What changed in this filing

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Item 9A. Controls and Procedures

2026-03-31 compared with 2025-03-14 · 1464 added, 1561 removed, 1201 unchanged (72% of the section changed)

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that our internal control over financial reporting was effective as of December 31, 2025.

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 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

Changes in Internal Control over Financial

There were no changes in our

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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.

the quarter ended December 31, 2025, 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

Amendment to CEO Employment

March 30, 2026, the Company and Mr.

DeMartini entered into an 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.

Agreement (the “Employment Agreement Amendment”).

The Employment Agreement Amendment revises Mr.

Amended and Restated Employment agreement to (i) provide that in the event of a termination of Mr.

DeMartini’s employment

without Cause (as defined in the Amended and Restated Employment Agreement) during a Change in Control Period (as defined in the

Amended and Restated Employment Agreement), then Mr.

DeMartini will be entitled to, among other things, an amount of cash severance

equal to 1.5 times Mr.

DeMartini’s annual Base Salary (as defined in the Amended and Restated Employment Agreement), and (ii)

extend the period of the restrictive covenants under Mr.

DeMartini’s Amended and Restated Employment Agreement to eighteen

months if his employment is terminated without Cause or he resigns for Good Reason during a Change in Control Period.

The foregoing

summary of the Employment Agreement Amendment does not purport to be complete and is subject to, and qualified in its entirety by,

the full text of the Employment Agreement Amendment, which will be filed as an exhibit to our Quarterly Report on Form 10-Q for the

quarter ending March 31, 2026.

Amendment to CFO Equity

On March 14, 2024, the Company

granted 129,630 Restricted Stock Units and 240,741 Performance Stock Units to Mr.

Vogensen, with a vesting commencement date of March

14, 2024 (the “Prior Awards”).

On March 30, 2026, the Company amended the terms of the Prior Awards to correct the vesting

commencement date to October 16, 2023 (collectively, the “Award Amendments”).

The foregoing summary of the Award Amendments

does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Award Amendments, which will

be filed as exhibits to our Quarterly Report on Form 10-Q for the quarter ending March 31, 2026.

Disclosure Regarding Foreign Jurisdictions that Prevent

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

Certificate of Elimination of the Preferred Stock of the Company dated May 6, 2025 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K (File No.

001-37523) filed with the SEC on May 6, 2025).

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.

Description of Registered Securities (incorporated by reference to Exhibit 4.2 to the Annual Report on Form 10-K filed with the SEC on March 14, 2025).

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.

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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.

001-37523) filed on March 13, 2025).

Form of Warrant (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K (File No.

001-37523) filed on March 13, 2025).

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.

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

001-37523) filed on March 13, 2025).

Second Amendment to Amended and Restated Credit Agreement, dated as of May 2, 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 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No.

001-37523) filed on May 6, 2025).

Form of Loan Warrant (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K (File No.

001-37523) filed on May 6, 2025).

Form of SGI Warrant (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K (File No.

001-37523) filed on May 6, 2025).

Third Amended and Restated Registration Rights Agreement, dated as of May 2, 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.

(incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K (File No.

001-37523) filed on May 6, 2025).

Registration Rights Agreement, dated as of May 2, 2025, by and between Purple Innovation, Inc.

and Somnigroup International, Inc.

(incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K (File No.

001-37523) filed on May 6, 2025).

First Amendment to the Stockholders Right Agreement, dated May 6, 2025 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 (File No.

001-37523) filed on May 6, 2025).

Long-Term Incentive Cash Bonus Agreement dated July 22, 2025, between Purple Innovation, Inc.

and Robert DeMartini (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No.

001-37523) filed on July 23, 2025).

Long-Term Incentive Cash Bonus Agreement dated July 23, 2025, between Purple Innovation, Inc.

and Todd Vogensen (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K (File No.

001-37523) filed on July 23, 2025).

Long-Term Incentive Cash Bonus Agreement dated July 22, 2025, between Purple Innovation, Inc.

and Eric Haynor (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K (File No.

001-37523) filed on July 23, 2025).

Agreement dated July 23, 2025, between Purple Innovation, Inc.

and Robert DeMartini (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No.

001-37523) filed on July 29, 2025).

Agreement dated July 24, 2025, between Purple Innovation, Inc.

and Todd Vogensen (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K (File No.

001-37523) filed on July 29, 2025).

Agreement dated July 24, 2025, between Purple Innovation, Inc.

and Eric Haynor (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K (File No.

001-37523) filed on July 29, 2025).

Form of Restricted Stock Unit Grant Agreement relating to Special Incentive Bonus Equity Grants (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q (File No.

001-37523) filed with the SEC on July 30, 2025).

Letter Agreement between the Company and Todd E.

Vogensen dated March 12, 2025 (incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q (File No.

001-37523) filed with the SEC on July 30, 2025).

Letter Agreement between the Company and Eric S.

Haynor dated March 12, 2025 (incorporated by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q (File No.

001-37523) filed with the SEC on July 30, 2025).

Letter Agreement between the Company and John J.

Roddy dated March 12, 2025 (incorporated by reference to Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q (File No.

001-37523) filed with the SEC on July 30, 2025).

Second Amendment dated March 12, 2025, to Amended and Restated Employment Agreement of Robert T.

DeMartini (incorporated by reference to Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q (File No.

001-37523) filed with the SEC on July 30, 2025).

Second Amendment dated May 2, 2025, to Master Retailer Agreement between the Company and Mattress Firm, Inc.

(incorporated by reference to Exhibit 10.8 to the Company’s Quarterly Report on Form 10-Q (File No.

001-37523) filed with the SEC on July 30, 2025).

Amended and Restated Master Vendor Supply and Services Agreement dated May 2, 2025, between the Company and Tempur Sherwood, LLC.

(incorporated by reference to Exhibit 10.9 to the Company’s Quarterly Report on Form 10-Q (File No.

001-37523) filed with the SEC on July 30, 2025).

Amendment to Amended and Restated Employment Agreement dated August 7, 2025, between Purple Innovation, Inc.

and Robert DeMartini (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No.

001-37523) filed with the SEC on August 12, 2025).

Form of Amendment to the Restricted Share Unit Agreement dated August 7, 2025, between Purple Innovation, Inc.

and certain officers of the Company (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K (File No.

001-37523) filed with the SEC on August 12, 2025).

Insider Trading Policy

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Power of Attorney (included on signature page)

Certification of the Principal Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a)

Certification of the Principal Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a)

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

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

Certification by Robert T.

DeMartini, Chief Executive Officer, pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Certification by Todd E.

Vogensen, Chief Financial Officer, pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Certification by Robert T.

DeMartini, Chief Executive Officer, pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Certification by Todd E.

Vogensen, Chief Financial Officer, pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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

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Filed herewith

Furnished herewith

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

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

Certain portions of this exhibit have been omitted pursuant to Item 601(b)(10) of Regulation S-K.

The Registrant hereby undertakes to furnish to the SEC, upon request, copies of any such instruments.

Form 10-K Summary

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PCAOB ID# 243 ) F-2

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

Consolidated Balance Sheets as of December 31, 2025 and 2024 F-4

Consolidated Statements of Operations for the years ended December 31, 2025, 2024 and 2023 F-5

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

Going Concern Uncertainty

The accompanying consolidated

financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 2 to the consolidated

financial statements, the Company has a history of recurring net losses and cash used in operations, an accumulated deficit, and access

to additional capital is currently outside of the Company’s control, which raises substantial doubt about its ability to continue

as a going concern.

Management’s plans in regard to this matter are also described in Note 2.

The consolidated financial statements

do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

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standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated

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

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in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit

matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Accrued Warranty Liabilities

As of December 31, 2024, the Company’s accrued

warranty liabilities were $32.2 million.

As discussed in Note 2 to the consolidated financial statements, the Company provides a limited

warranty on the majority of its products sold.

Accrued warranty liabilities are estimated based on the results of historical trends and

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

Estimated warranty costs for the Company’s direct

to consumer customers are recognized at the time of sale in cost of revenues and warranty costs for the Company’s wholesale customers

are recognized at the time of sale as an offset to net revenues.

As described in Note 2 to the consolidated financial

statements, the Company’s accrued warranty liabilities balance was $26.7 million as of December 31, 2025.

The Company provides a

limited warranty on the majority of its products sold.

Estimates for direct to consumer (“DTC”) warranty costs are based primarily

on historical warranty claims, estimated warranty costs and the estimated warranty claim rate, and estimates for wholesale warranty costs

are based primarily on the historical warranty claim amounts and the estimated warranty claim rate, which both may be adjusted for expected

Estimated warranty costs for the Company’s DTC customers are recognized at the time of sale as cost of revenues and estimated

warranty costs for the Company’s wholesale customers are recognized at the time of sale as an offset to net revenues.

We identified the estimate of accrued warranty

liabilities as a critical audit matter because of certain assumptions used by management to estimate warranty costs at the time of sale,

specifically, estimated future warranty claims and estimated costs to remedy warranty claims.

The principal consideration for our determination

was the subjective judgment required to determine the future warranty claim rate used to estimate warranty claims through the end of the

warranty period and an increased extent of audit effort to address this matter.

liabilities as a critical audit matter because of certain assumptions and inputs used to estimate warranty costs at the time of sale require

judgment or significant effort by management, specifically, the historical warranty claims, estimated warranty costs, and estimated warranty

claim rate for the DTC estimated warranty costs, and the historical warranty claims amounts and estimated warranty claim rate for the

wholesale estimated warranty costs.

