What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-08-11 compared with 2026-04-28 · 325 added, 397 removed, 61 unchanged (92% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

The following discussion is

intended to provide a review of the operating results and financial condition of Purple Innovation, Inc.

The discussion should be read

in conjunction with the unaudited condensed consolidated financial statements and the notes thereto included in “Part I.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion is intended to provide a review of the operating results and financial condition of Purple Innovation, Inc.

The discussion should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto included in “Part I.

Financial Statements.” Capitalized terms used in this “Part I.

Management’s Discussion and Analysis of Financial

Condition and Results of Operations and not otherwise defined shall have the meanings set forth in “Part I.

Management’s Discussion and Analysis of Financial Condition and Results of Operations and not otherwise defined shall have the meanings set forth in “Part I.

1 Financial Statements.”

FORWARD-LOOKING STATEMENTS

This quarterly report on Form

10-Q (this “Quarterly Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act,

and Section 21E of the Securities Exchange Act of 1934, as amended (“the “Exchange Act”), that represent our current

expectations and beliefs.

All statements other than statements of historical fact are “forward-looking statements” for purposes

of federal and state securities laws.

In some cases, you can identify these statements by forward-looking words such as “believe,”

“expect,” “project,” “anticipate,” “estimate,” “intend,” “plan,”

“targets,” “likely,” “will,” “would,” “could,” “may,” “might,”

the negative of these words and other similar words.

All forward-looking statements

included in this Quarterly Report are made only as of the date hereof.

It is routine for our internal projections and expectations to

change throughout the year, and any forward-looking statements based upon these projections or expectations may change prior to the end

of the next quarter or year.

In addition, any statements that refer to projections of our future financial performance, our anticipated

growth and trends in our businesses (including the discussion under the heading “Outlook for Growth”), and other characterizations

of future events or circumstances are forward-looking statements.

We caution and advise readers

that these statements are only predictions and are subject to risks, uncertainties and assumptions that are difficult to predict, including

those included in the “Risk Factors” section of this Quarterly Report and in our Annual Report on Form 10-K filed with the

SEC on March 31, 2026.

Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements

and investors are cautioned not to place undue reliance on any such statements.

We undertake no obligation to publicly update or revise

any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law.

This quarterly report on Form 10-Q (this “Quarterly Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended (“the “Exchange Act”), that represent our current expectations and beliefs.

All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws.

In some cases, you can identify these statements by forward-looking words such as “believe,” “expect,” “project,” “anticipate,” “estimate,” “intend,” “plan,” “targets,” “likely,” “will,” “would,” “could,” “may,” “might,” the negative of these words and other similar words.

All forward-looking statements included in this Quarterly Report are made only as of the date hereof.

It is routine for our internal projections and expectations to change throughout the year, and any forward-looking statements based upon these projections or expectations may change prior to the end of the next quarter or year.

In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses (including the discussion under the heading “Outlook for Growth”), and other characterizations of future events or circumstances are forward-looking statements.

We caution and advise readers that these statements are only predictions and are subject to risks, uncertainties and assumptions that are difficult to predict, including those included in the “Risk Factors” section of this Quarterly Report and in our Annual Report on Form 10-K filed with the SEC on March 31, 2026 and our Quarterly Report on Form 10-Q filed with the SEC on April 28, 2026.

Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements and investors are cautioned not to place undue reliance on any such statements.

We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law.

Overview of Our Business

Our mission is to deliver

the greatest sleep ever invented.

We 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 brand.

We offer a variety of innovative, branded and premium comfort products, including mattresses, pillows, cushions,

bases, sheets and more.

Our products are the result of decades of innovation and investment in proprietary and patented comfort technologies

and the development of our own manufacturing processes.

Our proprietary Hyper-Elastic Polymer gel technology underpins many of our comfort

products and provides a range of benefits that differentiate our products from our competitors.

Specially engineered to relieve pressure,

maintain an ideal body temperature, and provide instantly adaptive support, Purple’s patented technology has been tested rigorously

within medical and consumer applications for over 30 years.

Originally designed for use in hospital beds and wheelchairs, we adapted this

unique pressure-relieving material for our mattresses, pillows and other cushion products.

We market and sell our products

via our direct-to-consumer channel, which includes Purple.com (our direct-to-consumer e-commerce), Purple showrooms, our customer contact

center and online marketplaces (collectively “DTC”), and our wholesale channel through retail brick-and-mortar and online

wholesale partners.

Our business consists of Purple

Our mission is to deliver the greatest sleep ever invented.

We 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 brand.

We offer a variety of innovative, branded and premium comfort products, including mattresses, pillows, cushions, bases, sheets and more.

Our products are the result of decades of innovation and investment in proprietary and patented comfort technologies and the development of our own manufacturing processes.

Our proprietary Hyper-Elastic Polymer gel technology underpins many of our comfort products and provides a range of benefits that differentiate our products from our competitors.

Specially engineered to relieve pressure, maintain an ideal body temperature, and provide instantly adaptive support, Purple’s patented technology has been tested rigorously within medical and consumer applications for over 30 years.

Originally designed for use in hospital beds and wheelchairs, we adapted this unique pressure-relieving material for our mattresses, pillows and other cushion products.

We market and sell our products via our direct-to-consumer channel, which includes Purple.com (our direct-to-consumer e-commerce), Purple showrooms, our customer contact center and online marketplaces (collectively “DTC”), and our wholesale channel through retail brick-and-mortar and online wholesale partners.

Our business consists of Purple Inc.

and its consolidated subsidiary, Purple LLC.

As the sole managing member of Purple LLC, Purple Inc., through its officers and directors,

is responsible for all operational and administrative decision making and control of the day-to-day business affairs of Purple LLC without

the approval of any other member.

At March 31, 2026, Purple Inc.

had a 99.85% economic ownership interest in Purple LLC while Class B

unit holders had the remaining 0.15%.

As the sole managing member of Purple LLC, Purple Inc., through its officers and directors, is responsible for all operational and administrative decision making and control of the day-to-day business affairs of Purple LLC without the approval of any other member.

At June 30, 2026, Purple Inc.

had a 99.85% economic ownership interest in Purple LLC while Class B unit holders had the remaining 0.15%.

Recent Developments in Our Business

Operational Developments

We entered 2026 building

on the progress we made in the fourth quarter, and our first quarter reflects continued progress and greater consistency across our

Trends were solid during the quarter, with growth in our showroom and wholesale channels.

The E-commerce channel also

improved sequentially declining 10% in the first quarter year over year compared to down 15% in the prior period year over year,

reflecting more disciplined marketing execution and early signs of improved conversion.

Importantly, we continue to see the benefits of actions taken last year reflected in our operating expense

This progress is a direct result of the changes we’ve made to the business, not a recovery of the broader market,

reinforcing the durability of the model we’ve been building.

Impact of Revenue Presentation for Certain

Product Arrangements

Revenue for certain product

arrangements is presented differently depending on the nature of the underlying manufacturing relationships and the application of ASC

606— Revenue from Contracts with Customers .

