Purple Innovation, Inc.

Previous wording

We caution and advise readers that these statements are only predictions and are subject to risks, uncertainties and assumptions that are difficult to predict, including those included in the “Risk Factors” section of this Quarterly Report and in our Annual Report on Form 10-K filed with the SEC on March 14, 2025. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements and investors are cautioned not to place undue reliance on any such statements. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law.

Current wording

We caution and advise readers that these statements are only predictions and are subject to risks, uncertainties and assumptions that are difficult to predict, including those included in the “Risk Factors” section of this Quarterly Report and in our Annual Report on Form 10-K filed with the SEC on March 14, 2025 and our Quarterly Report on Form 10-Q filed with the SEC on May 6, 2025. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements and investors are cautioned not to place undue reliance on any such statements. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law.

Previous wording

On May 2, 2025, we entered into a Second Amendment to Master Retailer Agreement (the “MRA Amendment”) with Mattress Firm, Inc. (“Mattress Firm”), a business unit of Somnigroup International, Inc. (“SGI”), which provides that SGI, through its Mattress Firm stores, will expand its inventory of our products across its national store network from approximately 5,000 mattress slots to a minimum of 12,000 mattress slots. We expect that this increased retail presence in Mattress Firm stores will generate approximately $70 million in incremental net revenue beginning in 2026. Also on May 2, 2025, we entered into an Amended and Restated Master Vendor Supply and Services Agreement (the “Sherwood Agreement” and together with the MRA Amendment the “SGI Agreements”) with Tempur Sherwood, LLC, a subsidiary of Tempur Sealy. The Sherwood Agreement provides that Tempur Sherwood, LLC will have the exclusive right to assemble certain product lines that the Company sells to Mattress Firm.

Current wording

On May 2, 2025, we entered into the Second Amendment to Master Retailer Agreement with Mattress Firm, a business unit of SGI, which provides that SGI, through its Mattress Firm stores, will expand its inventory of our products across its national store network from approximately 5,000 mattress slots to a minimum of 12,000 mattress slots. We expect that this increased retail presence in Mattress Firm stores will generate approximately $70 million in annualized incremental net revenue beginning in 2026. This rollout is well underway and we expect to be in their full store network during the third quarter 2025. In partnership with Mattress Firm, we are developing an exclusive Luxe product for Mattress Firm, scheduled to launch early next year, which will increase our total slot count to the contractual minimum. Also on May 2, 2025, we entered into the Sherwood Agreement with Tempur Sherwood, LLC, a subsidiary of Tempur Sealy. The Sherwood Agreement provides that Tempur Sherwood, LLC will have the exclusive right to assemble certain product lines that we sell to Mattress Firm.

Previous wording

In August 2024, we initiated the Restructuring Plan to strategically realign our operational focus to achieve efficiencies in our operations that are expected to improve profitability and provide for reinvesting in technology and marketing initiatives. The Restructuring Plan includes the permanent closure of both Utah manufacturing facilities to consolidate mattress production in our Georgia plant, and a headcount reduction at our Utah headquarters to drive additional operating efficiencies. Closure of the two Utah manufacturing facilities is projected to be completed in the second quarter of 2025 while consolidation into the Georgia facility was finalized in December 2024. The reduction in workforce at our Utah headquarters was completed in August 2024. During the three months ended March 31, 2025, we recognized $2.9 million in costs relating to the Restructuring Plan, which included $1.9 million of moving and transition related costs, $0.6 million related to disposal of long-lived assets or equipment in progress that will not be put in service, $0.2 million in employee related costs, and $0.2 million in accelerated depreciation. We expect to record additional restructuring and other related charges in the amount of $3.0 million in the second quarter of 2025. These charges include certain estimates that are provisional and include management judgments and assumptions that could change materially as we complete the execution of our plans. Actual results may differ from these estimates, and the completion of our plan could result in additional restructuring, impairment or other related charges not reflected.

