UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended June 30, 2026

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM          TO          

Commission File Number 001-40014

ALLIANCE ENTERTAINMENT HOLDING CORPORATION

(Exact name of Registrant as specified in its Charter)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ☐ NO ☒

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. YES ☐ NO ☒

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ☒ NO ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). YES ☒ NO ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definition of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act.:

If an emerging growth company, indicate by the check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to section 13(a) of the Exchange Act. YES ☐ NO ☐

Indicate by check mark whether the Registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒

The aggregate market value of the Registrant’s shares of Class A common stock outstanding, other than shares held by persons who may be deemed affiliates of the Registrant, at December 31, 2025, was $27,062,514.

As of September 10, 2026, 50,979,630 shares of Class A common stock, par value $0.0001 per share, and 60,000,000 shares of contingent¹ Class E common stock, par value $0.0001 per share, were issued and outstanding.

Documents Incorporated by Reference: None.

TABLE OF CONTENTS

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this Annual Report on Form 10-K may constitute “forward-looking statements” under federal securities laws. Our forward-looking statements include, but are not limited to, statements about us and our industry, as well as statements regarding our or our management team’s expectations, hopes, beliefs, intentions or strategies regarding the future. These forward-looking statements include information concerning possible or projected future results of our operations, including statements about potential acquisition or merger targets, strategies or plans; business strategies; prospects; future cash flows; financing plans; plans and objectives of management; any other statements regarding future cash needs, future operations, business plans and future financial results; and any other statements that are not historical facts. Forward-looking statements often include words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “potential,” “will,” and similar expressions. However, the absence of these words does not mean a statement is not forward-looking.

Forward-looking statements should not be read as a guarantee of future performance or results and may not be accurate indications of when such performance or results will be achieved. These statements are based on our current expectations, forecasts, and assumptions and involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied. These risks include, but are not limited to:

These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that could cause our actual results, levels of activity, performance or achievement to differ materially from those expressed or implied by these forward-looking statements. We discuss in greater detail and incorporate by reference into this annual report in their entirety, many of these risks and uncertainties under the heading “Risk Factors” contained in this annual report and in the documents incorporated by reference herein. Moreover, we operate in a rapidly changing and competitive environment. New risk factors emerge from time to time, and it is not possible for management to predict all such risk factors.

Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely upon these statements.

Further, it is not possible to assess the effect of all risk factors on our businesses or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, we caution investors not to place undue reliance on these forward-looking statements, which are based on information available as of the date of this filing. We are not obligated to update these statements to reflect new information or future events, except as required by law.

PART I

Item 1. Business.

Alliance Entertainment is a leading global distributor and retailer of physical entertainment and collectible products, including vinyl records, CDs, DVDs, Blu-rays, video games, electronics, and licensed fan merchandise. The Company’s unique position in the entertainment ecosystem is supported by a diverse portfolio of direct-to-consumer brands, including Critics’ Choice Video, Collectors’ Choice Music, Movies Unlimited, DeepDiscount, PopMarket, Blowitoutahere, Fulfillment Express, ImportCDs, GamerCandy, and WowHD.

Alliance connects top content creators, including Universal Pictures, Warner Bros. Home Video, Walt Disney Studios, Sony Pictures, Lionsgate, Paramount Pictures, Universal Music Group, Sony Music, Warner Music Group, Microsoft, Nintendo, Take-Two, Electronic Arts, Ubisoft, and Square Enix with leading retailers such as Walmart, Amazon, Best Buy, Barnes & Noble, Wayfair, Costco, Dell, Verizon, Kohl’s, Target, and Shopify. Through its multi-channel distribution model, the Company serves more than 35,000 retail locations and approximately 200 online storefronts across more than 75 countries.

The Company’s operations are supported by advanced warehouse automation and scalable logistics infrastructure, enabling Alliance to offer a broad product selection, high in-stock availability, and fast fulfillment across over 340,000 SKUs. These include core physical media as well as toys, figures, limited-edition collectibles, and licensed memorabilia. Alliance also provides third-party logistics (3PL) and drop-ship fulfillment capabilities for major brands and retailers.

To support its recent strategic expansion into collectibles and fan-focused categories, Alliance recently launched three new divisions:

Alliance’s competitive advantage is driven by its commitment to three pillars, Service, Selection, and Technology, which enable the Company to serve as a trusted partner across the entertainment and collectibles landscape.

Founded in 1990 (formerly CD Listening Bar, Inc.), Alliance has grown through organic expansion and sixteen accretive acquisitions, including Phantom Sound and Vision, MSI Music, Infinity Resources, ANconnect, Mecca Electronics, Distribution Solutions, Mill Creek, COKeM, Think3Fold, and Super D (Alliance Entertainment). This growth is supported by the Company’s scalable operating platform and experienced management team.

On December 31, 2025, the Company completed the acquisition of Endstate Authentic LLC (“Endstate”), a digital authentication and loyalty-driven consumer brand. The transaction was accounted for as a business combination under ASC 805. Accordingly, the assets acquired and liabilities assumed have been recorded at their estimated fair values as of the acquisition date. Results of operations for Endstate are included in the Company’s consolidated financial statements beginning on the acquisition date. Additional information related to this acquisition is provided in Note 22 – Business Combinations..

On February 10, 2023, Alliance completed its business combination with Adara Acquisition Corp., which was accounted for as a reverse recapitalization with Alliance treated as the accounting acquirer (the “Merger”). The Company continues to recognize certain warrant and equity-related impacts from this transaction, including the outstanding contingent Class E shares and warrant liabilities, as discussed further in Notes 15 and 20.

Alliance’s Business

With more than thirty five years of distribution experience, Alliance serves customers of every size, providing a suite of services to resellers and retailers worldwide. We believe that our efficient processing and essential seller tools noticeably reduce the costs associated with administrating multiple vendor relationships and streamline the overall purchasing experience. Alliance believes that it is a single source for all customer entertainment product needs. As a solutions-based operation, Alliance seeks to drive sales for their suppliers with broad product selection and cost-efficient processing.

Alliance’s distribution business is built around three areas, where our marketplace value is created: Service, Selection and Technology.

Service

Alliance provides efficient, Omni-Channel expansion solutions for retailers, including:

Alliance provides leading product and e-commerce distribution and inventory solutions. Alliance provides a full, enterprise-level infrastructure and whitelists dropships orders directly to consumers on behalf of its omni customers. The entire ordering, confirmation and invoicing process is automated. The functionality allows customers to focus on sales while Alliance performs all stocking, warehousing, and shipping functions.

Alliance is a leader in vendor managed inventory (VMI) solutions providing solutions tailored to customers to support their inventory needs. These value-add services provide a highly technical, critical business function for our partners using traiting of locations and min/max system of supply.

Alliance: Alliance was a competitor to CD Listening Bar prior to its 2013 combination with CD Listening Bar, through which the two businesses were merged. Alliance primarily serviced Barnes & Noble, Best Buy, and hundreds of independent retailers.

COKeM: Alliance acquired COKeM International Ltd. in September 2020. COKeM is a video game and accessory distributor, providing full-service distribution and fulfillment across a wide array of industries and product categories. Alliance acquired Mecca Electronics in 2018, and in 2021 Mecca Electronics was merged into COKeM. In 2024 COKeM has merged in Alliance.

AMPED Distribution: a division of Alliance which serves as the exclusive supplier of physical media to retailers in the United States for over 100 small music labels.

Distribution Solutions: an aggregator and distributor of independent film labels in North America. Alliance acquired Distribution Solutions in 2018. Over 50 movie studios are exclusively distributed to over 30,000 retail stores through Distribution Solutions. In 2025 Distribution Solutions has merged into Alliance Home Entertainment.

DirectToU: consists of Alliance’s owned retail brands operating under the dbas of ImportCDs, Deep Discount, Collectors Choice Music, Collectors Choice, Vinyl, Blow It Out of Here, Wow, Pop Market, Collectors Choice Video, and Movies Unlimited. Most of these brands were purchased from Infinity Resources in 2010.

Mill Creek Entertainment: an independent studio for Blu-ray, DVD, and digital distribution. With direct sales pipelines to primary retail and online partners, Mill Creek licenses, produces, markets, and distributes film and television content to over 30,000 retail stores and to thousands of websites across North America. Its library includes theatrical feature films, classic and contemporary television series, original documentary productions, and pop-culture catalog titles. In 2025 Mill Creek has merged into Alliance Home Entertainment.

NCircle Entertainment: founded in 2006, NCircle is an independent distributor of children’s and family entertainment content, with a focus on programming that supports early learning. NCircle’s library includes children’s brands such as Gigantosaurus, The Cat in the Hat Knows a Lot About That!, Llama Llama, The Octonauts, Sonic Boom, and The Snowman. In 2025 Ncircle Entertainment has merged into Alliance Home Entertainment.

Alliance Home Entertainment: launched in January 2025, Alliance Home Entertainment is Alliance’s dedicated home entertainment distribution division, and was established in connection with a multi-year agreement under which Alliance serves as the exclusive distributor of Paramount Pictures’ physical media, including DVDs, Blu-rays, and 4K UHD titles, across the United States and Canada. In January 2026, the Company entered into an exclusive agreement with Amazon MGM Studios for physical media distribution in the United States and Canada, which is also managed through this division. The division provides full-service support across production, marketing, and retail execution.

Alliance Authentic: Alliance Authentic is the Company’s internally developed brand and platform for authenticated, certified collectibles, including certified vinyl, and a marketplace for buying, selling, and trading investment-grade physical media. The platform is built on the near-field communication (NFC)-enabled authentication and digital product identity technology held by Endstate Authentic LLC.

Handmade by Robots: Acquired in December 2024, Handmade by Robots produces licensed vinyl collectible figures styled to resemble knitted or crocheted plush toys, featuring characters from licensed entertainment franchises. The acquisition included inventory, tooling equipment, and a trademark associated with the product line. See Note 16 – Business Combinations

Endstate Authentic: a wholly owned subsidiary acquired on December 31, 2025 and focused on authentication and resale technology. Endstate’s patented NFC-enabled authentication and digital product identity technology enables real-time product verification, counterfeit prevention, and authenticated resale services, and supports the Company’s internally developed Alliance Authentic brand. See Note 22- Business Combinations

Selection:

Product Categories : Alliance consolidates and distributes a portfolio of entertainment products with over 340,000 SKUs in stock in core media and entertainment product areas in five primary categories:

Technology:

Alliance continues to strengthen its competitive position through ongoing investment in two complementary areas of technology: automation of its distribution and fulfillment operations, and proprietary product-authentication and digital identity capabilities that support the Company’s expansion into authenticated collectibles.

Warehouse Automation

Alliance continues to improve its warehouse operations through targeted investments in automated handling equipment at its Shepherdsville, Kentucky facility. In December 2022 implementation of an AutoStore Automated Storage & Retrieval System for handling primarily LP’s, which improved warehouse speed, reliability, capacity, and accuracy. In April 2024, the Company implemented the OPEX Sure Sort X® system to automate the sortation of non-standard size products, replacing manual sorting processes, reducing labor costs, accelerating processing times, and lowering the potential for product damage. In 2026, an additional 5,000 totes were added for expansion of AutoStore to 57,000 totes. Together, these automation initiatives have contributed to operational efficiencies and cost savings.

Product Authentication and Digital Identity

On December 31, 2025, Alliance completed its strategic acquisition of Endstate Authentic LLC (“Endstate”), establishing it as a wholly owned subsidiary focused on authentication and resale technology. Endstate’s patented NFC-enabled authentication and digital product identity technology enables real-time product verification, counterfeit prevention, and authenticated resale services. This technology forms the foundation of Alliance Authentic, a premium platform designed to create authenticated, certified vinyl collectibles and a trusted global marketplace for buying, selling, and trading investment-grade physical media. By embedding secure, traceable digital identity into high-value physical products, these capabilities strengthen Alliance’s position in the growing authenticated collectibles market and support the development of new technology-enabled and recurring revenue opportunities. The NFC chip we use is NXP’s NTAG424, the data on the tag can be encrypted and using AES-128 encryption the tag cannot be cloned or counterfeited acting as sure-fire authentication for any collectables. The chip generates a new unique code on each scan which can be verified by a third-party server.

Customer and Stakeholder Platforms

Alliance’s technology platforms provide stakeholders with seamless access to the Company’s global inventory through a modern, user-friendly interface accessible on desktop, notebook, and mobile devices.

Key features include:

These capabilities enhance transaction efficiency and engagement, supporting revenue growth and profitability relative to legacy distribution systems. Management believes these platforms enhance stakeholder productivity and competitiveness.

Industry Background

The industries in which the Company distributes products are:

Distributors of physical media continue to navigate changes in consumer demand, an evolving omni-channel retail environment, and ongoing supplier consolidation. While many consumers have shifted to digital formats such as streaming music and video services, management believes a growing market remains for collectible physical media, including vinyl records, specialty SteelBook® DVDs, CD box sets, and pop culture collectibles. There have been news reports that consumers prefer to own their music, movies, and gaming rather than rent.

This shift in demand, coupled with structural changes in the retail and supplier landscape, is contributing to the consolidation of distribution networks. Management believes this presents an opportunity for distributors, such as Alliance, that are positioned to meet the evolving needs of retailers and suppliers that wish to outsource because physical media is not their core competency.

Although overall demand for physical media has declined, niche markets serving music and movie enthusiasts have shown growth. This trend is reflected in the rising popularity of K-pop releases in CD and vinyl formats, special edition SteelBook® DVDs, and 4K UHD Blu-ray titles, particularly among consumers seeking exclusive content. Nostalgia and collector-driven purchases remain a factor driving customer demand, with buyers valuing artwork, perceived audio quality, and the intrinsic value of limited-edition formats.

As major retail chains reduce shelf space for physical media, management believes distributors with direct-to-consumer capabilities and fulfillment services for retail e-commerce platforms, such as Alliance, are increasingly well-positioned. These capabilities allow retailers to expand product offerings without the need for incremental warehouse space or inventory carrying costs.

Suppliers are also adapting to this shift. By partnering with distributors, such as Alliance, that serve both mass and niche channels, suppliers can reach broader consumer bases through a more efficient distribution model. Exclusive and limited-edition releases allow suppliers to maintain premium pricing, and collaboration on marketing and promotional campaigns can further support product visibility and sell-through.

The physical media market remains competitive as companies seek to serve a more targeted customer base. Management believes that long-term success in this environment requires differentiation through exclusive content, curated product offerings, and enhanced customer service. The ability to anticipate consumer preferences and quickly deliver relevant entertainment experiences is increasingly important.

Specialized distributors may have a relative advantage in this regard due to their agility and ability to respond quickly to market trends. In management’s view, partnerships with artists and content creators to secure exclusive releases offer Alliance an additional competitive edge. Alliance leverages its broad product portfolio to create bundled, exclusive collectibles that support omni-channel retail strategies and appeal to collectors and enthusiasts.

Market Opportunity

The Company has identified three primary market areas where it currently conducts business and plans to grow its operations:

Content Media

As technology and consumer trends evolve, film, music, and gaming studios continue to re-evaluate distribution strategies to address shifting behaviors and expanding digital and physical platforms. Despite the rise of streaming and digital delivery, consumer demand for physical media remains resilient, driven by factors such as collectibility, superior audio-visual quality, and the intrinsic value of physical packaging.

In response to this opportunity, the Company recently launched Alliance Home Entertainment, a dedicated business unit established through a multi-year distribution agreement with Paramount Home Entertainment. This new division will handle the exclusive distribution of Paramount’s physical home video products across all major retail channels and direct-to-consumer platforms, including the management of catalog returns beginning January 31, 2025. The launch of Alliance Home Entertainment positions the Company as a trusted partner for major studios seeking a more efficient, centralized, and experienced physical media distributor.

Building on this platform, in January 2026 the Company entered into an exclusive home entertainment license agreement with Amazon MGM Studios for physical media distribution in the United States and Canada, covering new releases and select catalog content across wholesale, e-commerce, and brick-and-mortar retail channels. The agreement broadens the Company’s physical media portfolio, particularly in higher-value and collectible offerings, and leverages its scale, marketing capabilities, and omnichannel fulfillment platform.

Simultaneously, the Company is capitalizing on demand from collectors and enthusiasts through the expansion of its physical music and video offerings, most notably vinyl records, SteelBooks™, and special edition box sets. The Company believes that consumers continue to favor tangible media formats for their superior sound and picture quality, unique artwork, and collectible nature.

To further extend its reach into consumer lifestyle categories, the Company recently launched Alliance Authentic, a new brand focused on officially licensed merchandise and collectible products from leading artists, creators, and entertainment brands. This business complements our core media offerings and addresses growing demand for branded, limited-edition pop culture products that can be marketed through both B2B and DTC channels.

Fulfillment

The global e-commerce fulfillment services market continues to experience strong growth driven by increasing online sales penetration, particularly in North America. Large retailers such as Amazon, Walmart, Target, and Best Buy are increasingly relying on fulfillment partners to improve speed, flexibility, and service levels while maintaining cost efficiency.

Alliance is well-positioned to serve this expanding market through its scalable third-party logistics (3PL) and direct-to-consumer fulfillment solutions. By combining physical inventory depth, technology-driven distribution, and established carrier relationships, the Company enables retailers, brands, and suppliers to reach their customers more effectively. As retailers and manufacturers focus on core competencies, the outsourcing of logistics and fulfillment operations is expected to accelerate, further expanding the addressable market for Alliance’s services.

Our Competitive Strengths

Alliance is one of the largest physical media and entertainment and collectibles product distributors in the world and a leader in fulfillment and e-commerce distribution solutions. Its existing product and service offering has positioned the Company to capitalize on shifts towards e-commerce and Omni-Channel strategies, especially as retailers and manufacturers greatly increase their reliance on their direct-to-consumer fulfillment and distribution partners.

We believe that our key strengths position us to deliver on our strategy to grow profitably, optimize our core physical media and entertainment and collectibles product distributors’ fulfillment and e-commerce distribution solutions, and expand and continue to invest in higher-margin advanced technology solutions and high-value services.

The Company believes the following strengths are key to its ability to grow and maintain its position as a market leader:

Strategy for Future Growth

Alliance will continue to capitalize on its services, selection, technology, strategic studio relationships, and scalable distribution infrastructure to drive profitable growth both organically and through acquisitions. The Company continues to maintain a disciplined approach to capital allocation while investing in strategic initiatives, expanding higher-margin product categories, and pursuing opportunities that strengthen its market position.

Our strategy will include:

Suppliers

Alliance distributes and markets over 400,000 products worldwide from more than 600 of the industry’s premier physical media entertainment products suppliers. The Company maintains approximately 340,000 SKUs of unique items in its inventory.

For the fiscal year ended June 30, 2026, Alliance’s five largest suppliers accounted for approximately 65% of total product receipt value, which represents the cost value of inventory received from suppliers, compared to approximately 59% for the fiscal year ended June 30, 2025. One supplier accounted for approximately 23% of Alliance’s total product receipt value in each of the fiscal years ended June 30, 2026 and 2025.

Alliance has written supply agreements with many of its suppliers. These agreements usually provide for nonexclusive distribution rights and often include territorial restrictions that limit the countries and, in some cases, certain channels in which it may distribute the products. Some of Alliance’s agreements with suppliers may contain limitations of liability with respect to our suppliers’ obligations and warranties. Historically, warranty expenses have not been material.

The agreements also are generally short-term, subject to annual renewal, and in some cases contain provisions permitting termination by either party without cause upon relatively short notice. Certain supply agreements either require (at our option) or allow for the repurchase of inventory upon termination of the agreement. In cases in which suppliers are not obligated to accept inventory returns upon termination, some suppliers will nevertheless elect to repurchase the inventory while other suppliers will assist with either liquidation or resale of the inventory.