Under the guidance, payments to third-party manufacturers, including manufacturers

under common control with certain customers, are evaluated to determine whether they are economically linked to an underlying customer

For certain customer-specific or exclusive product programs where the manufacturer is under common control with the customer,

the Company has concluded that payments to the manufacturer are economically linked to the customer relationship and therefore represent

consideration payable to a customer.

As a result, these payments are recorded as a reduction of revenue, and revenue is presented on a

The Company recorded $4.9 million in consideration paid as a reduction of revenue in the unaudited condensed consolidated statement

of operations for the three months ended March 31, 2026.

This presentation results in reported revenue being lower than the gross amount

billed to the customer.

We continue building on the progress we made in the past year and remain focused on where we believe we can make the most impact.

The demand environment remained challenging in the second quarter of 2026, and we made progress in our showroom and E-commerce channels.

Our showroom business was up 16.6% compared to last year.

This was driven by improving traffic, stronger conversion and strength in our premium products.

E-commerce was down slightly by 1.4% compared to last year, but we are moving in the right direction as we have had three consecutive quarters of sequential improvement.

We are improving our management of the channel and the work we are doing across marketing and the website experience is contributing to that progress.

Our performance in the wholesale channel remained challenged as revenues were down 19.1% compared to last year.

This decrease is due to certain payments to customers and a manufacturer under common control with a customer which represent consideration paid to a customer and are recorded as a reduction of revenue.

In addition, we experienced lower wholesale sales volumes related to lower industry demand.

Operationally, we continue to see the benefits of previous actions taken in areas we can control, reflected in our improved profitability and cash generation, disciplined expense performance and inventory management.

We continue to invest in innovation, advertising and consumer experience.

Although the demand environment remains uncertain, we believe that we are operating from a stronger foundation.

We expect to benefit from continued operational improvements, additional sourcing initiatives and the continued development of our premium product line.

Impact of Revenue Presentation for Certain Product Arrangements

Revenue for certain product arrangements is presented differently depending on the nature of the underlying manufacturing relationships and the application of ASC 606— Revenue from Contracts with Customers .

Under the guidance, payments to third-party manufacturers, including manufacturers under common control with certain customers, are evaluated to determine whether they are economically linked to an underlying customer arrangement.

For certain customer-specific or exclusive product programs where the manufacturer is under common control with the customer, the we have concluded that payments to the manufacturer are economically linked to the customer relationship and therefore represent consideration payable to a customer.

As a result, these payments are recorded as a reduction of revenue, and revenue is presented on a net basis.

We recorded $0.5 million and $5.4 million in consideration paid as a reduction of revenue in the unaudited condensed consolidated statement of operations for the three months and six months ended June 30, 2026, respectively.

This presentation results in reported revenue being lower than the gross amount billed to the customer.

While the net presentation affects reported revenue, it does not impact gross profit dollars for these arrangements.

The distinction reflects the application of GAAP to different fact patterns rather than a difference in the underlying economics of the

transactions.

The distinction reflects the application of GAAP to different fact patterns rather than a difference in the underlying economics of the transactions.

Debt Financings

On March 24, 2026, the Loan Parties entered into the Third Amendment 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 the 2025 Lenders’ outstanding principal amount.

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

other lenders.

In connection with the Third Amendment, the Loan Parties also agreed to reimburse the 2025 Lenders for certain expenses

in the amount of $0.3 million.

On March 24, 2026, the Loan Parties entered into the Third Amendment 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 was paid-in-kind by adding such amount to the 2025 Lenders’ outstanding principal amount.

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

In connection with the Third Amendment, the Loan Parties also agreed to reimburse the 2025 Lenders for certain expenses in the amount of $0.3 million.

Reclassification of Merchant and Financing Fees

In the second quarter of 2026, we changed the presentation of costs associated with merchant credit card processing fees and third-party consumer financing fees.

These costs were previously presented within cost of revenues and are now presented within marketing and sales.

We believe this presentation will enhance the comparability of our financial statements with those of our industry peers.

The tables below present the effect of the reclassification on our previously issued financial statements.

This change in presentation had no impact on previously reported revenues, operating loss, net loss, or earnings per share.

Additionally, the reclassifications did not impact the historical balance sheets or statement of cash flows.

Three Months Ended

March 31, 2026 Three Months Ended

March 31, 2025

(In thousands, except per share amounts) As Previously

Presented Reclassification As Reclassified As Previously Presented Reclassification As Reclassified

Cost of revenues $ 60,535 $ (5,026 ) $ 55,509 $ 62,207 $ (4,615 ) $ 57,592

Total cost of revenues 60,535 (5,026 ) 55,509 63,125 (4,615 ) 58,510

Gross profit 35,195 5,026 40,221 41,046 4,615 45,661

Marketing and sales 31,557 5,026 36,583 36,626 4,615 41,241

Total operating expenses 52,038 5,026 57,064 55,525 4,615 60,140

Three Months Ended

June 30, 2025 Six Months Ended

June 30, 2025

(In thousands, except per share amounts) As Previously Presented Reclassification As Reclassified As Previously Presented Reclassification As Reclassified

Cost of revenues $ 67,340 $ (4,831 ) $ 62,509 $ 129,547 $ (9,446 ) $ 120,101

Total cost of revenues 67,417 (4,831 ) 62,586 130,542 (9,446 ) 121,096

Gross profit 37,683 4,831 42,514 78,729 9,446 88,175

Marketing and sales 30,616 4,831 35,447 67,242 9,446 76,688

Total operating expenses 51,922 4,831 56,753 107,447 9,446 116,893

Three Months Ended

September 30, 2025 Nine Months Ended

September 30, 2025

(In thousands, except per share amounts) As Previously Presented Reclassification As Reclassified As Previously Presented Reclassification As Reclassified

Cost of revenues $ 67,915 $ (5,642 ) $ 62,273 $ 197,462 $ (15,088 ) $ 182,374

Total cost of revenues 67,915 (5,642 ) 62,273 198,457 (15,088 ) 183,369

Gross profit 50,851 5,642 56,493 129,580 15,088 144,668

Marketing and sales 40,120 5,642 45,762 107,362 15,088 122,450

Total operating expenses 62,977 5,642 68,619 170,424 15,088 185,512

December 31, 2025

(In thousands, except per share amounts) As Previously Presented Reclassification As Reclassified

Cost of revenues $ 279,171 $ (21,618 ) $ 257,553

Total cost of revenues 280,166 (21,618 ) 258,548

Gross profit 188,559 21,618 210,177

Marketing and sales 147,040 21,618 168,658

Total operating expenses 231,588 21,618 253,206

Review of Strategic Alternatives

We have engaged with multiple

parties about a broad range of opportunities to maximize shareholder value, including, but not limited to, a merger, sale or other strategic

or financial transaction.

The Board has formed a special committee of independent directors and we have engaged a financial advisor to

support them in evaluating a range of options and exploring other potential strategic alternatives.

If we are unsuccessful in engaging

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

be adversely affected.

We have engaged with multiple parties about a broad range of opportunities to maximize shareholder value, including, but not limited to, a merger, sale or other strategic or financial transaction.

The Board has formed a special committee of independent directors and we have engaged a financial advisor to support them in evaluating a range of options and exploring other potential strategic alternatives.