Auditing these assumptions involved especially challenging and subjective auditor judgment due to

the nature and extent of audit evidence and an increased extent of audit effort required to address this matter.

The primary procedures we performed to address

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

claims to actual warranty 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.

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

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

certain inputs that served as the basis for the DTC estimated warranty costs, including the historical warranty claims made, actual warranty

costs incurred, and costs expected to be reimbursed by the customer.

the historical warranty claim amounts which served as the basis for the wholesale estimated warranty costs.

of operational management regarding their knowledge of any existing 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.

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Related party debt

Long-term debt, net of current portion

Accrued warranty liabilities, net of current portion

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Commitments and contingencies (Note 13)

Stockholders’ equity:

Stockholders’ equity (deficit):

Class A common stock;

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Accumulated deficit

Total stockholders’ equity attributable to Purple Innovation, Inc.

Total stockholders’ equity (deficit) attributable to Purple Innovation, Inc.

Noncontrolling interest

Total stockholders’ equity

Total liabilities and stockholders’ equity

Total stockholders’ equity (deficit)

Total liabilities and stockholders’ equity (deficit)

The accompanying notes are an integral part of

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Change in fair value – warrant liabilities

Tax receivable agreement income

Total (expense) other income, net

Total other (expense) income, net

Net (loss) income before income taxes

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Noncontrolling

— December 31, 2021

$ ( 262,742 )

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

Balance – December 31, 2022

$ ( 355,212 )

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

Stock-based compensation

Exchange of stock

Proportional Representation Preferred Linked Stock redemption fee

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

$ ( 475,969 )

of stock for Intellibed acquisition

of stock under equity compensation plans

of transactions affecting NCI

– December 31, 2024

Stock-based compensation

Exchange of stock

Issuance of stock for Intellibed acquisition

Issuance of stock under equity compensation plans

Impact of transactions affecting NCI

Balance – December 31, 2024

$ ( 573,866 )

Stock-based compensation

Exchange of stock

Accrued distributions

Issuance of stock under equity compensation plans

Impact of transactions affecting NCI

Balance – December 31, 2025

The accompanying notes are an integral part of

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(In thousands)

Ended December 31,

Years Ended December 31,

Cash flows from operating activities:

$ ( 121,215 )

Adjustments to reconcile net

loss to net cash used in operating activities:

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization

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Paid-in-kind interest

Non-cash restructuring, impairment

and other related charges

Non-cash restructuring, impairment and other related charges

Loss on impairment of goodwill

Loss on extinguishment of debt

Loss on disposal of property and

Change in fair value – warrant

Tax receivable agreement income

Loss on disposal of property and equipment

Change in fair value – warrant liabilities

Stock-based compensation

Gain from effective settlement

of preexisting relationship

Deferred income taxes

Changes in operating assets

and liabilities:

Changes in operating assets and liabilities:

Accounts receivable

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Accrued warranty liabilities

Other accrued

used in operating activities

Other accrued liabilities

Net cash 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

Excess restricted cash returned to acquiree

Sale of property and equipment

Purchase of property and equipment

in intangible assets

used in investing activities

Investment in intangible assets

Net cash used in investing activities

Cash flows from financing activities:

Proceeds from term loan

Proceeds from revolving line

Proceeds from related party

Proceeds from revolving line of credit

Proceeds from related party loan

Payments on term loan

Payments on revolving line of

Payments on revolving line of credit

Payments for debt issuance costs

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

Payments for stock offering costs

Proportional Representation Preferred Linked Stock redemption fee

Tax receivable agreement payments

Net cash provided by financing activities

Net increase (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

Warrants Issued

Amendment fee added to principal of loan

Escrow shares cancelled in connection with Intellibed acquisition

The accompanying notes are an integral part of

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

and third-party online retailers.

The mission of Purple Innovation,

(the “Company” or “Purple Inc.”) is to deliver the greatest sleep ever invented.

The Company, collectively

with its subsidiary Purple Innovation, LLC (“Purple LLC”) is an omni-channel company that began as a digitally-native vertical

brand founded on comfort product innovation with premium offerings, and have since expanded into brick & mortar stores as a true omni-channel

The Company offers 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

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On February 2, 2018, the Company consummated a transaction structured similar to a reverse recapitalization (the “Business Combination”)

pursuant to which the Company acquired a portion of the equity of Purple Innovation, LLC (“Purple LLC”).

At the closing of

the Business Combination (the “Closing”), the Company became the sole managing member of Purple LLC, and GPAC was renamed

Purple Innovation, Inc.

pursuant to which the Company acquired a portion of the equity of Purple LLC.

At the closing of the Business Combination (the “Closing”),

the Company became the sole managing member of Purple LLC, and GPAC was renamed Purple Innovation, Inc.

As the sole managing member

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control of the day-to-day business affairs of Purple LLC without the approval of any other member.

On August 31, 2022, the Company

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.

On October 3, 2022,

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

Summary of Significant Accounting Policies

This summary of significant

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

Liquidity and Going Concern

The accompanying financial

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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.

Company had cash and cash equivalents of approximately $ 24.3 million and an accumulated deficit of $ 625.3 million at December 31, 2025.

The Company had a net loss of $ 51.4 million and net cash used in operating and investing activities was $ 33.8 million and $ 8.3

million, respectively, for the year ended December 31, 2025.

The Company has a history of recurring net losses and cash used

in operations, an accumulated deficit, and requiring additional capital to fund its operations.

funds the Company has on hand and any follow-on capital, if needed, will be used to fund its operations and invest in the business to

expand sales and marketing efforts, as well as to invest in innovation.

As described below, management has implemented plans to both increase

its revenues from the sales of its products and to achieve cost savings within the next year, sufficient to generate positive operating

cash flow levels.

However, the Company may be adversely impacted by uncertain market conditions and there can be no assurance that the

Company will be successful in this regard.

If such plans are not successful, the Company may need to raise additional capital in order

to support operations and business initiatives.

Access to additional capital is uncertain and not within the control of the Company.

there is substantial doubt about the Company’s ability to continue as a going concern.

PURPLE INNOVATION, INC.

Notes to Consolidated Financial Statements

Company has taken a number of actions to increase cash flow and support its operations and strategies.

In August 2024, the Company implemented

the Restructuring Plan (as defined below) to consolidate manufacturing operations resulting in cost savings.

The Company has realized

and plans to continue to realize direct material cost savings by concentrating efforts on driving gross margin improvement through various

methods such as selective pricing actions, continued mix shift towards the Restore and Rejuvenate collections, and by driving cost savings

through supply chain initiatives and manufacturing efficiency.

The Company has delivered direct material cost savings from its supplier

diversification efforts, improved scrap and yield results from continuous improvements, and outbound freight costs reflect cost improvements

along with improved delivery reliability.

The Company has been successful in subleasing the two manufacturing facilities that were vacated

as part of the Restructuring Plan.

The Company has also taken additional cost-saving initiatives in 2025 and the beginning of 2026 to

reduce headcount and streamline responsibilities and reporting structure.

Further, management’s plans include additional actions

intended to improve liquidity and reduce costs, including a planned optimization of advertising spend, limiting the number of new store

openings, efforts to mitigate tariff impacts by managing the country of origin, and other cost-saving initiatives.

As disclosed in Note

10 - Debt, the Company has elected to have interest paid-in-kind and added to the principal amount of the loans under the Amended

and Restated Credit Agreement and on March 24, 2026, the Company executed the Third Amendment to the Amended and Restated Credit Agreement

(the “Third Amendment”) with the Lenders to extend the maturity date of the Amended and Restated Credit Agreement from December

31, 2026 to April 30, 2027.

The Company is currently evaluating potential strategic alternatives and opportunities to achieve additional

liquidity through one or more future debt refinancings.

Additionally,

in May 2025, the Company entered into an agreement with Mattress Firm, Inc.

(“Mattress Firm”), a business unit of Somnigroup

International, Inc.

(“SGI”) to expand its inventory of the Company’s products across SGI’s national store network

from approximately 5,000 mattress slots to a minimum of 12,000 mattress slots (see Note 13 — Commitments and Contingencies, SGI

Commercial Arrangements).

The Company is now represented in Mattress Firm’s full store network and with the recent launch of

Purple Royale, the exclusive Luxe product for Mattress Firm, the Company has expanded to all 12,000 committed slots.

The Company has also

expanded into more Costco clubs in the fourth quarter of 2025.

consolidated financial statements do not include any adjustments that may result from the outcome of these uncertainties.

Variable Interest Entities

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.

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.

At December 31, 2025, 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

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.

The holders of Class B Units held 0.2 % of the economic interest in Purple LLC as of December 31, 2025.

Refer to Note 17— Stockholders’

Equity for more information.

Reclassification

Certain prior year amounts

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

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.

to Note 15— Stockholders’ Equity for more information.

PURPLE INNOVATION, INC.

Notes to Consolidated Financial Statements

Use of Estimates

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

receivable and the allowance for credit losses, valuation of inventories, sales returns, warranty returns, fair value of assets acquired

and liabilities assumed in 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.

receivable and the allowance for credit losses, valuation of inventories, sales returns, warranty returns, 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

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Refer to Note 3 –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

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Balance at end of period

Inventories are comprised

of raw materials, work-in-process and finished goods and are stated at the lower of cost or net realizable value.

Manufactured inventory

consists of raw material, direct labor and manufacturing overhead costs.

Inventory cost is calculated using a method that approximates

average cost.

The Company reviews the components of its inventory on a regular basis for excess and obsolete inventory and makes appropriate

adjustments when necessary.

Once established, the original cost of the inventory less the related inventory reserves represents the new

cost basis of such products.