Current wording

In August 2024, we initiated the Restructuring Plan to strategically realign our operational focus to achieve efficiencies in our operations that are expected to improve profitability and provide for reinvesting in technology and marketing initiatives. The Restructuring Plan includes the permanent closure of both Utah manufacturing facilities to consolidate mattress production in our Georgia plant, and a headcount reduction at our Utah headquarters to drive additional operating efficiencies. Closure of the two Utah manufacturing facilities was completed in the second quarter of 2025 while consolidation into the Georgia facility was finalized in December 2024. The reduction in workforce at our Utah headquarters was completed in August 2024. During the three months ended June 30, 2025, we recognized $4.2 million in costs relating to the Restructuring Plan, which included $2.9 million of impairment on leases and leasehold improvements, $0.6 million of moving and transition related costs, $0.2 million related to disposal of equipment in progress that will not be put in service, $0.2 million in employee related costs, and $0.2 million in accelerated depreciation. We expect to record additional restructuring and other related charges in the amount of $0.9 million in the third quarter of 2025. These charges include certain estimates that are provisional and include management judgments and assumptions that could change materially as we complete the execution of our plans. Actual results may differ from these estimates, and the completion of our plan could result in additional restructuring, impairment or other related charges not reflected.

Previous wording

In connection with the 2025 Amendment, we issued to the 2025 Lenders the 2025 Warrants to purchase 6.2 million shares of our Class A common stock. Each 2025 Warrant entitles the registered holder to purchase one share of our Class A common stock at a price of $1.50 per share, subject to adjustment with a floor of $0.6979 and expire on March 12, 2025. The 2025 Warrants contain certain provisions that do not meet the criteria for equity classification and therefore were recorded as liabilities. The liability for the 2025 Warrants was recorded at a fair value of $5.4 million on the date of issuance with the offset included in debt issuance costs. This liability is subsequently re-measured to fair value at each reporting date or exercise date with changes in the fair value included in earnings. During the three months ended March 31, 2025, we incurred a loss of $0.2 million due to the increase in the fair value of the 2025 Warrants outstanding at March 31, 2025.

Current wording

In connection with the 2025 Amendment, we issued to the 2025 Lenders the 2025 Warrants to purchase 6.2 million shares of our Class A common stock. Each 2025 Warrant entitles the registered holder to purchase one share of our Class A common stock at a price of $1.50 per share, subject to adjustment with a floor of $0.6979 and expire on March 12, 2035. The 2025 Warrants contain certain provisions that do not meet the criteria for equity classification and therefore were recorded as liabilities. The liability for the 2025 Warrants was recorded at a fair value of $5.4 million on the date of issuance with the offset included in debt issuance costs.

Previous wording

In connection with the Second 2025 Amendment, we issued to the 2025 Lenders the 2025 Additional Warrants to purchase 6.6 million shares of our Class A common stock. Each 2025 Additional Warrant entitles the registered holder to purchase one share of our Class A common stock at a price of $1.50 per share, subject to adjustment with a floor of $0.6979 and expire on March 12, 2035.

Current wording

In connection with the Second 2025 Amendment, we issued to the 2025 Lenders the 2025 Additional Warrants to purchase 6.6 million shares of our Class A common stock. Each 2025 Additional Warrant entitles the registered holder to purchase one share of our Class A common stock at a price of $1.50 per share, subject to adjustment with a floor of $0.6979 and expire on March 12, 2035. The liability for the 2025 Additional Warrants was recorded at a fair value of $5.4 million on the date of issuance with the offset included in debt issuance costs.

Previous wording

In connection with the SGI Agreement, we issued to SGI, warrants to purchase 8.0 million shares of our Class A common stock at a strike price of $1.50 per share (the “SGI Warrants”). The SGI Warrants include full-ratchet anti-dilution protections, subject to a floor of $0.6979 with respect to adjustments to the exercise price and expire on March 12, 2035.

Current wording

In connection with the SGI Agreement, we issued to SGI, warrants to purchase 8.0 million shares of our Class A common stock at a strike price of $1.50 per share (the “SGI Warrants”). The SGI Warrants include full-ratchet anti-dilution protections, subject to a floor of $0.6979 with respect to adjustments to the exercise price and expire on March 12, 2035. The liability for the 2025 Additional Warrants was recorded at a fair value of $6.5 million on the date of issuance with the offset recorded as an asset to be amortized as a reduction of revenue over the life of the SGI Agreement.