If we are unsuccessful in engaging in a favorable strategic alternative, then our ability to grow our business and compete with larger, including combined, competitors may be adversely affected.

Impact of United States Tariff Policy

We continue to actively manage the impact of recent United States tariff

Importantly, all of our mattresses are manufactured in the United States, and about 15% of our cost of goods is tied to products

sourced from overseas.

This limited exposure is primarily concentrated in the textile side of the business, which includes sheets and

mattress covers, but also includes the import of bases and foundations.

Tariffs impacted us by approximately $1.0 million during the three

months ended March 31, 2026 due to our mitigation efforts which have reduced the overall impact to our initial expectations.

landscape remains fluid, and we are actively evaluating sourcing alternatives and pricing strategies on a case-by-case basis.

that our vertically integrated model and strong vendor relationships give us the flexibility to remain agile and responsive to changes

in tariff policies, and we believe that we will be able to partially mitigate these impacts through a combination of supply chain repositioning,

vendor collaborations, and selective pricing actions.

We continue to actively manage the impact of recent United States tariff policies.

Importantly, all of our mattresses are manufactured in the United States, and about 15% of our cost of goods is tied to products sourced from overseas.

This limited exposure is primarily concentrated in the textile side of the business, which includes sheets and mattress covers, but also includes the import of bases and foundations.

Tariffs impacted us by approximately $0.9 million and $1.8 million during the three and six months ended June 30, 2026, respectively, due to our mitigation efforts which have reduced the overall impact to our initial expectations.

The tariff landscape remains fluid, and we are actively evaluating sourcing alternatives and pricing strategies on a case-by-case basis.

We believe that our vertically integrated model and strong vendor relationships give us the flexibility to remain agile and responsive to changes in tariff policies, and we believe that we will be able to partially mitigate these impacts through a combination of supply chain repositioning, vendor collaborations, and selective pricing actions.

On March 6, 2026, we filed a lawsuit in the U.S.

Court of International Trade against

Customs and Border Protection (“CBP”), the CBP commissioner, and the United States of America seeking a full refund

of the $5.3 million in tariffs imposed under the International Emergency Economic Powers Act that the Company has paid to the United States

(See Note 13 – Commitments and Contingencies, Legal Proceedings).

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 the tariffs imposed under the International Emergency Economic Powers Act that the Company has paid to the United States.

During the second quarter of 2026, we received $5.5 million in tariff refunds plus interest (See Note 2 – Summary of Significant Accounting Policies, Refund of Tariffs).

Pricing Actions

In the latter part of the second quarter of 2026, we announced a pricing action to increase the sales price of our products across all products to offset the impact of materials and logistics inflation related to the rise of fuel prices and to maintain gross margins.

We expect all price increases will be effective with all customers during the third quarter of 2026.

Reverse Stock Split

On July 2, 2026, our stockholders approved a reverse stock split of our Class A common stock and Class B common stock (collectively, the “common stock”) at a ratio ranging from any whole number between 1-for-10 to 1-for-30, with the exact ratio determined by the Company’s Board of Directors.

On July 6, 2026, the Board of Directors approved a 1-for-25 reverse stock split (“Reverse Stock Split”) of the Company’s common stock that became effective on July 19, 2026.

Following the effect of the Reverse Stock Split, every 25 shares of the Company’s common stock that were issued and outstanding automatically converted into one outstanding share of common stock.

All stock awards and warrants of the Company outstanding immediately prior to the Reverse Stock Split were proportionally adjusted.

The Reverse Stock Split did not change the Company’s authorized number of shares of common stock.

The Reverse Stock Split did not change the par value of the common stock and, therefore the Company reclassified an amount equal to the reduction in the number of shares of common stock at par value to additional paid-in capital.

No fractional shares of common stock were issued in connection with the Reverse Stock Split.

Instead, any fractional share that would otherwise result from the Reverse Stock Split will be rounded up to the next whole share of common stock.

Proportionate adjustments were made to the number of shares authorized under the Company’s equity incentive plans, the number of shares subject to any award or purchase right under the Company’s equity incentive plans, and the exercise price or purchase price with respect to any stock award or warrant.

Executive Summary – Results of Operations

Net revenues decreased $8.4

million, or 8.1%, to $95.7 million for the three months ended March 31, 2026 compared to $104.2 million for the three months ended March

The drop in revenue was primarily due to a decrease in e-commerce sales and recognized wholesale revenue.

From a sales channel

perspective, e-commerce net revenues decreased $4.8 million, or 10.6%, wholesale net revenues decreased $4.5 million or 11.0% and showroom

net revenues increased $0.9 million, or 4.8%.

The decrease in wholesale revenue was due mainly to $4.9 million in payments to a manufacturer

that is under common control with a customer and represents consideration paid to a customer.

Accordingly, these payments are recorded

as a reduction in revenue.

The decreases were partially offset by our showroom net revenue increase of $0.9 million or 4.8%.

in our showrooms channel represents a 7.0% year-over-year increase for all stores that have been open for 13 or more months.

third consecutive quarter of year-over-year growth in the showrooms channel, driven by increased order values through effective upselling

and product bundling.

Gross profit decreased

$5.9 million, or 14.3%, to $35.2 million for the three months ended March 31, 2026 compared to $41.0 million for the three months

ended March 31, 2025.

Our gross profit percentage decreased to 36.8% of net revenues in the first quarter of 2026 from 39.4% in the

first quarter of 2025 due to our strategic investment in Purple Royale floor models to support the Mattress Firm rollout, as well as

modest manufacturing overhead deleverage driven by lower production volumes and less favorable absorption of fixed costs.

Operating expenses decreased $3.5 million, or 6.3% to $52.0 million

for the three months ended March 31, 2026 compared to $55.5 million for the three months ended March 31, 2025.

This decrease was driven

by a $3.3 million decrease in advertising spending, a $2.8 million decrease in employee related expenses and $2.0 million decrease in

restructuring related costs from last year, partially offset by $4.6 million in strategic alternative and other costs.

Total other expense, net increased $9.0 million, or 194.6% to $13.7

million for the three months ended March 31, 2026 compared to $4.6 million for the three months ended March 31, 2025.

The other expense,

net in the first quarter of 2026 consists of interest expense of $8.2 million and a $7.0 million loss on change in fair value of warrants,

partially offset by $1.5 million in other income.

The other expense, net in the first quarter of 2025 consists of interest expense of

$4.8 million, partially offset by $0.2 million in other income and gain on change in fair value of warrants.

Net loss attributable to Purple

was $30.5 million for the three months ended March 31, 2026 compared to a net loss of $19.1 million for the three months ended March

The $11.4 million increase in net loss was primarily due to lower gross margins and the increase in loss from change in fair

value of the warrants, partially offset by reduced operating expenses.

Net revenues decreased $6.8 million, or 6.5%, to $98.3 million for the three months ended June 30, 2026 compared to $105.1 million for the three months ended June 30, 2025.

The decrease in revenue was primarily driven by an $8.8 million or 19.1% decrease in our wholesale revenue due to an increase of $5.3 million in certain payments to customers and a manufacturer under common control with a customer.

