On February 9, 2026, we entered into a share purchase agreement (the “Purchase Agreement”) with UTG Brands Management Group (“UTG”) for a new joint venture for the Playboy licensing business in China (the “New China JV”), in which UTG is to ultimately own a 50% interest and operate Playboy’s China licensing business for an aggregate purchase price of $45,000,000 (the “Purchase Price”). Concurrent with the execution of the Purchase Agreement, UTG paid $9,000,000 to us as a signing deposit which was ultimately applied to the Purchase Price as of the New China JV Initial Closing (defined below).

On March 20, 2026 (the “Initial Closing Date”), the initial closing pursuant to the Purchase Agreement (the “New China JV Initial Closing”) occurred, and the New China JV was established. On the Initial Closing Date, the New China JV issued and sold 1,333 class B ordinary shares of the New China JV (“Class B Shares”) to UTG for aggregate consideration of $11,997,000, which was concurrently distributed to us, and we sold and transferred to UTG 334 Class B Shares for aggregate consideration of $3,006,000, for total aggregate consideration to us at the New China JV Initial Closing of $15,003,000. At the second closing under the Purchase Agreement (to occur on or before January 4, 2027), we will sell and transfer to UTG 1,667 Class B Shares for aggregate consideration of $15,003,000, and, at the third closing under the Purchase Agreement (to occur on or before January 4, 2028), we will sell and transfer to UTG 1,666 Class B Shares for aggregate consideration of $14,994,000. The full proceeds from the initial, second, and third closings pursuant to the Purchase Agreement are being used for the repayment of debt. During the three months ended March 31, 2026, we repaid $15.0 million of our senior secured debt from Purchase Price proceeds. Refer to Note 8, Debt, for details.

During the three months ended March 31, 2026, we incurred $2.8 million of transaction expenses in connection with the formation of the New China JV, including legal, advisory and other professional fees. These costs are included in selling and administrative expenses in the condensed consolidated statements of operations for the three months ended March 31, 2026.

Pursuant to the establishment of the New China JV, we are entitled to receive annual minimum distributions of $10,000,000 in 2026, $9,000,000 in 2027 and $8,000,000 in each year from 2028 through and including 2033, in each case, to be paid to us semi-annually. To the extent the New China JV does not have sufficient available cash or earnings to fund such distributions, UTG is contractually obligated to contribute the shortfall amount to the New China JV, which will then distribute such amount to us.

As the New China JV did not have sufficient earnings to fund the entire required dividend distribution due as of the Initial Closing Date, UTG was required to, and did, contribute $2.4 million to the New China JV (the “Noncontrolling Interest Capital Contribution”) pursuant to the terms of the shareholders agreement for the New China JV (the “JV Shareholders Agreement”). The Noncontrolling Interest Capital Contribution has been recorded as a gross-up on the condensed consolidated balance sheet, with a corresponding receivable due from UTG of $2.4 million included in current assets under prepaid expenses and other current assets and an offsetting payable to the New China JV of $2.4 million included in additional paid-in capital as of March 31, 2026. The Noncontrolling Interest Capital Contribution of $2.4 million was received from UTG in April 2026.

Under the terms of a Brand Support Services Agreement between UTG and us (the “BSSA”), UTG will pay us for brand support services up to an annual cap (the “Annual Cap”) of (i) $4,000,000 for services provided in the first contract year, (ii) $4,000,000 for services provided in the second contract year, and (iii) $2,000,000 for services provided in the third contract year.

During the three months ended March 31, 2026, we received an advance payment of $4.0 million from UTG representing the full Annual Cap for the first contract year under the BSSA. As the underlying brand support services had not yet been rendered as of March 31, 2026, the advance payment of $4.0 million was recorded in other current liabilities and accrued expenses on the condensed consolidated balance sheet as of March 31, 2026. We will offset related brand expenses in the period as they are incurred within selling and administrative expenses in the condensed consolidated statements of operations.

The New China JV was determined to be a VIE, of which we are the primary beneficiary. As a result of such determination and in accordance with ASC 810, Consolidations, we consolidated the financial results of the New China JV from the Initial Closing Date. There was no New China JV income distribution to UTG in the first quarter of 2026 in conjunction with the terms of the JV Shareholders Agreement. The JV Shareholders Agreement requires UTG to absorb the initial risk of profits shortfalls, creating an economic reality that diverges from the parties’ stated legal ownership percentages. This creates a substantive profit-sharing arrangement where a simple pro-rata allocation of net income or loss would not faithfully depict the underlying economics. Therefore, we allocate net income or loss to the noncontrolling interest using the hypothetical liquidation at book value (the “HLBV”) method. Under the HLBV method, the amount of net income or loss attributable to the noncontrolling interest for each reporting period is determined as the change in the noncontrolling interest holder’s claim on the New China JV’s net assets from the beginning to the end of the period, after adjusting for capital activity and distributions, if any. This claim is calculated by assuming a hypothetical liquidation of the New China JV at its recorded book value as of each balance sheet date, with net assets distributed in accordance with the liquidation and distribution priorities specified in the agreements governing the New China JV.

The New China JV’s distribution priorities entitled us to an initial preferential allocation of an aggregate of $67.0 million through 2033. Until such $67.0 million threshold is fully satisfied, no earnings or hypothetical liquidation proceeds are allocated to the noncontrolling interest. Consequently, in accordance with this distribution waterfall, no value was allocated to the noncontrolling interest for the three months ended March 31, 2026.

Our maximum exposure to loss as a result of our involvement with the New China JV is limited to our investment in the VIE and any unfunded commitments, as UTG is obligated under the JV Shareholders Agreement to fund any shortfall in required minimum distributions. The assets of the New China JV can only be used to settle obligations of the New China JV, and the creditors of the New China JV generally have no recourse to the general credit of the Company.