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What changed in Purple Innovation, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Purple Innovation, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+487 added−753 removedSource: 10-K (2025-03-14) vs 10-K (2024-03-12)

Top changes in Purple Innovation, Inc.'s 2024 10-K

487 paragraphs added · 753 removed · 250 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

59 edited+22 added−32 removed73 unchanged
Biggest changeKrausz attended Cornell University as an undergraduate and received her Masters of Business Administration degree from Dartmouth College. John J. Roddy IV has served as Chief People Officer of the Company since October 2021. Mr. Roddy brings to the Company over 20 years of experience in culture transformation, talent development, organization design and change leadership.
Biggest changeRoddy brings to the Company over 20 years of experience in culture transformation, talent development, organization design and change leadership. Prior to joining the Company, Mr. Roddy served as the chief people officer for VASA Fitness, a fitness club operator, from 2018 to October 2021.
We believe will be achieved by selectively recruiting outstanding talent, tailoring development plans for employees, implementing an accelerated leadership development program for promising individuals, and building cross-functional career maps. Improve organizational performance We attempt to drive efficiency, effectiveness, and business success through strategic people initiatives.
We believe this will be achieved by selectively recruiting outstanding talent, tailoring development plans for employees, implementing an accelerated leadership development program for promising individuals, and building cross-functional career maps. Improve organizational performance We attempt to drive efficiency, effectiveness, and business success through strategic people initiatives.
In our wholesale channel, we sell most of our products through select national and regional retailers as well as a variety of independent retail partners throughout the United States and Canada.
In our wholesale channel, we sell most of our products through select national and regional retailers as well as a variety of independent retail partners throughout the United States.
Purple currently sells four types of seat cushions and one back cushion, all in varying sizes and shapes to meet the needs of our customers. 6 Technology Technology is key to our unique position within the sleep products industry. The introduction of our proprietary Hyper-Elastic Polymer material was the first major innovation in the consumer mattress category in decades.
Purple currently sells four types of seat cushions and one back cushion, all in varying sizes and shapes to meet the needs of our customers. 5 Technology Technology is key to our unique position within the sleep products industry. The introduction of our proprietary Hyper-Elastic Polymer material was the first major innovation in the consumer mattress category in decades.
Furthermore, we have in-house fabrication capabilities enabling us to design, manufacture, install and maintain new equipment as well as optimize the performance and efficiency of our existing machinery based on real-time insights gained from our vertically integrated operations. Marketing We have developed a brand that resonates with consumers.
We have in-house engineering and fabrication capabilities enabling us to design, manufacture, install and maintain new equipment as well as optimize the performance and efficiency of our existing machinery based on real-time insights gained from our vertically integrated operations. Marketing We have developed a brand that resonates with consumers.
Direct-to-Consumer Channel Our e-commerce distribution channel is a critical hub for consumer education and consumer engagement, as well as conversion. We have benefitted from the rapid growth of the direct-to-consumer channel in the sleep product industry in addition to our differentiated product offering and unique marketing campaigns.
Direct-to-Consumer Channel Our e-commerce distribution channel is a critical hub for consumer education and consumer engagement, as well as conversion. We have benefited from the rapid growth of the direct-to-consumer channel in the sleep product industry in addition to our differentiated product offering and unique marketing campaigns.
In 2024, Purple’s human resources team is focusing on four pillars that drive our people strategy: (i) acquire, retain, and develop great people; (ii) improve organizational performance; (iii) deliver competitive and meaningful pay and benefits; and (iv) celebrate our people. 10 Acquire, retain, and develop great people We attempt to strategically acquire, keep and cultivate a talented, motivated, and high-caliber workforce.
In 2025, Purple’s human resources team is focusing on four pillars that drive our people strategy: (i) acquire, retain, and develop great people; (ii) improve organizational performance; (iii) deliver competitive and meaningful pay and benefits; and (iv) celebrate our people. Acquire, retain, and develop great people We attempt to strategically acquire, keep and cultivate a talented, motivated, and high-caliber workforce.
McDermott received a Bachelor of Arts degree in English and a Juris Doctor degree from Rutgers University along with a certificate in Accelerated Management from Yale School of Management. 12 Eric S. Haynor has served as the Chief Operating Officer of the Company since June 2022. Prior to joining the company, Mr.