These payments represent consideration paid to a customer and are recorded as a reduction of revenue.

In addition, we had a $3.5 million decrease in wholesale sales volume related to lower industry demand.

E-commerce net revenues also decreased $0.6 million, or 1.4%.

While down against the prior year’s period, E-commerce net revenues for the three months ended June 30, 2026 represented the third quarter of sequential improvement.

These decreases were partially offset by a $2.6 million or 16.6% increase in showroom net revenues which continues to outperform the mattress industry.

Gross profit increased $1.9 million, or 4.5%, to $44.4 million for the three months ended June 30, 2026 compared to $42.5 million for the three months ended June 30, 2025.

Our gross profit increased due to the $5.3 million benefit from tariff refunds, partially offset by lower sales.

Our gross profit percentage increased to 45.2% of net revenues in the second quarter of 2026 from 40.5% in the second quarter of 2025 primarily due to the tariff refund.

Operating expenses decreased $8.1 million, or 14.3% to $48.7 million for the three months ended June 30, 2026 compared to $56.8 million for the three months ended June 30, 2025.

This decrease was driven by a $4.1 million decrease in restructuring related costs from last year, a $4.0 million decrease in employee related expenses and $2.1 million decrease in professional services and all other operating expenses, partially offset by a $2.1 million increase in advertising spending.

Total other income (expense), net was $1.0 million net other income for the three months ended June 30, 2026, compared to $3.1 million net other expense for the three months ended June 30, 2025.

The other income, net for the three months ended June 30, 2026 consists of $7.4 million gain from the change in the fair value of warrants, $1.4 million in other income, partially offset by $7.8 million in interest expense.

The other expense, net in the three months ended June 30, 2025 consists of interest expense of $7.5 million, partially offset by $4.4 million in other income due to the gain on the change in the fair value of warrants.

Net loss attributable to Purple Inc.

was $3.2 million for the three months ended June 30, 2026 compared to a net loss of $17.3 million for the three months ended June 30, 2025.

The $14.1 million decrease in net loss was primarily due to higher margins, reduced operating expenses and the increase in gain from change in fair value of the warrants.

Outlook for Growth

The way we think about the

business today is fundamentally different than a year ago.

Last year was about reshaping the business for a tougher market – right

sizing our cost structure, strengthening the foundation and restoring profitability.

Now, we are focused on growth with our strategic

focus areas that build on what is already working and how we are running our business.

We believe we are well positioned to grow our business

given our new grid innovation, evolved messaging strategy, our new cost structure and other cost saving initiatives.

Our Path to Premium

Sleep strategy remains focused on the following three priorities to drive growth:

Our Consumer.

The way we think about the business today is fundamentally different than a year ago.

Last year was about reshaping the business for a tougher market – right sizing our cost structure, strengthening the foundation and restoring profitability.

Now, we are focused on growth with our strategic focus areas that build on what is already working and how we are running our business.

We believe we are well positioned to grow our business given our new grid innovation, evolved messaging strategy, our new cost structure and other cost saving initiatives.

Our Path to Premium Sleep strategy remains focused on the following three priorities to drive growth:

● Knowing Our Consumer.

Knowing our consumer continues to shape how we show up across all channels.

We have shifted away from promotion-led

messaging toward clearer, benefit driven marketing focused on our differentiated technology and how we deliver better sleep.

Pain, Better Sleep positioning continues to resonate, providing a consistent, consumer-led message that translates across e-commerce,

retail, and wholesale channels.

We are making our differentiation clearer, our content more educational and our local marketing more

effective at converting awareness into foot traffic.

We continue to make changes to our creative approach and how we guide consumers

through the online purchase journey with a more focused and tactical path to identifying the right mattress.

Better Sleep.

Our innovation continues to resonate with consumers, with our premium

products maintaining strong interest in both wholesale and showroom channels.

We saw a strong

initial response to the launch of Purple Royale, our new premium offering developed in partnership

with Mattress Firm.

Additionally, Rejuvenate 2.0 continues to outperform our expectations

with strong demand.

This performance reinforces the strength of our premium positioning and

the resonance of our innovation with consumers.

We are also seeing a positive halo effect

across the portfolio, supporting performance in adjacent categories.

We are focused on elevating

the full consumer journey across both owned and partner channels.

This includes improving

how we present and explain our technology in-store, with greater emphasis on pain relief

and more effective use of demonstrations and digital support.

This is resulting in improved

engagement from retail sales associates, particularly within our wholesale channel, as our

product storytelling continues to resonate.

We have also made changes to our online sales

approach, enhancing live customer care and follow-up to better replicate the in-store experience

in a digital environment, which is helping improve engagement and close rates.

time, we’re enhancing our delivery experience to ensure a more consistent and credible

brand experience from purchase through fulfillment.

These improvements are helping reinforce

our value proposition and support stronger conversion.

with Financial Discipline.

We have taken meaningful steps to resize and simplify the business, and we are seeing those

benefits reflected in our operating efficiency and cost structure.

These actions have created a more stable foundation as we shift

toward growth.

In the first quarter, gross margin came in below our normal 40% baseline, primarily driven by higher levels of floor

model discounts associated with the Purple Royale rollout at Mattress Firm.

We view this as temporary, and as the floor model

transition normalizes, we expect improved contribution from Purple Royale.

We’ve seen similar dynamics during prior transitions and would expect a comparable normalization as floor

model activity moderates.

At the same time, we are making continued progress in our underlying cost structure, particularly across

sourcing, operations, and fulfillment, supported by ongoing productivity initiatives and supply chain optimization efforts.

also actively managing a more dynamic cost environment, including tariff dynamics and rising input costs.

Our mitigation efforts are

well underway, including diversifying our supplier base, expanding multi-sourcing, and selectively in-sourcing key components, such

as pillows, where we see both cost and quality benefits.

There is no guarantee that we will be able to

effectively execute on these initiatives, which are subject to risks, uncertainties, and assumptions that are difficult to predict, including

the risks described in the “Risk Factors” section of this Quarterly Report and in our Annual Report on Form 10-K filed with

the SEC on March 31, 2026 and elsewhere herein.

We remain focused on helping people understand why the Gelflex Grid is different, why it matters to sleep quality and which Purple product is right for them.

We have shifted our marketing approach to place greater emphasis on brand building and consumer education outside of key holiday periods, while continuing to use targeting conversion marketing as consumers move closer to purchase.

We believe that we have strong consumer awareness and an opportunity to turn that awareness into stronger purchase consideration.

That means making the benefits of the GelFlex Grid easier to understand before consumers are ready to buy and making it simpler to choose the right Purple product when they enter the purchase process.

This effort applies across the full consumer journey, from our showrooms and website to our wholesale partners, with the same objectives everywhere – to clearly answer, why Purple and which Purple mattress?

● Delivering Better Sleep.

During the second quarter, our premium products continued to perform well, with Rejuvenate remaining the strongest-performing collections, particularly in our showroom channel.

Within our showroom business, Rejuvenate 2.0 continues to account for over 50% of total mattress revenue, underscoring the strength of our premium positioning and consumers’ willingness to invest in better sleep products.

