Aether Holdings, Inc.

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item. However, we are voluntarily providing risk factor updates as described in this Item 1A.

For our current risk factors relating to our operations, other than as set forth below, see the section entitled “Risk Factors” contained in our Annual Report.

Our management is currently involved in litigation proceedings with one of our former directors who has brought claims against us for breach of contract and promissory fraud. If we were to receive an adverse ruling, it could materially and adversely affect our reputation, cause us to incur significant judgment or settlement costs in cash or equity securities, and adversely affect our stock price.

On March 19, 2026, David Mandel, a former member of our board of directors, filed a complaint against us, Nicolas Lin, our Chief Executive Officer and Chairman, and certain Doe defendants in the Superior Court of the State of California, County of Los Angeles, Case No. 26STCV08877. On April 24, 2026, we removed the action to the United States District Court for the Central District of California, Case No. 2:26-cv-04423. The complaint alleges breach of oral contract and promissory fraud based on allegations that we and Mr. Lin offered Mr. Mandel the position of our Chief Executive Officer for a three-year term at an annual salary of $220,000 and an equity interest equal to 7.5% of our equity, vesting in tranches over a three-year period. Mr. Mandel seeks damages in excess of $11.46 million, punitive damages and such other relief as the court may deem appropriate. We believe the claims are without merit and intend to defend the action vigorously.

Defending against Mr. Mandel’s legal action could cause us to incur significant expenses and consume large amounts of our management’s time and attention. If Mr. Mandel were to prevail, an adverse ruling on such a claim could materially and adversely affect our reputation, cause us to incur significant judgment or settlement costs in cash or equity securities and could adversely affect our stock price. See the section above entitled “Item 1. Legal Proceedings – Mandel v. Aether Holdings, Inc., et. al.” and the sections in our Annual Report on Form 10-K filed with the SEC on December 17, 2025, entitled “Business - Recent Developments - Dispute with Former Director” and “Business – Recent Developments – Removal of Director” for additional information regarding the legal action, dispute and Mr. Mandel’s removal.

Covenants and other provisions in the Note Purchase Agreement with Streeterville Capital, LLC pursuant to which we issued a Secured Promissory Note may restrict our business and operations, and if we do not effectively manage our covenants, our financial condition and results of operations could be adversely affected. In addition, our operations may not provide sufficient cash to meet the repayment obligations of our debt incurred under the Note Purchase Agreement and the Secured Promissory Note.

Pursuant to the Note Purchase Agreement, we granted to Streeterville Capital, LLC a security interest in substantially all of our assets, including our intellectual property. If an event of default occurs under the Note Purchase Agreement, Streeterville Capital, LLC may foreclose on its security interest and liquidate some or all of these assets, which would harm our business, financial condition and results of operations.

In the event of a default in connection with our bankruptcy, insolvency, liquidation, or reorganization, Streeterville Capital, LLC would have a prior right to substantially all of our assets to the exclusion of our general unsecured creditors. Only after satisfying the claims of Streeterville Capital, LLC and any unsecured creditors would any amount be available for our equity holders. The pledge of these assets and other restrictions imposed in the Note Purchase Agreement may limit our flexibility in raising capital for other purposes. Because substantially all of our assets are pledged to secure the Note, our ability to incur additional indebtedness or to sell or dispose of assets to raise capital may be impaired, which could have an adverse effect on our financial flexibility.

In addition, if we are unable to comply with certain covenants in the Note Purchase Agreement, we may be limited in our business activities and access to credit or may default under the Note Purchase Agreement. Provisions in the Note and Note Purchase Agreement impose restrictions or require prior approval on our ability, and the ability of our subsidiaries to, among other things:

The Note Purchase Agreement also contains certain other covenants, which we may not be able to comply with in the future. Our failure to comply with these covenants may result in the declaration of an event of default, which, if not cured or waived, may result in the acceleration of our repayment obligations under the Note. If the maturity of our indebtedness is accelerated, we may not have sufficient funds available for repayment or we may not have the ability to borrow or obtain sufficient funds to replace the accelerated indebtedness on terms acceptable to us or at all. Our failure to repay our obligations under the Note would result in Streeterville Capital, LLC foreclosing on all or a portion of our assets, which could force us to curtail or cease our operations.