McDermott-Spikes received a Bachelor of Arts degree in English and a Juris Doctor degree from Rutgers University along with a certificate in Accelerated Management from Yale University School of Management. 10 Eric S. Haynor has served as the Chief Operating Officer of the Company since June 2022. Prior to joining the company, Mr.
Whether it’s getting a better night’s rest or elevating every day life, we design and manufacture innovative, differentiated products that put our customers’ comfort first. Sleep Products The sleep products category encompasses a variety of products including mattresses, pillows, bases, foundations, sheets, mattress protectors, blankets and duvets.
Whether it’s getting a better night’s rest or elevating everyday life, we design and manufacture innovative, differentiated products that put our customers’ comfort first. Sleep Products The sleep products category encompasses a variety of products including mattresses, pillows, bases, foundations, sheets, mattress protectors, blankets and duvets.
Roddy was the senior vice president of human resources for Luxottica Group. Prior to joining Luxottica Group, he was the vice president of human resources for Starbucks Corporation from 2004 to 2012. Mr. Roddy holds a Master’s degree from Columbia University in Organizational Psychology and a Bachelor’s degree in Organizational Behavior from Brigham Young University – Hawaii. 13
Prior to joining Luxottica Group, he was the vice president of human resources for Starbucks Corporation from 2004 to 2012. Mr. Roddy holds a Master’s degree from Columbia University in Organizational Psychology and a Bachelor’s degree in Organizational Behavior from Brigham Young University – Hawaii. 11
We now sell mattresses through Ashley Furniture, Big Sandy, City Furniture, Denver Mattress, HOM Furniture, Living Spaces, Mathis Brothers, Mattress Firm, Mattress Warehouse, Raymour & Flanigan and Rooms To Go, among others. We typically have four to five mattress models on the floor.
We now sell mattresses through Ashley Furniture, Big Sandy, City Furniture, Costco, Denver Mattress, HOM Furniture, Living Spaces, Mathis Brothers, Mattress Firm, Mattress Warehouse and Raymour & Flanigan, among others. We typically have four to five mattress models on the floor.
Meaningful innovation in sleep products has remained stagnant and limited over the last 150 years. Coil spring mattresses and memory foam, two of the primary materials underpinning mattress technology today, were invented in the 1860’s and 1990’s. Latex, water and air mattresses followed, emerging in the latter part of the 20 th century.
Meaningful innovation in sleep products has remained stagnant and limited over the last 150 years. Coil spring mattresses and memory foam, two of the primary materials underpinning mattress technology today, were invented in the 1860s and 1990s. Latex, water and air mattresses followed, emerging in the latter part of the 20 th century.
Proprietary Technologies The Purple innovation team, through their scientific journey to get to the root causes of pressure sores, designed the Hyper-Elastic Polymer material and other patented and proprietary comfort technologies in order to improve the lives of “every body.” Each different cushioning product line requires unique molding techniques. Our Hyper-Elastic Polymer material is non-toxic and hypoallergenic.
Proprietary Technologies The Purple innovation team, through their scientific journey to get to the root causes of pressure sores, designed the Hyper-Elastic Polymer material and other patented and proprietary comfort technologies in order to improve the lives of “every body.” Each different cushioning product line requires unique molding techniques.
We believe our differentiated products (including differences across price, comfort, benefit, marketing strategies, manufacturing capabilities, branding and technology) position us to continue to drive our growth.
We believe our differentiated products (including differences across price, comfort, benefit, marketing strategies, manufacturing capabilities, branding and technology) position us to drive long-term growth.
Our people initiatives are strategically crafted to enhance the professional growth and overall satisfaction of our employees, with the overarching goal of making Purple the best place they’ve ever worked. As of March 12, 2024, we had approximately 1,700 employees engaged in manufacturing, research and development, general corporate functions, wholesale, e-commerce, and Purple showrooms.
Our people initiatives are strategically crafted to enhance the professional growth and overall satisfaction of our employees, with the overarching goal of making Purple the best place they’ve ever worked. As of March 7, 2025, we had approximately 1,200 employees engaged in manufacturing, research and development, general corporate functions, wholesale, e-commerce, and Purple showrooms.
We operate 60 Purple showrooms across the United States where consumers can experience our brand, learn and engage with our technology and purchase our products. Over time, we plan to continue expanding our showroom footprint across the United States. Wholesale Channel We sell our assortment of products through brick-and-mortar and online wholesale partners.
We operate 58 Purple showrooms across the United States where consumers can experience our brand, learn and engage with our technology and purchase our products. Over time, we plan to strategically expand our showroom footprint across the United States. Wholesale Channel We sell our assortment of products through brick-and-mortar and online wholesale partners.
We are also subject to laws such as the Toxic Substances Control Act, the Resource Conservation and Recovery Act, the Clean Air Act, the Clean Water Act, the Safe Drinking Water Act and the Comprehensive Environmental Response, Compensation and Liability Act, and related state and local statutes and regulations.
For example, we are subject to the Toxic Substances Control Act, the Resource Conservation and Recovery Act, the Clean Air Act, the Clean Water Act, the Safe Drinking Water Act and the Comprehensive Environmental Response, Compensation and Liability Act, and related state and local statutes and regulations.
Our Purple, No Pressure and Hyper-Elastic Polymer trademarks are also registered and have applications pending for various classes of goods in numerous foreign jurisdictions, some of which include Australia, Canada, China, Europe, United Kingdom, Japan and Korea. We also have several common law trademarks. Many of the common law marks have registrations pending with the USPTO and other international jurisdictions.
Our Purple, No Pressure, Gelflex, the color purple, and Hyper-Elastic Polymer trademarks are also registered and have applications pending for various classes of goods in numerous foreign jurisdictions, some of which include Australia, Canada, China, Europe, United Kingdom, Japan and Korea. We also have several common law trademarks.
We also back up the quality and durability of our pillows with a 100-night trial and a one-year warranty. 5 ● Sheets— We sell two types of sheets and pillowcases: Softstretch and Complete Comfort. Made from stretchy and breathable bamboo-based Viscose, our SoftStretch sheets are designed to maximize the functionality of our mattresses and pillows.
We also back up the quality and durability of our pillows with a 100-night trial and a one-year warranty . ● Sheets— Made from stretchy and breathable bamboo-based Viscose, our Purple SoftStretch sheets are designed to maximize the functionality of our mattresses and pillows.
We intend to continue to develop and introduce new comfort technologies and products. Our vertical integration is a key differentiator that enhances the effectiveness of our research and development capabilities. By gaining real-time feedback, we can integrate these insights into our manufacturing process, digital marketing, products and equipment.
Our vertical integration is a key differentiator that enhances the effectiveness of our research and development capabilities. By gaining real-time feedback, we can integrate these insights into our manufacturing process, digital marketing, products and equipment.
While we are slowing the opening of new showrooms in the short term, we anticipate continued expansion of our showrooms in the future. 1 Industry and Competition Our portfolio of products is driven by our commitment to innovating real comfort solutions that meaningfully help people sleep, feel and live better.
We continue to strategically open new showrooms and anticipate continued expansion of our showrooms in the future. 1 Industry and Competition Our portfolio of products is driven by our commitment to innovating real comfort solutions that meaningfully help people sleep, feel and live better.
In addition, the acquisition allowed us to immediately expand into the luxury mattress segment. As a result, Purple launched three collections in the second quarter of 2023: Essentials (including the New Day, The Purple Mattress, and The Purple Plus), Premium (including Restore, RestorePlus, and RestorePremier) and Luxe (including Rejuvenate, RejuvenatePlus and RejuvenatePremier).
In addition, the acquisition allowed us to immediately expand into the luxury mattress segment. As a result, Purple launched two collections in the second quarter of 2023, giving us three collection offerings: Essentials (including the Purple Flex, The Purple Mattress, and The Purple Plus), Restore (including Restore, RestorePlus, and RestorePremier) and Rejuvenate (including Rejuvenate, RejuvenatePlus and RejuvenatePremier).
Roddy IV 56 Chief People Officer Executive Officers Robert T. DeMartini has served as Chief Executive Officer since January 2022. Prior to joining the Company, Mr. DeMartini, served as president and chief executive officer of USA Cycling, Inc., the official U.S.
Hutchings 58 Chief Innovation Officer Jeffery S. Kerby 56 Chief of Owned Retail Officer John J. Roddy IV 57 Chief People Officer Executive Officers Robert T. DeMartini has served as Chief Executive Officer since January 2022. Prior to joining the Company, Mr. DeMartini, served as president and chief executive officer of USA Cycling, Inc., the official U.S.
These suppliers may be interchanged in order to maintain quality, cost and delivery expectations. 8 Environmental and Governmental Regulation We are subject to numerous federal, state, local and foreign consumer protection and other laws and regulations applicable to the sleep product industry.
These suppliers may be interchanged in order to maintain quality, cost and delivery expectations. 7 Environmental and Governmental Regulation We are subject to numerous federal, state, local and foreign consumer protection, retail, environmental, health, safety, import/export, marketing, e-commerce, privacy, and other laws and regulations applicable to the sleep product industry.
The Purple Premium and Purple Premium Plus smart bases have a wide range of functions, such as adjustable head and foot positions, zero-gravity preset for a near weightless feel, a “sitting” preset, under-bed lighting, adjustable legs and a wireless remote with in-app control. Our Purple Bed Frame is easy to ship and assemble, with no tools required.
The Purple Adjustable Base, the Purple Premium Smart Base, and the Purple Premium Plus Smart base have a wide range of functions, such as adjustable head and foot positions, zero-gravity preset for a near weightless feel, a “sitting” preset, under-bed lighting, adjustable legs and a wireless remote with in-app control.
Our marketing strategy enables us to market our full product suite to customers, generate frequent interactions online and drive traffic to all channels offering our products. Our knowledge of and engagement with consumers across digital and brick and mortar retail channels is advantageous and increasing.
We have an experienced marketing team, providing efficient customer acquisition and brand demand development. Our marketing strategy enables us to market our full product suite to customers, generate frequent interactions online and drive traffic to all channels offering our products. Our knowledge of and engagement with consumers across digital and brick and mortar retail channels is advantageous and increasing.
These arrangements help to minimize delivery times and provide white glove service in addition to parcel services. We outsource and resell other products, including adjustable bases, platform bases, sheets, mattress protectors, blankets and duvets. These products unique to Purple are either designed in-house or in partnership. We have relationships with multiple suppliers for our outsourced products and components.
We outsource and resell other products, including adjustable bases, platform bases, sheets, mattress protectors, blankets and duvets. These products unique to Purple are either designed in-house or in partnership. We have relationships with multiple suppliers for our outsourced products and components.
Our Products Our current product portfolio is as follows: ● Mattresses —Our mattresses utilize the unique benefits of our patented GelFlex Grid technology creating a one-of-a-kind sleep solution that regulates body temperature, keeping you sleeping cooler and soft enough to cradle pressure points while also providing support through localized buckling columns.
These savings will enable us to reinvest in innovation and marketing to drive growth. 4 Our Products Our current product portfolio is as follows: ● Mattresses— Our mattresses utilize the unique benefits of our patented Gelflex Grid technology creating a one-of-a-kind sleep solution that regulates body temperature, allowing you to sleep cooler through the night and soft enough to cradle pressure points while also providing support through localized buckling columns.
We launched our elevated brand positioning in 2023 with the launch of our new products and we believe our premium brand position will allow us to increase our market share of the premium mattress category going forward. 7 Our Sales Channels We sell our products via our DTC, including Purple.com, online marketplaces (e.g., Amazon), our customer contact center, our Purple showrooms and through wholesale retailers.
We launched our elevated brand positioning in 2023 with the launch of our new products and we believe our premium brand position will allow us to increase our market share of the premium mattress category going forward. 6 Our Sales Channels We sell our products via our DTC channel, which includes Purple.com (our direct-to-consumer e-commerce), Purple showrooms, our customer contact center and online marketplaces, and our wholesale channel through retail brick-and-mortar and online wholesale partners.
In May 2022, we appointed our first ever chief innovation officer. In 2023, we launched our three new premium mattress collections including our new line of luxury mattresses. We have an extensive history of innovation that is core to our culture and key to our continued success. Our inventions have culminated over years of persistent research and development.
In 2023, we launched our three new premium mattress collections including our new line of luxury mattresses. We have an extensive history of innovation that is core to our culture and key to our continued success. Our inventions have culminated over years of persistent research and development. We intend to continue to develop and introduce new comfort technologies and products.
For the year ended December 31, 2023, our DTC sales, which includes online and Purple showrooms, accounted for 58.1% of our net revenues, as compared to 57.7% for 2022 and 65.4% for 2021 and wholesale accounted for 41.9% of net revenues for 2023, as compared to 42.3% for 2022 and 34.6% for 2021.
For the year ended December 31, 2024, our DTC sales accounted for 58.1% of our net revenues, as compared to 58.1% for 2023 and 57.7% for 2022, and wholesale sales accounted for 41.9% of net revenues, as compared to 41.9% for 2023 and 42.3% for 2022.