Beyond mattresses, our pillow business continued to deliver strong results, reinforcing the broader appeal of the Purple brand and providing additional opportunities to introduce new consumers to our GelFlex Grid technology.

While the overall mattress category remained under pressure, we continue to believe our premium innovation positions us well for long-term growth.

Beyond the product itself, we are continuing to invest in the customer experience across every touchpoint.

Our showrooms are the clearest proof point for our product.

When consumers experience the GelFlex Grid in person and our teams can explain the difference, we see better conversion and a stronger premium mix.

That was evident again in the second quarter, with showroom sales up compared to the prior year.

Expanding and strengthening our distribution network remains an important component of our long-term growth strategy.

Our owned retail footprint expanded during the quarter with the opening of one new showroom and the relocation of another, both of which are performing well.

As we expand our showrooms, we continue to deepen our presence with key wholesale partners.

The rollout of Purple Royale at Mattress Firm was completed during the second quarter.

Costco continued to perform well during the second quarter and remains one of our strongest wholesale relationships.

Volume was well ahead of last year, and we continue to see meaningful opportunity with them.

Amazon also had another strong quarter, delivering double-digit growth as we further optimized our product assortment and fulfillment strategy.

● Executing with Financial Discipline.

Over the past year, we have taken meaningful steps to improve the efficiency of our business.

Those efforts continue to support improved profitability.

During the second quarter of 2026, we delivered higher gross margin and profitability above last year despite lower sales.

We took pricing actions in June to help offset commodity and logistics inflation and preserve gross margins.

We are making continued progress in our underlying cost structure, particularly across sourcing, operations, and fulfillment, supported by ongoing productivity initiatives and supply chain optimization efforts.

Our sourcing teams continue to identify additional opportunities to improve costs through supplier diversification and operational efficiencies.

There is no guarantee that we will be able to effectively execute on these initiatives, which are subject to risks, uncertainties, and assumptions that are difficult to predict, including the risks described in the “Risk Factors” section of this Quarterly Report and in our Annual Report on Form 10-K filed with the SEC on March 31, 2026 and our Quarterly Report on Form 10-Q filed with the SEC on April 28, 2026.

Therefore, actual results may differ materially and adversely from those described above.

In addition, we may, in the future, adapt these focuses in response to changes in the market or our business.

Operating Results for the Three Months Ended March 31, 2026 and

The following table sets forth

for the periods indicated, our results of operations and the percentage of total revenue represented in our unaudited condensed consolidated

statements of operations (dollars in thousands):

Three Months Ended March 31,

Operating Results for the Three Months Ended June 30, 2026 and 2025

The following table sets forth for the periods indicated, our results of operations and the percentage of total revenue represented in our unaudited condensed consolidated statements of operations (dollars in thousands):

Three Months Ended June 30,

Net Revenues 2025 % of

Revenues, net $ 98,270 100.0 % $ 105,100 100.0 %

3 unchanged sentences

Total cost of revenues 53,857 54.8 62,586 59.5

Gross profit 44,413 45.2 42,514 40.5

Operating expenses:

9 unchanged sentences

Change in fair value – warrant liabilities 7,393 7.5 4,378 4.2

Total other expense, net

Total other income (expense), net 1,036 1.1 (3,078 ) (2.9 )

Net loss before income taxes (3,214 ) (3.3 ) (17,317 ) (16.5 )

Income tax expense (32 ) — (54 ) —

Net loss (3,246 ) (3.3 ) (17,371 ) (16.5 )

Net loss attributable to noncontrolling interest (16 ) — (26 ) —

Net loss attributable to Purple Innovation, Inc.

$ (3,230 ) (3.3 ) $ (17,345 ) (16.5 )

Revenues, Net

Net revenues decreased $8.4

million, or 8.1%, to $95.7 million for the three months ended March 31, 2026 compared to $104.2 million for the three months ended March

This decrease was primarily driven by our e-commerce and wholesale recognized revenue.

From a sales channel perspective, e-commerce

net revenues decreased $4.8 million, or 10.6%, wholesale net revenue decreased $4.5 million or 11.0% and showroom net revenues increased

$0.9 million, or 4.8%.

The decrease in wholesale revenue was due mainly to $4.9 million in payments to a manufacturer that is under common

control with a customer and represents consideration paid to a customer.

Accordingly, these payments are recorded as a reduction in revenue.

Net revenues decreased $6.8 million, or 6.5%, to $98.3 million for the three months ended June 30, 2026 compared to $105.1 million for the three months ended June 30, 2025.

These payments represent consideration paid to a customer and are recorded as a reduction of revenue.

In addition, we had a $3.5 million decrease in wholesale sales volume related to lower industry demand.

E-commerce net revenues also decreased $0.6 million, or 1.4%.

While down against the prior year’s period, E-commerce net revenues for the three months ended June 30, 2026 represented the third quarter of sequential improvement.

These decreases were partially offset by a $2.6 million or 16.6% increase in showroom net revenues which continues to outperform the mattress industry.

Total Cost of Revenues

Total cost of revenues decreased $8.7 million, or 14.0%, to $53.9 million for the three months ended June 30, 2026, compared to $62.6 million for the three months ended June 30, 2026.

This decrease was due primarily to a $5.3 million benefit from our tariff rebates that we received during the quarter, $2.3 million in lower tariff payments and $1.1 million reduction in other costs.

Our gross profit percentage increased to 45.2% of net revenues in the second quarter of 2026 from 40.5% in the second quarter of 2025, due mainly to the tariff refund.

Marketing and Sales

Marketing and sales expense decreased $1.7 million, or 4.8%, to $33.7 million for the three months ended June 30, 2026 compared to $35.4 million for the three months ended June 30, 2025.

This decrease primarily consisted of a $2.3 million decrease in various marketing activities and professional services, a $1.2 million decrease in employee-related expenses due to headcount reductions and $0.3 million decrease in all other marketing and sales expenses, partially offset by a $2.1 million increase in advertising spending.

General and Administrative

General and administrative expense decreased $2.5 million, or 17.0%, to $12.4 million for the three months ended June 30, 2026 compared to $15.0 million for the three months ended June 30, 2025.

This decrease was due to a $2.7 million decrease in employee related costs due to headcount reductions and $0.5 million reduction in strategic alternative costs, partially offset by a $0.7 million increase in all other general and administrative costs.

Research and Development

Research and development expense increased $0.3 million, or 14.1%, to $2.5 million for the three months ended June 30, 2026 compared to $2.2 million for the three months ended June 30, 2025.

The increase is due to an increase in professional service expenses.

Restructuring, Impairment and Other Related Charges

There were no restructuring, impairment and other related charges for the three months ended June 30, 2026 as all restructuring activities were completed in 2025.

We incurred $4.1 million of restructuring, impairment and other related charges during the three months ended June 30, 2025.

Operating Loss

Operating loss decreased $9.9 million, or 70.1%, to $4.3 million, for the three months ended June 30, 2026 compared to $14.2 million for the three months ended June 30, 2025.

This decrease in our operating loss is the result of a higher gross profit percent, lower operating expenses and no restructuring costs in 2026.

Interest Expense

Interest expense totaled $7.8 million for the three months ended June 30, 2026 compared to $7.5 million for the three months ended June 30, 2025.