Customers

Alliance conducts business with most of the leading retailers of entertainment products and services around the world. Alliance serves a customer base that is divided into categories including retailers, direct marketers, Internet-based resellers, independent dealers, product category specialists and other distributors. Management believes that many of its customers are heavily dependent on Alliance as a partner with the necessary systems, capital, inventory availability, and distribution and facilities in place to provide fulfillment and other services. Alliance tries to reduce our exposure to the impact of business fluctuations by maintaining a balance in the customer categories we serve. Alliance has over 4,000 customers shipping to over 35,000 storefronts and distributes to over 2,500 independent music and video retailers.

In most cases Alliance conducts business with our customers under our general terms and conditions, without minimum purchase requirements. It also has resale contracts with some of its reseller customers that are terminable at will after a reasonable notice period and have no minimum purchase requirements. Alliance typically ships products on the same day it receives and accepts customers’ purchase orders. Unless otherwise requested, substantially all of Alliance’s products are delivered by common freight carriers. Backlog is usually not material to its business because orders are generally filled shortly after acceptance.

Alliance has specific agreements in place with certain suppliers and resellers in which it provides supply chain management services such as order management, technical support, call center services, forward and reverse logistics management, and procurement management services. These agreements generally may be terminated by either party without cause following reasonable notice. None of the Company’s customer contracts exceed a one-year term, with most contracts having auto-renewal clauses.

For the year ended June 30, 2026, Alliance’s top three customers represented approximately 45% of its consolidated revenue. Alliance’s top customer represented approximately 21% of its consolidated net sales. By comparison, for the fiscal year ended June 30, 2025, the top three customers generated approximately 40% of consolidated revenue with one customer representing approximately 15%.

Our Business is Affected by Seasonality

Alliance experiences some seasonal fluctuation in demand in our business due to changes in consumer behavior and schedules of new releases. In addition, the Company typically experiences an increase in demand in the October-to-December period, driven primarily by pre-holiday stocking levels in the retail channel for its North American business.

How We Manage Our Inventory

Alliance strives to maintain enough product inventories to achieve optimum order fill rates. Alliance’s business, like that of other distributors, is subject to the risk that our inventory’s value will be adversely impacted by suppliers’ price reductions or by technological changes affecting the usefulness or desirability of the products comprising the inventory. It is the policy of many suppliers to offer distributors limited protection from the loss in inventory value due to technological change or a supplier’s price reductions. When protection is offered, the distributor may be restricted to a designated period of time in which products may be returned for credit or exchanged for other products or during which price protection credits may be claimed. Alliance continually takes various actions, including monitoring inventory levels and controlling the timing of purchases, to maximize its protection under supplier programs and reduce inventory risk. However, no assurance can be given that current protective terms and conditions will continue or that they will adequately protect Alliance against declines in inventory value, or that they will not be revised in such a manner as to adversely impact Alliance’s ability to obtain price protection. Alliance is subject to the risk that inventory values may decline, and supplier agreements may not adequately cover the decline in values. Alliance manages these risks through pricing and continual monitoring of existing inventory levels relative to customer demand, reflecting its forecasts of future demand and market conditions. On an ongoing basis, Alliance reduces inventory values for excess and obsolescence to assist in the liquidation of impacted inventories. Music CD’s and Video Movies are 100% returnable back to Alliance’s suppliers. Products that have exclusive distributions for AMPED and Distribution Solutions are not owned by Alliance and are treated as consignments for ownership and title.

Inventory levels may vary from period to period, due, in part, to differences in actual demand from that forecasted when orders were placed, the addition of new suppliers or new product lines with current suppliers, expansion into new product areas and strategic purchases of inventory. In addition, payment terms with inventory suppliers may vary from time to time and could result in fewer inventories being financed by suppliers and a greater amount of inventory being financed by our own capital. Our payment patterns can be influenced by incentives, such as early pay discounts offered by suppliers.

Sales and Marketing

Alliance’s product management and marketing groups help create demand for Alliance’s suppliers’ products and services, enable the launch of new products, and facilitate customer contact. Our marketing programs are tailored to meet specific supplier and customer needs. These needs are met through a wide offering of services by our in-house marketing organization, including advertising, market research, online marketing, retail programs, sales promotions, training, and solutions marketing. In addition, Alliance creates and utilizes specialized channel marketing communities to deliver focused resources and business building support to solution providers.

For its Direct-to-Consumer division, the Company deploys performance marketing strategies through digital and offline channels to drive additional traffic and transactions from high-intent prospective customers. To increase the efficiency of its performance marketing initiatives, the Company utilizes a Customer Relationship management platform, which provides further opportunities to personalize marketing campaigns and target advertising to specific market segments. Alliance complements its brand and performance marketing with nurture initiatives through email and outbound communications to ensure the Company retains high-value customers, increases brand loyalty, and drives recurring transactions.

The Company’s marketing strategy includes brand performance, and viral marketing. Brand marketing, which may also include the Company’s presence on social media platforms, increases awareness among potential customers, helping them understand the benefits of using Alliance’s platforms. In addition to brand, and performance marketing, Alliance engages in traditional public relations and communications activities, such as trade show participation, to strengthen its brand and enable it to be less reliant on performance marketing, reducing the Company’s customer acquisition costs. The Company’s communications team works across press and policy channels to share timely and important news about the Company. They also oversee the execution of a consumer, product, corporate, and policy communications plan that supports Alliance’s brand strategy.

Competition

Alliance faces competition from a variety of competitors, including some of our own suppliers that sell directly to certain segments of the market, wholesale distributors, retailers, and internet-based businesses. We are a leading company in the sale and marketing of physical media entertainment and collectible products, including vinyl, gaming, DVDs, CD’s and consumer products and toys offerings and authenticated collectibles, and operate in the competitive e-commerce business environment. We compete with several smaller physical media companies in our product categories, as well as with many larger e-commerce companies in the United States and internationally. In addition, we compete with entertainment companies that digitally download and stream their products and other established authentication businesses. Competition is based primarily on meeting consumer product preferences and on the quality and play value of our physical media products and experiences. To a lesser extent, competition is also based on product pricing.

Many of the major entertainment and gaming companies are part of large, diversified companies with a variety of other operations. Some of these competitors have substantially greater marketing and financial resources than we do and may be able to compete aggressively on pricing in order to increase entertainment revenues and streaming placement. In addition, the resources of the major entertainment producers may give them an advantage in acquiring other businesses or assets, including media content, that we might also be interested in acquiring. The competition we face may cause us to lose market share, achieve lower prices for our products or pay more for third party content, any of which could harm our business.

The changing trends in consumer preferences with respect to entertainment and collectibles and barriers to entry as well as the emergence of new technologies and different mediums for viewing content, such as the growing number of streaming platform options, continually creates new opportunities for existing competitors and start-ups to develop products and offerings that compete with our entertainment and e-commerce offerings. In the future, the Company may face increased competition through the emergence of new competitors or business models. Some of Alliance’s competitors may have access to significant financial resources, greater name recognition and well-established client bases in their target customer segments, differentiated business models, technology and other capabilities, or a differentiated geographic coverage, which may make it more difficult for Alliance to attract new customers.

The market for physical media is becoming increasingly competitive as companies compete for a shrinking customer base. Distributors must differentiate themselves by offering unique products, exclusive content, and superior customer service. The ability to quickly adapt to market trends and consumer preferences is crucial. Specialized distributors often have an advantage in this regard, as they can be more agile and responsive compared to larger more diverse distributors. Additionally, partnerships with artists and content creators to secure exclusive releases can provide a unique competitive edge. As the market evolves, distributors that can innovate and meet the demands of niche audiences will likely thrive.

Intellectual Property

Alliance’s intellectual property is an important component of its business. The Company relies on a combination of patents and patent applications, domain names, trademarks, copyrights, know-how and trade secrets, as well as contractual provisions and restrictions, to protect its intellectual property.

In connection with its acquisition of Endstate, the Company acquired a portfolio of patents and patent applications relating to NFC chip-enabled authentication of physical goods and the linking of physical assets to corresponding digital assets. As of June 30, 2026, the Company held two issued United States patents, which expire in 2042, and 16 pending patent applications in the United States and in foreign and international jurisdictions. The Company also owns registered United States trademarks, including its ENDSTATE marks, a registered copyright, and various domain names, and maintains unregistered marks used in its authentication business.

The Company intends to continue prosecuting its pending applications and to pursue additional patent protection to the extent it believes it would be beneficial and cost effective. The Company cannot provide assurance that any pending application will result in an issued patent, or that any issued patent will provide meaningful protection against competitors.

As of June 30, 2026, the Company owned 22 U.S. registered or pending trademarks and one registered or pending trademark in another jurisdiction. Alliance also owns 128 domain names including www.deepdiscount.com, www.aent.com, www.cokem.com, www.importcds.com, www.ds.aent.com, and www.AMPEDdistribution.com.

The Company relies on trade secrets and confidential information to develop and maintain its competitive advantage. Alliance seeks to protect its trade secrets and confidential information through a variety of methods, including confidentiality agreements with employees, third parties, and others who may have access to the Company’s proprietary information. Alliance also requires key employees to sign invention assignment agreements with respect to inventions arising from their employment and restrict unauthorized access to the Company’s proprietary technology.

Notwithstanding the Company’s efforts to protect its intellectual property, there can be no assurance the measures taken will be effective or that its intellectual property will provide any competitive advantage. Alliance can provide no assurance that any patents will be issued from its pending applications or any future applications or that any issued patents will adequately protect its proprietary technology. The Company’s intellectual property rights may be invalidated, circumvented, or challenged. Furthermore, the laws of certain countries do not protect intellectual property and proprietary rights to the same extent as the laws of the United States and, as a result, Alliance may be unable to protect its intellectual property and other proprietary rights in certain jurisdictions. In addition, while the Company has confidence in the measures it takes to protect and preserve its trade secrets, it cannot guarantee these measures will not be circumvented, or that all applicable parties have executed confidentiality or invention assignment agreements. In addition, such agreements can be breached, and may not have adequate remedies should any such breach occur. Accordingly, Alliance’s trade secrets may otherwise become known or be independently discovered by competitors.

Human Capital Resources

As of June 30, 2026, Alliance had approximately 724 employees on its payroll and approximately 143 workers hired through staffing agencies throughout the U.S. and internationally. Staffing agencies are used to flex labor capacity to ensure the labor supply and demand are in balance. None of Alliance’s employees are subject to a collective bargaining agreement and Alliance believes it has a good relationship with its employees and staffing agencies.

Employees & Demographics. With respect to global demographics on June 30, 2026, approximately 49% of the Company’s payroll employees are female and 51% are male.

Talent & Turnover. With a focus on talent acquisition, the leadership team seeks out the most qualified candidates for open roles and endeavors to keep them at Alliance. Alliance has a robust program for seeking out those candidates, which ranges from sourcing through talent applications, reviewing direct applicants and using internal referrals to fill roles. Additionally, Alliance strives to promote internally when possible. Alliance’s program resulted in an annualized turnover rate of about 12% for the fiscal year ended June 30, 2026.

Compensation Practice & Pay Equality. As Alliance evolves and expands operations, Human Resources, in partnership with the leadership team, will continue to evaluate the existing workforce to ensure that best practices are maintained across the entire team without risk of inequality. Pay structures for hourly employees are reviewed annually and for all other employees, compensation is benchmarked according to the position when a vacancy becomes available. This ensures best practices in a competitive market and, as part of that review, compensation will be realigned where appropriate for existing employees and new hires.

Regulatory Compliance

The Company’s overall business approach and strategy includes rigorous attention to regulatory compliance, as its operations are subject to regulations in the following principal areas, across a wide variety of jurisdictions. Alliance’s business is subject to a wide array of laws, regulations, and standards in each domestic and foreign jurisdiction where we operate. Alliance has a buying office in the UK and operates under the name Fulfillment Express. Fulfillment Express sources music from the UK music suppliers that is then transferred (exported from the United Kingdom) to Kentucky where that music product is prepared to sell in the US market. Fulfillment Express makes no sales of any kind, for it is a buying office.

The regulatory environment in each market is often complex, evolving and can be subject to significant change. Some relevant laws and regulations are inconsistent, ambiguous and could be interpreted by regulators and courts in ways that could adversely affect the Company’s business, results of operations, and financial condition. Moreover, certain laws and regulations have not historically been applied to an innovative hospitality provider such as Alliance, which often makes their application to its business uncertain. For additional information regarding the laws and regulations that affect the Company’s business, see “Item 1A. Risk Factors.”

Privacy and Data Protection Regulation

In processing purchase transactions and information about customers, the Company receives and stores a large volume of personally identifiable data. The collection, storage, processing, transfer, use, disclosure and protection of this information are increasingly subject to legislation and regulations in numerous jurisdictions around the world, such as the European Union’s General Data Protection Regulation (“GDPR”) and variations and implementations of that regulation in the member states of the European Union, as well as privacy and data protection laws and regulations in various U.S. states and other jurisdictions, such as the California Consumer Privacy Act (as amended by the California Privacy Rights Act), the Canadian Personal Information Protection and Electronic Documents Act (“PIPEDA”), and the UK General Data Protection Regulation and the UK Data Protection Act.

Alliance incorporates a variety of technical and organizational security measures and other procedures and protocols to protect data within the Company’s platforms and business services, including personally identifiable data pertaining to guests and employees. Alliance is engaged in an ongoing process of evaluating and considering additional steps to maintain compliance with the California Consumer Privacy Act, GDPR, PIPEDA, the UK General Data Protection Regulation, and the UK Data Protection Act.

Employment Laws

The Company is also subject to laws governing its relationship with employees, including laws governing wages and hours, benefits, immigration and workplace safety and health.

Other Regulation

Alliance’s business is subject to various other laws and regulations involving matters such as income tax and other taxes, consumer protection, online messaging, advertising, and marketing, the U.S. Foreign Corrupt Practices Act and other laws governing bribery and other corrupt business activities, and regulations aimed at preventing money laundering or prohibiting business activities with specified countries or persons. As the Company expands into additional markets, it will be subject to additional laws and regulations.

Periodic Reporting and Financial Information

Our Class A common stock and warrants are registered under the Exchange Act, and as a smaller reporting company, we have specific reporting obligations. We file annual, quarterly, and current reports with the SEC, which include financial statements audited by our independent registered public accounting firm. The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC (www.sec.gov). These reports and other important information are available on our website at www.aent.com under the Investor Relations section, free of charge, as soon as they are filed with the SEC. Please note that information on our website is not incorporated by reference into this report.

We qualify as a “smaller reporting company” under SEC regulations and as a non-accelerated filer. These statuses allow us to benefit from certain reduced disclosure obligations, including the option to provide only two years of audited financial statements, scaled executive-compensation disclosure, and exemption from the auditor attestation requirement regarding internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act. We will remain a smaller reporting company for so long as we satisfy the applicable public float and revenue thresholds, which are re-measured annually.

Item 1A. Risk Factors.

An investment in our securities involves a high degree of risk. You should carefully consider all of the risks described below, together with the other information contained in this annual report before making a decision to invest in our securities. If any of the following events occur, our business, financial condition and operating results may be materially adversely affected. In that event, the trading price of our securities could decline, and you could lose all or part of your investment.

Risk Factor Summary

The following is a summary of the principal risks that could materially adversely affect our business, reputation, financial condition, and/or operating results. It is important that investors and stakeholders read this summary together with the more detailed description of each risk contained below:

Risks Related to Our Business and Industry

If we fail to respond to or capitalize on the rapid technological development in the music, video, gaming, and entertainment industry, including changes in entertainment delivery formats, our business could be harmed.

The music, video, gaming, entertainment and collectible industries continue to experience frequent change driven by technological development, including developments with respect to the formats through which music, films, television programming, games, and other content are delivered to consumers. With rapid technological changes and dramatically expanded digital content offerings, the scale and scope of these changes have accelerated in recent years. For example, consumers are increasingly accessing television, film, and other episodic content on streaming and digital content networks, such as Netflix, Amazon Prime Video, Hulu, Disney+ and Apple TV+. Additionally, consumers access music content through Apple Music, Pandora, Amazon Music, Spotify, and other providers. Video game services can be accessed through Xbox Game Pass, PlayStation Now, GeForce, Steam, Stadia, xCloud, Shadow, Luna, and Switch Online.

Some entertainment offerings have gone direct to streaming channels and have not produced a physical content format. Direct release to streaming channels is likely to continue. Technological as well as other changes caused by the pandemic have caused significant disruption to the retail distribution of music and entertainment offerings and have caused and could in the future cause a negative impact on sales of our products and other forms of monetization of content. We may lose opportunities to capitalize on changing market dynamics, technological innovations, or consumer tastes if we do not adapt our content offerings or distribution capabilities in a timely manner. The overall effect that technological development and new digital distribution platforms have on the revenue and profits we derive from our entertainment content, including from merchandise sales derived from such content, and the additional costs associated with changing markets, media platforms and technologies, is unpredictable. If we fail to accurately assess and effectively respond to changes in technology and consumer behavior in the entertainment industry, our business may be harmed.

If we do not successfully optimize and operate our fulfillment network, our business could be harmed.

If we do not adequately predict customer demand or otherwise optimize and operate our fulfillment network successfully, it could result in excess or insufficient fulfillment, or result in increased costs, impairment charges, or both, and harm our business in other ways. As we continue to add fulfillment or add new businesses with different requirements, our fulfillment networks become increasingly complex and operating them becomes more challenging. There can be no assurance that we will be able to operate our networks effectively. In addition, a failure to optimize inventory in our fulfillment network could result in lost sales from under inventory positions or extra costs of holding excess inventory or write-downs on inventory. Due to tight labor markets, we may be unable to staff our fulfillment network and customer service centers adequately or must increase wages to attract more employees.

We rely on several shipping companies to deliver inventory to us and complete orders to our customers. If we are not able to negotiate acceptable terms with these companies or they experience performance problems or other difficulties, it could negatively impact our operating results and customer experience. In addition, our ability to receive inbound inventory efficiently and ship completed orders to customers also may be negatively affected by inclement weather, fire, flood, power loss, earthquakes, labor disputes, acts of war or terrorism, acts of God, and similar factors.

Under some of our commercial agreements, we maintain the inventory of other companies, thereby increasing the complexity of tracking inventory and operating our fulfillment network. Our failure to properly handle such inventory or the inability of these other companies to accurately forecast product demand would result in unexpected costs and other harm to our business and reputation.

We face competition. If we are unable to compete effectively with existing or new competitors, our revenues, market share and profitability could decline

Our businesses are rapidly evolving and competitive, and we have many competitors in different industries, including physical, e-commerce, and omni-channel retail, e-commerce services, digital content and electronic devices, web and infrastructure computing services, transportation and logistics services and authentication services, and across geographies, including cross-border competition. Some of our current and potential competitors have greater resources, longer histories, more customers, and/or greater brand recognition. They may also secure better terms from vendors, adopt more aggressive pricing, and devote more resources to technology, infrastructure, fulfillment, and marketing.

The music, video, gaming, and entertainment industry is highly competitive. We compete in the U.S. and internationally with a wide array of large and small distributors, and sellers of vinyl records, CD’s, DVD’s, video games and other entertainment and consumer products. In addition, we compete with companies who are focused on building their brands across multiple product and consumer categories, including through entertainment offerings. Across our business, we face competitors who are constantly monitoring and attempting to anticipate consumer tastes and trends, seeking which will appeal to consumers, and introducing new products that compete with our products for consumer acceptance and purchase.

The market for physical media is becoming increasingly competitive as companies compete for a shrinking customer base. Distributors must differentiate themselves by offering unique products, exclusive content, and superior customer service. To be successful, we must correctly anticipate the types of entertainment, products and play patterns which will capture consumers’ interests and imagination, and quickly develop and introduce innovative products and engaging entertainment which can compete successfully for consumers’ limited time, attention, and spending. Specialized distributors often have an advantage in this regard, as they can be more agile and responsive compared to larger more diverse distributors. Additionally, partnerships with artists and content creators to secure exclusive releases can provide a unique competitive edge. As the market evolves, distributors that can innovate and meet the demands of niche audiences will likely thrive.

