charter Amendment or the NOL Rights Plan, as applicable) related to, or

affiliated with, such stockholder.

Because the NOL Protective

Charter Amendment and the NOL Rights Plan were approved by our stockholders at the Special Meeting, we have included a legend reflecting

the transfer restrictions included in the NOL Protective Charter Amendment and the Rights issued pursuant to the NOL Rights Plan on certificates

representing newly issued or transferred shares of our Common Stock and disclosed such Rights and restrictions to Persons holding our

Common Stock in uncertificated form, and to the public generally.

Because certain buyers, including Persons who wish to acquire more than

4.9% of our Common Stock and certain institutional holders who may not be comfortable holding our Common Stock with restrictive legends,

may choose not to purchase our Common Stock, the NOL Protective Charter Amendment and the NOL Rights Plan could have an adverse effect

on the marketability and trading value of our Common Stock in an amount that could more than offset any value preserved from protecting

our Current NOLs.

The NOL Protective Charter Amendment and NOL Rights Plan could also have a negative impact on the trading value of our

Common Stock by deterring Persons or groups of Persons from acquiring our Common Stock, including in acquisitions that might result in

some or all our stockholders receiving a premium above market value.

The NOL Protective Charter

Amendment and the NOL Rights Plan may have an anti-takeover effect .

While the NOL Protective Charter

Amendment is not intended to prevent, or even discourage, a proposal to acquire the Company, the NOL Protective Charter Amendment may

have a potential anti-takeover effect because, among other things, it will restrict the ability of a Person, entity or group to accumulate

more than 4.9% of our Common Stock and the ability of Persons, entities or groups now owning more than 4.9% of our Common Stock to acquire

any significant amount of additional shares of our Common Stock, in each case, without the approval of our Board.

Similarly, while the

NOL Rights Plan is not intended to prevent, or even discourage, a proposal to acquire the Company the NOL Rights Plan may have a potential

anti-takeover effect because, among other things, an Acquiring Person (as such term is defined in the NOL Rights Plan) may have its ownership

interest diluted upon the occurrence of a triggering event.

The overall effects of the NOL Protective Charter Amendment and NOL Rights

Plan may be to render more difficult or discourage a merger, tender offer, proxy contest or assumption of control by a substantial holder

of our Common Stock and have an adverse effect on the marketability and the trading value of our Common Stock.

However, the NOL Protective

Charter Amendment and NOL Rights Plan should not interfere with any merger or other business combination approved by the Board.

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

What changed 10-K

Item 1A. Risk Factors