This increase was primarily due to additional interest incurred on a higher principal balance on the Related Party Loan as the Company elected the paid-in-kind option on monthly interest over the past 12 months along with additional debt issuance costs to amortize over the life of the loan.

Other Income, Net

Other income was $1.5 million for the three months ended June 30, 2026 compared to a de minimis amount for the three months ended June 30, 2025.

This increase was mainly due to $1.2 million received for sublease rent payments on facilities we are no longer using and have subleased to other parties.

Change in Fair Value – Warrant Liabilities

Our warrants contain certain provisions that did not meet the criteria for equity classification and therefore are recorded as liabilities with a re-measurement of fair value at each reporting date.

We incurred a $7.4 million gain on the change in fair value of our warrant liabilities for the three months ended June 30, 2026 related to the decrease in fair value from the previous reporting date, due mainly to the reduction in stock price.

For the three months ended June 30, 2025, we recognized a $4.4 million gain related to the decrease in fair value of the warrant liability during that period.

Income Tax (Expense) Benefit

We had a de minimis income tax expense for the three months ended June 30, 2026 and 2025.

The income tax expense amounts in both the second quarter of 2026 and 2025 were related to various state taxes.

Noncontrolling Interest

We calculate net loss attributable to noncontrolling interests on a quarterly basis using their weighted average ownership percentage.

Net loss attributed to noncontrolling interests was negligible for the three months ended June 30, 2026 and 2025.

Operating Results for the Six Months Ended June 30, 2026, and 2025

Six Months Ended June 30,

Net Revenues 2025 % of

Revenues, net $ 194,000 100.0 % $ 209,271 100.0 %

Cost of revenues:

Cost of revenues 109,366 56.4 120,101 57.4

Cost of revenues - restructuring related charges — — 995 0.5

Total cost of revenues 109,366 56.4 121,096 57.9

decreased $2.6 million, or 4.1%, to $60.5 million for the three months ended March 31, 2026, compared to $63.1 million for the three

months ended March 31, 2025.

This decrease was due primarily to $4.9 million in costs associated with a manufacturer that is

affiliated with a customer recorded as reduction of revenue.

This decrease was partially offset by less favorable absorption of

fixed costs from lower production volumes.

Our gross profit percentage decreased to 36.8% of net revenues in the first quarter of

2026 from 39.4% in the first quarter of 2025, due to our strategic investment in Purple Royale floor models to support the Mattress

Firm rollout, as well as modest manufacturing overhead deleverage driven by lower production volumes and less favorable absorption

of fixed costs.

Gross profit 84,634 43.6 88,175 42.1

Operating expenses:

Marketing and sales 70,316 36.2 76,688 36.6

Marketing and sales expense decreased $5.1 million, or 13.8%, to $31.6

million for the three months ended March 31, 2026 compared to $36.6 million for the three months ended March 31, 2025.

This decrease primarily

consisted of a $3.3 million decrease in advertising spend, a $1.3 million decrease in employee related expenses due to head count reductions

and $0.2 million decrease in all other marketing and sales expenses.

General and administrative 30,478 15.7 29,478 14.1

General and administrative expense increased $3.5 million, or 24.5%,

to $18.0 million for the three months ended March 31, 2026 compared to $14.5 million for the three months ended March 31, 2025.

This increase

was due to a $4.3 million increase in strategic alternative costs and an increase of $0.7 million in all other general and administrative

costs, partially offset by a $1.4 million decrease in employee related costs due to headcount reductions.

Research and development 4,933 2.5 4,630 2.2

Research and development expense was flat to prior year at $2.4 million

for the three months ended March 31, 2026 compared to the three months ended March 31, 2025.

Restructuring, Impairment and Other Related

There were no restructuring,

impairment and other related charges for the three months ended March 31, 2026 as all restructuring activities were completed in 2025.

We incurred $2.0 million of restructuring, impairment and other related charges during the three months ended March 31, 2025.

Restructuring, impairment and other related charges — — 6,097 2.9

Total operating expenses 105,727 54.5 116,893 55.9

Operating loss (21,093 ) (10.9 ) (28,718 ) (13.7 )

Operating loss increased $2.4

million, or 16.3%, to $16.8 million, for the three months ended March 31, 2026 compared to $14.5 million for the three months ended March

This increase in our operating loss is the result of a lower gross profit percent and increases in strategic alternative costs,

partially offset by reduced advertising spend and lower headcount costs.

Other income (expense):

Interest expense (16,031 ) (8.3 ) (12,221 ) (5.8 )

Interest expense totaled $8.2

million for the three months ended March 31, 2026 compared to $4.8 million for the three months ended March 31, 2025.

This increase was

primarily due to additional interest incurred on a higher principal balance on the Related Party Loan as the Company elected the paid-in-kind

option on monthly interest over the past 12 months.

Other income, net 2,946 1.5 70 —

Other income increased to

$1.5 million for the three months ended March 31, 2026 compared to $0.1 million for the three months ended March 31, 2025.

This increase

was mainly due to $1.3 million received for sublease rent payments on facilities we are no longer using and have subleased to other parties.

Change in fair value – warrant liabilities 435 0.2 4,427 2.1

Our Warrants contain certain

provisions that did not meet the criteria for equity classification and therefore are recorded as liabilities with a re-measurement of

fair value at each reporting date.

We incurred a $7.0 million loss on the change in fair value of our warrant liabilities for the three

months ended March 31, 2026 related to the increase in fair value from the previous reporting date.

For the three months ended March 31,

2025, we recognized a negligible gain related to the net decrease in fair value of the warrant liability.

Total other income (expense), net (12,650 ) (6.5 ) (7,724 ) (3.7 )

Net loss before income taxes (33,743 ) (17.4 ) (36,442 ) (17.4 )

Income tax expense (79 ) — (95 ) —

Net loss (33,822 ) (17.4 ) (36,537 ) (17.5 )

Net loss attributable to noncontrolling interest (51 ) — (55 ) —

Net loss attributable to Purple Innovation, Inc.

$ (33,771 ) (17.4 ) $ (36,482 ) (17.4 )

Revenues, Net

Net revenues decreased $15.3 million, or 7.3%, to $194.0 million for the six months ended June 30, 2026, compared to $209.3 million for the six months ended June 30, 2025.

This decrease was primarily driven by a $13.3 million or 15.3% decrease in our wholesale revenue due to an increase of $11.1 million in certain payments to customers and a manufacturer under common control with a customer.

These payments represent consideration paid to a customer and are recorded as a reduction of revenue.

In addition, we had a $2.2 million decrease in wholesale sales volume related to lower industry demand.

E-commerce net revenues decreased $5.4 million, or 6.1% and showroom net revenues increased $3.5 million, or 10.3%.

Total Cost of Revenues

Total cost of revenues decreased $11.7 million, or 9.7%, to $109.4 million for the six months ended June 30, 2026, compared to $121.1 million for the six months ended June 30, 2025.

This decrease was due primarily to a $5.3 million credit for tariff refunds we received in the second quarter, costs of $5.4 million to a manufacturer under common control that were booked against revenues, $3.0 million in lower tariff payments and a $1.0 million reduction in restructuring costs as the plan ended in 2025.