Competition is likely to continue intensifying, including with the development of new business models and the entry of new and well-funded competitors, as our competitors enter into business combinations or alliances, and established companies in other market segments expand to become competitive with our business. In addition, new and enhanced technologies, including search, digital content, and electronic devices, are likely to continue to increase our competition. The Internet facilitates competitive entry and comparison shopping, and increased competition may reduce our sales and profits.

Disruptions in Alliance’s supply chain have increased product expenditures and could result in an adverse impact on results of operations.

The occurrence of one or more natural or human induced disasters, including pandemic diseases or viral contagions such as the COVID-19 pandemic; geopolitical events, such as war, civil unrest attacks in a country in which Alliance’s suppliers are located; and the imposition of measures that create barriers to or increase the costs associated with international trade could result in disruption of Alliance’s logistics or supply chain network. For example, the outbreak of the COVID-19 pandemic disrupted the operations of Alliance and its suppliers and customers. Customer demand for certain products has also fluctuated during the pandemic which challenged Alliance’s ability to anticipate and/or procure product to maintain inventory levels to meet that demand. Additionally supply chain disruptions can be the result of the bankruptcy or failure of trucking and other logistics businesses. Labor shortages can also cause supply chain disruptions.

These factors have resulted in higher product inventory cost positions in certain products as well as delays in delivering those products to Alliance’s distribution centers, branches or customers, and similar results may occur in the future. Even when Alliance is able to find alternate sources for certain products, they may cost more or require Alliance to incur higher transportation costs, which could adversely impact Alliance’s profitability and financial condition. Any of these circumstances could impair Alliance’s ability to meet customer demand for products and result in lost sales, increased supply chain costs, penalties, or damage to Alliance’s reputation. Any such increased product costs from supplier disruption could adversely impact the results of operations and financial performance.

Inflation may continue to cause Alliance’s product costs and operating and administrative expenses to grow more rapidly than net sales, which could result in lower gross margins and lower net earnings.

Market variables, such as inflation of product costs from suppliers, labor rates and fuel, freight and energy costs, have and may continue to increase potentially causing Alliance to be unable to efficiently manage its product costs and operating and administrative expenses in a way that would enable it to leverage its revenue growth into higher net earnings. In addition, Alliance’s inability to pass on such increases in product costs to customers in a timely manner, or at all, could cause Alliance’s operating and administrative expenses to grow, which could result in lower gross profit margins and lower net earnings.

Weakness in the economy, market trends and other conditions affecting the profitability and financial stability of Alliance’s customers could negatively impact Alliance’s sales growth and results of operations.

Economic, political and industry trends affect Alliance’s business environments. Unfavorable conditions in the economy in the United States and abroad may negatively affect the growth of our business and have affected our results of operations. For example, macroeconomic events, including inflation, interest rates, and geopolitical issues, have led to economic uncertainty globally. Alliance serves several industries and markets in which the demand for its products and services is sensitive to the production activity, capital spending and demand for products and services of Alliance’s customers. Many of these customers operate in markets that are subject to cyclical fluctuations resulting from market uncertainty, trade and tariff policies, costs of goods sold, currency exchange rates, central bank interest rate fluctuations, economic downturns, recessions, foreign competition, offshoring of production, oil and natural gas prices, geopolitical developments, labor shortages, inflation, natural or human induced disasters, extreme weather, outbreaks of pandemic disease such as the COVID 19 pandemic, inflation, deflation, and a variety of other factors beyond Alliance’s control. Any of these factors could cause customers to idle or close stores, delay purchases, reduce wholesale purchasing levels, or experience reductions in the demand for their own retail and wholesale products or services.

Any of these events could also reduce the volume of products and services these customers purchase from Alliance or impair the ability of Alliance’s customers to make full and timely payments and could cause increased pressure on Alliance’s selling prices and terms of sale.

If we incurred any significant impairment charges, our net earnings would be reduced.

Declines in the profitability of acquired brands or our decision to reduce our focus or exit these brands may impact our ability to recover the carrying value of the related assets and could result in an impairment charge. Similarly, declines in our profitability may impact on the fair value of our reporting unit, which could result in a write-down of our goodwill and consequently harm our net earnings.

Risks Related to Expansion of our Business

Our expansion places a strain on our management, operational, financial, and other resources.

We are rapidly and significantly expanding operations, including increasing our product and service offerings and scaling our infrastructure to support our retail and services businesses. This expansion increases the complexity of our business and places strain on our management, personnel, operations, systems, technical performance, financial resources, and internal financial control and reporting functions. We may not be able to manage growth effectively, which could damage our reputation, limit our growth, and negatively affect our operating results.

We may not realize the anticipated benefits of acquisitions or investments in our acquisitions or joint ventures, or those benefits may be delayed or reduced in their realization.

Acquisitions and investments have been a component of our growth and the development of our business, such as our acquisition of Endstate in December 2025, Hand Made by Robots in December 2024 and COKeM in September 2020. Acquisitions can broaden and diversify our brand holdings and product offerings and allow us to build additional capabilities and competencies of the company.

We cannot be certain that the products and offerings of companies we may acquire, or acquire an interest in, will achieve or maintain popularity with consumers in the future or that any such acquired companies or investments will allow us to market our products more effectively, develop our competencies or grow our business. In some cases, we expect that the integration of the companies that we may acquire into our operations will create production, marketing and other operating, revenue or cost synergies which will produce greater revenue growth and profitability and, where applicable, cost savings, operating efficiencies, and other advantages. However, we cannot be certain that these synergies, efficiencies, and cost savings will be realized. Even if achieved, these benefits may be delayed or reduced in their realization. In other cases, we may acquire or invest in companies that we believe have strong and creative management, in which case we may plan to operate them more autonomously rather than fully integrating them into our operations. We cannot be certain that the key talented individuals at these companies will continue to work for us after the acquisition or that they will develop popular and profitable products, entertainment, or services in the future. We cannot guarantee that any acquisition or investment we may make will be successful or beneficial, and acquisitions can consume significant amounts of management attention and other resources, which may negatively impact other aspects of our business.

Our expansion into new products, services, technologies, and geographic regions subjects us to additional business, legal, financial, and competitive risks.

We may have limited or no experience in our newer market segments, including collectibles, and our customers may not adopt our offerings. These offerings may present new and difficult technology challenges, and we may be subject to claims if customers of these offerings experience service disruptions or failures or other quality issues. In addition, profitability, if any, in our newer activities may be lower than in our older activities, and we may not be successful enough in these newer activities to recoup our investments in them. If any of this were to occur, it could damage our reputation, limit our growth, and negatively affect our operating results.

We may experience significant fluctuations in our operating results and growth rate.

We may not be able to accurately forecast our growth rate. We base our expense levels and investment plans on sales estimates. A significant portion of our expenses and investments is fixed, and we may not be able to adjust our spending quickly enough if our sales are less than expected.

Our revenue growth may not be sustainable, and our percentage growth rates may decrease. Our revenue and operating profit growth depends on the continued growth of demand for the products and services offered by us or our customers, and our business is affected by general economic and business conditions worldwide. A softening of demand, whether caused by changes in customer preferences or a weakening of the U.S. or global economies, may result in decreased revenue or growth.

Our sales and operating results will also fluctuate for many other reasons, including due to risks described elsewhere in this section and the following:

Our international operations expose us to a number of risks.

Our international activities are insignificant to our revenues and profits, and we plan to further expand internationally. In certain international market segments, we have relatively little operating experience and may not benefit from any first-to-market advantages or otherwise succeed. It is costly to establish, develop, and maintain international operations, and promote our brand internationally. Our international operations may not be profitable on a sustained basis.

In addition to risks described elsewhere in this section, our international sales and operations are subject to a number of risks, including:

As international physical, e-commerce, and other services grow, competition will intensify, including through adoption of evolving business models. Local companies may have a substantial competitive advantage because of their greater understanding of, and focus on, the local customer, as well as their more established local brand names. We may not be able to hire, train, retain, and manage required personnel, which may limit our international growth.

Our business will suffer if we are not successful in developing and expanding our partner brands across our consumer base.

Our strategy is to focus and expand larger global brands with an emphasis on developing and expanding those of our key partner brands, which we view as having the largest global potential across our customer base. As we concentrate our efforts on more brands, we believe we can gain additional leverage and enhance the consumer experience. This focus means that our success depends disproportionately on our and our new partners’ ability to successfully develop these new brands across our consumer base and to maintain and extend the reach and relevance of these brands to global consumers in a wide array of markets. This strategy has required us to acquire, build, invest in and develop our competencies in music, movies, gaming, consumer products and entertainment products. Acquiring, developing, investing in, and growing these competencies has required significant effort, time and money, with no assurance of success. The success of our brand blueprint strategy also requires significant alignment and integration among our business segments. If we are unable to successfully develop, maintain and expand key partner brands across our brand blueprint, our business performance will suffer.

Risks Related to Shifts in Consumer Demand

Consumer interests change rapidly, and acceptance of products and entertainment offerings are influenced by outside factors.

The interests of families, individuals, fans, and audiences evolve extremely quickly and can change dramatically from year to year and by geography. To be successful, we must correctly anticipate the types of entertainment, products and play patterns which will capture consumers’ interests and imagination and quickly develop and introduce innovative products and engaging entertainment which can compete successfully for consumers’ limited time, attention, and spending. This challenge is more difficult with the ever-increasing utilization of technology, social media, and digital media in entertainment offerings, and the increasing breadth of entertainment available to consumers. Evolving consumer tastes and shifting interests, coupled with an ever-changing and expanding pipeline of entertainment and consumer properties and products that compete for consumer interest and acceptance, create an environment in which some products and entertainment offerings can fail to achieve consumer acceptance, and other products and entertainment offerings can be popular during a certain period of time but then be rapidly replaced. As a result, our products and entertainment offerings can have short consumer life cycles.

Consumer acceptance of our or our partners’ entertainment offerings is also affected by outside factors, such as critical reviews, promotions, the quality and acceptance of films and television programs, music, video games, collectibles and content released into the marketplace at or near the same time, the availability of alternative forms of entertainment and leisure time activities, general economic conditions and public tastes generally, all of which could change rapidly and most of which are beyond our control. There can be no assurance that television programs and films, video games, video movies and collectibles we distribute will obtain favorable reviews or ratings, that films, video games, video movies we distribute will be popular with consumers and perform well in our distribution channels.

If we devote time and resources to distributing and marketing products or entertainment that consumers do not accept or do not find interesting enough to buy in sufficient quantities to be profitable to us, our revenues and profits may decline, and our business performance may be harmed. Similarly, if our product offerings and entertainment fail to correctly anticipate consumer interests, our revenues and earnings will be reduced.

An inability to develop, introduce and ship planned products, product lines and new brands in a timely and cost-effective manner may damage our business.

In acquiring new products, product lines and new brands we have anticipated dates for the associated product and brand introductions. When we state that we will introduce, or anticipate introducing, a particular product, product line or brand at a certain time in the future those expectations are based on completing the associated development, implementation, and marketing work in accordance with our currently anticipated development schedule. We cannot guarantee that we will be able to source and ship new or continuing products in a timely manner and on a cost-effective basis to meet constantly changing consumer demands.

The risk is also exacerbated by the increasing sophistication of many of the products we are distributing, providing greater innovation and product differentiation. Unforeseen delays or difficulties in the development process, significant increases in the planned cost of development, or changes in anticipated consumer demand for our products and new brands may cause the introduction date for products to be later than anticipated, may reduce or eliminate the profitability of such products or, in some situations, may cause a product or new brand introduction to be discontinued.

Risks Related to Our Supply Chain and Sales Channels

Disruptions or inefficiencies in our supply chain or logistics network could adversely affect our ability to fulfill customer demand and may increase our costs.

While global supply chain conditions have generally stabilized compared to the disruptions experienced in 2021 and 2022, we continue to face certain logistical and cost-related challenges, including fluctuating freight rates, labor shortages in transportation and warehousing, and longer lead times for certain products sourced internationally.

Although we have implemented strategies to mitigate these risks—such as diversifying our supplier base, leveraging alternative shipping methods, and negotiating improved carrier terms, there can be no assurance that these measures will be sufficient in the event of renewed disruption, geopolitical instability, or macroeconomic pressures.

If we are unable to effectively manage shipping logistics, maintain adequate inventory levels, or adjust pricing in response to cost increases, we may not be able to meet customer demand or sustain our margins. Any prolonged disruption or cost pressure in our supply chain could have a material adverse effect on our business, financial condition, and results of operations.

If we are unable to adapt our business to the continued shift to e-commerce, our business may be harmed.

In fiscal year 2026, ecommerce sales represented approximately 35% of overall sales as consumers increasingly purchased our products online as compared to through in-store shopping. Ecommerce sales have resulted in retailers holding less inventory, which has caused us to adjust our supply chain. This supply chain is further strained by customers desiring faster delivery at reduced costs. Additionally, if our technology and systems used to support ecommerce order processing are not effective, our ability to deliver products on time on a cost-effective basis may be adversely affected. Failure to continue to adapt our systems and supply chain and successfully fulfill ecommerce sales could harm our business.

The concentration of our retail customer base and continued shift to ecommerce sales means that economic difficulties or changes in the purchasing or promotional policies or patterns of our major customers could have a significant impact on us.

For the year ended June 30, 2026, our top three customers generated approximately 45% of our net sales, and our largest customer accounted for approximately 21% of our total net sales. For the year ended June 30, 2025, our top customer accounted for 15% of total net sales.

Due to our customer concentration, if our top customer was to experience difficulties in fulfilling their obligations to us, cease doing business with us, significantly reduce the amount of their purchases from us, favor competitors or new entrants, change their purchasing patterns, impose unexpected fees on us, alter the manner in which they promote our products or the resources they devote to promoting and selling our products, or return substantial amounts of our products, our business may be harmed.

Our customers do not make binding long-term commitments to us regarding purchase volumes and make all purchases by delivering purchase orders. Any customer could reduce its overall purchase of our products and reduce the number and variety of our products that it carries, and the shelf space allotted for our products. In addition, increased concentration among our customers could negatively impact our ability to negotiate higher sales prices for our products and could result in lower gross margins than would otherwise be obtained if there were less consolidation among our customers. Furthermore, the failure or lack of success of a significant retail customer could negatively impact our revenues and profitability.

Our business, including our costs and supply chain, is subject to risks associated with sourcing, manufacturing, warehousing, distribution and logistics, and the loss of any of our key suppliers or service providers could negatively impact our business.

All the products we offer are manufactured by third-party labels, studios, publishers, and suppliers, and as a result we may be subject to price fluctuations or demand disruptions. Our operating results would be negatively impacted by increases in the costs of the products we offer, and we have no guarantees that costs will not rise. In addition, as we expand into new categories and product types, we expect that we may not have strong purchasing power in these new areas, which could lead to higher costs than we have historically seen in our current categories. We may not be able to pass increased costs on to consumers, which could adversely affect our operating results. Moreover, in the event of a significant disruption in the supply of the materials used in the manufacture of the products we offer, we and the vendors that we work with might not be able to locate alternative suppliers of materials of comparable quality at an acceptable price.

In addition, products, and merchandise we receive from manufacturers and suppliers may not be of sufficient quality or free from damage, or such products may be damaged during shipping, while stored in our warehouse fulfillment centers or with third-party ecommerce or retail customers or when returned by consumers. We may incur additional expenses, and our reputation could be harmed if consumers and potential consumers believe that our products do not meet their expectations, are not properly labeled or are damaged.

We purchase significant amounts from a limited number of suppliers with limited supply capabilities. There can be no assurance that our current suppliers will be able to accommodate our anticipated growth or continue to supply current quantities at preferential prices. An inability of our existing suppliers to provide products in a timely or cost-effective manner could impair our growth and have an adverse effect on our business, financial condition, results of operations and prospects. We generally do not maintain long-term supply contracts with any of our suppliers and any of our suppliers could discontinue selling to us at any time. The loss of any of our other significant suppliers, or the discontinuance of any preferential pricing or exclusive incentives they currently offer to us could have an adverse effect on our business, financial condition, results of operations and prospects.

We continually seek to expand our base of product suppliers, especially as we identify new markets. We also require our new and existing suppliers to meet our ethical and business partner standards. Suppliers may also have to meet governmental and industry standards and any relevant standards required by our consumers, which may require additional investment and time on behalf of suppliers and us. If any of our key suppliers becomes insolvent, ceases, or significantly reduces its operations or experiences financial distress, or if any environmental, economic or other outside factors impact their operations. If we are unable to identify or enter distribution relationships with new suppliers or to replace the loss of any of our existing suppliers, we may experience a competitive disadvantage, our business may be disrupted and our business, financial condition, results of operations and prospects could be adversely affected.

Our principal suppliers currently provide us with certain incentives such as extended payment terms, volume purchasing, trade discounts, cooperative advertising, and market development funds. A reduction or discontinuance of these incentives would increase our costs and could reduce our ability to achieve or maintain profitability. Similarly, if one or more of our suppliers were to offer these incentives, including preferential pricing, to our competitors, our competitive advantage would be reduced, which could have an adverse effect on our business, financial condition, results of operations and prospects.

We face significant inventory risk.

In addition to risks described elsewhere relating to fulfillment network and inventory optimization by us and third parties, we are exposed to significant inventory risks that may adversely affect our operating results as a result of seasonality, new product launches, rapid changes in product cycles and pricing, defective merchandise, changes in consumer demand and consumer spending patterns, changes in consumer tastes with respect to our products, spoilage, and other factors. We endeavour to accurately predict these trends and avoid overstocking or understocking products we manufacture and/or sell. Demand for products, however, can change significantly between the time inventory or components are ordered and the date of sale. In addition, when we begin selling or manufacturing a new product, it may be difficult to establish vendor relationships, determine appropriate product or component selection, and accurately forecast demand. The acquisition of certain types of inventory or components requires significant lead-time and prepayment, and they may not be returnable. We carry a broad selection and significant inventory levels of certain products, and at times we are unable to sell products in sufficient quantities or to meet demand during the relevant selling seasons. If our inventory forecasting and production planning processes result in higher inventory levels exceeding the levels demanded by customers or should our customers decrease their orders with us, our operating results could be adversely affected due to costs of carrying the inventory and additional inventory write-downs for excess and obsolete inventory. Any one of the inventory risk factors set forth above may adversely affect our operating results.

If our third-party suppliers’ labels, studios, and publishers do not comply with applicable laws and regulations, our reputation, business, financial condition, results of operations and prospects could be harmed.

Our reputation and our consumers’ willingness to purchase our products depend in part on our suppliers’ labels, studios, publishers, and other suppliers, and retail partners’ compliance with ethical employment practices, such as with respect to child labor, wages and benefits, forced labor, discrimination, safe and healthy working conditions, and with all legal and regulatory requirements relating to the conduct of their businesses. We do not exercise control over our suppliers, manufacturers, and retail partners and cannot guarantee their compliance with ethical and lawful business practices. If our suppliers, manufacturers, or retail partners fail to comply with applicable laws, regulations, safety codes, employment practices, human rights standards, quality standards, environmental standards, production practices, or other obligations, norms, or ethical standards, our reputation and brand image could be harmed, and we could be exposed to litigation, investigations, enforcement actions, monetary liability, and additional costs that would harm our reputation, business, financial condition, results of operations and prospects.

Shipping is a critical part of our business and any changes in our shipping arrangements or any interruptions in shipping could adversely affect our operating results.

We primarily rely on the major suppliers for our shipping requirements. If we are not able to negotiate acceptable pricing and other terms with these suppliers or if one of the two experiences performance problems or other difficulties, it could negatively impact our operating results and our consumer or retail partner experience. Shipping vendors may also impose shipping surcharges from time to time. In addition, our ability to receive inbound inventory efficiently and ship products to consumers and retailers may be negatively affected by inclement weather, fire, flood, power loss, earthquakes, labor disputes, acts of war or terrorism, trade embargoes, customs and tax requirements and similar factors. For example, strikes at major international shipping ports have in the past impacted our supply of inventory from our third-party labels, studios, publishers, and suppliers, and the escalating trade dispute between the United States and China has and may in the future lead to increased tariffs, the revocation of current tariff exclusions for certain of our products, which may restrict the flow of the goods from China to the United States. We are also subject to risks of damage or loss during delivery by our shipping vendors. If our products are not delivered in a timely fashion or are damaged or lost during the delivery process, our consumers could become dissatisfied and cease shopping on our site or retailer or third-party ecommerce sites, which could have an adverse effect on our business, financial condition, operating results, and prospects.