Previous wording

In connection with the issuance of the 2025 Additional Warrants, on May 2, 2025, we entered into a Third Amended and Restated Registration Rights Agreement (the “2025 Amended Registration Rights Agreement”) with the 2025 Holders, providing for the registration under the Securities Act of the 2025 Additional Warrants, the shares issuable upon the exercise of the 2025 Additional Warrants, other warrants held by the 2025 Holders (and shares issuable upon exercise thereof) and the Class A common stock held by the 2025 Holders as of such date (the “2025 Additional Registrable Securities”), subject to customary terms and conditions.

Current wording

In connection with the issuance of the 2025 Additional Warrants, on May 2, 2025, we entered into a Third Amended and Restated Registration Rights Agreement (the “Third Amended Registration Rights Agreement”) with the 2025 Holders, providing for the registration under the Securities Act of the 2025 Additional Warrants, the shares issuable upon the exercise of the 2025 Additional Warrants, other warrants held by the 2025 Holders (and shares issuable upon exercise thereof) and the Class A common stock held by the 2025 Holders as of such date (the “2025 Additional Registrable Securities”), subject to customary terms and conditions.

Previous wording

In connection with the issuance of the SGI Warrants, on May 2, 2025, we entered into a Registration Rights Agreement (the “SGI Registration Rights Agreement” and collectively with the 2025 Registration Rights Agreement and 2025 Amended Registration Rights Agreement, the “Registration Rights Agreements”) with SGI, providing for the registration under the Securities Act of the SGI Warrants, the shares issuable upon the exercise of the SGI Warrants, and the Class A common stock held by SGI as of such date (the “SGI Registrable Securities” and collectively with the 2025 Registrable Securities and 2025 Additional Registrable Securities, the “Registrable Securities”), subject to customary terms and conditions.

Current wording

In connection with the issuance of the SGI Warrants, on May 2, 2025, we entered into a Registration Rights Agreement (the “SGI Registration Rights Agreement” and collectively with the 2025 Registration Rights Agreement and the Third Amended Registration Rights Agreement, the “Registration Rights Agreements”) with SGI, providing for the registration under the Securities Act of the SGI Warrants, the shares issuable upon the exercise of the SGI Warrants, and the Class A common stock held by SGI as of such date (the “SGI Registrable Securities” and collectively with the 2025 Registrable Securities and 2025 Additional Registrable Securities, the “Registrable Securities”), subject to customary terms and conditions.

Previous wording

We regularly engage in dialogue with market participants regarding potential business combinations, partnerships and other strategic alternatives. Based on certain recent preliminary inquiries, the Board has formed a special committee of independent directors and we have engaged a financial advisor to support them in evaluating any indications of interest and exploring other potential strategic alternatives. If we are unsuccessful in engaging in a favorable strategic alternative, then our ability to grow our business and compete with larger, including combined, competitors may be adversely affected.

Current wording

We have engaged with multiple parties about a broad range of opportunities to maximize shareholder value, including, but not limited to, a merger, sale or other strategic or financial transaction. The Board has formed a special committee of independent directors and we have engaged a financial advisor to support them in evaluating a range of options and exploring other potential strategic alternatives. If we are unsuccessful in engaging in a favorable strategic alternative, then our ability to grow our business and compete with larger, including combined, competitors may be adversely affected.

Previous wording

We continue to closely monitor the potential impact of recent United States tariff policies. Importantly, all of our mattresses are manufactured in the United States, and about 15% of our cost of goods is tied to products sourced from overseas. This limited exposure is primarily concentrated in the textile side of the business, which includes sheets and mattress covers, but also includes the import of bases and foundations. Based on current tariff rates, we estimate the potential annual cost impact to be approximately $10 million. The tariff landscape remains fluid, and we are actively evaluating sourcing alternatives and pricing strategies on a case-by-case basis, which we believe will mitigate at least a portion of expected costs increases. We believe that our vertically integrated model and strong vendor relationships give us the flexibility to remain agile and responsive to changes in tariff policies, and we believe that we will be able to mitigate these impacts through a combination of supply chain repositioning, vendor collaborations, and selective pricing actions.

