ALLIANCE ENTERTAINMENT HOLDING CORP

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 isNXP’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 launchedAlliance 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.