We are subject to credit risk and may be subject to substantial write-offs if one or more of our significant customers default on their payment obligations to us.

We currently allow our major customers between 30 and 60 days to pay for each sale. This practice, while customary, presents an accounts receivable write-off risk, including the financial creditworthiness of our customers, if one or more of our significant customers defaulted on their payment obligations to us. Any such write-off, if substantial, would have a material adverse effect on our business and results of operations.

During the fiscal year ended June 30, 2026, we recorded a $7.8 million vendor transaction loss related to the write-off of a receivable associated with a historical rebate arrangement with Tastemakers. The receivable represented amounts previously accrued under a contractual vendor rebate program and was expected to be recovered through future purchase order deductions and other contractual recovery mechanisms. During the fiscal ended June 30, 2026, Tastemakers ceased operations and was no longer able to fulfill its obligations under the arrangement, resulting in the determination that the remaining receivable balance was no longer recoverable. Accordingly, we recorded a non-cash charge of approximately $7.8 million to write off the remaining balance which negatively impacted our results of operations for the fiscal year. While we believe that this charge is not reflective of our ongoing operating performance as it resulted from a specific counterparty insolvency event rather than current-period merchandising, purchasing, or distribution activities, we are at risk that other customers may experience financial difficulties anddefault in their obligations to us which could result in a significant write-off and adversely affect our operating results in future periods.

We are subject to risks related to online payment methods, including third-party payment processing-related risks.

We currently accept payments using a variety of methods, including checks, ACH, wire transfers, credit card, debit card, PayPal, and gift cards. As we offer new payment options to consumers, we may be subject to additional regulations, compliance requirements, fraud, and other risks. We also rely on third parties to provide payment processing services, and for certain payment methods, we pay interchange and other fees, which may increase over time and raise our operating costs and affect our ability to achieve or maintain profitability. We are also subject to payment card association operating rules and certification requirements, including the Payment Card Industry Data Security Standard, or PCI-DSS, and rules governing electronic funds transfers, which could change or be reinterpreted to make it difficult or impossible for us to comply. If we (or a third-party processing payment card transactions on our behalf) suffer a security breach affecting payment card information, we may have to pay onerous and significant fines, penalties and assessments arising out of the major card brands’ rules and regulations, contractual indemnifications or liability contained in merchant agreements and similar contracts, and we may lose our ability to accept payment cards for payment for our goods and services, which could materially impact our operations and financial performance.

Furthermore, as our business changes, we may be subject to different rules under existing standards, which may require new assessments that involve costs above what we currently pay for compliance. As we offer new payment options to consumers, including by way of integrating emerging mobile and other payment methods, we may be subject to additional regulations, compliance requirements and fraud. If we fail to comply with the rules or requirements of any provider of a payment method we accept, if the volume of fraud in our transactions limits or terminates our rights to use payment methods we currently accept, or if a data breach occurs relating to our payment systems, we may, among other things, be subject to fines or higher transaction fees and may lose, or face restrictions placed upon, our ability to accept credit card payments from consumers or facilitate other types of online payments.

We also occasionally receive orders placed with fraudulent data and we may ultimately be held liable for the unauthorized use of a cardholder’s card number in an illegal activity and be required by card issuers to pay charge-back fees. Charge-backs result not only in our loss of fees earned with respect to the payment, but also leave us liable for the underlying money transfer amount. If our chargeback rate becomes excessive, card associations also may require us to pay fines or refuse to process our transactions. To mitigate credit card fraud, we use Kount to score all credit card orders for risk of fraud. In addition, we may be subject to additional fraud risk if third-party service providers or our employees fraudulently use consumer information for their own gain or facilitate the fraudulent use of such information. Overall, we may have little recourse if we process a criminally fraudulent transaction. If any of these events were to occur, our business, financial condition, results of operations and prospects could be adversely affected.

We rely on third-party suppliers, labels, studios, publishers, suppliers, retail and ecommerce partners and other vendors, and they may not continue to produce products or provide services that are consistent with our standards or applicable regulatory requirements, which could harm our brand, cause consumer dissatisfaction, and require us to find alternative suppliers of our products or services.

We do not own or operate any manufacturing facilities. We use multiple third-party suppliers and labels, studios, publishers, suppliers based primarily in the United States, China and Mexico and other countries to a lesser extent, to manufacture and supply all the products we offer and sell.

We engage many of our third-party suppliers and labels, studios, publishers, suppliers on a purchase order basis and in most cases are not party to long-term contracts with them. The ability and willingness of these third parties to supply and manufacture the products we offer, and sell may be affected by competing orders placed by other companies and the demands of those companies. If we experience significant increases in demand or need to replace a significant number of existing suppliers or manufacturers, there can be no assurance that additional supply and manufacturing capacity will be available when required on terms that are acceptable to us, or at all, or that any supplier or manufacturer will allocate sufficient capacity to us to meet our requirements. Furthermore, our reliance on suppliers and manufacturers outside of the United States, the number of third parties with whom we transact and the number of jurisdictions to which we sell complicates our efforts to comply with customs duties and excise taxes; any failure to comply could adversely affect our business. In addition, quality control problems, such as the use of materials and delivery of products that do not meet our quality control standards and specifications or comply with applicable laws or regulations, could harm our business. Quality control problems could result in regulatory action, such as restrictions on importation, products of inferior quality or product stock outages or shortages, harming our sales and creating inventory write-downs for unusable products.

We have also outsourced minute portions of our fulfillment process, as well as certain technology-related functions, to third-party service providers. Specifically, we are dependent on third-party vendors for credit card processing, and we use third-party hosting and networking providers to host our sites. The failure of one or more of these entities to provide the expected services on a timely basis, or at all, or at the prices we expect, or the costs and disruption incurred in changing these outsourced functions to being performed under our management and direct control or that of a third party, could have an adverse effect on our business, financial condition, results of operations and prospects.

We are party to short-term contracts with some of our retail and ecommerce partners, and upon expiration of these existing agreements, we may not be able to renegotiate the terms on a commercially reasonable basis, or at all.

Further, our third-party labels, studios, publishers, suppliers and retail and ecommerce partners may:

Risks Related to Our Debt

Alliance’s existing and any future indebtedness could adversely affect its ability to operate its business.

On October 1, 2025, the Company, as parent, and certain of its subsidiaries, as borrowers and/or Guarantors, entered into a Loan and Security Agreement with Bank of America, N.A., as agent, and the other lenders from time to time party thereto (the “Credit Agreement”), which provides for a $120.0 million senior secured revolving credit facility (the “Revolving Credit Facility”). The Revolving Credit Facility also permits, subject to the satisfaction of certain conditions and the consent of the Agent and the other lenders, additional borrowings in an amount not to exceed $50.0 million, and provides for a $3.0 million sub-limit for letters of credit. The Revolving Credit Facility matures on October 1, 2030 (the “Revolving Credit Facility Maturity Date”). As of June 30, 2026, the Company had approximately $74 million outstanding under the Revolving Credit Facility (see Note 8 to Notes to Consolidated Financial Statements).

Borrowings under the Revolving Credit Facility bear interest at the 30-day SOFR rate, subject to a floor of 2.00%, plus an applicable margin of 1.50% through March 31, 2026 and 1.625% thereafter. The 30-day SOFR rate as of June 30, 2026 was 3.61%. The Company also pays a commitment fee of 0.15% per annum on unused availability. Commitment fees incurred during the year ended June 30, 2026 and June 30, 2025 were $0.12 million and $0.22 million respectively. Included in interest expense for the year ended June 30, 2026, is $1.6 million related to the accelerated amortization of unamortized deferred financing costs associated with the prior revolving credit facility that was refinanced and replaced. The effective interest rate from execution of the Revolving Credit Facility through June 30, 2026 was 5.3%.

The Credit Agreement is secured by a first priority security interest on substantially all of the Company’s and the Borrowers’ and other Guarantors’ assets. In addition, the Revolving Credit Facility contains customary representations and warranties, events of default, financial reporting requirements and affirmative covenants, including a fixed charge coverage ratio (on a trailing twelve months basis) of at least 1.0, measured on the last day of each month, as well as certain additional covenants, including restrictions limiting the Company’s ability to incur additional indebtedness, incur liens, pay dividends, hold unpermitted investments, or make material changes to the business, except, in the case of certain payments, distributions, acquisitions or investments, if specified payment conditions are satisfied, including that pro forma excess availability under the Revolving Credit Facility is at least equal to the greater of (i) 20% of the Borrowing Base (as defined in the Credit Agreement) and (ii) $20 million.

A breach of the covenants under the Credit Agreement could result in an event of default under the applicable indebtedness. Such a default may allow the creditors to accelerate the related debt and may result in the acceleration of any other debt to which a cross-acceleration or cross-default provision applies. In addition, an event of default under the Credit Agreement could permit the lenders under the Credit Agreement to terminate all commitments to extend further credit under the Credit Agreement. Furthermore, if we were unable to repay the amounts due and payable under the Credit Agreement, those lenders could proceed against the collateral granted to them to secure that indebtedness. In the event our lenders accelerate the repayment of our borrowings, we may not have sufficient assets to repay that indebtedness.

Availability under the Revolving Credit Facility is limited by formula based on eligible accounts receivable and eligible inventory, subject to adjustment at the discretion of the lenders.

Alliance’s outstanding indebtedness, including any additional indebtedness beyond our borrowings under the Credit Agreement, combined with its other financial obligations and contractual commitments, could have significant adverse consequences, including:

We intend to satisfy our current and future debt service obligations with our then existing cash. However, we may not have sufficient funds and may be unable to arrange for additional financing to pay the amounts due under the Revolving Credit Facility or any other debt instruments. Failure to make payments or comply with other covenants under our existing credit facility or such other debt instruments could result in an event of default and acceleration of amounts due, which would have a material adverse effect on our business.

Covenants and events of default under Alliance’s Credit Agreement could limit our ability to undertake certain types of transactions and adversely affect our liquidity.

The Credit Agreement contains a fixed charge coverage ratio covenant of at least 1.0 on a trailing twelve months basis, measured on the last day of each month, and restricts our ability to, among other things, incur additional indebtedness, incur liens, pay dividends, hold unpermitted investments or make material changes to our business. Certain payments, distributions, acquisitions and investments are permitted only if specified payment conditions are satisfied, including that pro forma excess availability under the Revolving Credit Facility is at least equal to the greater of 20% of the Borrowing Base and $20 million. These restrictions could limit our ability to undertake certain types of transactions and adversely affect our liquidity.

A breach of the covenants under the Revolving Credit Facility could result in an event of default under the applicable indebtedness. Such a default may allow the creditors to accelerate the related debt and may result in the acceleration of any other debt to which a cross-acceleration or cross-default provision applies. In addition, an event of default under the Revolving Credit Facility could permit the lenders under the Revolving Credit Facility to terminate all commitments to extend further credit under the Revolving Credit Facility. Furthermore, if we were unable to repay the amounts due and payable under the Revolving Credit Facility, those lenders could proceed against the collateral granted to them to secure that indebtedness. In the event our lenders accelerate the repayment of our borrowings, we may not have sufficient assets to repay that indebtedness.

Government efforts to combat inflation, along with other interest rate pressures arising from an inflationary economic environment, could lead to us to incur even higher interest rates and financing costs.

Inflation has risen on a global basis, the United States has been experiencing historically high levels of inflation, and government entities have taken various actions to combat inflation, such as raising interest rate benchmarks. Government entities may continue their efforts, or implement additional efforts, to combat inflation, which could include among other things continuing to raise interest rate benchmarks and/or maintaining interest rate benchmarks at elevated levels. Such government efforts, along with other interest rate pressures arising from an inflationary economic environment, could lead to us to incur even higher interest rates and financing costs on our Credit Agreement with Bank of America, N.A. and have material adverse effects on our business, financial condition, and results of operations.

Our indebtedness may limit our availability of cash, cause us to divert cash to fund debt service payments or make it more difficult to take certain other actions.

We operate the business with an asset-based line of credit to fund working capital to support our Accounts Payable and our Inventory purchases.

If we were unable to obtain or service our other external financing, or if the restrictions imposed by such financing were too burdensome, our business would be harmed.

Due to the seasonal nature of our business, we rely on a revolving credit agreement to meet our working capital needs, providing a $120 million committed, asset-based revolving credit facility. The Revolving Credit Facility contains certain restrictive covenants setting forth leverage and coverage requirements and certain other limitations typical of an investment-grade facility. These restrictive covenants may limit our future actions as well as our financial, operating, and strategic flexibility.

Not only may our financial performance impact our ability to access external financing sources, but significant disruptions to credit markets in general may also harm our ability to obtain financing. In times of severe economic downturn and/or distress in the credit markets, it is possible that one or more sources of external financing may be unable or unwilling to provide funding to us. In such a situation, it may be that we would be unable to access funding under our existing credit facilities, and it might not be possible to find alternative sources of funding.

We also may choose to finance our capital needs, from time to time, through the issuance of debt securities. Our ability to issue such securities on satisfactory terms, if at all, will depend on the state of our business and financial condition, any ratings issued by major credit rating agencies, market interest rates, and the overall condition of the financial and credit markets at the time of the offering. The condition of the credit markets and prevailing interest rates have fluctuated significantly in the past and are likely to fluctuate in the future. Variations in these factors could make it difficult for us to sell debt securities or require us to offer higher interest rates in order to sell new debt securities. The failure to receive financing on desirable terms, or at all, could damage our ability to support our future operations or capital needs or engage in other business activities.

If we are unable to generate sufficient available cash flow to service our outstanding debt, we would need to refinance our outstanding debt or face default. We cannot guarantee that we would be able to refinance debt on favorable terms, or at all.

Risks Related to our Management

Our success is dependent on the efforts and dedication of our officers and other employees.

Our officers and employees are at the heart of all our efforts. It is their skill, innovation and hard work that drive our success. We compete with many other potential employers in recruiting, hiring, and retaining our management team and our many other skilled officers and employees around the world. The increasing prevalence of remote work creates further challenges in retaining employees as some employees desire more flexibility in their employment and the ability to work remotely opens more employment opportunities. The impact of failing to retain key employees can be high due to loss of key knowledge and relationships, loss of creative talent, lost productivity, hiring and training costs, all of which could result in lower profitability. We cannot guarantee that we will recruit, hire, or retain the key personnel we need to succeed.

Our future success also depends on the continued leadership of key executives, including Mr. Bruce Ogilvie, our Executive Chairman, and Mr. Jeff Walker, our Chief Executive Officer. The loss of any key members of our management team, including Mr. Ogilvie and Mr. Walker, or the failure to attract and retain talented individuals with the necessary skill sets for our diverse and evolving business could materially and adversely affect our operations and financial results. We cannot guarantee that we will successfully recruit, hire, or retain the personnel essential to our success.

If we fail to develop diverse top talent, we may be unable to compete, and our business may be harmed.

To compete successfully, we must continuously develop a diverse group of talented people. We promote a diverse and inclusive work environment. To that end, we have set goals and objectives with respect to hiring and retention of talented, diverse employees, who we believe will foster new ideas and perspectives that will benefit our business. Competition for diverse talent is intense. We cannot guarantee we will achieve our goals or that our actions will result in expected benefits to our business.

Alliance has engaged in transactions with related parties, and such transactions present possible conflicts of interest that could have an adverse effect on our business and results of operations.

Alliance has entered into transactions with related parties, including our two principal stockholders, Bruce Ogilvie, our Executive Chairman, and Jeffrey Walker, our Chief Executive Officer. These include transactions with companies owned by Messrs. Ogilvie and Walker, such as GameFly Holdings, LLC (“GameFly”), which they own equally.

For each of the years ended June 30, 2026 and 2025, Alliance sold new-release movies, video games, and video game consoles to GameFly, a customer of Alliance, in the amount of approximately $2.7 million. As of June 30, 2026, and 2025, amounts due from GameFly were $0.24 million and $0.22 million, respectively.

We may in the future enter into additional transactions with entities in which our principal stockholders, executive officers, members of our board of directors and other related parties hold ownership interests. All such transactions are subject to review and approval in accordance with our related person transaction policy. See “Certain Relationships and Related Party Transactions.”

Transactions with such related parties present potential for conflicts of interest, as the interests of the third-party owned related entity and its shareholders may not align with the interests of our stockholders with respect to the negotiation of, and certain other matters. For example, conflicts of interest may arise in connection with decisions regarding the structure and terms of the GameFly contract, contractual remedies, events of default and dealings with customers.

Pursuant to our related party transactions policy, all additional material related party transactions that we enter require either (i) the unanimous consent of our audit committee or (ii) the approval of a majority of the members of our board of directors. See “Certain Relationships and Related Party Transactions — Policies and Procedures for Related Party Transactions.” Nevertheless, we may have achieved more favorable terms if such transactions had not been entered into with related parties and these transactions, individually or in the aggregate, may have an adverse effect on our business and results of operations or may result in government enforcement actions or other litigation.

A default under the personal loan between our Executive Chairman and our Chief Executive Officer could result in a substantial change in the ownership of our common stock.

On May 21, 2026, Bruce Ogilvie, our Executive Chairman, extended a personal loan in the principal amount of $2.0 million to Jeffrey Walker, our Chief Executive Officer. The loan bears interest at 12% per annum and matures on May 21, 2027. Mr. Walker has pledged 4,350,000 shares of our common stock, representing approximately 9% of our outstanding shares of Class A common stock, as collateral for the loan. If an event of default occurs under the loan, Mr. Ogilvie could acquire beneficial ownership of the pledged shares through foreclosure or sale. Such a transfer would increase Mr. Ogilvie’s beneficial ownership from approximately 30.1% to approximately 38.6% of our outstanding common stock, further concentrating ownership and voting power in a single stockholder and potentially resulting in a change in control of the Company. A sale of a block of shares of this size into the public market could also cause the market price of our common stock to decline.

The Company is not a party to the loan or the related pledge agreement, has not guaranteed any obligations under the loan, and has no ability to control or prevent any of the outcomes described above. For additional information, see “Certain Relationships and Related Party Transactions—Alliance Related Party Transactions—Personal Loan Between Executive Chairman and Chief Executive Officer.”

Risks Related to Our Technology and Intellectual Property

Our business may be harmed if we are unable to protect our critical intellectual property rights.

Our intellectual property, including our patents, trademarks and tradenames, copyrights, patents, and rights under our license agreements and other agreements that establish our intellectual property rights and maintain the confidentiality of our intellectual property, is of critical value. We rely on a combination of trade secret, copyright, trademark, patent, and other proprietary rights laws to protect our rights to valuable intellectual property in the U.S. and around the world. From time to time, third parties have challenged, and may in the future try to challenge, our ownership of our intellectual property in the U.S. and around the world. In addition, our business is subject to the risk of third parties counterfeiting our products or infringing on our intellectual property rights, as well as the risk of unauthorized third parties copying and distributing our entertainment content or leaking portions of planned entertainment content. We may need to resort to litigation to protect our intellectual property rights, which could result in substantial costs and diversion of resources. Similarly, third parties may claim ownership over certain aspects of our products, productions, or other intellectual property. Our failure to successfully protect our intellectual property rights could significantly harm our business and competitive position.

Failure to successfully operate our information systems and implement new technology effectively could disrupt our business or reduce our sales or profitability.