These costs were offset by a $3.0 million increase in material and other costs, primarily logistics due to higher fuel costs and reduced driver supply.

Our gross profit percentage increased to 43.6% for the first six months in 2026 from 42.1% in the first six months of 2025.

Marketing and Sales

Marketing and sales expense decreased $6.4 million, or 8.3%, to $70.3 million for the six months ended June 30, 2026, compared to $76.7 million for the six months ended June 30, 2025.

This decrease is due to a decrease of $2.6 million for payroll related costs, a decrease of $1.2 million in advertising spending, and a decrease of $2.6 million in all other marketing expenses.

General and Administrative

General and administrative expense increased $1.0 million, or 3.4%, to $30.5 million for the six months ended June 30, 2026, compared to $29.5 million for the six months ended June 30, 2025.

This increase was primarily due to $3.8 million increase in strategic alternative costs, increase in facilities and other expenses of $1.3 million, partially offset by a $4.1 million decrease in employee related expenses due to headcount reductions.

Research and Development

Research and development expense increased $0.3 million, or 6.5%, to $4.9 million for the six months ended June 30, 2026, compared to $4.6 million for the six months ended June 30, 2025.

This increase is due to an increase in professional services during the period.

Restructuring, Impairment and Other Related Charges

There were no restructuring, impairment and other related charges for the six months ended June 30, 2026 as all restructuring activities were completed in 2025.

We incurred $6.1 million of restructuring, impairment and other related charges during the six months ended June 30, 2025.

Operating Loss

Operating loss decreased $7.6 million, or 26.5%, to $21.1 million, for the six months ended June 30, 2026, compared to $28.7 million for the six months ended June 30, 2025.

This decrease in our operating loss is the result of the reduced marketing and sales expenses and no restructuring and impairment charges in 2026, partially offset by reduced gross profit due to lower revenues and increases in other operating expenses.

Interest Expense

Interest expense totaled $16.0 million for the six months ended June 30, 2026, compared to $12.2 million for the six months ended June 30, 2025.

Change in Fair Value – Warrant Liabilities

Our warrants contain certain provisions that did not meet the criteria for equity classification and therefore are recorded as liabilities with a re-measurement of fair value at each reporting date.

We incurred a $0.4 million gain on the change in the fair value of our warrant liabilities for the six months ended June 30, 2026.

For the six months ended June 30, 2025, we recognized a $4.4 million gain related to the decrease in fair value of the warrant liability during that period.

Income Tax (Expense) Benefit

We had a de minimis income

tax expense for the three months ended March 31, 2026 and 2025.

The income tax expense amounts in both the first quarter of 2026 and 2025

were related to various state taxes.

We had a $0.1 million income tax expense for the six months ended June 30, 2026, compared to $0.1 million income tax expense for the six months ended June 30, 2025.

The income tax expense amounts in the six months ended June 30, 2026 and 2025 were related to various state taxes.

Noncontrolling Interest

We calculate net loss attributable

to noncontrolling interests on a quarterly basis using their weighted average ownership percentage.

Net loss attributed to noncontrolling

interests was negligible for the three months ended March 31, 2026 and 2025.

We calculate net income or loss attributable to noncontrolling interests on a quarterly basis using the weighted average ownership percentage.

Net loss attributed to noncontrolling interests was de minimis for the six months ended June 30, 2026 and 2025.

Liquidity and Capital Resources

Our principal sources of funds

are cash flows from operations and cash and cash equivalents on hand, supplemented with borrowings made pursuant to various loan agreements.

Our historical principal sources of funds are cash flows from operations and cash and cash equivalents on hand, supplemented with borrowings made pursuant to various loan agreements.

Principal uses of funds consist of capital expenditures, working capital needs, operating lease payment obligations and investing in innovation.

In accordance with the terms of our various loan agreements, we have elected to pay interest in kind on our loans to reduce cash obligations.

Our working capital needs depend largely upon the timing of cash receipts from product sales, payments to vendors and others, changes

in inventories, and operating lease payment obligations.

Our cash and cash equivalents and working capital positions were $25.0 million

and $22.4 million, respectively, as of March 31, 2026 compared to $24.3 million and $35.2 million, respectively, as of December 31, 2025.

Cash used for capital expenditures was $2.0 million and $2.1 million for the three months ended March 31, 2026 and 2025.

Our capital expenditures

in 2026 have primarily consisted of additional investments made in our manufacturing operations and showroom facilities.

Additional details

regarding our current debt are described above in Note 10 - Debt .

Our financial statements have

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

and commitments in the normal course of business.

In connection with the preparation of the consolidated financial statements for the

year ended December 31, 2025, we conducted an evaluation as to whether there were conditions and events, considered in the aggregate,

which raised substantial doubt as to our ability to continue as a going concern within one year after the date of the issuance of such

financial statements.

had cash and cash equivalents of approximately $25.0 million and an accumulated deficit of $655.8 million at March 31,

We incurred a net loss of $30.5 million and net cash provided by operating activities and net cash used in investing activities

was $3.0 million and $2.0 million, respectively, for the three months ended March 31, 2026.

We have a history of recurring net losses

and cash used in operations, an accumulated deficit, and requiring additional capital to fund our operations.

The funds we have on hand and any follow-on capital, if needed, will

be used to fund our operations and invest in the business to expand sales and marketing efforts, as well as to invest in innovation.

described below, we have implemented plans that we believe will both increase our revenues from the sales of our products and achieve

cost savings within the next year, sufficient to generate positive operating cash flow levels.

However, we may be adversely impacted by

uncertain market conditions and there can be no assurance that we will be successful in this regard.

If such plans are not successful,

we may need to raise additional capital in order to support operations and business initiatives.

Access to additional capital is uncertain

and not within our control.

Accordingly, there is substantial doubt about our ability to continue as a going concern.

We have taken a number of

actions to increase cash flow and support our operations and strategies.

In August 2024, we implemented the Restructuring Plan (as defined

below) to consolidate manufacturing operations resulting in cost savings.

We have realized and plan 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

We have delivered direct material cost savings from our supplier diversification efforts, improved scrap and yield results

from continuous improvements, and outbound freight costs reflect cost improvements along with improved delivery reliability.

successful in subleasing the two manufacturing facilities that were vacated as part of the Restructuring Plan.

We have also taken additional

cost-saving initiatives in 2025 and the beginning of 2026 to reduce headcount and streamline responsibilities and reporting structure.

Further, our plans include additional actions intended to improve liquidity and reduce costs, including 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

We have elected to have interest paid-in-kind and added to the principal amount of the loans under the Amended and Restated

Credit Agreement.

On March 24, 2026, we 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.

are currently evaluating potential strategic alternatives and opportunities to achieve additional liquidity through one or more future

debt refinancings.

Additionally, in May 2025,

we 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).

We are now represented in Mattress Firm’s full store network and with the recent launch of Purple Royale, the exclusive Luxe

product for Mattress Firm, we have expanded to all 12,000 committed slots.

We have also expanded into more Costco clubs in the fourth

quarter of 2025.