PURPLE INNOVATION, INC.

Notes to Consolidated Financial Statements

Inventories are

comprised of raw materials, work-in-process and finished goods and are stated at the lower of cost or net realizable value.

Manufactured inventory consists of raw material, direct labor and manufacturing overhead costs.

Inventory cost is calculated using a

method that approximates average cost.

The Company reviews the components of its inventory on a regular basis for excess and

obsolete inventory and makes appropriate adjustments when necessary.

Once established, the original cost of the inventory less the

related inventory reserves represents the new cost basis of such products.

Property and Equipment

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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.

Closure of these two facilities was 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 by $ 5.8 million and $ 11.2 million in 2025 and 2024, respectively.

Refer to Note 3– Restructuring, Impairment and Other

Related Charges for more information.

The Company capitalizes interest

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cost of the Company’s outstanding borrowings.

PURPLE INNOVATION, INC.

Notes to Consolidated Financial Statements

The Company determines if

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

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

to the reporting unit in which the acquired business will operate.

The Company does not amortize goodwill but tests it for impairment

each fiscal year or whenever events or changes in circumstances indicate the carrying amount may not be recoverable.

recoverability of goodwill is measured at the reporting unit level by comparing the reporting unit’s carrying amount, including

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.

Refer to Note 4— Acquisition for more information .

Intangible Assets

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

PURPLE INNOVATION, INC.

Notes to Consolidated Financial Statements

Asset Impairment Charges

Long-Lived Assets and Definite-lived

Intangible Assets – The Company reviews its long-lived assets and definite-lived intangible assets for impairment whenever events

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

When evaluating long-lived assets and

definite-lived intangible assets for potential impairment, the Company first determines if there are any indicators of impairment and

if the carrying amount of the long-lived assets and definite-lived intangible assets might not be recoverable.

If there are indicators

of impairment, then the Company performs a recoverability test by comparing the carrying value of the assets to the estimated future cash

flows (undiscounted and without interest charges - plus proceeds expected from disposition, if any).

If the estimated undiscounted cash

flows are less than the carrying value of the assets, the Company calculates an impairment loss.

The impairment loss calculation compares

the carrying value of its assets to the assets’ estimated fair value.

When the Company recognizes an impairment loss, the carrying

amount of the impaired assets are reduced to estimated fair value based on discounted cash flows, quoted market prices or other valuation

Assets to be disposed of are reported at the lower of the carrying amount of the asset or fair value less costs to sell.

the Company recognizes an impairment loss for a depreciable long-lived asset, the adjusted carrying amount of the asset becomes its new

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

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 and 2022.

Long-Lived Assets and

Definite-lived Intangible Assets – The Company reviews its long-lived assets and definite-lived intangible assets for

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

evaluating long-lived assets and definite-lived intangible assets for potential impairment, the Company first determines if there

are any indicators of impairment and if the carrying amount of the long-lived assets and definite-lived intangible assets might not

be recoverable.

If there are indicators of impairment, then the Company performs a recoverability test by comparing the carrying

value of the assets to the estimated future cash flows (undiscounted and without interest charges - plus proceeds expected from

disposition, if any).

If the estimated undiscounted cash flows are less than the carrying value of the assets, the Company

calculates an impairment loss.

The impairment loss calculation compares the carrying value of its assets to the assets’

estimated fair value.

When the Company recognizes an impairment loss, the carrying amount of the impaired assets are reduced to

estimated fair value based on discounted cash flows, quoted market prices or other valuation techniques.

Assets to be disposed of

are reported at the lower of the carrying amount of the asset or fair value less costs to sell.

If the Company recognizes an

impairment loss for a depreciable long-lived asset, the adjusted carrying amount of the asset becomes its new cost basis and will be

depreciated (amortized) over the remaining useful life of that asset.

The Company concluded there were indicators of impairment that

existed at December 31, 2025 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, 2025 and no resultant impairment charges

were recorded.

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.

action initiated in August 2024, the Company recorded impairment charges of $ 2.9 million and $ 2.5 million in 2025 and 2024, respectively,

on various long-lived assets associated with entering into a subleases on the Utah manufacturing facilities that closed during the first

quarter of 2025.

Refer to Note 3 –Restructuring, Impairment and Other Related Charges for more information.

Indefinite-lived Intangible

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with customers.

PURPLE INNOVATION, INC.

Notes to Consolidated Financial Statements

Identify the performance obligations

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

Determine the transaction price .

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.

Determine the transaction

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 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.

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 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

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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 sheets, 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

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Balance at end of period

PURPLE INNOVATION, INC.

Notes to Consolidated Financial Statements

Accrued Warranty Liabilities

1 unchanged sentence

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 estimated warranty return 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 DTC warranty costs are

based primarily on historical warranty claims, estimated warranty costs and the estimate warranty claim rate.

Estimates for wholesale

warranty costs are based primarily on the historical warranty claim amounts and the estimated claim rate and may be 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

The Company classifies estimated warranty costs expected to be paid beyond a year as a long-term liability.

The Company had the following

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Balance at beginning of period

Additions charged to cost of sales

Additions (deductions) charged to cost of sales

Additions that reduced net revenue

Deduction from reserves for current year claims

Deductions from reserves for current year claims

Balance at end of period

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was $ 56.1 million, $ 65.2 million and $ 72.4 million for the years ended December 31, 2025, 2024 and 2023, respectively.

PURPLE INNOVATION, INC.

Notes to Consolidated Financial Statements

Debt Issuance Costs and Discounts

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.

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 10 – Debt for more information.

1 unchanged sentence

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.

to purchase 20.0 million shares of the Company’s Common Stock to the lenders associated with a related party credit agreement entered

into in January 2024.

The Company issued warrants to purchase 6.2 million and 6.6 million shares of the Company’s Common Stock to

lenders associated with amendments to the related party credit agreement entered into in March 2025 and May 2025, respectively.

2025, the Company issued to SGI warrants to purchase 8.0 million shares of the Company’s Common Stock.

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 or amortized as a reduction of revenue.

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 warrants.

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 10 –

Debt and Note 11 – 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 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.

Fair Value Measurements

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

The classification of fair

value measurements within the established three-level hierarchy is based upon the lowest level of input that is significant to the measurements.

Financial instruments, although not recorded at fair value on a recurring basis include cash, cash equivalents and restricted cash, receivables,

accounts payable, and the Company’s debt obligations.

The carrying amounts of cash, cash equivalents and restricted cash, accounts

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

The classification of fair value measurements within the established

three-level hierarchy is based upon the lowest level of input that is significant to the measurements.

Financial instruments, although

not recorded at fair value on a recurring basis include cash, cash equivalents, accounts receivables, accounts payable, and the Company’s

debt obligations.

The carrying amounts of cash, cash equivalents, accounts receivable and accounts payable approximate fair value because

of the short-term nature of these accounts.

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

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 Company’s related party debt is based on Level 2 and Level 3 inputs.

Level 2 inputs include observable inputs such as market-based

expectations for interest rates, credit risk and volatility.

The unobservable Level 3 inputs are associated with the required rate of

return for the security implied by the May 2025 issuance of debt bundled with warrants, which were valued using a Monte Carlo model and

the timing and probability of a warrant reprice event, like a strategic alternative transaction.

The estimated fair value of the Company’s

related party debt was $ 115.9 million and $ 56.6 million as of December 31, 2025 and 2024, respectively.

PURPLE INNOVATION, INC.

Notes to Consolidated Financial Statements

The warrant liabilities (see

Note 11 — Warrant Liabilities for more information) are Level 3 instruments and use internal models to estimate fair value

using 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.

Significant inputs, certain of which are unobservable, include

risk free interest rate, expected average life, expected dividend yield, expected volatility and the timing and probability of a warrant

reprice event.

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 increases (decreases) in value

if the expected average life or expected volatility were to increase (decrease).

The following table summarizes

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Fair value as of December 31, 2023

Change in valuation inputs (1)

Fair value as of December 31, 2022

Change in valuation inputs (1)

Initial measurement at time of issuance

Change in valuation inputs (a)

Fair value as of December 31, 2024

Initial measurement at time of issuance

Change in valuation inputs (1)

Change in valuation inputs (a)

Fair value as of December 31, 2025

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

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

Stock Based Compensation

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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 2023, 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.

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 rate.

Changes in these assumptions can materially affect the fair value

The Company recognizes forfeitures of stock option awards as they occur.

There were no stock options granted in 2025 or 2024.

During 2023, 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.

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 2025 or

During 2025, 2024 and 2023,

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condition is met.

PURPLE INNOVATION, INC.

Notes to Consolidated Financial Statements

Deferred tax assets and liabilities

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Tax Receivable Agreement

In 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.

As noncontrolling interest

holders exercise their right to exchange or cause Purple LLC to redeem all or a portion of its Class B Units, a liability under the tax

receivable agreement 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.

The amount of

the increase in asset basis, the related estimated cash tax savings and the attendant liability to be recorded will depend on the price

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

The estimation of liability under the

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

In 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.

As noncontrolling interest holders exercise their right to exchange

or cause Purple LLC to redeem all or a portion of its Class B Units, a liability under the tax receivable agreement 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.

The amount of the increase in asset basis, the related estimated

cash tax savings and the attendant liability to be recorded will depend on the price of the Company’s Common Stock at the time of

the relevant redemption or exchange.

The estimation of liability under the agreement is imprecise and subject to significant assumptions

regarding the amount and timing of future taxable income.

Segment Information

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Information and Concentrations for more information.

PURPLE INNOVATION, INC.