We rely extensively on various information technology systems and software applications to manage many aspects of our business, including product development, management of our supply chain, sale and delivery of our products, royalty and financial reporting and various other processes and transactions. We are critically dependent on the integrity, security and consistent operations of these systems and related back-up systems. These systems are subject to damage or interruption from power outages, computer and telecommunications failures, computer viruses, malware and other cybersecurity breaches, catastrophic events such as hurricanes, fires, floods, earthquakes, tornadoes, acts of war or terrorism and usage errors by our employees or partners. The efficient operation and successful growth of our business depends on these information systems, including our ability to operate them effectively and to select and implement appropriate upgrades or new technologies and systems and adequate disaster recovery systems successfully. The failure of our information systems or third-party hosted technology to perform as designed or our failure to implement and operate them effectively could disrupt our business, require significant capital investments to remediate a problem or subject us to liability.

If our electronic data is compromised, our business could be significantly harmed.

We and our business partners maintain significant amounts of data electronically in locations around the United States and in the cloud. This data relates to all aspects of our business, including current and future products and entertainment under development, and also contains certain customer, consumer, supplier, partner and employee data. We maintain systems and processes designed to protect this data, but notwithstanding such protective measures, there is a risk of intrusion, cyber-attacks or tampering that could compromise the integrity and privacy of this data. Cyber-attacks are increasing in their frequency, sophistication, and intensity, and are becoming increasingly difficult to detect. They are often carried out by motivated, well-resourced, skilled, and persistent actors, including nation states, organized crime groups, “hacktivists” and employees or contractors acting with malicious intent. Cyber-attacks could include the deployment of harmful malware and key loggers, ransomware, a denial-of-service attack, a malicious website, the use of social engineering and other means to affect the confidentiality, integrity and availability of our technology systems and data. Cyber-attacks could also include supply chain attacks, which could cause a delay in the manufacturing of our products. In addition, we provide confidential and proprietary information to our third-party business partners in certain cases where doing so is necessary to conduct our business. While we obtain assurances from those parties that they have systems and processes in place to protect such data, and where applicable, that they will take steps to assure the protections of such data by third parties, those partners may also be subject to data intrusion or otherwise compromise the protection of such data. Any compromise of the confidential data of our customers, consumers, suppliers, partners, employees or ourselves, or failure to prevent or mitigate the loss of or damage to this data through breach of our information technology systems or other means could substantially disrupt our operations, harm our customers, consumers, employees and other business partners, damage our reputation, violate applicable laws and regulations, subject us to potentially significant costs and liabilities and result in a loss of business that could be material.

Risks Related to Matters Outside our Control That May Impact Our Business

Risks Related to International Trade Policies and Tariffs

We are subject to risks arising from changes in international trade policies, including the imposition of new or increased tariffs on imported goods. These risks are particularly relevant to our gaming and collectibles categories, where a significant portion of our inventory is sourced from foreign suppliers.

There have recently been significant changes to international trade policies and tariffs affecting imports and exports. Any significant increases in tariffs on goods or materials or other changes in trade policy could negatively affect our search for a target and/or our ability to complete a business combination.

Recently, the U.S. has implemented a range of new tariffs and increases to existing tariffs. In response to the tariffs announced by the U.S., other countries have imposed, are considering imposing and may in the future impose new or increased tariffs on certain exports from the United States. There is currently significant uncertainty about the future relationship between the United States and other countries with respect to trade policies, taxes, government regulations and tariffs, and we cannot predict whether and to what extent current tariffs will continue or trade policies will change in the future.

Tariffs, the threat of tariffs or increases in tariffs, could materially increase our cost of goods sold. While we may be able to offset some of these increases through price adjustments, there is no guarantee that market conditions will support such increases without negatively affecting consumer demand. In some cases, higher retail prices could increase revenues, but these effects are uncertain and highly dependent on our ability to maintain price elasticity and competitive positioning in the marketplace.

If we are unable to pass through increased costs or if supply chain disruptions prevent us from sourcing key products, our business, financial condition, results of operations, and cash flows could be materially and adversely affected.

Adverse economic conditions in the markets in which we and our employees, consumers, customers, suppliers, and manufacturers operate could negatively impact our ability to produce and ship our products, and lower our revenues, margins and profitability.

Various economic conditions in the markets we, our employees, consumers, customers, suppliers, and manufacturers operate, could have a significant negative impact on our revenues, profitability and business. The occurrence of adverse economic conditions can result in manufacturing and other work stoppages, slowdowns, and delays; shortages or delays in production or shipment of products or raw materials; delays or reduced purchases from customers and consumers; and other factors that cause increases in costs or delay in revenues. Inflation, such as what consumers in the U.S. and other economies are experiencing, can cause significant increases in the costs of other products which are required by consumers, such as gasoline, home heating fuels, or groceries, may reduce household spending on the discretionary products and entertainment we offer. Weakened economic conditions, higher interest rates, lowered employment levels or recessions may also significantly reduce consumer purchases of our products and spending on entertainment. Economic conditions may also be negatively impacted by terrorist attacks, wars, and other conflicts, such as the war in Ukraine, natural disasters, increases in critical commodity prices or labor costs, or the prospect of such events. Such a weakened economic and business climate, as well as consumer uncertainty created by such a climate, could significantly harm our revenues and profitability.

Our success and profitability not only depend on consumer demand for our products, but also on our ability to produce and sell those products at costs which allow us to make a profit. Rising fuel and raw material prices, due to inflation or otherwise, for paperboard and other components such as resin used in plastics or electronic components, increased transportation and shipping costs, and increased labor costs in the markets in which our products are manufactured all may increase the costs we incur to produce and transport our products, which in turn may reduce our margins, reduce our profitability and harm our business.

Changes in U.S., global or regional economic conditions could harm our business and financial performance.

Our financial performance is affected by the level of discretionary consumer spending in the markets where we operate. Reductions in stimulus payments provided to consumers, high inflation and rising interest rates on credit cards could impact discretionary spending. Recessions, credit crises and other economic downturns, or disruptions in credit and financial markets in the U.S. and in other markets in which we operate can result in lower levels of economic activity, lower employment levels, less consumer disposable income, and lower consumer confidence. Similarly, reductions in the value of key assets held by consumers, such as their homes or stock market investments, can lower consumer confidence and consumer spending power. Any of these factors can reduce the amount which consumers spend on the purchase of our products and entertainment. This in turn can reduce our revenues and harm our financial performance and profitability.

Our global operations mean we transact business in many jurisdictions and currencies. As a result, if the exchange rate between the U.S. dollar and a local currency for an international market in which we have significant sales or operations changes, our financial results as reported in U.S. dollars, may be meaningfully impacted even if our business in the local currency is not significantly affected. Similarly, our expenses can be significantly affected in U.S. dollar terms by exchange rates, meaning the profitability of our business in U.S. dollar terms can be negatively impacted by exchange rate movements that we do not control. Depreciation in key currencies may have a significant negative impact on our revenues and earnings as they are reported in U.S. dollars.

Our quarterly and annual operating results may fluctuate due to seasonality in our business and union strikes impacting the availability of content.

Sales of our music, video movies, video games and other entertainment products are seasonal, with an increase of retail sales occurring during the period from October through December for the holiday season. This seasonality for our consumer products business has increased over time, as retailers become more and more efficient in their control of inventory levels through quick response or just in time inventory management techniques, including the use of automated inventory replenishment programs. Further, ecommerce continues to grow significantly and accounts for a higher portion of the ultimate sales of our products to consumers. Ecommerce retailers tend to hold less inventory and take inventory closer to the time of sale to consumers than traditional retailers. As a result, customers are timing their orders so that they are being fulfilled by suppliers, such as us, closer to the time of purchase by consumers. While these techniques reduce a retailer’s investment in inventory, they increase pressure on suppliers like us to fill orders promptly and thereby shift a significant portion of inventory risk and carrying costs to the supplier. This can also result in our losing significant revenues and earnings if our supply chain is unable to supply product to our customers when they want it.

The level of inventory carried by retailers may also reduce or delay retail sales resulting in lower revenues for us. If we or our customers determine that one of our products is more popular at retail than was originally anticipated, we may not have sufficient time to procure and ship enough additional products to fully meet consumer demand. Additionally, the logistics of supplying more product within shorter time periods increases the risk that we will fail to achieve tight and compressed shipping schedules, which also may reduce our sales and harm our financial performance.

Our entertainment business is also subject to seasonal variations based on the timing of music, television, film, gaming content releases. Release dates are determined by several factors, including the timing of holiday periods, geographical release dates and competition in the market.

This seasonal pattern of our business requires significant use of working capital, mainly to purchase inventory during the months prior to the holiday season and requires accurate forecasting of demand for products during the holiday season in order to avoid losing potential sales of popular products or producing excess inventory of products that are less popular with consumers. Our failure to accurately predict and respond to consumer demand, resulting in our underproducing popular items and/or overproducing less popular items, would reduce our total sales and harm our results of operations.

As a result of the seasonal nature of our business, we would be significantly and adversely affected, in a manner disproportionate to the impact on a company with sales spread more evenly throughout the year, by unforeseen events such as a natural disaster, a terrorist attack, economic shock or pandemic that harms the retail environment or consumer buying patterns during our key selling season, or by events such as strikes or port delays or other supply chain challenges that interfere with the shipment of goods, particularly from the Far East, during the critical months leading up to the holiday shopping season.

Risks Related to Taxes and Government Related Matters

We face additional tax liabilities and collection obligations. Changes in, or differing interpretations of, income tax laws and rules, and changes in our geographic operating results, may impact our effective tax rate.

We are subject to income taxes in the United States and the United Kingdom, as well as tax collection and reporting obligations in various other jurisdictions where we conduct business. Changes in tax laws, regulations, or their interpretations, whether at the federal, state, or international level, could increase our tax liabilities or compliance costs. For example, the OECD’s Pillar Two initiative has resulted in the implementation of a 15% global minimum tax in the European Union and other jurisdictions, and additional countries are actively considering similar legislation. At this time, we do not expect these developments to have a material impact on our effective tax rate or financial position, but we continue to monitor legislative activity across relevant jurisdictions.

In the U.S., the Inflation Reduction Act of 2022 introduced a corporate alternative minimum tax and a 1% excise tax on certain stock repurchases. These provisions currently do not have a material effect on our consolidated financial statements. In addition, we are subject to routine audits by domestic and international tax authorities. The outcome of tax audits or disputes, changes in applicable tax laws or rates, or changes in the recognition of deferred tax assets could materially affect our effective tax rate, income tax expense, or cash flows.

We are subject to various government regulations, violations of which could subject us to sanctions or otherwise harm our business. In addition, we could be the subject of future product liability suits or merchandise recalls, which could harm our business.

We are subject to significant government regulations, including, in the U.S., under The Consumer Products Safety Act, The Federal Hazardous Substances Act, and The Flammable Fabrics Act, as well as under product safety and consumer protection statutes in our international markets. In addition, certain of our products are subject to regulation by the Food and Drug Administration or similar international authorities. Advertising to children is subject to regulation by the Federal Trade Commission, the Federal Communications Commission, and a host of other agencies globally, and the collection of information from children under the age of 13 is subject to the provisions of the Children’s Online Privacy Protection Act and other privacy laws around the world. The collection of personally identifiable information from anyone, including adults, is under increasing regulation in many markets, such as the General Data Protection Regulation adopted by the European Union, and data protection laws in the United States and in a number of other counties. While we take all the steps, we believe are necessary to comply with these acts and regulations, we cannot assure you that we will be in compliance and, if we fail to comply with these requirements or other regulations enacted in the future, we could be subject to fines, liabilities or sanctions which could have a significant negative impact on our business, financial condition and results of operations. We may also be subject to involuntary product recalls or may voluntarily conduct a product recall. While costs associated with product recalls have generally not been material to our business, the costs associated with future product recalls individually or in aggregate in any given fiscal year could be significant. In addition, any product recall, regardless of direct costs of the recall, may harm the reputation of our products and have a negative impact on our future revenues and results of operations.

As a multinational corporation, we are subject to a host of governmental regulations throughout the world, including antitrust, employment, customs and tax requirements, anti-boycott regulations, environmental regulations, and the Foreign Corrupt Practices Act. Complying with these regulations imposes costs on us which can reduce our profitability and our failure to successfully comply with any such legal requirements could subject us to monetary liabilities and other sanctions that could further harm our business and financial condition.

Risks Related to Litigation

We may face increased costs in achieving our sustainability goals and any failure to achieve our goals could result in reputational damage.

We view sustainability challenges as opportunities to innovate and continuously improve our product design and operational efficiencies. We also believe the long-term viability and health of our own operations and our supply chain, and the significant potential for environmental improvements, are critical to our business success. We have set key goals and objectives in this area as described in our business section of this Form 10-K.

We devote significant resources and expenditure to help achieve these goals. It is possible that we will incur significant expense in trying to achieve these goals with no assurance that we will be successful. Additionally, our reputation could be damaged if we fail to achieve our sustainability goals, or if we or others in our industry do not act, or are perceived not to act, responsibly with respect to the production and packaging of our products.

Our entertainment business involves risks of liability claims for media content, which could adversely affect our business, results of operations and financial condition.

As a distributor of media content, we may face potential liability for defamation, invasion of privacy, negligence, copyright or trademark infringement, and other claims based on the nature and content of the materials distributed. These types of claims have been brought, sometimes successfully, against producers and distributors of media content. Any imposition of liability that is not covered by insurance or is in excess of insurance coverage could have a material adverse effect on our business, results of operation and financial condition.

We are involved in litigation, arbitration or regulatory matters where the outcome is uncertain, and which could entail significant expense.

As a larger multinational corporation, we are subject to regulatory investigations, risks related to internal controls, litigation and arbitration disputes, including potential liability from personal injury or property damage claims by the users of products that have been or may be developed by us, claims by third parties that our products infringe upon or misuse such third parties’ property or rights, or claims by former employees for employment related matters. Because the outcome of litigation, arbitration and regulatory investigations is inherently difficult to predict, it is possible that the outcome of any of these matters could entail significant cost for us and harm our business. The fact that we operate in a significant number of international markets also increases the risk that we may face legal and regulatory exposures as we attempt to comply with a large number of varying legal and regulatory requirements. Any successful claim against us could significantly harm our business, financial condition, and results of operations.

We are exposed to claims and litigation of varying degrees arising in the ordinary course of business and use various methods to resolve these matters. When a loss is probable, we record an accrual based on the reasonably estimable loss or range of loss. When no point of loss within an estimated range is more likely than another, we record the lowest amount in the range and, if material, disclose the estimated range of loss.

Of the matters described below, only the Office Create claim exceeds that threshold; the remaining matters are described because management considers them relevant to an understanding of the Company’s contingencies.

On June 6, 2024, Office Create Corporation (“Office Create”) filed a complaint against COKeM International Ltd. (“COKeM”) in the United States District Court for the District of Minnesota alleging contributory trademark infringement, contributory false designation of origin and unjust enrichment relating to COKeM’s alleged distribution of the video game Cooking Mama: Cookstar. Office Create originally sought damages of no less than $20,913,200, plus interest of 9% accruing from October 3, 2022. On August 29, 2024, COKeM filed a response denying all allegations, and on September 12, 2024 filed a third-party complaint against Planet Entertainment LLC and Steven Grossman asserting claims for indemnification and contribution. Office Create later filed an amended complaint impleading the former owner, chairman, chief financial officer and senior vice president of purchasing of COKeM and asserting claims for willful trademark infringement and civil conspiracy, increasing the damages sought to an amount in excess of $35 million. COKeM filed an amended answer as to the new claims pertaining to it directly on March 12, 2025, denies the allegations, and intends to continue to defend the lawsuit vigorously.

A court-ordered settlement conference scheduled for August 11, 2025, was canceled by the court. The parties then completed fact discovery, including depositions of a co-defendant corporate designee and of current and former COKeM personnel taken between September 2025 and February 2026, and each party designated a damages expert. On January 6, 2026, Office Create stipulated to the dismissal of its claims against the Plaion defendants pursuant to a confidential settlement, and the court dismissed those defendants from the litigation the same day. Fact discovery has concluded.

The parties have engaged in settlement discussions that have not resulted in an agreement, and their respective positions as to value remain materially divergent. During the period from April 17, 2026 through June 30, 2026 the matter remained in the expert-motion phase: COKeM opposed Office Create’s motion to strike portions of COKeM’s rebuttal expert report, the court heard the matter in June 2026, and the parties were required to submit public and redacted versions of the expert materials by June 30, 2026 following the court’s ruling. COKeM denies liability and continues to defend the matter. The Company maintains liability insurance applicable to this claim, subject to a policy limit of $2.5 million for all claims that is shared with the Video Privacy Protection Act matters described below, a portion of which has been utilized. Because the proceedings remain at an expert and pre-trial stage and the parties’ valuations of the claim differ materially, the Company is unable to estimate the amount or range of reasonably possible loss, and no liability has been recorded for this matter as of June 30, 2026. An unfavorable outcome could exceed available insurance and could be material to the Company’s consolidated financial position, results of operations and cash flows.

Jonathan Hoang To v. DirectToU, LLC, United States District Court for the Northern District of California, Case No. 3:24-cv-06447; Douglas Feller, Jeffry Haise, and Joseph Mull v. Alliance Entertainment, LLC and DirectToU, LLC, United States District Court for the Southern District of Florida, Case No. 0:24-cv-61444; and Vivek Shah v. DirectToU, LLC, JAMS Arbitration, No. 5220006749. — On or about September 12, 2024, these actions were brought against DirectToU, LLC (“DirectToU”) and/or Alliance Entertainment, LLC (“Alliance”) alleging violations of the Video Privacy Protection Act (“VPPA”) related to the alleged collection of, and alleged disclosure to Meta and other third parties including data brokers of, private information and user data regarding a user’s account information and video viewing and purchasing history from websites operated by the Company. DirectToU and Alliance disputed the allegations. The Feller action was dismissed and those plaintiffs were added to the Hoang To matter.

The parties agreed to resolve the claims on a class-wide basis for $1.58 million. The court granted preliminary approval of the settlement on September 22, 2025 and entered final approval on May 5, 2026. The settlement was funded during the fiscal year ended June 30, 2026, and the matter was fully resolved as of that date. No further obligation or contingency exists in respect of these claims.

The Company recorded a contingent liability of $1.58 million for the settlement and a related insurance recovery receivable from CNA of $1.38 million as of June 30, 2025. Both amounts were settled during the fiscal year ended June 30, 2026, and no balances relating to this matter remain recorded on the consolidated balance sheet as of June 30, 2026.

On June 9, 2025, Sparkle Pop, LLC v. Alliance Entertainment Holding Corporation and Alliance Entertainment. LLC (U.S. Bankruptcy Court for MD-In Re Diamond Comic Distributors): Sparkle Pop sued the Alliance entities in the United States Bankruptcy Court for the District of Maryland (In re Diamond Comic Distributors) alleging theft of trade secrets and tortious interference with contracts arising out of Alliance’s successful bid for, and then Alliance’s subsequent termination of, the asset purchase agreement in the Diamond Comic Distributors bankruptcy. Alliance moved to dismiss the original complaint on July 10, 2025. On July 24, 2025, Sparkle Pop filed an amended complaint asserting the same claims plus an additional claim for breach of a non-disclosure agreement, and on August 7, 2025 Alliance moved to dismiss the amended complaint on the grounds that Sparkle Pop lacks standing, having been neither a party to, an intended third-party beneficiary of, nor an assignee of rights under the non-disclosure agreement, and that it failed to state a claim. Briefing was completed on September 17, 2025, and on November 10, 2025 the court heard oral argument and denied Alliance’s motion to dismiss. The adversary proceeding was stayed until February 16, 2026 to permit the appointed Chapter 7 trustee to become familiar with the litigation, after which the parties advance to discovery.

Risks Related to Accounting Matters

Prior to the Business Combination, Adara had accounted for its outstanding Warrants as a warrant liability and following the Business Combination, Alliance is now required to determine the value warrant liability for the Private Warrants quarterly, which could have a material impact on Alliance’s financial position and operating results.