Current wording

We continue to actively manage the impact of recent United States tariff policies. Importantly, all of our mattresses are manufactured in the United States, and about 15% of our cost of goods is tied to products sourced from overseas. This limited exposure is primarily concentrated in the textile side of the business, which includes sheets and mattress covers, but also includes the import of bases and foundations. While future changes in tariffs are difficult to predict, we currently estimate the total cost exposure in 2025 to be less than our previous $10 million estimate, due to a combination of our mitigation efforts and changes to the underlying tariff rates. We have begun shifting sourcing outside of China, and in July, we implemented price increases on select product, including two mattress models. The tariff landscape remains fluid, and we are actively evaluating sourcing alternatives and pricing strategies on a case-by-case basis. We believe that our vertically integrated model and strong vendor relationships give us the flexibility to remain agile and responsive to changes in tariff policies, and we believe that we will be able to mitigate these impacts through a combination of supply chain repositioning, vendor collaborations, and selective pricing actions.

Previous wording

Operating expenses decreased $9.3 million, or 14.4% to $55.5 million for the three months ended March 31, 2025 compared to $64.9 million for the three months ended March 31, 2024. This decrease was driven by $4.8 million decrease in employee related expenses, $3.8 million decrease in legal and consulting fees and $0.8 million decrease in all other operating expenses. These decreases are the result of our restructuring efforts, the in-sourcing of certain functions in marketing and finance and other cost reduction efforts.

Current wording

Operating expenses decreased $11.6 million, or 18.2% to $51.9 million for the three months ended June 30, 2025, compared to $63.5 million for the three months ended June 30, 2024. This decrease was driven by a $8.2 million reduction in advertising spend, $4.7 million decrease in employee related expenses, $2.2 million decrease in research and development project write-offs and $0.7 million decrease in all other operating expenses, partially offset by an increase of $4.2 million in restructuring related costs. These decreases are the result of restructuring efforts, the in-sourcing of certain functions in marketing and finance and other cost reduction efforts.

Previous wording

Other expense, net decreased $22.4 million, or 82.8% to $4.6 million for the three months ended March 31, 2025 compared to $27.1 million for the three months ended March 31, 2024. The other expense, net in the first quarter of 2025 consists of interest expense of $4.8 million, partially offset by $0.1 in other income and gain on change in fair value of warrants. The other expense, net in the first quarter of 2024 consists of $23.6 million loss on change in fair value of warrants, $4.5 million in interest expense, $3.4 million loss on extinguishment of debt, partially offset by $4.4 million in other income. Net loss attributable to Purple Inc. was $19.1 million for the three months ended March 31, 2025 compared to a net loss of $50.2 million for the three months ended March 31, 2024. The $31.1 million decrease in net loss was primarily due to increased gross margin and reduced operating expenses as we are realizing the benefits from our Restructuring Plan, supply chain initiatives, operational efficiency improvements and other cost reduction efforts throughout the Company and the decrease in loss from change in fair value of the warrants.

Current wording

Other income (expense), net decreased $17.7 million, or 121.1% to other income (expense), net of $(3.1) million for the three months ended June 30, 2025, compared to other income (expense), net of $14.6 million for the three months ended June 30, 2024. The other income (expense), net in the second quarter of 2025 consists of interest expense of $7.5 million, partially offset by a $4.4 million gain on the change in fair value of warrants. The other income (expense), net in the second quarter of 2024 consists of $18.7 million gain on the change in fair value of warrants and all other income, net of $0.1 million, partially offset by $4.2 million in interest expense.

Previous wording

We believe, given the Restructuring Plan and our new grid innovation, that we are well positioned to grow our business in this challenging market. We are focused on the following three key initiatives to drive sustainable and profitable market share:

Current wording

We believe we are well positioned to grow our business in this challenging market given our new grid innovation, evolved messaging strategy, the Restructuring Plan and other cost saving initiatives. We believe we are entering the second half with significant momentum that we believe will continue building through the end of the year, with third quarter to date revenues up in the mid-single digits percentage range versus the same period last year. We are seeing validation of our brand and innovation strategy through the success of Rejuvenate 2.0, which has sold more than twice as many units as our Rejuvenate 1.0 in the prior year through our direct channels, the growing momentum behind our Mattress Firm expansion, which is rolling out across the country, the deepening partnership with Costco as we prepare to launch in 450 clubs for their year-end furniture show and the strong interest from other traditional and non-traditional partners. Our Path to Premium Sleep strategy remains focused on the following three key initiatives to drive sustainable and profitable market share:

Previous wording

Marketing and sales expense decreased $4.8 million, or 11.7%, to $36.6 million for the three months ended March 31, 2025 compared to $41.5 million for the three months ended March 31, 2024. This decrease primarily consisted of a $2.2 million decrease in employee related costs due to headcount reductions, $1.3 million decrease in wholesale marketing and sales expenses, a $0.9 million decrease in showrooms marketing and sales expenses and $0.4 million decrease in all other marketing and sales expenses. Advertising expense remained consistent between the two period at $14.6 million and $14.5 million for the three months ended March 31, 2025 and 2024, respectively.

Current wording

Marketing and sales expense decreased $10.8 million, or 26.0%, to $30.6 million for the three months ended June 30, 2025, compared to $41.4 million for the three months ended June 30, 2024. This decrease primarily consisted of $8.2 million in reduced advertising spend, and a $2.7 million decrease in employee related costs due to headcount reductions, partially offset by a $0.1 million increase in all other marketing and sales expense.

Previous wording

General and administrative expense decreased $5.2 million, or 26.6%, to $14.5 million for the three months ended March 31, 2025 compared to $19.7 million for the three months ended March 31, 2024. This decrease was due to a $2.3 million decrease in employee related costs due to headcount reductions, $1.7 million decrease in consulting fees, $0.8 million reduction in legal fees and $0.4 million decrease in all other general and administrative expenses.

Current wording

General and administrative expense decreased $3.1 million, or 17.3%, to $15.0 million for the three months ended June 30, 2025, compared to $18.1 million for the three months ended June 30, 2024. This decrease was due to a $1.7 million decrease in employee related costs from headcount reductions, a $0.7 million reduction in professional services mainly from certain consulting services that have been discontinued, and $0.8 million reductions in all other general and administrative expenses.

Previous wording

In August 2024, we initiated a Restructuring Plan to permanently close our two Utah manufacturing facilities and consolidate mattress production in our Georgia plant. The Restructuring Plan also provided for a headcount reduction at our Utah headquarters to drive additional operating efficiencies. The $2.0 million of restructuring and impairment charges recorded during the first quarter of 2025 included $1.2 million of moving and transition related costs, $0.6 million related to disposal of long-lived assets or equipment in progress that will not be put in service, and $0.2 million in employee related costs. We expect to record additional restructuring and other related charges in the amount of $1.6 million in the second quarter of 2025 related to continued moving and transition costs.

Current wording

In August 2024, we initiated a Restructuring Plan to permanently close our two Utah manufacturing facilities and consolidate mattress production in our Georgia plant. The Restructuring Plan also provided for a headcount reduction at our Utah headquarters to drive additional operating efficiencies. The $4.1 million of restructuring and impairment charges recorded in operating expense during the second quarter of 2025 included $2.9 million of impairment related to leases and leasehold improvements, $0.6 million of moving and transition related costs, $0.2 million related to disposal of equipment in progress that will not be put in service, $0.2 million in employee related costs, and $0.2 million in accelerated depreciation. We expect to record additional restructuring and other related charges in the amount of $0.9 million in the third quarter of 2025.

Previous wording

Operating loss decreased $8.7 million, or 37.4%, to $14.5 million, for the three months ended March 31, 2025 compared to $23.1 million for the three months ended March 31, 2024. This decrease in our operating loss is the result of the benefits realized through our Restructuring Plan, supply chain initiatives, operational efficiency improvements and other cost reduction efforts throughout the Company.

Current wording

Operating loss decreased $0.3 million, or 2.1%, to $14.2 million, for the three months ended June 30, 2025, compared to $14.5 million for the three months ended June 30, 2024. This decrease in our operating loss is the result of improved advertising efficiency, the benefits realized through our Restructuring Plan, supply chain initiatives, and other cost reduction efforts throughout the Company, partially offset by increased costs due to tariffs and ramp up costs tied to our manufacturing facility consolidation and the Rejuvenate 2.0 launch.

Previous wording

Interest expense totaled $4.8 million for the three months ended March 31, 2025 compared to $4.5 million for the three months ended March 31, 2024. This increase was primarily due to additional interest incurred on a higher principal balance on the Related Party Loan as the Company elected the paid-in-kind option on monthly interest over the past 12 months.

Current wording

Interest expense totaled $7.5 million for the three months ended June 30, 2025, compared to $4.2 million for the three months ended June 30, 2024. This increase was primarily due to additional interest incurred on a higher principal balance on the Related Party Loan as the Company elected the paid-in-kind option on monthly interest over the past 12 months and increased the loan funding by $39.0 million.

Previous wording

In March 2025 and January 2024, in connection with the loans, we issued 6.2 million and 20.0 million warrants, respectively, to the various lenders. These Warrants contained certain provisions that did not meet the criteria for equity classification and therefore are recorded as liabilities with a re-measurement of fair value at each reporting date. For the three months ended March 31, 2025, we recognized a negligible gain related to the net decrease in fair value of the warrant liability comprised of a decrease in fair value of $0.3 million for the warrants issued in 2024 partially offset by an increase in fair value of $0.2 million from the March 2025 issuance date for the warrants issued in March 2025. For the three months ended March 31, 2024, we recognized a $23.6 million loss related to the increase in the fair value of the warrants from the January 2024 issuance date.

Current wording

We have 40.8 million warrants outstanding that contain certain provisions that do not meet the criteria for equity classification and therefore are recorded as liabilities with a re-measurement of fair value at each reporting date. For the three months ended June 30, 2025, we recognized a $4.4 million gain related to the decrease in fair value of the warrant liabilities as of June 30, 2025, as compared with the previous measurement date. The decrease is due mainly to the change in the probability and timing of a fundamental transaction. For the three months ended June 30, 2024, we recognized a $ 18.7 million gain related to the decrease in the fair value of the warrants from the January 2024 issuance date.

Previous wording

We had a de minimis income tax expense for the three months ended March 31, 2025 compared to $0.1 million income tax expense for the three months ended March 31, 2024. The income tax expense amounts in both the first quarter of 2025 and 2024 were related to various state taxes.

Current wording

We had a $0.1 million income tax expense for the three months ended June 30, 2025, compared to $0.1 million income tax expense for the three months ended June 30, 2024. The income tax expense amounts in both the second quarter of 2025 and 2024 were related to various state taxes.

Previous wording

Net revenues decreased $15.9 million, or 13.2%, to $104.2 million for the three months ended March 31, 2025 compared to $120.0 million for the three months ended March 31, 2024. This decrease was primarily driven by the continuing industry-wide demand softness for home-related products. From a sales channel perspective, e-commerce net revenues decreased $4.1 million, or 8.2%, showrooms net revenues increased $1.2 million, or 7.4%, and wholesale net revenues decreased $13.0 million, or 24.2%.

Current wording

Net revenues decreased $31.0 million, or 12.9%, to $209.3 million for the six months ended June 30, 2025, compared to $240.3 million for the six months ended June 30, 2024. This decrease was primarily driven by the industry-wide demand softness for home-related products in the first quarter 2025, the impact of longer delivery times of Rejuvenate 2.0, reductions in Wholesale door count in 2024 and softness in e-commerce. From a sales channel perspective, e-commerce net revenues decreased $9.6 million, or 9.8%, showrooms net revenues decreased $1.2 million, or 3.4%, and wholesale net revenues decreased $20.2 million, or 18.8%.

Previous wording

We calculate net income or loss attributable to noncontrolling interests on a quarterly basis using their weighted average ownership percentage. Net loss attributed to noncontrolling interests was negligible for the three months ended March 31, 2025 and $0.1 million for the three months ended March 31, 2024.

Current wording

We calculate net income or loss attributable to noncontrolling interests on a quarterly basis using their weighted average ownership percentage. Net loss attributed to noncontrolling interests was $0.1 million for the six months ended June 30, 2025, and $0.1 million for the six months ended June 30, 2024.