Notes to Consolidated Financial Statements

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.

share is calculated by dividing net loss attributable to common stockholders by the weighted average number of shares of 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 Stock, and the treasury stock method to determine

the potential dilutive effect of its outstanding warrants and share-based payment awards.

Recent Accounting Pronouncements

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

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

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Improvements to Income Tax Disclosures.

amends existing income tax disclosure guidance, primarily requiring more detailed disclosures for income taxes paid and the effective

tax rate reconciliation.

This ASU is effective for fiscal years beginning after December 15, 2024,

may be applied prospectively or retrospectively, and allows for early adoption.

The Company is currently evaluating the impact

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

ASU amends existing income tax disclosure guidance, primarily requiring more detailed disclosures for income taxes paid and the

effective tax rate reconciliation.

This ASU is effective for fiscal years beginning after

December 15, 2024, may be applied prospectively or retrospectively, and allows for early adoption.

The Company has adopted ASU

2023-09 prospectively and has enhanced its income tax disclosures included in Note 20 - Income Taxes , to comply with the

requirements.

The adoption did not have a material impact on the Company’s financial statements.

Disaggregation Disclosures

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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.

The guidance 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

In February 2023, the Company

completed an underwritten offering of 13.4 million shares of Class A common stock at a price of $ 4.50 per share.

The underwriters

did not exercise their over-allotment option.

The aggregate net proceeds received by the Company from the offering, after deducting offering

fees and expenses of $ 3.3 million, totaled $ 57.0 million.

In March 2022, the Company

completed an underwritten offering of 16.1 million shares of Class A common stock, which included the underwriters exercising

their over-allotment option in full to purchase an additional 2.1 million shares.

The underwriters purchased the Class A common

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.

(“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.

The acquisition date fair

value of the consideration transferred for Intellibed was $ 28.2 million, which consisted of the following (in thousands):

Fair value of Class A common stock issued at closing

Fair value of Class A common stock held in escrow

Fair value of contingent consideration

Fair value of effective settlement of preexisting relationships

Transaction expenses paid on behalf of Intellibed

Due to seller

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

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 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.

The table below

reflects final measurement period adjustments made to various assets acquired and liabilities assumed based on updated information, and

revisions to reflect the final fair value analysis associated with the two intangible assets.

The corresponding offsets for these final

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):

Net tangible assets (liabilities):

Adjusted Balances

Cash, cash equivalents and restricted cash

Accounts receivable

Other current assets

Property and equipment

Operating lease right-of-use assets

Other long-term assets

Accounts payable

Other current liabilities

Operating lease obligations

Deferred tax liabilities

Net tangible assets (liabilities)

Customer relationships

Developed technology

Net assets acquired and liabilities assumed

The amount of goodwill that

resulted from the purchase price allocation was attributed to expected synergies from the assembled workforce, an increase in development

capabilities, increased offerings to customers, expanded market opportunities, and enhanced opportunities for growth and innovation.

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.

The ongoing decline in the

Company’s market capitalization, along with other qualitative considerations was determined to be a triggering event for potential

goodwill impairment.

Accordingly, the Company performed a goodwill impairment analysis as of September 30, 2023.

The Company, considered

as a single reporting unit, estimated the implied fair value of its goodwill using a variety of valuation methods, including both the

income and market approaches.

As a result of the impairment assessment performed, the Company determined goodwill was impaired and recorded

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

The impairment charge was recorded in the 2023 consolidated

statement of operations as a loss on impairment of goodwill.

The two identified definite

lived intangible assets, comprised of customer relationships and developed technology, are being amortized over their estimated useful

lives of 10 and two years , respectively.

The customer relationships intangible asset represents the estimated fair value of the underlying

relationships with Intellibed customers, valued utilizing the multi-period excess earnings method.

The developed technology intangible

represents the fair value of Intellibed industry-specific cloud and mobile software and related technologies, valued using the cost to

recreate method.

The acquired cash, cash equivalents

and restricted cash balance included $ 1.7 million of cash deposited by Intellibed in a separate account pursuant to an escrow agreement

with the Company.

The purpose of the escrow cash amount was to cover Intellibed’s estimated state income tax liabilities, sales

tax liabilities and related filing expenses that existed prior to the acquisition date.

If the actual liabilities were less than estimated,

any excess cash was to be returned to the previous shareholders of Intellibed.

If payments for these items exceeded the escrow balance,

the Company would have been required to pay the excess.

The Company recorded the escrow account balance of $ 1.7 million as an acquired

restricted cash balance on the date of acquisition and used $ 0.9 million of the escrow account balance for actual expenses incurred.

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 $ 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 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.

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 statements.

The Company is currently evaluating the potential impact this update will have on its expense disclosures

in the notes to the consolidated financial statements.

Accounting for Internal-Use

In September 2025, the FASB

issued ASU No.

2025-06, “Intangible - Goodwill and Other - Internal-Use Software (Subtopic 350-40):

Targeted Improvements to the

Accounting for Internal-Use Software.” The ASU removes all references to prescriptive and sequential software development stages.

The ASU requires entities to begin capitalizing software costs when management authorizes and commits to funding the software project,

and it is probable that the project will be completed and the software will be used for its intended purpose.

The amendments in this ASU

are effective for fiscal years beginning after December 15, 2027.

Early adoption is permitted.

The Company is currently evaluating the

impact this update will have on its consolidated financial statements and related disclosures.

Accounting for Government

Grants Received by Business Entities

In December 2025, the FASB issued ASU 2025-10, “Accounting for Government

Grants Received by Business Entities,” to establish guidance on the recognition, measurement, and presentation of government

grants received by business entities.

This guidance is effective for annual periods beginning after December 15, 2028.

Early adoption

is permitted.

The Company does not expect the adoption of this to have a significant impact on its consolidated financial statements.

PURPLE INNOVATION, INC.

Notes to Consolidated Financial Statements

Restructuring, Impairment and Other Related

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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):

The consolidation into the Georgia facility was finalized in December 2024 and the closure

of the two Utah manufacturing facilities was completed in May 2025.

The reduction in workforce at the Utah headquarters was completed

in August 2024.

All restructuring activities have now been completed.

The following table summarizes the restructuring, impairment and other

related charges the Company has recognized in its consolidated statement of operations for the years ended December 31, 2025 and 2024

(in thousands):

Years Ended December 31,

Restructuring,

Cash charges:

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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.

Accelerated depreciation of

$ 5.7 million in 2025 and $ 11.3 million in 2024 primarily represents increased depreciation expense associated with shortening the useful

lives of the production equipment at the two Utah manufacturing facilities that were closed to reflect the remaining period these assets

will remain in service.

The write-down of long-lived

assets of $ 0.9 million in 2025 and $ 5.2 million in 2024 represents the write-down to salvage value of other property and equipment located

at the two Utah manufacturing facilities that were 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 charges of $ 2.9 million in 2025 and $ 2.5 million in 2024 associated with the closing and subleasing of the Salt Lake City,

Utah and Grantsville, Utah manufacturing facilities and related impairment charges associated with certain leasehold improvements of the

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.

If estimated fair values subsequently decline, the carrying values of the assets will be adjusted accordingly.

PURPLE INNOVATION, INC.

Notes to Consolidated Financial Statements

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.

included the write-off in 2024 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

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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.

Because of the closure of this facility as part of

the Restructuring Plan, the renewal option will not be 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

2025 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):

line item of the consolidated statement of operations, that were settled in cash (in thousands):

Balance at December 31, 2023

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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.

Employee-related costs – restructuring charges

Other costs – restructuring charges

Balance at December 31, 2025

There are no additional restructuring

charges expected to be incurred in the future.

Revenue from Contracts with Customers

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

PURPLE INNOVATION, INC.

Notes to Consolidated Financial Statements

The following tables present

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$ 5.3 million and $ 6.4 million at December 31, 2025 and 2024, 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.

During 2025 and 2024, the Company recognized all of the revenue

that was deferred in customer prepayments at December 31, 2024.

Inventories consisted of the

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Property and equipment, net

PURPLE INNOVATION, INC.

Notes to Consolidated Financial Statements

Equipment in progress reflects

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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

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

expiration dates through 2036.

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

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

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

years ended December 31, 2025 and 2024 were $ 5.7 million and $ 11.3 million of accelerated depreciation recorded in conjunction with the

Restructuring Plan, respectively.

Refer to Note 3— Restructuring and Impairment Charges for more information.

The Company leases its

manufacturing and distribution facilities, corporate offices, Purple showrooms and certain equipment under non-cancelable operating

leases with various expiration dates through 2036.

The Company’s office and manufacturing leases provide for initial lease

terms up to 16 years, while Purple showrooms have initial lease terms of up to 10 years.

Certain leases may contain options to

extend the term of the original lease.

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

Any lease renewal options are included in the lease term if

exercise is reasonably certain at lease commencement.

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

leases with initial lease terms of three to five years .

The ROU asset for finance leases was $ 1.0 million and $ 0.7 million as of December

31, 2024 and 2023, respectively.

Any lease renewal

options are included in the lease term if exercise is reasonably certain at lease commencement.

The Company also leases vehicles and

other equipment under both operating and finance leases with initial lease terms of three to five years .

The ROU asset for finance

leases was $ 0.6 million and $ 1.0 million as of December 31, 2025 and 2024, respectively.

The following table presents

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Present value of operating lease payments

PURPLE INNOVATION, INC.