Our working capital needs depend largely upon the timing of cash receipts from product sales, payments to vendors and others, changes in inventories, and operating lease payment obligations.

Our cash and cash equivalents and working capital positions were $23.3 million and $(105.2) million, respectively, as of June 30, 2026 compared to $24.3 million and $35.2 million, respectively, as of December 31, 2025.

The change in working capital position at June 30, 2026 is due to our debt maturity date now within the next 12 months.

We had an accumulated deficit of $659.1 million at June 30, 2026.

We incurred a net loss of $33.8 million for the six months ended June 30, 2026, with net cash provided by operating activities of $3.6 million.

Cash used for capital expenditures was $3.6 million for the six months ended June 30, 2026.

Our capital expenditures in 2026 have primarily consisted of additional investments made in our manufacturing operations and showroom facilities.

Additional details regarding our current debt are described above in Note 10 - Debt .

We have a history of recurring net losses and cash used in operations, an accumulated deficit, and requiring additional capital to fund our operations, invest in the business to expand sales and marketing efforts and invest in innovation.

Our financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets and liabilities and commitments in the normal course of business.

In connection with the preparation of the consolidated financial statements for the year ended December 31, 2025, we conducted an evaluation as to whether there were conditions and events, considered in the aggregate, which raised substantial doubt as to our ability to continue as a going concern within one year after the date of the issuance of such financial statements.

Debt service has consisted primarily of re-financing or extending the maturity date of the debt as well as paying-in-kind interest payments.

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.

In addition, certain requirements and events of default relating to the going concern qualification in our December 31, 2025 financial statements were waived (see Note 10 – Debt ).

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 cannot guarantee that it will have sufficient cash flow to meet the debt obligations when they become due within the next twelve months.

The Company will need to raise additional capital or secure alternative financing arrangements, both of which are uncertain and not within the control of the Company.

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

The 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 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 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 spending, pacing the number of new store openings, efforts to mitigate tariff impacts by managing the country of origin, and other cost-saving initiatives.

In the latter part of the second quarter of 2026, the Company announced a pricing action to increase the sales price of our various products to offset the impact of materials and logistics inflation related to the rise of fuel prices and to maintain gross margins.

The Company is currently evaluating potential strategic alternatives and opportunities to achieve additional liquidity through one or more future debt refinancings.

Other Contractual Obligations

Other material contractual

obligations primarily include operating lease payment obligations.

See Note 8 - Leases of the unaudited condensed consolidated

financial statements for additional information on leases.

Cash Flows for the Three Months Ended March

31, 2026 Compared to the Three Months Ended March 31, 2025

The following summarizes our

cash flows for the three months ended March 31, 2026 and 2025 as reported in our unaudited condensed consolidated statements of cash flows (in

Three Months Ended

Other material contractual obligations primarily include operating lease payment obligations.

See Note 8 - Leases of the unaudited condensed consolidated financial statements for additional information on leases.

Cash Flows for the Six Months Ended June 30, 2026 Compared to the Six Months Ended June 30, 2025

The following summarizes our cash flows for the six months ended June 30, 2026 and 2025 as reported in our unaudited condensed consolidated statements of cash flows (in thousands):

Six Months Ended

Net cash provided by (used in) operating activities $ 3,636 $ (27,062 )

Net cash used in investing activities (4,335 ) (5,144 )

Net cash provided by (used in) financing activities

Net increase (decrease) in cash

Net cash (used in) provided by financing activities (346 ) 37,443

Net (decrease) increase in cash (1,045 ) 5,237

Cash, beginning of the period 24,345 29,011

Cash, end of the period $ 23,300 $ 34,248

Cash provided by operating activities was $3.0 million for the three

months ended March 31, 2026 compared to cash used in operating activities was $23.1 million for the three months ended March 31, 2025.

The $26.1 million increase in year-over-year cash provided by operating activities included a $28.5 million increase in cash provided

from the changes in operating assets and liabilities and an $8.8 million increase in non-cash cash adjustments, partially offset by a

$11.4 million increase in net loss.

Cash used in investing activities

reflected net capital expenditures of $2.0 million and $2.1 million for the three months ended March 31, 2026 and 2025, respectively.

Capital expenditures in the first three months of 2026 primarily consisted of additional investments made in our manufacturing operations.

Cash used in investing activities

was $0.3 million for the three months ended March 31, 2026 compared to cash provided in investing activities of $17.8 million during the

three months ended March 31, 2025.

Cash used in financing activities for 2026 consist of amendment fess paid in cash to certain lenders

for the Third Amendment.

Financing activities during the first three months of 2025 included $19.0 million of proceeds from the 2025 Amendment

financing offset in part by $1.2 million in payments for debt issuance costs.

Cash provided by operating activities was $3.6 million for the six months ended June 30, 2026 compared to cash used in operating activities of $27.1 million for the six months ended June 30, 2025.

The $30.7 million increase in year-over-year cash provided by operating activities included a $26.4 million increase in cash provided from the changes in operating assets and liabilities, a $2.7 million decrease in net loss and a $1.6 million increase in non-cash cash adjustments.

Cash used in investing activities reflected net capital expenditures of $3.6 million and $5.2 million for the six months ended June 30, 2026 and 2025, respectively.

Capital expenditures in 2026 consisted primarily additional investments made in our manufacturing operations and showroom facilities.

Cash used in financing activities was $0.3 million for the six months ended June 30, 2026 compared to cash provided by financing activities of $37.4 million during the six months ended June 30, 2025.

Cash used in financing activities for 2026 consist of amendment fess paid in cash to certain lenders for the Third Amendment.

Financing activities during the first six months of 2025 included $39.0 million of proceeds from the additional financing in 2025 offset in part by $1.6 million in payments for debt issuance costs.

Critical Accounting Estimates

We discuss our critical accounting

policies and estimates in Management’s Discussion and Analysis of Financial Condition and Results of Operations in

our 2025 Annual Report on Form 10-K filed with the SEC on March 31, 2026.

There have been no significant changes in our critical accounting

policies since the end of fiscal 2025.

We discuss our critical accounting policies and estimates in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2025 Annual Report on Form 10-K filed with the SEC on March 31, 2026.

There have been no significant changes in our critical accounting policies since the end of fiscal 2025.

Available Information

Our website address is www.purple.com.

We make available free of charge on the Investor Relations portion of our website, investors.purple.com, our annual report on Form 10-K,

quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a)

or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the

The inclusion of our website address in this report does not include or incorporate by reference into this report any information

on our website.

We also use the Investor Relations

portion of our website, investors.purple.com, as a channel of distribution of additional Company information that may be deemed material.

Accordingly, investors should monitor this channel, in addition to following our press releases, SEC filings and public conference calls

and webcasts.

We make available free of charge on the Investor Relations portion of our website, investors.purple.com, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

The inclusion of our website address in this report does not include or incorporate by reference into this report any information on our website.

We also use the Investor Relations portion of our website, investors.purple.com, as a channel of distribution of additional Company information that may be deemed material.

Accordingly, investors should monitor this channel, in addition to following our press releases, SEC filings and public conference calls and webcasts.

The contents of our website shall not be deemed to be incorporated herein by reference.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis