In the second quarter of 2026, we amended the Lease to change the lease commencement date to January 1, 2027 and the expiration date to November 30, 2037. As we did not take possession of the office space as of June 30, 2026, it is not reflected in our condensed consolidated financial statements or in the tables below. The future undiscounted fixed non-cancelable payment obligation pertaining to the Lease is approximately $25.0 million.

On May 14, 2026, we entered into a new operating lease (the “Additional Lease”) with the Landlord for the remainder of the same floor as the Lease, comprising approximately 5,696 square feet, which commenced on May 1, 2026 and expires on November 30, 2037, subject to two five-year renewal options. In addition to base rent under the Additional Lease, we are responsible for operating expenses and property taxes. In connection with the Additional Lease, the Landlord agreed to provide a TIA of $1.6 million, which reduced the right-of-use asset recognized upon commencement of the Additional Lease and was recorded as a receivable within prepaid expenses and other current assets on our condensed consolidated balance sheet as of June 30, 2026. Refer to Note 5, Prepaid Expenses and Other Current Assets, for additional information. The future undiscounted lease payments under the Additional Lease are approximately $6.9 million.

During the second quarter of 2026, we terminated certain operating leases for Honey Birdette retail stores prior to their contractual expiration dates. Upon termination of such leases, we derecognized the related right-of-use assets and operating lease liabilities of $0.6 million in our condensed consolidated balance sheet as of June 30, 2026, and we recognized a net loss of $0.1 million in Other income, net in our condensed consolidated statements of operations for the three and six months ended June 30, 2026.

As of June 30, 2026 and December 31, 2025, the weighted-average remaining term of our operating leases was 4.9 years and 3.9 years, respectively, and the weighted-average discount rate used to estimate the net present value of the operating lease liabilities was 9.1% and 8.2%, respectively. Cash payments for amounts included in the measurement of operating lease liabilities were $2.1 million for each of the three months ended June 30, 2026 and 2025, and $4.4 million and $4.1 million for the six months ended June 30, 2026 and 2025, respectively. Right-of-use assets obtained in exchange for new operating lease liabilities were $1.6 million and $0.6 million during the three months ended June 30, 2026 and 2025, respectively, and $3.4 million and $0.6 million for the six months ended June 30, 2026 and 2025, respectively.


	Three Months Ended June 30,				Six Months Ended June 30,
	2026		2025		2026		2025
Operating lease cost	$	1,866	$	1,825	$	3,723	$	3,641
Variable lease cost	413		404		826		834
Short-term lease cost	440		415		832		847
Sublease income	(538)		(365)		(1,077)		(590)
Total	$	2,181	$	2,279	$	4,304	$	4,732


Remainder of 2026	$	4,144
2027	6,567
2028	4,198
2029	3,682
2030	2,402
Thereafter	6,989
Total undiscounted lease payments	27,982
Less: imputed interest	(6,550)
Total operating lease liabilities	$	21,432

Operating lease liabilities, current portion	$	6,863
Operating lease liabilities, noncurrent portion	$	14,569

From time to time, we may have certain contingent liabilities that arise in the ordinary course of our business activities. We accrue a liability for such matters when it is probable that future expenditures will be made and that such expenditures can be reasonably estimated. Significant judgment is required to determine both probability and the estimated amount.

In March 2020, our subsidiary Playboy Enterprises International, Inc. (together with its subsidiaries, “PEII”) terminated its license agreement with a licensee, AVS Products, LLC (“AVS”), for AVS’s failure to make required payments to PEII under the agreement, following notice of breach and an opportunity to cure. On February 6, 2021, PEII received a letter from counsel to AVS alleging that the termination of the contract was improper, and that PEII failed to meet its contractual obligations, preventing AVS from fulfilling its obligations under the license agreement.

On February 25, 2021, PEII brought suit against AVS in Los Angeles Superior Court to prevent further unauthorized sales of Playboy-branded products and for disgorgement of unlawfully obtained funds. On March 1, 2021, PEII also brought a claim in arbitration against AVS for outstanding and unpaid license fees. PEII and AVS subsequently agreed that the claims PEII brought in arbitration would be alleged in the Los Angeles Superior Court case instead, and on April 23, 2021, the parties entered into and filed a stipulation to that effect with the court. On May 18, 2021, AVS filed a demurrer, asking for the court to remove an individual defendant and dismiss PEII’s request for a permanent injunction. On June 10, 2021, the court denied AVS’s demurrer. AVS filed an opposition to PEII’s motion for a preliminary injunction to enjoin AVS from continuing to sell or market Playboy-branded products on July 2, 2021, which the court denied on July 28, 2021.

On August 10, 2021, AVS filed a cross-complaint for breach of contract, breach of the implied covenant of good faith and fair dealing, quantum meruit and declaratory relief. As in its February 2021 letter, AVS alleges its license was wrongfully terminated and that PEII failed to approve AVS’ marketing efforts in a manner that was either timely or that was commensurate with industry practice. AVS is seeking to be excused from having to perform its obligations as a licensee, payment of the value for services rendered by AVS to PEII outside of the license, and damages to be proven at trial. The court heard PEII’s motion for summary judgment on June 6, 2023, and dismissed six out of 10 of AVS’ causes of action. AVS’ contract-related claims remain to be determined at trial, which is scheduled for March 8, 2027. In addition, PEII filed a complaint against Sunrise Brands based on their participation in AVS’s misconduct, as well as their own direct misconduct. Both cases have been related together by the court and will be tried together, for both pretrial and trial purposes. While the AVS case is a material litigation, we are currently unable to estimate the range of reasonably possible loss, if any, related to this matter. We believe AVS’ remaining claims and allegations are without merit, and we will defend this matter vigorously.