Notes to Consolidated Financial Statements

As of December 31, 2025 and

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intangible assets (in thousands, except useful life):

As of December

31, 2024 As of December 31, 2023

Useful life Gross Accumulated Net Carrying Gross Accumulated Net

(years) Cost Amortization Impairment Value Cost Amortization Value

As of December 31, 2025 As of December 31, 2024

Useful life Gross Accumulated Net Carrying Gross Accumulated Net Carrying

(years) Cost Amortization Impairment Value Cost Amortization Impairment Value

Indefinite-lived non-amortizing:

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$ ( 8,456 ) $ —

Trademarks 30 —

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assets was $ 3.2 million, $ 4.2 million and $ 5.3 million for the years ended December 31, 2025, 2024 and 2023, respectively.

PURPLE INNOVATION, INC.

Notes to Consolidated Financial Statements

Estimated amortization expense for definite-lived

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Accrued sales and use tax

Long-term debt and unamortized issuance costs - current portion

Asset retirement obligation

Insurance financing

Accrued interest

Asset retirement obligation

Total other current liabilities

3 unchanged sentences

Related party loan

Revolving line of credit

unamortized debt issuance costs

Current portion of debt and unamortized issuance costs (c)

Debt, net of current portion

Total related party debt

PURPLE INNOVATION, INC.

Notes to Consolidated Financial Statements

2024 Credit Agreement

3 unchanged sentences

“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.

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

Delaware Trust Company, as administrative agent.

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

Agreement and refinance their existing obligations.

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

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

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

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

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

The Company has

elected for interest to be capitalized and added to the principal amount of the loan.

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

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.

Total fees and expenses of $ 3.5 million were recorded as debt issuance costs in the first quarter

of 2024 and are being amortized over the life of the loan.

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.

and Restated Credit Agreement, the Company issued 20.0 million warrants (the “2024 Warrants”) to the Lenders (see Note 11

– Warrant Liabilities ).

These 2024 Warrants include full-ratchet anti-dilution protections, subject to a floor of $ 0.8502

with respect to adjustments to the exercise price and expire on January 23, 2034 .

The 2024 Warrants had a fair value of $ 19.6 million

upon issuance and were recorded as a debt discount and are being amortized over the life of the loan.

The Amended and Restated Credit

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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

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

the “Term Loans”).

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

The borrowing rates under the Term

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

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.

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

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.

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

Company entered into a fifth amendment to the 2020 Credit Agreement.

The amendment, among other things, revised various covenants associated

with the 2020 Credit Agreement.

As a condition of entering into the amendment, the Company repaid the $ 24.7 million outstanding balance

on the term loan plus accrued interest.

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

recorded as debt issuance costs in the 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):

PURPLE INNOVATION, INC.

Notes to Consolidated Financial Statements

2025 Amendment

On March 12, 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”), which amends the Amended and Restated Credit Agreement.

The 2025 Amendment, among other things, provides for an increase in the initial principal amount of the Related Party Loan by $ 19.0 million

(the “First Incremental Loan”) from an initial Related Party Loan principal amount of $ 61.0 million to an initial aggregate

principal amount of $ 80.0 million, and allows the Loan Parties to request one or more additional term loans from the 2025 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 First Incremental Loan will bear interest at the same

rate as the Initial Loan (as defined in the Amended and Restated Credit Agreement), which may be paid in cash or in kind at the Company’s

The 2025 Amendment also provides

that (i) the First Incremental Loan shall be senior in right of repayment to the Related Party Loan and (ii) in any voluntary or mandatory

prepayment in part or in full of the First 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 First Incremental Loan

so prepaid, replaced or assigned.

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 First Incremental Loan, plus (y) the present value at such date of all remaining scheduled

interest payments due on such First 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 2025 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 First Incremental Loan on such prepayment date.

The 2025 Amendment requires

prepayment from certain amounts of proceeds received by the Company related to asset dispositions, equity issuances, incurrence of indebtedness,

and extraordinary receipts.

Additionally, upon an event of default, the 2025 Lenders may declare all or any portion of the term loan then

outstanding to be accelerated and due and payable, immediately, including the prepayment premium.

The Company determined that these features

qualify as a derivative and must be bifurcated from the debt, but such value is de minimis.

The Company will reassess whether the derivative

has more than a de minimis value at each reporting period.

The 2025 Amendment also includes

contingent interest upon an event of default at a rate of 2 %.

Certain non-credit related factors qualify as a derivative and must be bifurcated

from the debt, but such value is de minimis.

In addition, the Company also

paid (i) an amendment fee equal to 2 % of the outstanding principal and accrued and unpaid interest under the Related Party Loan held by

the 2025 Lenders, paid in kind and (ii) a 2 % work fee of the initial aggregate principal amount of the First Incremental Loan paid to

the 2025 Lenders, deducted from the proceeds at closing.

Total fees and expenses of $ 2.1 million were recorded as a debt discount upon

issuance of the Incremental Loan and are being amortized over the life of the loan.

In connection with the 2025

Amendment, the Company issued to the 2025 Lenders, warrants (the “2025 Warrants”) to purchase 6.2 million shares of the Company’s

Common Stock at a price of $ 1.50 per share, subject to certain adjustments (see Note 11 – Warrant Liabilities ).

Warrants include full-ratchet anti-dilution protections, subject to a floor of $ 0.6979 with respect to adjustments to the exercise price

and expire on March 12, 2035 .

The 2025 Warrants had a fair value of $ 5.4 million upon issuance and were recorded as a debt discount upon

issuance of the Incremental Loan and is being amortized over the life of the loan.

The 2025 Amendment was evaluated

and determined to be a modification of debt since the 2025 Lenders did not grant a concession as the effective borrowing rate was not

reduced, and the 2025 Amendment terms were not substantially different from the Amended and Restated Credit Agreement.

PURPLE INNOVATION, INC.

Notes to Consolidated Financial Statements

Second 2025 Amendment

On May 2, 2025, the Loan Parties

entered into a Second Amendment to the Amended and Restated Credit Agreement (the “Second 2025 Amendment”) with the 2025 Lenders,

which amends the Amended A&R Credit Agreement.

The Second 2025 Amendment, among other things, provides for a commitment increase in

the initial principal amount of the senior secured term loan facility by $ 20.0 million (the “Second Incremental Loan”) from

an aggregate principal amount of up to $ 80.0 million (the “Existing Loan”) to an initial aggregate principal amount of up

to $ 100.0 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 A&R Credit Agreement).

The Second Incremental Loan will bear interest at the same

rate as the Existing Loan, which may be paid in cash or in kind at the Company’s option.

The Second 2025 Amendment

also provides that (i) the Second Incremental Loan shall be senior in right of repayment to the initial $ 61.0 million loan under the Amended

and Restated Credit Agreement and pari passu with the First Incremental Loan and (ii) in any voluntary or mandatory prepayment in part

or in full of the Second Incremental Loan for any reason, the Company will be required to pay an amount equal to the greater of (a) the

Make-Whole Premium (as defined below) and (b) 2.5 % of the aggregate principal amount of the Second Incremental Loan so prepaid, replaced

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 Second Incremental Loan, plus (y) the present value at such date of all remaining scheduled interest payments

due on such Second 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 Second 2025 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 Second Incremental Loan on such prepayment date.

In addition, the Company also

paid (i) an amendment fee equal to 0.25 % of the outstanding principal and accrued and unpaid interest under the Existing Loan held by

the Lenders, paid in kind to the 2025 Lenders, (ii) a work fee equal to 0.1 % of the outstanding principal and accrued and unpaid interest

under the Existing Loan, paid in cash to the Required Lenders, (iii) a waiver fee, to induce the Required Lenders to waive certain preemptive

and right of first refusal rights, equal to 0.15 % of the outstanding principal and accrued and unpaid interest under the Existing Loan,

paid in cash to the Required Lenders, and (iv) a commitment fee equal to $ 0.2 million, paid in cash to the Required Lenders.

In connection with the Second

2025 Amendment, the Company issued to the 2025 Lenders, warrants (the “2025 Additional Warrants”) to purchase 6.6 million

shares of the Company’s Common Stock at a price of $ 1.50 per share, subject to certain adjustments (see Note 11 – Warrant

Liabilities ).

These 2025 Additional Warrants include full-ratchet anti-dilution protections, subject to a floor of $ 0.6979 with respect

to adjustments to the exercise price and expire on March 12, 2035.

The 2025 Additional Warrants had a fair value of $ 5.4 million upon

issuance and were recorded as a debt discount upon issuance of the Incremental Loan and is being amortized over the life of the loan.

The Second 2025 Amendment

was evaluated and determined to be a modification of debt since the 2025 Lenders did not grant a concession, as the effective borrowing

rate was not reduced, and the 2025 Amendment terms were not substantially different from the Amended and Restated Credit Agreement.

The Company has elected

to have interest paid-in-kind and added to the principal amount of the loans.

Interest expense under the Related Party Loan, the

First Incremental Loan and the Second Incremental Loan for the year ended December 31, 2025, consisted of paid-in-kind interest of

$ 15.8 million and debt issuance cost amortization of $ 13.4 million.

Interest expense under the Related Party Loan for the year ended

December 31, 2024, consisted of paid-in-kind interest of $ 9.7 million and debt issuance cost amortization of $ 7.2 million.

effective interest rate was 14.58 % and 15.54 % for the years ended December 31, 2025 and 2024, respectively.

PURPLE INNOVATION, INC.

Notes to Consolidated Financial Statements

On March 24, 2026, pursuant to the Third Amendment to the Amended A&R Credit Agreement, the Loan Parties waived certain requirements

and events of default relating to the going concern qualification in our December 31, 2025 financial statements (see Footnote 21 –

Subsequent Events).

