6. Intangible Assets

Customer Relationships

During the three-month period ended August 2, 2026, our customer relationships related to our bedding segment were amortized on a straight-line basis over a useful life of 17 years. During the three-month period ended August 3, 2025, our customer relationships related to our bedding segment and Read were amortized on a straight-line basis over useful lives of 17 and nine years, respectively.

As of February 1, 2026 (third quarter of fiscal 2026), management performed a qualitative assessment of Read's customer relationships, as certain indicators of impairment existed, and accordingly, we believed it was more-likely-than-not the fair value of Read's customer relationships were less than its carrying amount. Management's conclusion was based on a significant decline in net sales during the first nine months of fiscal 2026 that was more than anticipated. Read's net sales during the first nine months

of fiscal 2026 totaled $4.8 million, a decrease of $4.9 million, or 50.8%, compared with net sales of $9.7 million during the first nine months of fiscal 2025. In addition, the declines in Read's net sales and profitability during the first nine months of fiscal 2026 were also attributable to the closure of Read's facility located in Knoxville, Tennessee, and the transition of certain production activities to our manufacturing facility located in Stokesdale, North Carolina, as well as strategically sourcing production and materials with long-standing supply partners. Based on this uncertainty, we recorded an asset impairment charge totaling $291,000 which represented the entire carrying value of Read's customer relationships. This charge was classified within restructuring credit within our fiscal 2026 Consolidated Statement of Net Loss.

The gross carrying amount of our customer relationships was $868,000, $3.1 million, and $868,000 as of August 2, 2026, August 3, 2025, and May 3, 2026, respectively. Accumulated amortization for our customer relationships was $677,000, $2.5 million, and $664,000 as of August 2, 2026, August 3, 2025, and May 3, 2026, respectively.

The remaining amortization expense for each of the next four fiscal years is as follows: FY 2027 - $38,000; FY 2028 - $51,000; FY 2029 - $51,000; and FY 2030 - $51,000.

The weighted average amortization period for our customer relationships was 3.8 years as of August 2, 2026.

Non-Compete Agreement

Our non-compete agreement is associated with a prior acquisition by our bedding segment and is amortized on a straight-line basis over the 15-year life of the agreement.

The gross carrying amount of our non-compete agreement was $2.0 million as of August 2, 2026, August 3, 2025, and May 3, 2026. Accumulated amortization for our non-compete agreement was $1.9 million as of August 2, 2026, August 3, 2025, and May 3, 2026.

The remaining amortization expense for each of the next two fiscal years is as follows: FY 2027 - $57,000; and FY 2028 - $75,000.

The weighted average amortization period for the non-compete agreement was 1.8 years as of August 2, 2026.

Impairment of Definite Lived Assets - Bedding Segment

As of August 2, 2026, management reviewed the long-lived assets associated with our bedding segment, which consisted of property, plant, and equipment and definite-lived intangible assets (collectively known as the "Bedding Asset Group"), for impairment, as events and changes in circumstances occurred that indicated the carrying amount of the Bedding Asset Group may not be recoverable. This segment has experienced a recent history of significant cumulative operating losses due to unfavorable macroeconomic conditions in the bedding and home furnishings industries.

Based on the above evidence, we were required to determine the recoverability of the Bedding Asset Group, which is classified as held and used, by comparing the carrying amount of the Bedding Asset Group to the sum of the future undiscounted cash flows expected to result from its use and eventual disposition. If the carrying amount of an asset group exceeds its estimated future cash flows, an impairment charge is recognized for the excess of the carrying amount over the fair value of the asset group. The carrying amount of the Bedding Asset Group totaled $19.4 million, which represents property, plant, and equipment of $19.0 million, customer relationships of $191,000, and a non-compete agreement of $132,000. The total carrying amount of the Bedding Asset Group did not exceed the sum of its expected future undiscounted cash flows from its use and disposition. As a result, we determined there was no impairment associated with the Bedding Asset Group as of August 2, 2026.