Included on Alliance’s consolidated balance sheets as of June 30, 2026, and 2025, contained elsewhere in this Form 10-K, are derivative liabilities related to embedded features contained within the Warrants. Accounting Standards Codification 815, Derivatives and Hedging (“ASC 815”) provides for the remeasurement of the fair value of such derivatives at each balance sheet date, with a resulting non-cash gain or loss related to the change in the fair value being recognized in earnings in the statements of income and comprehensive income. As a result of the recurring fair value measurement, our financial statements and results of operations may fluctuate quarterly based on factors that are outside of our control. Due to the recurring fair value measurement, we expect that we will recognize non-cash gains or losses on our warrants each reporting period and that the amount of such gains or losses could be material.

Following the Business Combination, although Alliance has determined that the Public Warrants are treated as equity, Alliance is required to continue to recognize the changes in the fair value of the Private Warrants from the prior period, if any, in its operating results for the current period, which could have a material impact on Alliance’s financial position and operating results.

Because Alliance qualifies as a “smaller reporting company” within the meaning of the Securities Act of 1933, as amended, it is eligible for, and relies on, certain scaled disclosure and reporting accommodations. This could make Alliance’s securities less attractive to investors and may make it more difficult to compare Alliance’s performance to the performance of other public companies.

Alliance qualifies as a “smaller reporting company” as defined in Rule 405 under the Securities Act and Rule 12b-2 under the Exchange Act, and as a “non-accelerated filer” under Rule 12b-2.

Alliance ceased to qualify as an “emerging growth company” effective June 30, 2026 and can no longer rely on the exemptions previously available to it on that basis, including the extended transition period under Section 107 of the JOBS Act for complying with new or revised accounting standards, the exemptions from the say-on-pay, say-on-frequency and say-on-golden-parachute advisory voting requirements, and the exemption from pay-versus-performance disclosure. Accordingly, the financial statements included in this Annual Report on Form 10-K for the fiscal year ended June 30, 2026 reflect the effective dates for new or revised accounting standards applicable to public business entities, and the advisory voting and pay-versus-performance requirements apply, in each case as modified by the scaled accommodations available to smaller reporting companies.

Alliance continues to qualify as a smaller reporting company and, as such, may continue to rely on reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, may present only the two most recent fiscal years of audited financial statements in its Annual Reports on Form 10-K, and may provide pay-versus-performance disclosure on a scaled basis. As a non-accelerated filer, Alliance is also not required to comply with the auditor attestation requirement under Section 404(b) of the Sarbanes-Oxley Act, and management’s assessment of the effectiveness of Alliance’s internal control over financial reporting has not been, and is not required to be, attested to by its independent registered public accounting firm.

Investors may find Alliance’s common stock less attractive because of its reliance on these accommodations, which could result in a less active trading market for the stock and greater price volatility.

Risks Related to Our Securities

The warrant agreement designates the courts of the State of New York or the United States District Court for the Southern District of New York as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by holders of the Warrants, which could limit the ability of warrant holders to obtain a favorable judicial forum for disputes with Alliance.

The warrant agreement provides that, subject to applicable law, (i) any action, proceeding or claim against us arising out of or relating in any way to the warrant agreement, including under the Securities Act, will be brought and enforced in the courts of the State of New York or the United States District Court for the Southern District of New York, and (ii) that we irrevocably submit to such jurisdiction, which jurisdiction shall be the exclusive forum for any such action, proceeding or claim. Alliance will waive any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum.

Notwithstanding the foregoing, these provisions of the warrant agreement do not apply to suits brought to enforce any liability or duty created by the Exchange Act or any other claim for which the federal district courts of the United States of America are the sole and exclusive forum. Any person or entity purchasing or otherwise acquiring any interest in any of the Warrants shall be deemed to have notice of and to have consented to the forum provisions in the warrant agreement. If any action, the subject matter of which is within the scope the forum provisions of the warrant agreement, is filed in a court other than a court of the State of New York or the United States District Court for the Southern District of New York (a “foreign action”) in the name of any holder of the Warrants, such holder shall be deemed to have consented to:

This choice of forum provision may limit a warrant holder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with our company, which may discourage such lawsuits. Alternatively, if a court were to find this provision of our warrant agreement inapplicable or unenforceable with respect to one or more of the specified types of actions or proceedings, Alliance may incur additional costs associated with resolving such matters in other jurisdictions, which could materially and adversely affect our business, financial condition and results of operations and result in a diversion of the time and resources of our management and board of directors.

Alliance may redeem unexpired Warrants prior to their exercise at a time that is disadvantageous to a Warrant holder, thereby making the Warrants worthless.

Alliance has the ability to redeem outstanding Warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant, provided that the last reported sales price of the Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30 trading- day period commencing once the warrants become exercisable and ending on the third trading day prior to the date on which Alliance gives proper notice of such redemption and provided certain other conditions are met. If and when the Warrants become redeemable, Alliance may not exercise our redemption right if the issuance of shares of common stock upon exercise of the Warrants is not exempt from registration or qualification under applicable state blue sky laws or it is unable to affect such registration or qualification. Alliance will use its best efforts to register or qualify such shares of Class A common stock under the blue-sky laws of the state of residence in those states in which the Warrants were offered in the IPO, if necessary. Redemption of the outstanding warrants could force holders (i) to exercise the Warrants and pay the exercise price therefor at a time when it may be disadvantageous for a holder to do so, (ii) to sell Warrants at the then-current market price when the holder might otherwise wish to hold Warrants or (iii) to accept the nominal redemption price which, at the time the outstanding Warrants are called for redemption, is likely to be substantially less than the market value of the Warrants. None of the Private Warrants are redeemable by Alliance so long as they are held by the Sponsor or its permitted transferees.

If Warrant holders exercise Public Warrants on a “cashless basis,” they will receive fewer shares of Alliance common stock from such exercise than if you were to exercise such warrants for cash.

There are circumstances in which the exercise of the Public Warrants may be required or permitted to be made on a cashless basis. First, if a registration statement covering the shares of Class A common stock issuable upon exercise of the Warrants is not effective by a specified date, warrant holders may, until such time as there is an effective registration statement, exercise warrants on a cashless basis in accordance with Section 3(a)(9) of the Securities Act or another exemption. Second, if a registration statement covering the Class A common stock issuable upon exercise of the warrants is not effective within a specified period following the consummation of the Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when Alliance shall have failed to maintain an effective registration statement, exercise Warrants on a cashless basis pursuant to the exemption provided by Section 3(a)(9) of the Securities Act, provided that such exemption is available; if that exemption, or another exemption, is not available, holders will not be able to exercise their Warrants on a cashless basis.

Third, if Alliance calls the Public Warrants for redemption, Alliance’s management will have the option to require all holders that wish to exercise Warrants to do so on a cashless basis. In the event of an exercise on a cashless basis, a holder would pay the Warrant exercise price by surrendering the Warrants for that number of shares of Class A common stock equal to the quotient obtained by dividing (x) the product of the number of shares of Class A common stock underlying the Warrants, multiplied by the difference between the exercise price of the Warrants and the “fair market value” (as defined in the next sentence) by (y) the fair market value. The “fair market value” for this purpose shall mean the average reported last sale price of the Class A common stock for the ten trading days ending on the third trading day prior to the date on which the notice of exercise is received by the warrant agent or on which the notice of redemption is sent to the holders of Warrants, as applicable. As a result, you would receive fewer shares of Class A common stock from such exercise than if you were to exercise such warrants for cash.

The receipt of cash proceeds from the exercise of our Warrants is dependent upon the market price exceeding the $11.50 exercise price and the Warrants being exercised for cash.

The receipt of cash proceeds from our Warrants’ exercise depends on the market price exceeding the $11.50 exercise price and the Warrants being exercised for cash. The $11.50 exercise price per share of the Warrants is considerably higher than the $5.45 closing sale price of the Class A common stock on September 8, 2026. If the price of our Class A Common Stock remains below the respective Warrant exercise prices per share, warrant holders will unlikely cash exercise their Warrants, resulting in little or no cash proceeds to us.

In addition, we may lower the exercise price of the Warrants in accordance with the Warrant Agreement to induce the holders to exercise such warrants. We may affect such a reduction in exercise price without the consent of such warrant holders and such reduction would decrease the maximum amount of cash proceeds we would receive upon the exercise in full of the Warrants for cash. Further, the holders of the Private Warrants and the Underwriter Warrants may exercise such Warrants on a cashless basis at any time. The holders of the Public Warrants may exercise such Warrants on a cashless basis at any time a registration statement is not effective. A prospectus is not currently available for issuing Class A common stock shares upon such exercise. Accordingly, we would not receive any proceeds from a cashless exercise of Warrants.

Concentration of ownership among Alliance’s executive officers, directors and their affiliates may prevent new investors from influencing significant corporate decisions.

As of the date of this Form 10-K, the executive officers and directors and their affiliates collectively beneficially owned, directly, or indirectly, excluding the Contingent Class E Shares, approximately 94% of the outstanding Class A common stock.

As a result, these stockholders are able to exercise a significant level of control over all matters requiring stockholder approval, including the election of directors, appointment and removal of officers, any amendment of our Certificate of Incorporation and approval of mergers and other business combination transactions requiring stockholder approval, including proposed transactions that would result in Alliance’s stockholders receiving a premium price for their shares and other significant corporate transactions. This control could have the effect of delaying or preventing a change of control or changes in and will make the approval of certain transactions difficult or impossible without the support of these stockholders.

An active trading market may not develop for our securities, and you may not be able to sell your Class A common stock at or above the price per share for which you purchased it.

Our Class A common stock shares are thinly traded, and we cannot predict when or if an active trading market will develop or how liquid that market might become. If such a market does not develop or is not sustained, it may be difficult for you to sell your shares of Class A common stock at a time or at price that is attractive to you, or at all.

The trading market for our Class A common stock in the future could be subject to wide fluctuations in response to several factors, including, but not limited to:

Furthermore, our stock price may be impacted by unrelated or disproportionate factors to our operating performance. These market fluctuations, along with general economic, political, and market conditions—such as recessions, interest rates, or international currency fluctuations—may adversely affect the market price of our Class A common stock. Due to our status as a smaller reporting company, the limited number of shares in our public float could contribute to extreme fluctuations in our Class A common stock price, increasing the risk of price volatility.

We might not be able to maintain the listing of our Class A common stock on the Nasdaq Capital Market.

Our Class A common stock and warrants are listed on the Nasdaq Capital Market. However, there can be no assurance that we will be able to maintain the listing standards of that exchange, which include requirements that we maintain our stockholders’ equity, total value of shares held by unaffiliated stockholders, and market capitalization above certain specified levels. If we fail to maintain the Nasdaq listing requirements on an ongoing basis, our Class A common stock might cease to trade on the Nasdaq Capital Market, and may move to the OTCQX, OTCQB or OTC Pink Open Market operated by OTC Markets Group, Inc. These quotation services are generally considered to be less efficient, and to provide less liquidity, than the Nasdaq Capital Market.

If securities or industry analysts do not publish or cease publishing research or reports about Alliance, its business, or its market, or if they change their recommendations regarding Alliance’s securities adversely, the price and trading volume of Alliance’s securities could decline.

The trading market for Alliance’s securities is influenced by the research and reports that industry or securities analysts may publish about Alliance, its business, market, or competitors. Securities and industry analysts do not currently, and may never, publish research on Alliance. If no securities or industry analysts commence coverage of Alliance, Alliance’s share price and trading volume would likely be negatively impacted. If any of the analysts who may cover Alliance change their recommendation regarding Alliance’s shares of common stock adversely, or provide more favorable relative recommendations about its competitors, the price of Alliance’s shares of common stock would likely decline. If any analyst who may cover Alliance were to cease coverage of Alliance or fail to regularly publish reports on it, Alliance could lose visibility in the financial markets, which in turn could cause its share price or trading volume to decline.

Because we have no current plans to pay cash dividends on Alliance’s common stock for the foreseeable future, you may not receive any return on investment unless you sell Alliance’s common stock for a price greater than that which you paid for it.

Alliance may retain future earnings, if any, for future operations, expansion and debt repayment and has no current plans to pay any cash dividends for the foreseeable future. Any decision to declare and pay dividends as a public company in the future will be made at the discretion of Alliance’s board of directors and will depend on, among other things, Alliance’s results of operations, financial condition, cash requirements, contractual restrictions and other factors that Alliance’s board of directors may deem relevant. In addition, Alliance’s ability to pay dividends may be limited by covenants of any existing and future outstanding indebtedness it or its subsidiaries incur. As a result, you may not receive any return on an investment in the Class A common stock unless you sell your shares of common stock for a price greater than that which you paid for it.

Anti-takeover provisions in the Certificate of Incorporation and under Delaware law could make an acquisition of Alliance, which may be beneficial to its stockholders, more difficult and may prevent attempts by its stockholders to replace or remove Alliance’s then current management.

The Certificate of Incorporation contains provisions that may delay or prevent an acquisition of Alliance or a change in its management. These provisions may make it more difficult for stockholders to replace or remove members of the board of directors. Because the board of directors is responsible for appointing the members of the management team, these provisions could in turn frustrate or prevent any attempt by the stockholders to replace or remove current management. In addition, these provisions could limit the price that investors might be willing to pay in the future for shares of Class A common stock. Among other things, these provisions include:

Moreover, because Alliance is incorporated in Delaware, it is governed by the provisions of Section 203 of the Delaware General Corporation Law (the DGCL), which prohibits a person who owns 15% or more of its outstanding voting stock from merging or combining with Alliance for a period of three years after the date of the transaction in which the person acquired 15% or more of Alliance’s outstanding voting stock, unless the merger or combination is approved in a prescribed manner. This could discourage, delay, or prevent a third party from acquiring or merging with Alliance, whether or not it is desired by, or beneficial to, its stockholders. This could also have the effect of discouraging others from making tender offers for Alliance’s common stock, including transactions that may be in its stockholders’ best interests. Finally, these provisions establish advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon at stockholder meetings. These provisions would apply even if the offer may be considered beneficial by some stockholders. For more information, see the section titled “Description of Securities — Certain Anti-Takeover Provisions of Delaware Law and the Existing Certificate of Incorporation and Bylaws.”

The Certificate of Incorporation requires, to the fullest extent permitted by law, that derivative actions brought in our name, actions against our directors, officers, other employees or stockholders for breach of fiduciary duty and certain other actions may be brought only in the Court of Chancery in the State of Delaware and, if brought outside of Delaware, the stockholder bringing the suit will, subject to certain exceptions, be deemed to have consented to service of process on such stockholder’s counsel, which may have the effect of discouraging lawsuits against our directors, officers, other employees or stockholders.

The Certificate of Incorporation requires, to the fullest extent permitted by law, that derivative actions brought in the name of Alliance, actions against our directors, officers, other employees or stockholders for breach of a fiduciary duty owed by any officer, director or other employee of Alliance or Alliance’s shareholders, any action asserting a claim against Alliance, its directors, officers or other employees arising pursuant to any provision of the DGCL or the Certificate of Incorporation or By-laws and certain other actions may be brought only in the Court of Chancery in the State of Delaware and, if brought outside of Delaware, the stockholder bringing the suit will be deemed to have consented to service of process on such stockholder’s counsel except any action (A) as to which the Court of Chancery in the State of Delaware determines that there is an indispensable party not subject to the jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten days following such determination), (B) which is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery or (C) for which the Court of Chancery does not have subject matter jurisdiction. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and consented to the forum provisions in the Certificate of Incorporation. This choice of forum provision may limit or make more costly a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, other employees, or stockholders, which may discourage lawsuits with respect to such claims. Alternatively, if a court were to find the choice of forum provision contained in the Certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm Alliance’s business, operating results and financial condition.

The Certificate of Incorporation provides that the exclusive forum provision will be applicable to the fullest extent permitted by applicable law, subject to certain exceptions. Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. As a result, the exclusive forum provision will not apply to suits brought to enforce any duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. In addition, The Certificate of Incorporation provides that, unless Alliance consents in writing to the selection of an alternative forum, the federal district courts of the United States of America shall, to the fullest extent permitted by law, be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act, or the rules and regulations promulgated thereunder. There is, however, the uncertainty as to whether a court would enforce this provision and that investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder. Section 22 of the Securities Act creates concurrent jurisdiction for state and federal courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder.

A possible “short squeeze” due to a sudden increase in demand of our Class A common stock that largely exceeds supply may lead to price volatility in our Class A common stock.

Investors may purchase our Class A common stock to hedge existing exposure in our Class A common stock or to speculate on the price of our Class A common stock. Speculation on the price of our Class A common stock may involve long and short exposures. To the extent aggregate short exposure exceeds the number of shares of our Class A common stock available for purchase in the open market, investors with short exposure may have to pay a premium to repurchase our common stock for delivery to lenders of our Class A common stock. Those repurchases may in turn, dramatically increase the price of our Class A common stock until investors with short exposure are able to purchase additional Class A common stock to cover their short position. This is often referred to as a “short squeeze.” A short squeeze could lead to volatile price movements in our common stock that are not directly correlated to the performance or prospects of our Class A common stock and once investors purchase the shares of Class A common stock necessary to cover their short position the price of our Class A common stock may decline.

We may issue additional shares of Class A common stock or preferred shares under the 2023 Plan, which would dilute the interest of our stockholders.

Pursuant to the Certificate of Incorporation, Alliance’s authorized capital stock consists of 490,000,000 shares of Class A common stock, 60,000,000 shares of Alliance contingent Class E common stock and 1,000,000 shares of preferred stock. As of June 30, 2026, we had 50,979,630 shares of Class A common stock outstanding, 60,000,000 shares of contingent Class E common stock outstanding and unallocated and no shares of preferred stock outstanding. All outstanding shares of contingent Class E common stock are held in escrow pursuant to the Contingent Consideration Escrow Agreement dated February 10, 2023, and remain unallocated and issued and outstanding unless and until they are forfeited or cancelled in accordance with that agreement.

For Alliance’s 2023 Omnibus Equity Incentive Plan we may issue a number of additional shares of common stock or shares of preferred stock under the 2023 Plan. Pursuant to Alliance’s 2023 Omnibus Equity Incentive Plan, Alliance may issue an aggregate of up to 1,000,000 shares of Class A common stock, of which 248,700 shares remained available for future awards as of June 30, 2026. For additional information about this plan, please read the discussion under the heading “Alliance’s Executive Compensation - Employee Benefit Plans.”

Additionally, as of June 30, 2026, Alliance had Warrants outstanding to purchase an aggregate of 9,919,993 shares of common stock. Alliance may also issue additional shares of common stock or other equity securities of equal or senior rank in the future in connection with, among other things, future acquisitions, or repayment of outstanding indebtedness, without stockholder approval, in a number of circumstances.

The issuance of additional common stock or preferred shares:

Item 1B. Unresolved Staff Comments.

None.

Item 1C. Cybersecurity

In the ordinary course of business, we receive, process, use, and store digitally large amounts of data, including customer data as well as confidential, sensitive, proprietary, and personal information. Maintaining the integrity and availability of our information technology systems and this information, as well as appropriate limitations on access and confidentiality of such information, is important to us and our business operations. To this end, we have implemented a program designed to assess, identify, and manage risks from potential unauthorized occurrences on or through our information technology systems that may result in adverse effects on the confidentiality, integrity, and availability of these systems and the data residing in them.

The program is managed by our executive management team, and includes mechanisms, controls, technologies, systems, policies, and other processes designed to prevent or mitigate data loss, theft, misuse, or other security incidents or vulnerabilities affecting the systems and data residing in them. We consult with and rely upon outside advisors and experts to assist us with assessing, identifying, and managing cybersecurity risks.

We consider cybersecurity, along with other significant risks that we face, within our overall enterprise risk management framework. Our Board of Directors has oversight for the most significant risks facing us and for our processes to identify, prioritize, assess, manage, and mitigate those risks. The Board of Directors receives periodic updates on cybersecurity and information technology matters and related risk exposures from management.

Item 2. Properties.