Accordingly, the Company is now in compliance with all covenants under the Amended and Restated Credit Agreement as

amended by the 2025 Amendment and the Second 2025 Amendment.

As of December 31,

2025, 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

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,

On January 23, 2024, in connection

with the Amended and Restated Credit Agreement, the Company issued 20.0 million 2024 Warrants to the Lenders, on March 12, 2025, in connection

with the 2025 Amendment, the Company issued 6.2 million 2025 Warrants to the 2025 Lenders, on May 2, 2025, in connection with the Second

2025 Amendment, the Company issued 6.6 million 2025 Additional Warrants to the 2025 Lenders, and on May 2, 2025, in connection with the

SGI Agreements (as defined above), the Company issued to SGI warrants to purchase 8.0 million shares of the Company’s Common Stock

(the “SGI Warrants,” collectively, the “Warrants”).

Each Warrant entitles the registered holder to purchase one

share of the Company’s Common Stock at a price of $ 1.50 per share.

The Warrants include full-ratchet anti-dilution protections,

subject to a floor price ranging from $ 0.6979 to $ 0.8502 with respect to adjustments to the exercise price and expire between January

23, 2034 and March 12, 2035.

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 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 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.

The Warrants will expire on the 10 -year anniversary of issuance,

or earlier upon redemption.

The holders do not have the rights or privileges of holders of Common Stock or any voting rights until they

exercise their Warrants.

After the issuance of shares of Common Stock upon exercise of the Warrants, each holder will be entitled to one

vote for each share of 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 Common Stock outstanding immediately after giving effect to such exercise.

The Warrants contain a repurchase provision which, upon an 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.

1 unchanged sentence

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

Exercise price

Risk free interest rate

Warrant life in years

Expected volatility

Expected dividend yield

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:

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

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.

PURPLE INNOVATION, INC.

Notes to Consolidated Financial Statements

The 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,

certain of which are unobservable, which include 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:

Trading price of common stock on measurement date

5 unchanged sentences

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.

Estimated date of event causing a warrant re-price

The Warrants had a fair value

of $ 16.2 million as of December 31, 2025.

The Company recognized a gain of $ 17.2 million and $ 3.5 million in its consolidated statement

of operations for the years ended December 31, 2025 and 2024, respectively, 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 previous measurement date or date of issuance.

Other Long-Term Liabilities

long-term liabilities consist of the following (in thousands):

Other 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,

The Company’s asset

retirement obligations (“ARO”) relate to two manufacturing facilities that are leased.

One of the properties is the Company’s

former manufacturing facility in Grantsville, Utah which was closed in the first quarter of 2025 (For further discussion see Note 3—

Restructuring, Impairment and Other Related Charges ).

The other property is the Company’s current manufacturing facility

in McDonough, Georgia.

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.

These liabilities are accreted each period, and the capitalized cost

is depreciated over the useful life of the related asset.

Revisions 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 ).

PURPLE INNOVATION, INC.

Notes to Consolidated Financial Statements

The Company had the following activity for its

ARO liabilities (in thousands):

Balance at beginning of period

4 unchanged sentences

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

and Contingencies

Chief Executive Officer

Cash Bonus Award

On 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 Common Stock on NASDAQ during the period from March 16, 2026

through June 30, 2026 subject to his continued employment with the Company.

The amount earned will be payable in quarterly installments

commencing with the first payroll period following June 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 and 2025 consolidated statement

of operations related to the fair value of the future bonus payment.

Senior Leadership Team

Special Recognition Bonus

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

4 unchanged sentences

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.

10 % was paid in August 2024, 20 % was paid in February 2025, and the remaining 70 % was to be paid in August 2025.

Certain members of the

Company’s senior leadership team agreed to postpone their August 2025 payment until January 2026 for a 15 % premium on the amount

that was due to be paid in August 2025.

Related to this bonus payment, the Company recorded compensation expense of $ 1.6 million and $ 3.1

million in its 2025 and 2024 consolidated statement of operations, respectively.

Incentive Cash Bonus Award

July 17, 2025, the Board unanimously approved a long-term incentive cash award to those employees eligible to participate in the Company’s

The incentive award payment is based on a combination of time-based payments over a three-year period and performance-based

payments paid in three years if certain financial performance targets are met.

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

in the Company’s 2017 Plan.

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

share of the Company’s 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 $ 0.3

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

million and $ 0.2 million of compensation expense related to these future cash awards in the 2025 and 2024 consolidated statement of operations,

respectively.

Settlement of Insurance

In 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.

PURPLE INNOVATION, INC.

Notes to Consolidated Financial Statements

Rights 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 Common Stock held by the Holders as of such date, subject to customary

terms and conditions.

On March 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 2025 Warrants,

the shares of Common Stock issuable upon the exercise of the Warrants, and the Common Stock held by the Holders as of such date (the

“Registrable Securities”).

On May 2, 2025 in connection with the issuance of the 2025 Additional Warrants, the Company entered into a Third Amended and Restated

Registration Rights Agreement (the “Third Amended Registration Rights Agreement”) with the Holders, providing for the registration

under the Securities Act of the 2025 Additional Warrants, the shares issuable upon the exercise of the 2025 Additional Warrants, other

warrants held by the Holders (and shares issuable upon exercise thereof) and the Common Stock held by the Holders as of such date (the

“2025 Additional Registrable Securities”), subject to customary terms and conditions.

On May 2, 2025 in connection with the issuance of the SGI Warrants, the Company entered into a Registration Rights Agreement (the “SGI

Registration Rights Agreement” and collectively with the 2025 Registration Rights Agreement and the Third Amended Registration Rights

Agreement, the “Registration Rights Agreements”) with SGI, providing for the registration under the Securities Act of the

SGI Warrants, the shares issuable upon the exercise of the SGI Warrants, and the Common Stock held by SGI as of such date (the “SGI

Registrable Securities” and collectively with the 2025 Registrable Securities and 2025 Additional Registrable Securities, the “Registrable

Securities”), subject to customary terms and conditions.

The Registration Rights Agreements entitle the investors party thereto 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, 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.

The registration statement filed on May 23, 2025, which registered the Registrable Securities, was declared effective by the SEC on May

NOL Rights Plan

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.

On May 6, 2025, the Board approved

the early termination of the NOL Rights Plan, effective May 7, 2025.

In conjunction with the termination of the NOL Rights Plan, the

Company filed a Certificate of Elimination with the Secretary of State of the State of Delaware eliminating the Series C Junior

Participating Preferred Stock, effective May 7, 2025.

Refer to Note 15 – Stockholders’ Equity – NOL Rights

Plan for more information.

NOL Protective Charter

To 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.

On May 6, 2025, the Board approved the early termination of the NOL

Protective Charter Amendment, effective May 7, 2025.

Refer to Note 15 – Stockholders’ Equity – NOL Protective

Charter Amendment for more information.

SGI Commercial Arrangements

On May 2, 2025, the Company

entered into a Second Amendment to Master Retailer Agreement (the “MRA Amendment”) with Mattress Firm, a business unit of

SGI, which provides that SGI, through its Mattress Firm stores, will expand its inventory of the Company’s products across its

national store network from approximately 5,000 mattress slots to a minimum of 12,000 mattress slots.

The agreement includes a $ 3.5 million

fee to be paid by the Company to reimburse Mattress Firm for certain costs in transitioning to the product placement required by the

The fee is accounted for under the provisions of ASC 606— Revenue from Contracts with Customers as consideration

payable to a customer as a reduction of revenue over the life of the contract and is included in accrued rebates and allowances on the

audited consolidated balance sheets.

The Company recorded $ 0.9 million as a reduction of revenue in the 2025 consolidated

statement of operations.

Also on May 2, 2025, the Company entered into an Amended and Restated Master Vendor Supply and Services Agreement

(the “Sherwood Agreement” and together with the MRA Amendment the “SGI Agreements”) with Tempur Sherwood, LLC,

a subsidiary of Tempur Sealy.

The Sherwood Agreement provides that Tempur Sherwood, LLC will have the exclusive right to assemble certain

product lines that the Company sells to Mattress Firm.

The SGI Agreements expire on December 31, 2027.

PURPLE INNOVATION, INC.

Notes to Consolidated Financial Statements

In connection with the SGI

Agreements, the Company issued to SGI the SGI Warrants to purchase 8.0 million shares of the Company’s Class A common stock at

a strike price of $ 1.50 per share.

The SGI Warrants include full-ratchet anti-dilution protections, subject to a floor of $ 0.6979 with

respect to adjustments to the exercise price and expire on March 12, 2035.

The Company determined the warrants are required to be accounted

for as a liability at the fair value of $ 6.5 million on the date of the transaction (see Note 11 – Warrant Liabilities ).

The fair value of the warrants on the date of the transaction is accounted for under the provisions of ASC 606— Revenue from

Contracts with Customers and deemed to be consideration payable to a customer as a reduction of revenue over the life of the contract.

The Company recorded $ 1.6 million as a reduction of revenue in the 2025 consolidated statement of operations.

Non-Income Related

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.

, 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.

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 plaintiffs’ allegations, setting forth its affirmative defenses, and requesting dismissal of all claims and entry of judgment

in Purple LLC’s favor.

However, the application

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

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

The application

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

collect and remit taxes.

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

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

Legal Proceedings

On December 16, 2022, Purple’s founders filed a complaint against

in the Fourth Judicial District Court in the State of Utah.

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

The 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.

The Court entered a final judgment dismissing the case in January 2024.

The plaintiffs appealed.

After oral arguments, on April 3, 2025,

the Utah Court of Appeals ordered the case return to the District Court for further fact finding.

The Utah Supreme Court declined to hear

the case, sending back for further action at the trial court that will continue into 2026.

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.

On April 3, 2023, Purple’s

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

The complaint alleges that Purple LLC breached the limited

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

The plaintiffs

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

with the litigation.

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

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

has been set for June 2026.

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

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.

On January 17, 2024, two customers

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

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

The suit 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.

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

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

the parties terminated effective September 30, 2023.

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

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

The plaintiffs further claim approximately

$ 0.8 million in holdover rent, as well as unspecified amounts in interest, late fees, liquidated damages, attorney fees and costs.

discovery is scheduled to conclude in early 2026.

The court has not yet set a date for trial.

Purple LLC denies all allegations and intends

to vigorously defend against these claims.

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

action lawsuit against Purple LLC in California Superior Court in the County of Alameda alleging failure to 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.

Purple LLC and the plaintiffs mediated the claims on May 8, 2025, which resulted in the parties agreeing

to a settlement.

The settlement agreement has been signed by the parties and are currently waiting for the California Superior Court to

approve the settlement.

PURPLE INNOVATION, INC.

Notes to Consolidated Financial Statements

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 sought declaratory relief, attorneys’ fees, costs, and other relief on behalf of the

The NOL Rights Plan expired by its own terms in June 2025, and plaintiff’s counsel voluntarily dismissed the lawsuit in September

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.

Related Party Transactions

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.

Coliseum Capital Management

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 10—

Debt — 2024 Credit Agreement for more information on the Related Party Loan and amendments .

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.

B Common Stock

Class A Common Stock

The Company has 210.0 million

shares of Class B common stock authorized.

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

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

Shares of Class B

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

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

transfers an equal number of such holder’s 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.

shares of Common Stock authorized.

Holders of the Company’s Common Stock are entitled to one vote for each share held on all matters

to be voted on by the stockholders.

Holders of Common Stock and holders of Class B 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,

2025, 108.2 million shares of Common Stock were outstanding.

Class B Common Stock

The Company has 90.0 million

shares of Class B Stock authorized.

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

the Company’s Common Stock on all matters properly submitted to a vote of the stockholders.

Shares of Class B 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 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 Stock to such transferee.

The Class B 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, 2025, 0.2 million shares of Class B Stock were

Preferred Stock

The Company has 5.0 million

shares of preferred stock authorized.

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

The Board is expressly authorized to provide for the issuance of shares of the preferred stock in one or more series and to establish

from time to time the number of shares to be included in each such series and to fix the voting rights, designations and other special

rights or restrictions.

The Board is expressly

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

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

31, 2025, there were no shares of preferred stock outstanding.

On June 27, 2024, 0.3 million shares of the Company’s authorized

shares of preferred stock were designated as Series C Junior Participating Preferred Stock, par value $ 0.0001 per share (“Series

C Preferred Shares”).

In conjunction with the termination of the NOL Rights Plan, the Company filed a Certificate of Elimination eliminating the Series C Junior

Participating Preferred Stock, effective May 7, 2025.

At December 31, 2025, there were no shares of preferred stock outstanding.

On June 27, 2024, 0.3 million shares

of the Company’s authorized shares of preferred stock were designated as Series C Junior Participating Preferred Stock, par value

$ 0.0001 per share (“Series C Preferred Shares”).

PURPLE INNOVATION, INC.

Notes to Consolidated Financial Statements

NOL Rights Plan

On June 27, 2024, the Board

13 unchanged sentences

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;

stock” includes (i) the Common Stock;

(ii) the Class B Stock;

and (iii) any interest that would be treated as “stock”

3 unchanged sentences

Refer to Note 11 – 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).

The 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 Rights provided that they 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.

The 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 were not

accounted for as a long-term obligation.

Accordingly, the NOL Rights Plan and the Rights issued thereunder have no impact on the Company’s

audited consolidated financial statements.

On May 6, 2025, the Board approved the early termination of the NOL Rights Plan, effective

PURPLE INNOVATION, INC.

Notes to Consolidated Financial Statements

NOL Protective Charter

On 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):

Any acquisition of common stock in violation of the NOL Protective Charter Amendment would be void as of the date it is attempted.

On May 6, 2025, the Board

approved the early termination of the NOL Protective Charter Amendment, effective May 7, 2025.

The Company issued warrants

in connection with various financing transactions and agreements.

The Company had the following warrants outstanding at December 31, 2025

and 2024 (in thousands):

2024 Warrants

2025 Warrants

2025 Additional Warrants

Total Warrants

The following table provides

the exercise price and expiration date for each warrant tranche as of December 31, 2025:

Warrant Share Equivalent

(000’s) Exercise

Price (d) Expiration Date

2024 Warrants 20,000 $ 1.50 January 23, 2034

2025 Warrants 6,230 $ 1.50 March 12, 2035

2025 Additional Warrants 6,557 $ 1.50 March 12, 2035

SGI Warrants 8,000 $ 1.50 March 12, 2035

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 Common Stock issuable

upon exercise of the Warrants upon not less than 45 days’ prior written notice of redemption to each holder.

This redemption right

is only available if the reported last sale price of the 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 Common Stock outstanding immediately after giving effect

to such exercise.

PURPLE INNOVATION, INC.

Notes to Consolidated Financial Statements

Noncontrolling Interest

Noncontrolling interest (“NCI”)

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

At both December 31, 2025 and 2024, 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.

Per Common Share

The 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,

8 unchanged sentences

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):

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 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.

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,

2 unchanged sentences

Stock options

Class B common stock

Class B Stock

Equity Compensation Plans

2017 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 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

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, 2025, 2024

and 2023, stock-based compensation associated with equity awards issued under the 2017 Equity Incentive Plan totaled $ 1.7 million, $ 2.8

million and $ 4.9 million, respectively, while the related tax benefits recognized on these awards were $ 0.8 million, $ 0.9 million and

$ 1.5 million, respectively.

PURPLE INNOVATION, INC.

Notes to Consolidated Financial Statements

Common Stock Awards

There were no stock awards

granted in 2024.

In June 2023, the Company

granted stock awards under the 2017 Equity 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.

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 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 .

The amended agreements

revised the vesting schedule of the awards included in each grant.

Pursuant to these agreements, 0.3 million of restricted stock units

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, 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.

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,

Weighted average grant date value $ 0.22 $ 2.02

Risk free rate 4.48 % 2.67 %

Dividend yield —

Expected volatility 44.98 % 54.22 %

Expected term in years 2.58 3.45

following table summarizes the Company’s total stock option activity for the year ended December 31, 2024:

granted in 2025 or 2024.

Employee Stock Options

There were no

employee stock options granted in 2025 or 2024.

The following table summarizes

the Company’s total stock option activity for the years ended December 31, 2025 and 2024:

(in thousands) Weighted

5 unchanged sentences

Options outstanding as of December 31, 2024 529 $ 7.17 2.2 $ —

and exercisable stock options as of December 31, 2024 are as follows:

Expired ( 29 ) 13.12 — —

Options outstanding as of December 31, 2025 500 $ 6.82 1.3 $ —

Outstanding and exercisable stock options as of

December 31, 2025 are as follows:

Options Outstanding Options Exercisable

8 unchanged sentences

$ 6.82 500 1.3 500 1.3 $ —

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:

The following table summarizes

the Company’s unvested stock option activity for the years ended December 31, 2025 and 2024:

(in thousands)

1 unchanged sentence

Nonvested options as of December 31, 2024

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.

Nonvested options as of December 31, 2025

The estimated fair value of

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

For the years ended December 31, 2025 and

2024, stock-based compensation expense related to stock options was de minimis.

As of December 31, 2025, all stock options have been expensed

and there is no remaining amount of unrecognized stock compensation expense.

INNOVATION, INC.

Notes to Consolidated Financial Statements

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.

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

In 2025 and 2024, the Company

granted 1.2 million and 1.8 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 2024, 1.2 million, included a market vesting condition.

The restricted stock awards granted in 2025, and 2024 that did not have a market vesting condition had weighted average grant date fair

values of $ 1.76 and $ 1.00 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

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

the vesting period.

The restricted stock awards

granted in 2024 that did have a market vesting condition had a weighted average grant date fair value of $ 1.13 per share.

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:

Trading price of common stock on measurement date $ 1.50

3 unchanged sentences

Expected dividend yield —

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:

The following table summarizes

the Company’s restricted stock unit activity for the years ended December 31, 2025 and 2024:

(in thousands)

1 unchanged sentence

Nonvested restricted stock units as of December 31, 2024

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).

Nonvested restricted stock units as of December 31, 2025

The Company recorded restricted stock unit expense of $ 1.7 million,

$ 2.8 million and $ 3.7 million during the years ended December 31, 2025, 2024 and 2023, respectively.

For restricted stock units

outstanding as of December 31, 2025, there was $ 1.3 million of total unrecognized stock compensation cost with a remaining recognition

period of 1.5 years.

INNOVATION, INC.

Notes to Consolidated Financial Statements

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.

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

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.

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 the Company to match employee contributions up to 5 % of

eligible earnings.

Company contributions immediately vest.

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.

The Company matching contribution expense was $ 3.4 million, $ 3.9 million and

$ 3.8 million for the years ended December 31, 2025, 2024 and 2023, respectively.

Segment Information and Concentrations

12 unchanged sentences

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):

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.

INNOVATION, INC.