Item 1. Business Introduction Our mission is to help people feel and live better through innovative comfort solutions. We began as a digitally-native vertical brand founded on comfort product innovation with premium offerings, and have since expanded into brick & mortar stores as a true omni-channel brand.
Item 1. Business Introduction Our mission is to deliver the greatest sleep ever invented. We began as a digitally-native vertical brand founded on comfort product innovation with premium offerings, and have since expanded into brick & mortar stores as a true omni-channel brand.
This proprietary material is also durable and will not develop body impressions (compression set) from use over time. It is elastic and can stretch up to 15 times its original size and return without losing its shape. It sleeps and sits temperature-neutral and has good ventilation to inhibit moisture build-up. Our Hyper-Elastic Polymer material is both soft and supportive.
Our Hyper-Elastic Polymer material is durable, elastic and can stretch up to 15 times its original size and return without losing its shape. It sleeps and sits temperature-neutral and has good ventilation to inhibit moisture build-up. Our Hyper-Elastic Polymer material is both soft and supportive.
As of December 31, 2023 we operate 60 Company locations across the United States as compared to 55 Company locations at the end of 2022 and 28 Company locations at the end of 2021.
As of December 31, 2024 we operate 58 Purple showrooms across the United States as compared to 60 Purple showrooms at the end of 2023 and 55 Purple showrooms at the end of 2022.
Intellectual Property We rely on patent and trademark protection laws to protect our intellectual property and maintain our competitive position in the marketplace. We hold various domestic and foreign patents, patent applications, trademarks and trademark applications regarding certain elements of the design, manufacturing and function of our products. We also maintain protections over proprietary trade secrets.
We hold various domestic and foreign patents, patent applications, trademarks and trademark applications regarding certain elements of the design, manufacturing and function of our products. We also maintain protections over proprietary trade secrets.
Kerby grew from director to associate vice president, head of stores for Bath and Body Works. Mr. Kerby holds a Bachelor of Science degree from Washington State University’s School of Communications. Keira M. Krausz has served as Chief Marketing Officer since November 2022. Prior to joining the Company, Ms.
Kerby grew from director to associate vice president, head of stores for Bath and Body Works. Mr. Kerby holds a Bachelor of Science degree from Washington State University’s School of Communications. John J. Roddy IV has served as Chief People Officer of the Company since October 2021. Mr.
With our new premium product launch in 2023, we now have three collections that come in a variety of feels and price points to appeal to a wide range of consumers with high satisfaction and delivering best sleep. ● Pillows — We currently sell eight pillow models with different designs to suit different needs.
With our premium mattress collections, the Restore Collection and the Rejuvenate Collection, launched in 2023, we now have three collections that come in a variety of feels and price points to appeal to a wide range of consumers with high satisfaction and delivering best sleep. ● Pillows— We currently sell eight pillow models, all designed to deliver various sleep preferences and needs.
In general, direct-to-consumer mattress companies offer convenience, flexible shipping and returns, and low prices, while leveraging third-party manufacturing and distribution. Materials used by online mattress retailers include layers of foam cushioning that are assembled, compressed and folded into a box for distribution. This market is highly fragmented, commoditized and competitive, with customer purchase decisions based primarily on price.
Materials used by online mattress retailers include layers of foam cushioning that are assembled, compressed and folded into a box for distribution. This market is highly fragmented, commoditized and competitive, with customer purchase decisions based primarily on price.
Our issued United States patents that are significant to our operations are expected to expire at various dates up to 2041. 9 We have several trademarks registered with the U.S. Patent and Trademark Office (USPTO).
Our issued United States patents that are significant to our operations are expected to expire at various dates up to 2042. We have several trademarks registered with the U.S. Patent and Trademark Office (USPTO). Applications are pending for registration of additional trademarks and some of these listed trademarks for additional classes of goods both in the United States and internationally.
We believe our combination of patents and intellectual property, proprietary and patented manufacturing equipment, production processes and decades of acquired knowledge create an advantage over our competitors who rely on commoditized materials, such as foam and outsourced manufacturing.
We believe our combination of patents and intellectual property, proprietary and patented manufacturing equipment, production processes and decades of acquired knowledge create an advantage over our competitors who rely on commoditized materials, such as foam. In addition to developing differentiated products and technologies, we have built a brand that we believe has high customer engagement and avid brand advocates.