Previous wording

Our principal sources of funds are cash flows from operations and cash and cash equivalents on hand, supplemented with borrowings made pursuant to various loan agreements. Principal uses of funds consist of capital expenditures, working capital needs and operating lease payment obligations. In accordance with the terms of our various agreements, we have elected to pay interest in kind on our loans to reduce cash obligations. Our working capital needs depend largely upon the timing of cash receipts from product sales, payments to vendors and others, changes in inventories, and operating lease payment obligations. Our cash and cash equivalents and working capital positions were $21.6 million and $29.8 million, respectively, as of March 31, 2025 compared to $29.0 million and $25.4 million, respectively, as of December 31, 2024. Cash used for capital expenditures totaled $2.1 million and $3.1 million for the three months ended March 31, 2025 and 2024, respectively. Our capital expenditures in the first quarter of 2025 have primarily consisted of additional investments made in our manufacturing operations and showrooms facilities. Additional details about our loan agreements are described above under “Recent Developments in our Business – Debt Financing.”

Current wording

Our principal sources of funds are cash flows from operations and cash and cash equivalents on hand, supplemented with borrowings made pursuant to various loan agreements. Principal uses of funds consist of capital expenditures, working capital needs and operating lease payment obligations. In accordance with the terms of our various agreements, we have elected to pay interest in kind on our loans to reduce cash obligations. Our working capital needs depend largely upon the timing of cash receipts from product sales, payments to vendors and others, changes in inventories, and operating lease payment obligations. Our cash and cash equivalents and working capital positions were $34.2 million and $41.5 million, respectively, as of June 30, 2025, compared to $29.0 million and $25.4 million, respectively, as of December 31, 2024. Cash used for capital expenditures totaled $5.1 million and $5.3 million for the six months ended June 30, 2025, and 2024, respectively. Our capital expenditures in the first half of 2025 have primarily consisted of additional investments made in our manufacturing operations. Additional details about our loan agreements are described above under “Recent Developments in our Business – Debt Financing.”

Previous wording

Our financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets and liabilities and commitments in the normal course of business. In connection with our preparation of our unaudited condensed consolidated financial statements for the three months ended March 31, 2025, we conducted an evaluation as to whether there were conditions and events, considered in the aggregate, which raised substantial doubt as to our ability to continue as a going concern within one year after the date of the issuance of such financial statements. We hadcash and cash equivalents of approximately $21.6 million and an accumulated deficit of $593.0 million at March 31, 2025, a net loss of $19.1 million and net cash used in operating and investing activities of $25.2 million for the three months ended March 31, 2025. We entered into the 2025 Amendment and the Second 2025 Amendment, pursuant to which we received an aggregate of $39.0 million in additional term loan proceeds from the 2025 Lenders.

Current wording

Our financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets and liabilities and commitments in the normal course of business. In connection with our preparation of our unaudited condensed consolidated financial statements for the three and six months ended June 30, 2025, we conducted an evaluation as to whether there were conditions and events, considered in the aggregate, which raised substantial doubt as to our ability to continue as a going concern within one year after the date of the issuance of such financial statements. We hadcash and cash equivalents of approximately $34.2 million and an accumulated deficit of $610.3 million at June 30, 2025, a net loss of $36.5 million and net cash used in operating and investing activities of $32.2 million for the six months ended June 30, 2025. We entered into the 2025 Amendment and the Second 2025 Amendment, pursuant to which we received an aggregate of $39.0 million in additional term loan proceeds from the 2025 Lenders.

Previous wording

We have also taken a number of other actions to increase cash flow. In August 2024, we implemented the Restructuring Plan to consolidate manufacturing operations to create efficiencies and cost savings. We have realized and plan to continue to realize direct material cost savings through supply chain initiatives and supplier diversification efforts. We have taken additional cost-saving initiatives in the first quarter of 2025 to maintain liquidity to support our operations and strategies. Additionally, we entered into an agreement with Mattress Firm, a business unit of SGI to expand its inventory of our products across SGI’s national store network from approximately 5,000 mattress slots to a minimum of 12,000 mattress slots.

Current wording

We have also taken a number of other actions to increase cash flow. In August 2024, we implemented the Restructuring Plan to consolidate manufacturing operations to create efficiencies and cost savings. We have realized and plan to continue to realize direct material cost savings through supply chain initiatives and supplier diversification efforts. We have taken additional cost-saving initiatives in the first half of 2025 to maintain liquidity to support our operations and strategies. Additionally, we entered into an agreement with Mattress Firm, a business unit of SGI to expand its inventory of our products across SGI’s national store network from approximately 5,000 mattress slots to a minimum of 12,000 mattress slots.