Our principal executive offices are located at 8201 Peters Road, Suite 1000, Plantation, FL 33324, and our telephone number is (954) 255-4000. We lease several distribution center facilities:

We also maintain marketing and sales offices in six cities throughout the United States and believe our facilities are adequate and suitable for our current business needs and expect to continue to reduce reliance on fixed office space in the future.

Item 3. Legal Proceedings.

Alliance is currently involved in, and may in the future be involved in, legal proceedings, claims, and government investigations in the ordinary course of business. These include proceedings, claims, and investigations relating to, among other things, regulatory matters, commercial matters, intellectual property, competition, tax, employment, pricing, discrimination, consumer rights, personal injury, and property rights.

Depending on the nature of the proceeding, claim, or investigation, the Company may be subject to monetary damage awards, fines, penalties, or injunctive orders. Furthermore, the outcome of these matters could materially adversely affect Alliance’s business, results of operations, and financial condition. The outcomes of legal proceedings, claims, and government investigations are inherently unpredictable and subject to significant judgment to determine the likelihood and amount of loss related to such matters.

On June 6, 2024, Office Create Corporation (“Office Create”) filed a complaint against COKeM International Ltd. (“COKeM”) in the United States District Court for the District of Minnesota alleging contributory trademark infringement, contributory false designation of origin and unjust enrichment relating to COKeM’s alleged distribution of the video game Cooking Mama: Cookstar. Office Create originally sought damages of no less than $20,913,200, plus interest of 9% accruing from October 3, 2022. On August 29, 2024, COKeM filed a response denying all allegations, and on September 12, 2024 filed a third-party complaint against Planet Entertainment LLC and Steven Grossman asserting claims for indemnification and contribution. Office Create later filed an amended complaint impleading the former owner, chairman, chief financial officer and senior vice president of sales of COKeM and asserting claims for willful trademark infringement and civil conspiracy, increasing the damages sought to an amount in excess of $35 million. COKeM filed an amended answer as to the new claims pertaining to it directly on March 12, 2025, denies the allegations, and intends to continue to defend the lawsuit vigorously.

The parties then completed fact discovery, including depositions of a co-defendant corporate designee and of current and former COKeM personnel taken between September 2025 and February 2026, and each party designated a damages expert. On January 6, 2026, Office Create stipulated to the dismissal of its claims against the Plaion defendants pursuant to a confidential settlement, and the court dismissed those defendants from the litigation the same day. Fact discovery has concluded.

The parties have engaged in settlement discussions that have not resulted in an agreement, and their respective positions as to value remain materially divergent. During the period from April 17, 2026 through June 30, 2026 the matter remained in the expert-motion phase: COKeM denies liability and continues to defend the matter. The Company maintains liability insurance applicable to this claim. Because the proceedings remain at an expert and pre-trial stage and the parties’ valuations of the claim differ materially, the Company is unable to estimate the amount or range of reasonably possible loss, and no liability has been recorded for this matter as of June 30, 2026. An unfavorable outcome could exceed available insurance and could be material to the Company’s consolidated financial position, results of operations and cash flows.

Jonathan Hoang To v. DirectToU, LLC, United States District Court for the Northern District of California, Case No. 3:24-cv-06447; Douglas Feller, Jeffry Haise, and Joseph Mull v. Alliance Entertainment, LLC and DirectToU, LLC, United States District Court for the Southern District of Florida, Case No. 0:24-cv-61444; and Vivek Shah v. DirectToU, LLC, JAMS Arbitration, No. 5220006749. — On or about September 12, 2024, these actions were brought against DirectToU, LLC (“DirectToU”) and/or Alliance Entertainment, LLC (“Alliance”) alleging violations of the Video Privacy Protection Act (“VPPA”) related to the alleged collection of, and alleged disclosure to Meta and other third parties including data brokers of, private information and user data regarding a user’s account information and video viewing and purchasing history from websites operated by the Company. DirectToU and Alliance disputed the allegations. The Feller action was dismissed and those plaintiffs were added to the Hoang To matter.

The parties agreed to resolve the claims on a class-wide basis for $1.58 million. The court granted preliminary approval of the settlement on September 22, 2025 and entered final approval on May 5, 2026. The settlement was funded during the fiscal year ended June 30, 2026, and the matter was fully resolved as of that date. No further obligation or contingency exists in respect of these claims.

The Company recorded a contingent liability of $1.58 million for the settlement and a related insurance recovery receivable from CNA of $1.38 million as of June 30, 2025. Both amounts were settled during the fiscal year ended June 30, 2026, and no balances relating to this matter remain recorded on the consolidated balance sheet as of June 30, 2026.

Sparkle Pop, LLC v. Alliance Entertainment Holding Corporation and Alliance Entertainment. LLC (U.S. Bankruptcy Court for MD-In Re Diamond Comic Distributors): On June 9, 2025, Sparkle Pop sued the Alliance entities in the United States Bankruptcy Court for the District of Maryland (In re Diamond Comic Distributors) alleging theft of trade secrets and tortious interference with contracts arising out of Alliance’s successful bid for, and subsequent termination of, the asset purchase agreement in the Diamond Comic Distributors bankruptcy. Alliance moved to dismiss the original complaint on July 10, 2025. On July 24, 2025, Sparkle Pop filed an amended complaint asserting the same claims plus an additional claim for breach of a non-disclosure agreement, and on August 7, 2025 Alliance moved to dismiss the amended complaint on the grounds that Sparkle Pop lacks standing, having been neither a party to, an intended third-party beneficiary of, nor an assignee of rights under the non-disclosure agreement, and that it failed to state a claim. Briefing was completed on September 17, 2025, and on November 10, 2025 the court heard oral argument and denied Alliance’s motion to dismiss. The adversary proceeding was stayed until February 16, 2026 to permit the appointed Chapter 7 trustee to become familiar with the litigation, after which the parties advance to discovery.

Item 4. Mine Safety Disclosures.

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information

Our Class A common stock and warrants are quoted on the NASDAQ under the symbol “AENT” and “AENTW”.

Holders

Although there are a larger number of beneficial owners, at June 30, 2026, there were 28 holders of record of our Class A common stock and 34 holders of record of our warrants.

Dividends

We have not paid any cash dividends on the Class A common stock to date. We may retain future earnings, if any, for future operations, expansion, and debt repayment, and we have no current plans to pay cash dividends for the foreseeable future. Any decision to declare and pay dividends in the future will be made at the discretion of the Board and will depend on, among other things, our results of operations, financial condition, cash requirements, contractual restrictions, and other factors that we may deem relevant. We do not anticipate declaring any cash dividends to holders of the Class A common stock in the foreseeable future. Further, our ability to declare dividends may be limited by the terms of financing or other agreements entered by us or our subsidiaries from time to time.

Recent Sales of Unregistered Securities; Use of Proceeds from Registered Offerings

We had no sales of unregistered equity securities during the period covered by this annual report that were not previously reported in a Quarterly Report on Form 10-Q or a Current Report on Form 8-K.

Purchases of Equity Securities

We have not repurchased any shares of our common stock during the fiscal year ended June 30, 2026.

Item 6. Reserved.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The objective for the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” is to provide information the Company’s management team believes is necessary to achieve an understanding of its financial condition and the results of business operations with particular emphasis on the Company’s future and should be read in conjunction with the Company’s audited consolidated financial statements, and footnotes.

This analysis contains forward-looking statements concerning the Company’s performance expectations and estimates. Other than statements with historical context, commentary should be considered forward- looking and carries with it risks and uncertainties. See “Statement Regarding Forward-Looking Statements” and Part I, Item 1A. Risk Factors, of this Form 10-K for a discussion of other uncertainties, risks and assumptions associated with these statements.

Alliance is a leading global wholesaler and a key player in the entertainment industry, with a diverse portfolio of owned brands and e-commerce properties, including DeepDiscount, Movies Unlimited, importCDs, WowHD, CD WOW, popmarket, blowitoutahere, Handmade by Robots, Vinyl Unlimited, Collectors Choice Vinyl, Heartland Music, Alliance Authentic, Fulfillment Express, Critics’ Choice, and other consumer-facing brands and specialty marketplaces. As a leading global wholesaler, direct-to-consumer (“DTC”) distributor, and e-commerce provider, Alliance serves as a key distribution partner between leading entertainment content and consumer product manufacturers, including Universal Pictures, Nintendo, Warner Bros. Home Entertainment, Sony Pictures, Paramount, Studio Distribution Services, Universal Music Group, Sony Music Entertainment, Warner Music Group, Microsoft, The Orchard, Allied Vaughn, Music Video Distribution, Lionsgate, and others, including a broad network of retailers and consumers. Alliance distributes products to many of the world’s largest retailers, both domestically and internationally, including Walmart, Amazon, Best Buy, Barnes & Noble, Target, Verizon, BJ’s Wholesale Club, EBAY, Costco, Vintage Stock, and numerous other customers.

Employing an established multi-channel distribution strategy, Alliance markets and distributes a broad portfolio of physical media, video games, collectibles, consumer electronics, accessories, and other entertainment products across wholesale, direct-to-consumer, and e-commerce channels. The Company sells products, where permitted for export, to customers in more than 75 countries worldwide.

Alliance provides integrated warehousing, distribution, technology, and logistics services that support the efficient distribution of entertainment products to retailers, e-commerce partners, and consumers. The Company’s proprietary technology platforms and operating systems facilitate order management, inventory visibility, electronic data interchange (“EDI”), and fulfillment activities across its wholesale, direct-to-consumer, and e-commerce channels. These capabilities provide customers with access to the Company’s in-stock inventory of more than 340,000 SKUs, including vinyl records, video games, compact discs, DVDs, Blu-ray discs, collectibles, consumer electronics, accessories, and other entertainment products. Combined with Alliance’s nationwide distribution network and fulfillment capabilities, these technology-enabled platforms allow customers to source a broad assortment of products through a single distribution partner. Alliance also provides retailers with back-office support, logistics services, and fully integrated EDI capabilities designed to simplify product onboarding, inventory replenishment, and order fulfillment. These services enable retail partners to efficiently expand their product offerings while leveraging Alliance’s inventory management and distribution infrastructure.

License Agreements

Amazon MGM

In January 2026, the Company entered into an exclusive home entertainment license agreement with Amazon MGM Studios Distribution to serve as the exclusive physical media distribution partner for the United States and Canada. Under the agreement, the Company distributes new releases and catalog titles across physical media formats, expanding its exclusive distribution portfolio and strengthening its relationships with major content licensors.

Paramount Pictures

In January 2025, Alliance entered into an exclusive home entertainment distribution agreement with Paramount Pictures, designating Alliance as the sole distributor of Paramount’s physical media – including DVDs, Blu-rays, and 4K UHD titles, across the United States and Canada. This strategic partnership significantly enhances Alliance’s leadership in home entertainment distribution by providing direct access to Paramount’s extensive library of blockbuster films and iconic TV series. The collaboration has already yielded positive results. This partnership not only strengthens relationships with major retailers and collectors but also reinforces Alliance’s commitment to delivering high-quality entertainment products to consumers.

Merger and Business Acquisition

Alliance has a proven history of successfully acquiring and integrating competitors and complementary businesses. The Company will continue to evaluate opportunities to identify targets that meet strategic and economic criteria.

On December 31, 2025, Alliance completed its strategic acquisition of Endstate Authentic LLC and established Endstate as a wholly owned subsidiary focused on authentication and resale technology. The acquisition supports the launch of Alliance Authentic, a new premium platform designed to create authenticated, certified vinyl collectibles and a trusted global marketplace for buying, selling, and trading investment-grade physical media. Endstate’s patented NFC-enabled authentication and digital product identity technology enables real-time product verification, counterfeit prevention, and authenticated resale services, forming the technological foundation of the Alliance Authentic platform. As part of the transaction, Endstate co-founders Bennett Collen and Stephanie Howard joined Alliance’s leadership team as President and Senior Vice President of Operations, respectively. The acquisition resulted in the recognition of $5 million of goodwill and $3.3 million of identifiable intangible assets as of June 30, 2026, primarily related to Endstate’s proprietary technology and digital identity systems. Management believes the acquisition strengthens Alliance’s strategic position in the growing authenticated collectibles market and supports the development of new technology-enabled and recurring revenue opportunities.

On December 17, 2024, Alliance acquired Handmade by Robots from Bensussen Deutsch & Associates, LLC, for $7.7 million. Handmade by Robots produces licensed vinyl figures that mimic the look of knitted or crocheted plush toys. These figures feature characters from popular franchises such as DC Comics, Ghostbusters, Harry Potter, Star Trek, and Stranger Things, and have become favorites among fans and collectors. The acquisition included inventory, tooling equipment, and a trademark associated with the product line. This addition has diversified our product offerings by adding an exclusive line to our portfolio.

On February 10, 2023, Alliance completed its business combination with Adara Acquisition Corp., which was accounted for as a reverse recapitalization with Alliance treated as the accounting acquirer (the “Merger”). The recapitalization has been retroactively reflected in all periods presented. The Company continues to recognize certain warrant and equity-related impacts from this transaction, including the outstanding contingent Class E shares and warrant liabilities.

As a result of the Merger, Alliance Entertainment became the successor to an SEC-registered company, which requires us to hire additional personnel and implement procedures and processes to address public company regulatory requirements and customary practices.

Macroeconomic Uncertainties

The Company operated throughout the fiscal year ended June 30, 2026, amid continued macroeconomic uncertainty, including inflationary pressures, evolving trade policies, changes in tariff policies, and geopolitical instability related to ongoing global conflicts. Although inflation moderated compared to prior periods, consumer discretionary spending remained uneven across certain product categories. During the fiscal year, the Company continued to experience cost pressures associated with existing and proposed tariffs on imported goods, particularly products sourced internationally, including collectibles and certain consumer products. Management actively monitored these developments and continued to manage pricing, product mix, sourcing strategies, and inventory levels to help mitigate the impact of economic and trade-related volatility. While uncertainty surrounding the broader economic environment may persist, the Company believes its diversified product portfolio, broad supplier relationships, and emphasis on higher-value and collectible product categories position it to effectively navigate these challenges. For further discussion of the potential impacts of macroeconomic conditions on our business, financial condition, and results of operations, “Risk Factors”.

Tariffs and Trade Policy

The U.S. trade policy environment has undergone significant change since early 2025. From February 4, 2025, through February 24, 2026, the U.S. government-imposed tariffs on a broad range of imported goods under IEEPA. These tariffs affected certain products distributed by the Company. The impact of IEEPA tariffs on the Company’s cost of sales during the year ended June 30, 2026, was not material.

On February 20, 2026, the U.S. Supreme Court held in Learning Resources, Inc. v. Trump that IEEPA does not authorize the President to impose tariffs, invalidating all IEEPA-based tariff orders. The President subsequently revoked the IEEPA tariff orders effective February 24, 2026. Following litigation before the U.S. Court of International Trade, CBP launched the CAPE portal on April 20, 2026, to process IEEPA refund applications. Based on its internal analysis of CBP entry records, the Company estimates it may be entitled to refunds of approximately $0.2 million in IEEPA tariffs previously paid. This amount has not been recognized in the financial statements as of June 30, 2026, due to uncertainties surrounding the refund process, including potential government appeal and administrative implementation. See Note 12 to the consolidated financial statements.

Despite the invalidation of IEEPA-based tariffs, other tariff authorities remain in effect. The administration has imposed a 10% temporary import surcharge under Section 122 of the Trade Act of 1974, effective February 24, 2026, and expired on July 24, 2026, along with continuing Section 301 tariffs on goods of Chinese origin and Section 232 tariffs on steel and aluminum products. The Company continues to evaluate the impact of the evolving trade policy environment on its sourcing, cost structure, and product distribution arrangements. While the Company’s exposure to currently effective tariffs has not been material to date, a further escalation of tariffs or the imposition of new tariff measures could adversely affect the Company’s cost of sales, gross margin, or supply chain in future periods.

Key Performance Indicators

Management monitors and analyzes key performance indicators to evaluate financial performance, including:

Net Revenue: To derive net revenue, the Company reduces total gross sales by customer returns, returns reserve, and allowances including discounts.

Cost of Revenues (excluding depreciation and amortization): Our cost of revenues reflects the total costs incurred to market and distribute products to customers. Changes in cost are impacted primarily by sales volume, product mix, product obsolescence, freight costs, and market development funds.

Margins: To analyze profitability, the Company reviews gross and net margins in dollars and as a percentage of revenue by line of business and product line.

Operating Expenses: Our operating expenses are the direct and indirect costs associated with the distribution and fulfillment of products and services. They include both distribution and fulfillment and selling, general and administrative (SG&A) expenses. The distribution and fulfillment Expenses are the payroll and operating expenses associated with the receipt, warehousing, and distribution of product.

Selling, General and Administrative Expenses: The Selling, General and Administrative Expenses are payroll and operating costs for Information Technology, Sales & Marketing, and General & Administrative functions. In addition, we include Depreciation and Amortization expenses and Transaction Costs, if applicable.

Balance Sheet Indicators: The Company views cash, product inventory, accounts payable, and working capital as key indicators of its financial position.

We consider the following metrics to be key performance indicators to evaluate our business, develop financial forecasts and make strategic decisions.

(1) EBITDA, Adjusted EBITDA, and Adjusted Net Income are financial measures not calculated in accordance with U.S. GAAP. For a reconciliation of each of these measures to net income, the most directly comparable U.S. GAAP financial measure, see “Non-GAAP Financial Measures” in this Item 7.

Alliance Entertainment Holding Corporation

Results of Income for the Year Ended June 30, 2026, Compared to Year Ended June 30, 2025

Net Revenue: Net revenues increased 8%, or $86.0 million, to $1.149 billion for the fiscal year ended June 30, 2026, compared to $1.063 billion for the prior fiscal year. The increase was driven by continued demand across several key product categories, particularly physical media, together with expanded exclusive distribution relationships and the Company’s diversified sales channels. The Company operated throughout the fiscal 2026 in a challenging macroeconomic environment characterized by elevated interest rates, uneven consumer discretionary spending, evolving trade policies, and ongoing geopolitical uncertainty. Despite these conditions, Alliance continued to leverage its position as a value-added distributor with exclusive distribution rights for nearly 200 film studios, music labels, and other entertainment content providers. The Company’s extensive product assortment, deep inventory, and broad supplier relationships enable it to effectively serve both business-to-business (“B2B”) customers and direct-to-consumer (“DTC”) customers with a wide selection of entertainment products, many of which are not broadly available through other distributors. The Company’s proprietary DTC fulfillment and technology platform, led by its DirectToU LLC subsidiary, continued to support growth across multiple e-commerce channels and represented approximately 34% of gross revenue for the fiscal year ended June 30, 2026, compared to 37% in the prior fiscal year. The year-over-year decrease as a percentage of gross revenue primarily reflects stronger relative growth in the Company’s wholesale distribution business rather than a decline in DTC operations.

Year over year, vinyl record sales increased from $340 million to $383 million (+$43 million, 13%) for the year ending June 30, 2026. This growth was driven by a 7.4% increase in sales volume and by a 4.8% increase in the average selling price. The increase was driven by higher unit sales, continued consumer demand for physical music formats, and a favorable product mix that included premium and limited-edition releases. Demand remained strong throughout the fiscal year, supported by a robust release schedule from major recording artists and continued interest from both collectors and mainstream consumers. Record Store Day 2026, along with its companion Black Friday Record Store Day event, generated strong demand for exclusive and limited-edition vinyl releases and continued to reinforce consumer interest in the vinyl format. Notable vinyl releases during the fiscal year included Taylor Swift’s The Tortured Poets Department: The Anthology on vinyl, Sabrina Carpenter’s Short n’ Sweet, Lorde’s Virgin, Billy Idol’s Dream Into It, Bruce Springsteen’s Tracks II: The Lost Albums, and other high-profile new releases and catalog reissues from major recording artists. These releases, together with continued demand for classic catalog titles and exclusive retailer editions, contributed to the Company’s vinyl sales growth. The Company’s leading vinyl distribution customers for the fiscal year ended June 30, 2026, included Walmart, Barnes & Noble, and Amazon.