Our mattress protector is stretchy and breathable. Our protector is also stain-resistant and machine-washable, making it easy to clean. ● Bases — Our recently added new line of smart adjustable bases have been designed to pair with our new mattresses for the ideal Purple sleep experience.
It is also stain-resistant and machine-washable, making it easy to clean. All features help keep your mattress looking and feeling like-new. ● Bases— Our full line-up of smart adjustable bases has been designed to pair with our premium mattresses for the ideal Purple sleep system experience.
Prior to joining the Company, Mr. Roddy served as the chief people officer for VASA Fitness, a fitness club operator, from 2018 to October 2021. Prior to that he was the chief human resources officer for SeaWorld Parks and Entertainment, a theme park and entertainment company, from 2016 to 2018. From 2012 to 2016, Mr.
Prior to that he was the chief human resources officer for SeaWorld Parks and Entertainment, a theme park and entertainment company, from 2016 to 2018. From 2012 to 2016, Mr. Roddy was the senior vice president of human resources for Luxottica Group.
Tricia S. McDermott joined Purple in October 2023 as Chief Legal Officer. Ms. McDermott is a skilled executive, attorney and business leader who brings more than 20 years of deep expertise in global licensing, intellectual property and corporate governance in multi-national retail and manufacturing environments. Prior to joining the Company, from February 2021 to October 2023, Ms.
Tricia S. McDermott-Spikes joined Purple in October 2023 and serves as Chief Legal Officer and Corporate Secretary responsible for strategic oversight of the legal organization, corporate governance, compliance intellectual property, licensing, litigation, insurance and government affairs. Ms. McDermott-Spikes is a skilled executive, attorney and business leader who brings more than 25 years of expertise in global retail and manufacturing environments.
Our mattress products are also subject to fire-retardant standards developed by the State of California, U.S. Consumer Product Safety Commission and other jurisdictions where we sell these products.
Our mattress products are subject to fire-retardant standards developed by the State of California, U.S. Consumer Product Safety Commission and other jurisdictions where we sell these products. We have made and will continue to make capital and other expenditures necessary to help us comply with these laws and regulations. These expenditures have been immaterial to our financial results.
The process of molding our Hyper-Elastic Polymer material using our molding machinery is proprietary, patent-protected and complex, requiring specific knowledge and expertise to successfully execute manufacturing. We have vertically integrated with our own machine shop with mechanics and engineers at each of our factories to maintain our machines and other equipment.
The process of molding our Hyper-Elastic Polymer material using our molding machinery is proprietary, patent-protected and complex, requiring specific knowledge and expertise to successfully execute manufacturing.
Accordingly, investors should monitor this channel, in addition to following our press releases, SEC filings and public conference calls and webcasts. The contents of our website shall not be deemed to be incorporated herein by reference. Information About Our Executive Officers As of the date of this report, our executive officers are as follows: Name Age Title Robert T.
We also use our Investor Relations website, investors.purple.com, as a channel of distribution of additional Purple information that may be deemed material. Accordingly, investors should monitor this channel, in addition to following our press releases, SEC filings and public conference calls and webcasts. The contents of our website shall not be deemed to be incorporated herein by reference.
McDermott served as the chief legal & risk officer and secretary at Shoe Show, Inc. Previously, from December 2011 to February 2021, Ms. McDermott was with Perry Ellis International, Inc., where she served as general counsel and secretary from November 2017 to February 2021. Ms.
Prior to joining the Company, from February 2021 to October 2023, Ms. McDermott-Spikes served as the chief legal & risk officer and secretary at Shoe Show, Inc. Previously, from December 2011 to February 2021, Ms.
Solely for convenience, we may refer to our trademarks in this Annual Report without the ™ or ® symbol, but such references are not intended to indicate that we will not assert, to the fullest extent under applicable law, our rights to our trademarks.
Solely for convenience, we may refer to our trademarks in this Annual Report without the ™ or ® symbol, but such references are not intended to indicate that we will not assert, to the fullest extent under applicable law, our rights to our trademarks. 8 In addition, we maintain copyrights, many registered, to past and present versions of purple.com, onpurple.com, equapressure.com, wondergel.com, marketing content, blogs, logos, graphics, videos and other marketing and promotional materials promoting our products.
We make available, free of charge on our Investor Relations website, investors.purple.com, all of our reports filed with or furnished to the Securities and Exchange Commission (“SEC”). We also use our Investor Relations website, investors.purple.com, as a channel of distribution of additional Purple information that may be deemed material.