Notes to Consolidated Financial Statements

The following table summarizes segment revenue,

significant segment expenses, other segment items and segment profit or loss (in thousands):

Year Ended December 31,

11 unchanged sentences

Loss on impairment of goodwill

Other segment items, net (d)

Tax receivable agreement income

Other segment items, net (e)

Income tax expense

2 unchanged sentences

$ ( 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.

(e) 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

10 unchanged sentences

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 had one individual

customer that accounted for approximately 39 % and 29 % of accounts receivable at December 31, 2025 and 2024, respectively, and approximately

16 %, 13 % and 10 % of net revenue during the years ended December 31, 2025, 2024 and 2023, 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.

The Company is continuing efforts to dual-source key components.

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)

income before income taxes of $( 98.0 ) million, $( 121.2 ) million and $ 120.4 million during the years ended December 31, 2024, 2023 and

2022, respectively, consisted entirely of income earned in the United States.

tax expense for the years ended December 31, 2024, 2023 and 2022 consist of the following (in thousands):

ended December 31,

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.

The Company’s (loss) income before income taxes of $( 51.3 ) million,

$( 98.0 ) million, and $( 121.2 ) million during the years ended December 31, 2025, 2024 and 2023, respectively, consisted entirely of income

earned in the United States.

Income tax expense for the years ended December 31, 2025, 2024

and 2023 consist of the following (in thousands):

Year ended December 31,

Total current

1 unchanged sentence

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

PURPLE INNOVATION, INC.

Notes to Consolidated Financial Statements

The table below provides the updated requirements of ASU 2023-09 for

See Note 2 - Summary of Significant Accounting Policies—Recent accounting pronouncements for additional details

on the adoption of ASU 2023-09.

The effective income tax rate for the year ended December 31, 2025

differs from the statutory federal income tax rate as follows (in thousands, except percentages):

December 31, 2025

Tax benefit at Federal statutory rate

State and local income tax, net of federal (national) income tax effect (f)

Change in valuation allowance

Nontaxable or nondeductible items

Stock Compensation

Change in fair value - warrant liabilities

Other Adjustments

Income tax (benefit) expense

(f) State taxes in Oregon and Texas made up the majority (greater

than 50 percent) of the tax effect in this category.

As previously disclosed for the years ended December 31, 2024 and 2023,

prior to the adoption of ASU 2023-09, the effective income tax rate differs from the statutory federal income tax rate as follows:

Tax (provision) benefit at Federal statutory rate

State income tax provision (benefit), net of federal benefit

Noncontrolling interest

8 unchanged sentences

Income tax expense

income taxes at December 31, 2024 and 2023 consisted of the following (in thousands):

Deferred income taxes at December 31, 2025 and 2024 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.

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.

The following table summarizes

the Company’s change in valuation allowance for the year ending December 31, 2025 and 2024 (in thousands):

Valuation allowance — beginning of period

Additions charged to income tax benefit

Allowances taken or written off

Deductions charged to other accounts

Valuation allowance — end of period

PURPLE INNOVATION, INC.

Notes to Consolidated Financial Statements

The Company’s sole

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

federal income tax purposes and for purposes of certain

state and local income taxes.

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

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

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

During 2022, the Company entered into a three-year cumulative loss

5 unchanged sentences

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.

The amount of the increase

in asset basis, the related estimated cash tax savings and the attendant liability to be recorded will depend on the price of the Company’s

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

In 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.

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 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.

The amount of the increase in asset basis, the related estimated cash tax savings and the attendant

liability to be recorded will depend on the price of the Company’s Common Stock at the time of the relevant redemption or exchange.

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 carryforwards (“NOLs”),

of which $ 64.7 million do not have an expiration date and $ 0.5 million expire in 2037.

The Company also had approximately $ 16.9 million

of tax-affected NOL carryforwards to reduce future state taxable income at December 31, 2024, which have various carryforward periods

and begin to expire in 2026, if unused.

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 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.

There was no tax receivable agreement

liability recorded during 2025 or 2024.

As of December 31, 2025, the Company estimates it will have approximately

$ 79.9 million of tax-affected U.S.

net operating loss carryforwards (“NOLs”), of which $ 79.4 million do not have an expiration

date and $ 0.5 million expire in 2037.

The Company also had approximately $ 21.1 million of tax-affected NOL carryforwards to reduce future

state taxable income at December 31, 2025, which have various carryforward periods and begin to expire in 2026, if unused.

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 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.

As of December

31, 2025, 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.

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.

and state taxable income may be subject to further limitations, which could result in increased future tax liabilities to us.

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.

Refer to Note 15 – Stockholders’ Equity –

NOL Rights Plan for information on plan adopted by the Board to preserve Current NOLs.

INNOVATION, INC.

Notes to Consolidated Financial Statements

The Company estimates federal research and development (“R&D”)

tax credit carryforwards will be approximately $ 2.9 million as of December 31, 2025, which begin to expire in 2042, if unused.

also had approximately $ 1.9 million of state tax credit carryforwards to reduce future state tax liability at December 31, 2025, which

have various carryforward periods and begin to expire in 2030, if unused.

On July 4, 2025, the U.S.

enacted tax legislation referred to as the One Big Beautiful Bill Act (“OBBBA”).

The OBBBA includes significant changes to U.S.

income tax laws, including tax cut extensions and modifications to the international tax

framework with certain provisions effective in 2025 and others effective in 2026 and afterward.

The OBBBA did not have a material impact

on the Company’s effective tax rate.

The effects of uncertain tax

7 unchanged sentences

balance sheets.

There are no material interest and penalties relating to uncertain tax positions as of December 31, 2025.

of December 31, 2025, there are $ 0.2 million of unrecognized tax benefits that if recognized would affect the annual effective tax rate.

The following table summarizes the Company’s unrecognized tax

benefits for the years ended December 31, 2025, 2024 and 2023 (in thousands):

Unrecognized Tax

Unrecognized tax benefits as of December 31, 2023

1 unchanged sentence

Increase due to prior year tax positions

Increase due to acquisition

Unrecognized tax benefits as of December 31, 2022

Increase due to current year tax positions

Increase due to prior year tax positions

Decrease due to lapse of statute of limitations

4 unchanged sentences

Unrecognized tax benefits as of December 31, 2025

Company remains subject to income tax examinations for its U.S.

As of December 31, 2025, there are $ 0.2 million of unrecognized tax benefits that if recognized would affect the annual effective tax

rate The Company remains subject to income tax examinations for its U.S.

federal income taxes for 2019 through 2025.

The Company also

remains subject to income tax examinations for U.S.

state and local income taxes generally for 2018 through 2024.

The Company also remains subject to income tax examinations for U.S.

state and local

income taxes generally for 2019 through 2025.

Subsequent Events

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 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, 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.

Tariff Refund Legal Proceedings

On February 20, 2026, the

Supreme Court issued a decision invalidating tariffs imposed under the International Emergency Economic Powers Act (“IEEPA”).

The Company estimates that approximately $ 5.3 million of its previous tariff payments are subject to this ruling.

On March 6, 2026, the

Company filed a lawsuit in the U.S.

Court of International Trade against the U.S.

Customs and Border Protection (“CBP”), the

CBP commissioner, and the United States of America seeking a full refund of all IEEPA tariffs that the Company has paid to the United

The financial impact of these events is uncertain, as it is unclear to what extent duties will be refunded by CBP, what processes

will govern such refunds, or if the Company can fully collect related amounts receivable by the Company.

The Company is evaluating the

impact of these developments on its business and financial statements.

No adjustments have been recorded in the accompanying audited

consolidated financial statements as the Company cannot reasonably estimate the financial impact;

however, it is reasonably possible that

it could be material.

Third Amendment to the Amended

A&R Credit Agreement

As previously disclosed, on

January 23, 2024, the Loan Parties, entered into Amended A&R Credit Agreement with Coliseum Capital Partners, L.P.

Blackwell Partners LLC – Series A (“Blackwell” and together with CCP, the “Coliseum Lenders”) and other

lenders (collectively, the “Lenders”) and CSC Delaware Trust Company, as administrative agent, which was amended on March

12, 2025, and May 2, 2025.

On March 24, 2026, the

Loan Parties entered into a Third Amendment to the Amended A&R Credit Agreement with the Lenders, which revised the maturity

date under the Amended A&R 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.

In connection with the

Third Amendment, the Loan Parties agreed to pay to the Lenders an amendment fee in the aggregate amount of $ 1.6 million, equal to

1.25 % pro rata based on each Lender’s outstanding principal amount (the “Amendment Fee”).

Of the Amendment Fee,

approximately $ 1.3 million is payable-in-kind by adding such amount to such Coliseum Lenders’ outstanding principal amount.

The remaining $ 0.3 million of the Amendment Fee was paid in cash.

In connection with the Third Amendment, the Loan Parties also

agreed to reimburse the Coliseum Lenders for certain expenses in the amount of $ 0.3 million.

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.

Purple Innovation, Inc.

March 31, 2026

/s/ Robert T.

Chief Executive Officer

(Principal Executive Officer)

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE

8 unchanged sentences

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

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 31, 2026

(Principal Executive Officer)

Chief Financial Officer

March 31, 2026

(Principal Financial Officer)

Vice President, Accounting

and Financial Reporting

/s/ George T.

Vice President, Accounting and Financial Reporting

March 31, 2026

(Principal Accounting Officer)

Chairman of the Board of

Claudia Hollingsworth

Chairman of the Board of Directors

March 31, 2026

/s/ McNeil S.

March 31, 2026

/s/ Claudia Hollingsworth

March 31, 2026

Claudia Hollingsworth

March 31, 2026

Scott Peterson

March 31, 2026

Scott Peterson

/s/ Erika Serow

March 31, 2026

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