Music Compact Discs (CDs) sales increased from $125 million to $156 million (+$31 million, +25%) for the year ended June 30, 2026. The increase was driven by a 17.6% increase in unit volume and a 6.6% increase in average selling price, reflecting continued consumer demand for physical music formats and a favorable product mix, supported by a robust release schedule from major recording artists, anniversary reissues, deluxe collector’s editions, and multi-disc box sets. Notable releases during the period included BTS’s ARIRANG, Morgan Wallen’s I’m the Problem, Harry Styles’ Kiss All the Time. Disco, Occasionally, and Olivia Rodrigo’s You Seem Pretty Sad for a Girl So in Love, among other high-profile new releases. These releases, together with continued demand for catalog titles and collector-oriented editions, contributed to increased unit sales and higher average selling prices across the CD category.

Physical movie sales, which include DVDs, Blu-Ray, and Ultra HD, increased from $279 million to $339 million (+$60 million, +22%) for the year ended June 30, 2026, versus the same period last year. The increase was driven primarily by a 20.8% increase in unit volume, with a 0.6% increase in average selling price providing additional support to revenue growth. Growth in physical movie sales was supported by a strong pipeline of theatrical releases, continued consumer demand for premium physical formats, including 4K Ultra HD and collectible SteelBook editions, and expanded content availability resulting from the Company’s studio relationships. During the 2026 fiscal year, the Company continued to benefit from its exclusive distribution relationship with Paramount, which expanded the Company’s portfolio of film content, and entered into a new distribution relationship with Amazon MGM Studios, further enhancing access to a broader range of new releases and catalog titles across retail and e-commerce channels. Notable releases during the fiscal year included Wicked, Moana 2, Gladiator II, Paramount’s The Running Man and Yellowstone, and other high-profile theatrical releases. In addition, continued demand for catalog films, anniversary editions, premium formats, and collector-focused releases contributed to increased consumer engagement with physical home entertainment products and supported growth across the Company’s DVD, Blu-ray, and Ultra HD categories.

Year-over-year, gaming sales decreased from $255 million to $187 million (-$68 million, -27%) for the 12 months ended June 30, 2026. The decrease was primarily driven by a 24.6% decline in average selling price and a 2.6% decrease in unit volume. The decline in average selling price was primarily attributable to changes in product mix compared to the prior year, which benefited from a greater mix of premium-priced hardware products associated with the Nintendo Switch 2 launch at the end of the last fiscal year ended June 30, 2025. During the 2026 fiscal year, the gaming category was impacted by the transition following major hardware introductions, a more limited pipeline of major software releases, and evolving consumer purchasing patterns. While demand for gaming content and accessories remained supported by the broader gaming ecosystem, sales reflected the normalization of hardware-related demand following the prior year’s console launch cycle. As a leading distributor of physical gaming products, Alliance continues to leverage its broad retail relationships, supplier network, and inventory management capabilities to support customers across the gaming category. Management continues to adjust purchasing and inventory strategies to align with product release schedules, consumer demand trends, and changing market conditions.

For the year ended June 30, 2026, consumer products revenue, which includes Collectibles and Electronics, increased from $37 million to $48 million (+$11 million, +30%) versus the prior year. Collectibles revenue totaled $32 million, up from $22 million the prior year (+$10 million, +45%). Collectibles revenue growth was driven by a 65.7% increase in average selling price, partially offset by a 13.2% decrease in unit volume. The increase in average selling price reflects a favorable shift in product mix toward higher-value collectibles, including premium figures, limited-edition products, and licensed merchandise. The Company continued to expand its collectibles portfolio following its acquisition of Handmade by Robots, adding new product offerings across established entertainment franchises and licensed properties. The collectibles category continues to represent an important component of the Company’s entertainment product portfolio, supported by consumer interest in recognizable entertainment brands and unique collectible offerings. Management continues to focus on expanding product offerings, strengthening supplier relationships, and leveraging the Company’s distribution network to support growth in this category.

Electronics revenue was $16 million, up slightly from $15 million in the prior year (+$1 million, +7%). The increase was driven by a 9.3% increase in unit volume, partially offset by a 1.7% decrease in average selling price. The decrease in average selling price primarily reflected changes in product mix and competitive pricing dynamics within the category. Electronics sales primarily consist of audio playback devices and accessories, including turntables, headphones, speakers, and related products, which are often sold as complementary products alongside the Company’s physical music and movie offerings. Growth in the category was supported by continued consumer interest in vinyl and physical media formats, which contributed to demand for playback devices and related accessories. Management continues to leverage the Company’s product assortment and distribution channels to support sales across the electronics category.

Distribution and fulfillment fee revenue increased $3.8 million, or 25.7%, to $18.6 million for the fiscal year ended June 30, 2026, compared to $14.8 million in the prior fiscal year. The increase was primarily driven by higher fulfillment and distribution activity associated with the Company’s expanded studio relationships, including its exclusive distribution partnership with Paramount and new distribution relationship with Amazon MGM Studios. These partnerships contributed to increased physical distribution and fulfillment volumes as the Company supported a broader portfolio of film releases across its retail and e-commerce channels. The increase also reflects continued demand for the Company’s value-added logistics and fulfillment services provided to customers. The remaining $17.3 million of net revenue for the fiscal year ended June 30, 2026, compared to $13.3 million in the prior fiscal year, consisted of digital download and freight revenue, net of customer allowances and the provision for estimated product returns, none of which was individually material.

Cost of Revenues: Total cost of revenues, excluding depreciation and amortization, increased from $931 million to $997 million (+$66 million or 7%) compared to the prior fiscal year. The increase was primarily attributable to higher sales volume and the corresponding increase in product costs. Gross profit increased by $19 million compared to the prior year, reflecting higher net revenues and improved product margins. Gross margin increased from 12.5% to 13.3%, an improvement of 80 basis points, for the fiscal year ended June 30, 2026, compared to the prior fiscal year. The improvement was primarily driven by stronger margins in the Company’s physical movie and collectibles categories, which benefited from an expanded portfolio of premium and exclusive content, improved product mix, and increased demand for higher-margin offerings. Gross margin also benefited from favorable returns activity and lower wholesale freight costs as a percentage of sales.

Operating Expenses: Total Operating Expenses increased 22% year over year and increased as a percentage of revenue from 9.7% to 10.9%, or 1.2 percentage points. The increase was primarily driven by a vendor transaction loss, as well as higher Distribution and Fulfilment expenses and SG&A expenses.

Vendor Transaction Loss: During the fiscal year ended June 30, 2026, the Company recorded a $7.8 million vendor transaction loss related to the write-off of a receivable associated with a historical rebate arrangement with Tastemakers. The receivable represented amounts previously accrued under a contractual vendor rebate program and was expected to be recovered through future purchase order deductions and other contractual recovery mechanisms. During the 2026 fiscal year, Tastemakers ceased operations and was no longer able to fulfill its obligations under the arrangement, resulting in the determination that the remaining receivable balance was no longer recoverable. Accordingly, the Company recorded a non-cash charge of approximately $7.8 million to write off the remaining balance. The Company does not consider this charge reflective of its ongoing operating performance, as it resulted from a specific counterparty insolvency event rather than current-period merchandising, purchasing, or distribution activities. 

Total Distribution and Fulfillment expense increased to 3.9% of net revenue for the fiscal year ended June 30, 2026, compared to 3.8% (0.1 percentage point) in the prior fiscal year. The increase was primarily attributable to higher order fulfillment activity associated with increased sales volumes, partially offset by continued operational efficiencies. Fulfillment payroll remained consistent at approximately 2.5% of net revenue despite a $2.4 million, or 9.1%, increase in payroll expense, reflecting the Company’s ability to leverage higher sales volumes while maintaining labor efficiency. During the fiscal year, the Company continued to invest in warehouse automation and operational improvements designed to enhance productivity and optimize labor resources. Average labor costs increased modestly by 1.5% year over year, while non-payroll fulfillment expenses, including shipping supplies and packaging materials, also increased. The increase in shipping supplies was primarily driven by higher sales volumes, particularly within the vinyl category, which generally requires more specialized packaging and handling than traditional bulk shipments.

Selling, General and Administrative (“SG&A”) expenses increased $10.2 million, or 18.2%, to $66.2 million for the fiscal year ended June 30, 2026, compared to $56.0 million in the prior fiscal year. As a percentage of net revenue, SG&A expenses increased to 5.8% from 5.3% in the prior fiscal year. The increase was primarily attributable to higher payroll and employee-related costs associated with supporting the Company’s continued growth, as well as increased consulting and professional service expenses related to strategic initiatives and public company operations. Management continues to review SG&A expenditures and business processes to identify opportunities to improve operational efficiency, including the ongoing evaluation and implementation of artificial intelligence tools and automation technologies to enhance workflows, streamline financial and operational processes, and support scalable growth while maintaining appropriate controls.

Operating Income: Total Operating Income decreased 9.7% year over year and decreased as a percentage of revenue from 2.8% to 2.4%, or 0.4 percentage points. The decrease was primarily attributable to the $7.8 million vendor transaction loss, partially offset by higher gross profit resulting from increased revenues and improved gross margins.

Interest Expense: Interest expense decreased $3.0 million, or 28%, from $10.6 million to $7.6 million for the fiscal year ended June 30, 2026, compared to the prior fiscal year. The decrease was primarily driven by a reduction in the average effective interest rate from 9.2% to 6.1%, reflecting the Company’s refinancing of its revolving credit facility with Bank of America and lower interest rates under the new facility. This benefit more than offset a 1.9% increase in the average revolver balance, from $77.5 million to $78.8 million.

Income Tax: For the year ended June 30, 2026, an income tax provision of $5.8 million was recorded compared to $3.6 million for the prior year. Alliance reported a pretax income of $18.8 million and $18.7 million for the years ended June 30, 2026, and 2025, respectively. The annual effective tax rate (“ETR”) for the year ending June 30, 2026 is a 25% expense and is primarily adjusted from the statutory rate of 21% by state taxes, export tax incentives and noncash immaterial prior year adjustments.

Provision for income taxes, effective tax rate and statutory federal income tax rate for the years ended June 30, 2026, and 2025 were as follows:

Non-GAAP Financial Measures: EBITDA, Adjusted EBITDA, Adjusted Net Income, and Adjusted Earnings per Diluted Share (collectively, the “Non-GAAP Financial Measures”) are supplemental measures of our performance that are not required by, or presented in accordance with, U.S. GAAP. The Non-GAAP Financial Measures are not measurements of our financial performance under U.S. GAAP and should not be considered as alternatives to net income, earnings per share or any other performance measure derived in accordance with U.S. GAAP. We define EBITDA as net income before interest expense, net, income tax expense, depreciation and amortization. We define Adjusted EBITDA as EBITDA further adjusted for non-cash charges related to equity-based compensation programs, acquisition and deal-related costs, changes in the fair value of warrants and vendor transaction loss, insurance claim recoveries, and restructuring costs and net gains and losses on the disposal of assets. We define Adjusted Net Income as net income adjusted for the impact of certain non-cash charges and other items that we do not consider in our evaluation of ongoing operating performance. These items include, among other things, non-cash charges related to equity-based compensation programs, acquisition and deal-related costs, amortization of acquisition-related intangible assets, amortization of deferred financing costs, changes in the fair value of warrants and litigation costs and settlements, regulatory assessments and insurance settlements, and the income tax expense effect of these adjustments. We define Adjusted Earnings per Diluted Share as Adjusted Net Income divided by the weighted-average shares outstanding used in the calculation of diluted earnings per share in accordance with U.S. GAAP.

We caution investors that amounts presented in accordance with our definitions of the Non-GAAP Financial Measures may not be comparable to similar measures disclosed by our competitors, because not all companies and analysts calculate the Non-GAAP Financial Measures in the same manner. We present the Non-GAAP Financial Measures because we consider them to be important supplemental measures of our performance and believe they are frequently used by securities analysts, investors, and other interested parties in the evaluation of companies in our industry. Management believes that investors’ understanding of our performance is enhanced by including these Non-GAAP Financial Measures as a reasonable basis for comparing our ongoing results of operations.

Management uses the Non-GAAP Financial Measures:

By providing these Non-GAAP Financial Measures, together with reconciliations, we believe we are enhancing investors’ understanding of our business and our results of operations, as well as assisting investors in evaluating how well we are executing our strategic initiatives. The Non-GAAP Financial Measures have limitations as analytical tools, and should not be considered in isolation, or as an alternative to, or a substitute for net income or other financial statement data presented in our consolidated financial statements included elsewhere in this Annual Report on Form 10-K as indicators of financial performance. Some of the limitations are:

Due to these limitations, Non-GAAP Financial Measures should not be considered as measures of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our U.S. GAAP results and using these non-GAAP measures only as a supplement. As noted in the tables below, the Non-GAAP Financial Measures include adjustments for non-cash charges related to equity-based compensation programs, acquisition and deal-related costs, amortization of acquisition-related intangible assets, amortization of deferred financing costs, changes in the fair value of warrants and contingent consideration, litigation costs and settlements, regulatory assessments and insurance settlements, and restructuring costs and net gains and losses on the disposal of assets. It is reasonable to expect that certain of these items will occur in future periods. However, we believe these adjustments are appropriate because the amounts recognized can vary significantly from period to period, do not directly relate to the ongoing operations of our business and complicate comparisons of our internal operating results and operating results of other companies over time. Each of the adjustments described herein and in the reconciliation tables below help management with a measure of our core operating performance over time by removing items that are not related to day-to-day operations.

The following tables reconcile the Non-GAAP Financial Measures to the most directly comparable U.S. GAAP financial performance measure, which is net income, for the years presented:

(1) Represents non-cash charges related to equity-based compensation programs, which vary from period to period depending on the timing of awards.

(2) Represents costs incurred in connection with completed and contemplated business combinations, including advisory, legal, accounting and other professional fees.

(3) Represents amortization of intangible assets acquired in business combinations. The revenue generated by those intangible assets is not excluded from the Non-GAAP Financial Measures.

(4) Represents amortization of debt issuance costs incurred in connection with our credit facility with Bank of America and the terminated White Oak Credit Facility.

(5) Represents non-cash gains and losses resulting from the remeasurement of warrant liabilities and contingent consideration to fair value at each reporting date.

(6) Represents a loss recognized on a receivable due from a vendor for rebates owed before the company went out of business.

(7) Represents legal fees, settlement amounts and other costs associated with litigation matters that we do not consider indicative of our ongoing operating performance.

(8) Represents recoveries received under insurance claims

(9) Represents the income tax effect of the above adjustments. This adjustment uses a blended federal and state statutory income tax rate of 25% for all periods presented and is applied only to those adjustments that carry an income tax consequence. Changes in the fair value of warrants and contingent consideration are not deductible for income tax purposes and accordingly have not been tax effected. 

(10) Represents total depreciation and amortization determined in accordance with U.S. GAAP, which includes amortization of acquisition-related intangible assets. Accordingly, no separate adjustment for that amortization is presented in the reconciliation of EBITDA to Adjusted EBITDA.

(11) Represents restructuring costs.

(12) Represents net gains and losses on the disposal of property and equipment.

(13) State Tax refund for abandoned property

LIQUIDITY AND CAPITAL RESOURCES

Liquidity: On October 1, 2025, Alliance Entertainment Holding Corporation entered into a Loan and Security Agreement with Bank of America, N.A. establishing a $120 million senior secured revolving credit facility (the “Revolving Credit Facility”), replacing the Company’s previous asset-based credit facility with White Oak Commercial Finance, LLC (the “Prior Credit Facility”). The Revolving Credit Facility provides enhanced borrowing capacity and greater financial flexibility to support the Company’s working capital requirements and ongoing operating activities. In addition, the Company has continued to implement strategic initiatives focused on reducing operating expenses and optimizing its product mix through the sale of higher-margin products. Based on the Company’s financial performance for the year ended June 30, 2026, together with available borrowing capacity under the Revolving Credit Facility, cash on hand, cash flows generated from operations, and existing working capital resources, management believes the Company has sufficient liquidity to fund its operations, meet its financial obligations, and support its strategic objectives for at least the next twelve months from the date these consolidated financial statements are issued.

Our primary sources of liquidity are cash on hand, cash provided by operating activities, and borrowings under our revolving credit facility. As of June 30, 2026, the Company had $0.8 million of cash on hand and $74 million outstanding under the Revolving Credit Facility. As of June 30, 2025, the Company had $1.2 million of cash on hand and $57 million outstanding under the Prior Credit Facility. Higher outstanding borrowings primarily reflect the Company’s working capital requirements, including inventory investments to support sales growth and ongoing operations. The Revolving Credit Facility provides increased borrowing capacity and financial flexibility compared to the Prior Credit Facility, with availability under the facility of approximately $46 million as of June 30, 2026.

The Company currently intends to continue relying primarily on its borrowing capacity under the Current Credit Facility, as well as any renewal or replacement of such facility, to fund working capital and other operational requirements. The availability of additional cash proceeds from the potential exercise of outstanding Warrants is contingent upon the market price of the Company’s Class A common stock exceeding the Warrant exercise price of $11.50 per share. Given that the market price of the Class A common stock was $5.84 as of June 30, 2026, the Company does not currently expect Warrants to be exercised unless and until the market price exceeds the exercise price. Although the Company does not currently have any definitive plans to do so, it may seek to raise additional capital through the issuance of equity securities in the future, depending on market conditions, strategic opportunities and liquidity needs.

In addition, we may lower the exercise price of the Warrants in accordance with the Warrant Agreement to induce the holders to exercise such Warrants. We may effect such reduction in exercise price without the consent of such warrant holders and such reduction would decrease the maximum amount of cash proceeds we would receive upon the exercise in full of the Warrants for cash. Further, the holders of the Private Warrants and the Underwriter Warrants may exercise such Warrants on a cashless basis at any time and the holders of the Public Warrants may exercise such Warrants on a cashless basis at any time an effective registration statement is not available for the issuance of shares of Class A common stock upon such exercise. Accordingly, we would not receive any proceeds from a cashless exercise of Warrants.

Cash Flow: The following table summarizes our net cash provided by or used on operating activities, investing activities and financing activities for the periods indicated and should be read in conjunction with our consolidated financial statements for the year ended June 30, 2026, and 2025.

For the year ended June 30, 2026, the Company used $1.7 million of cash in operating activities compared to $26.8 million of cash generated in the prior year, primarily driven by changes in working capital. Net income decreased to $13.1 million from $15.1 million in the prior year, while non-cash adjustments increased, including higher amortization of deferred financing costs and higher non-cash lease expense associated with finance leases. The increase in deferred financing costs was primarily related to the Company’s transition to a new Bank of America revolving credit facility, including the write-off of remaining deferred financing costs associated with the prior White Oak facility. Working capital increased to $62.4 million as of June 30, 2026, compared to $45.4 million as of June 30, 2025, reflecting higher investments in inventory and trade receivables to support sales growth and anticipated customer demand. Inventory increased by $23.8 million compared to a $4.7 million increase in the prior year, and trade receivables increased by $17.5 million compared to a $6.1 million increase in the prior year, primarily due to higher sales activity and timing of collections. These uses of cash were partially offset by an increase in accounts payable of $15.7 million compared to an increase of $22.1 million in the prior year, reflecting the timing of inventory purchases and payments. Overall, the change in operating cash flow reflects the Company’s investment in working capital to support growth initiatives, partially offset by vendor financing and operating performance.

Cash used in investing activities was $2.0 million for the year ended June 30, 2026, compared to $8.1 million used during the prior year. Cash used during the current year primarily reflects $1.1 million of capital expenditures related to facility improvements and warehouse automation, as well as $1.2 million of cash paid in connection with the Endstate acquisition completed on December 31, 2025, partially offset by nominal proceeds from asset disposals and other investing activities. Cash used in the prior year was significantly higher and was primarily driven by $7.6 million paid for the acquisition of Handmade by Robots, with minimal capital expenditures during that period. The year-over-year decrease in investing cash outflows primarily reflects lower acquisition-related spending during the 2026 fiscal year compared to the prior year.