We make available, free of charge on our Investor Relations website, investors.purple.com, all of our reports filed with or furnished to the Securities and Exchange Commission (“SEC”). The SEC also maintains an Internet website that contains reports and other information regarding issuers that file electronically with the SEC located at http://www.sec.gov.
Constructed from lightweight steel, the Purple Platform Bed provides optimal support and prevents the mattress from sagging. ● Seat Cushions — The evolution of our portfolio of seat cushions has resulted from decades of in-house manufacturing experience including development of proprietary machines and trade secrets, extending the benefits of our GelFlex Grid technology.
Our Purple Metal Platform, with its low-profile design, features a sturdy steel frame and extra slats to ensure silent, shake-free support for the lifetime of your mattress. ● Seat Cushions— The evolution of our portfolio of seat cushions has resulted from decades of in-house manufacturing experience including development of proprietary machines and trade secrets, extending the benefits of our Gelflex Grid technology.
Celebrate our people We attempt to continue to focus on maintaining a culture of recognition where we actively acknowledge and honor the achievements, contributions, and milestones of our people. Through thoughtful and authentic celebration, we not only create a culture of gratitude, but we will also foster a sense of belonging and motivation, ultimately strengthening our team cohesion and morale.
Celebrate our people We attempt to continue to focus on maintaining a culture of recognition where we actively acknowledge and honor the achievements, contributions, and milestones of our people.
We believe our factories provide ample room to accommodate our future growth and expansion plans for the near term. We have a number of contract manufacturers who assemble mattresses and have established a network of third-party logistics providers to help with order fulfillment across the United States.
We have a number of contract manufacturers who assemble mattresses and have established a network of third-party logistics providers to help with order fulfillment across the United States. These arrangements help to minimize delivery times and provide white glove service in addition to parcel services.
Originally designed for use in hospital beds and wheelchairs, we adapted this unique pressure-relieving material for our mattresses and other cushion products. We market and sell our products through direct-to-consumer e-commerce and Purple showrooms (collectively “DTC”) and wholesale partners. Our core competencies in design, development and manufacturing are the foundation of our business.
We market and sell our products via our direct-to-consumer channel, which includes Purple.com (our direct-to-consumer e-commerce), Purple showrooms, our customer contact center and online marketplaces (collectively “DTC”), and our wholesale channel through retail brick-and-mortar and online wholesale partners. Our core competencies in design, development and manufacturing are the foundation of our business.
We developed our own technology to enable customers to experience the full performance potential of our mattress (or any other mattress). We also sell traditional cotton-based Complete Comfort sheets designed to have cushion enhancing two-way stretch.
We developed our own technology to enable customers to experience the full performance potential of our unique Gelflex Grid mattress (or any other mattress).
In order to facilitate further innovation and development, we opened a facility in August 2023 that serves as our new innovation center and replaces the older and remote facility we previously had in Alpine, Utah. This new facility is located in Draper, Utah, close to our headquarters and comprises approximately 61,000 square feet.
In order to facilitate further innovation and development, we opened a 61,000 square foot facility in August 2023 located in Draper, Utah that serves as our innovation center. Intellectual Property We rely on patent and trademark protection laws to protect our intellectual property and maintain our competitive position in the marketplace.
The resulting real-time feedback cycle is a key differentiator compared to other competitors that outsource many of these functions and lack an integrated approach. Growth Strategies ● Expansion of the Brand to Premium and Luxe Categories— To complement and support our expansion into the higher-priced, higher margin categories, Purple is evolving its differentiated brand to broaden appeal.
The resulting real-time feedback cycle is a key differentiator compared to other competitors that outsource many of these functions and lack an integrated approach. In August 2023, we opened an innovation center near our headquarters in Utah to support and accelerate our ongoing research and development. Growth Strategies ● Focus on pioneering new technologies to maintain our competitive advantage.
At these factories we manufacture our proprietary Hyper-Elastic Polymer cushioning used in our mattress, pillow and seat cushion products. We also assemble, package and ship our products from these two facilities. Our facility in Salt Lake City was acquired as part of the Intellibed acquisition and has approximately 67,000 square feet.
Our manufacturing facility in McDonough, Georgia provides 844,000 square feet of manufacturing and distribution space where we manufacture our proprietary Hyper-Elastic Polymer cushioning used in our mattress, pillow and seat cushion products.