Previous wording

Although we currently expect our sources of capital to be sufficient to meet our near-term liquidity needs, there can be no assurance that such sources will be sufficient to satisfy our liquidity requirements in the future. If we cannot generate or obtain needed funds, we might be forced to make substantial reductions in our operating and capital expenses or pursue restructuring plans, which could adversely affect our business operations and ability to execute our current business strategy.

Current wording

Although we currently expect our sources of capital to be sufficient to meet our near-term liquidity needs, there can be no assurance that such sources will be sufficient to satisfy our liquidity requirements in the future, including the related party loan due December 31, 2026 (see Note 10 —Debt). If we cannot generate or obtain needed funds, we might be forced to make substantial reductions in our operating and capital expenses or pursue restructuring plans, which could adversely affect our business operations and ability to execute our current business strategy.

Previous wording

Cash Flows for the Three Months Ended March 31, 2025 Compared to the Three Months Ended March 31, 2024

Current wording

Cash Flows for the Six Months Ended June 30, 2025, Compared to the Six Months Ended June 30, 2024

Previous wording

The following summarizes our cash flows for the three months ended March 31, 2025 and 2024 as reported in our unaudited condensed consolidated statements of cash flows (in thousands):

Current wording

The following summarizes our cash flows for the six months ended June 30, 2025, and 2024 as reported in our unaudited condensed consolidated statements of cash flows (in thousands):

Previous wording

Cash used in operating activities was $23.1 million and $16.8 million for the three months ended March 31, 2025 and 2024, respectively. Significant components of the year-over-year change in cash used in operating activities included a $11.0 million increase in cash used in the changes in operating assets, and liabilities partially offset by a $31.1 million decrease in net loss and a $26.4 million decrease of net noncash adjustments.

Current wording

Cash used in operating activities was $27.1 million and $25.7 million for the six months ended June 30, 2025, and 2024, respectively. Significant components of the $1.4 million year-over-year increase in in cash used in operating activities included a $7.6 million increase in cash used from the changes in operating assets and liabilities and $7.5 million increase in cash used due to a decrease in the net noncash adjustments, partially offset by a $13.7 million decrease in net loss.

Previous wording

Cash used in investing activities reflected net capital expenditures of $2.1 million and $3.1 million for the three months ended March 31, 2025 and 2024, respectively. Capital expenditures in the first three months of 2025 primarily consisted of additional investments made in our manufacturing operations.

Current wording

Cash used in investing activities reflected net capital expenditures of $5.1 million and $5.3 million for the six months ended June 30, 2025, and 2024, respectively. Capital expenditures in the first six months of 2025 primarily consisted of additional investments made in our manufacturing operations.

Previous wording

Cash provided by financing activities was $17.8 million during the three months ended March 31, 2025 compared to $27.5 million during the three months ended March 31, 2024. Financing activities during the first three months of 2025 included $19.0 million of proceeds from the additional financing offset in part by $1.2 million in payments for debt issuance costs. Financing activities during the first three months of 2024 included $61.0 million of proceeds received from the Related Party Loan under the Amended and Restated Credit Agreement, offset in part by a $25.0 million payment to pay off the term loans from the 2023 credit agreement, a $5.0 million payment to pay off the ABL Loans from the 2023 credit agreement, and payments of $3.5 million for debt issuance costs associated with entering into the Amended and Restated Credit Agreement.

Current wording

Cash provided by financing activities was $37.4 million during the six months ended June 30, 2025, compared to $27.5 million during the six months ended June 30, 2024. Financing activities during the first six months of 2025 included $39.0 million of proceeds from the additional financing offset in part by $1.6 million in payments for debt issuance costs. Financing activities during the first six months of 2024 included $61.0 million of proceeds received from the Related Party Loan under the Amended and Restated Credit Agreement, offset in part by a $25.0 million payment to pay off the term loans from the 2023 credit agreement, a $5.0 million payment to pay off the ABL Loans from the 2023 credit agreement, and payments of $3.5 million for debt issuance costs associated with entering into the Amended and Restated Credit Agreement.