DeMartini 62 Director, Chief Executive Officer Todd E. Vogensen 55 Chief Financial Officer and Treasurer Tricia S. McDermott 52 Chief Legal Officer and Secretary Eric S. Haynor 60 Chief Operating Officer Jeffrey L. Hutchings 56 Chief Innovation Officer Jeffery S. Kerby 55 Chief of Owned Retail Officer Keira M. Krausz 58 Chief Marketing Officer John J.
Information About Our Executive Officers As of the date of this report, our executive officers are as follows: Name Age Title Robert T. DeMartini 63 Director, Chief Executive Officer Todd E. Vogensen 56 Chief Financial Officer and Treasurer Tricia S. McDermott-Spikes 53 Chief Legal Officer and Secretary Eric S. Haynor 61 Chief Operating Officer Jeffrey L.
Today, the U.S. sleep product industry has rebalanced to be comprised of vendors that rely on retail distribution as well as a consolidated number of direct-to-consumer retailers who have tried to expand brick and mortar distribution to capture more market share in a category still tied to instore product trials.
Recently, the U.S. sleep product industry has experienced significant consolidation as manufacturers have acquired both direct-to-consumer companies and brick and mortar retailers to expand profitability through vertical integration and extend their reach to the consumer to capture more market share.
Removed
In addition to developing differentiated products and technologies, we have built a brand that we believe has high customer engagement and avid brand advocates. We have an experienced marketing team, providing efficient customer acquisition and brand demand development.
Added
Originally designed for use in hospital beds and wheelchairs, we adapted this unique pressure-relieving material for our mattresses, pillows and other cushion products.
Removed
For the year ended December 31, 2023, sales of sleep products accounted for 97.2% of our net revenues, as compared to 97.1% for 2022 and 96.5% for 2021, and other products accounted for 2.8%, as compared to 2.9% for 2022 and 3.5% for 2021.
Added
We are re-launching the Rejuvenate collection (Rejuvenate 2.0) in the second quarter of 2025 with a newly innovated grid technology. In general, direct-to-consumer mattress companies offer convenience, flexible shipping and returns, and low prices, while leveraging third-party manufacturing and distribution.
Removed
We are investing in brand demand-driving marketing and advertising to create awareness, engagement and preference for the Purple brand and for our products across all our sales channels. We developed a reimagined brand associated with life enhancing sleep.
Added
Our strategy focuses on offering a differentiated product that provides unique benefits and higher customer satisfaction, all fueled by our proprietary flexible gel technology. Advancements and innovation in our grid technology has led to a new grid technology marking a significant advancement in our product lineup.
Removed
We believe that this strategic focus and investment will support our growth plans in the wholesale channel, in Purple showrooms, on Purple.com and online marketplaces. Our Luxe (“Rejuvenate”) offerings are expected to increase average sales prices significantly.
Added
Our new DreamLayer grid, stacked with our original grid, creates a unique combination that continues to differentiate us in the market while driving superior comfort and support for an even more premium sleep experience. This upgrade will result in a refresh of our current Rejuvenate line.
Removed
We will also continue to harness the evangelism of the ever-growing base of Purple owners whose advocacy of our products is one of our brand’s greatest strengths. ● Further direct-to-consumer growth and penetration— We believe that we are well positioned to leverage our brand, leading product portfolio, vertical integration and strong marketing capabilities to continue to attract new customers via our e-commerce channel.
Added
The new Rejuvenate 2.0 collection launches in the second quarter 2025 through our direct-to-consumer channels, followed by a full wholesale roll-out expected to be complete by the third quarter 2025. In addition, we significantly expanded our distribution of pillows by launching our renowned DreamLayer and Freeform pillows into our wholesale channel. ● Drive sales by promoting our product differentiation.
Removed
We have invested in substantial improvements to our website and analytics, enhancing the education, shopping and buying experiences, and we have expanded our contact center, enabling live voice, chat and messaging with our sales associates. These actions are intended to drive higher customer satisfaction, higher average order value and higher conversion.
Added
We started as a brand built on differentiation. In recent years, the category has relied extensively on discount messaging to attract customers, with less focus on product benefits. Our goal is to refocus our messaging to lead with our product differentiation.
Removed
Continued successful execution on Purple.com supports our planned e-commerce growth, and also supports further growth in all channels given the importance of the site during the customer decision journey. In addition, as of December 31, 2023, we operated 60 Purple showrooms in cities across the United States.
Added
We intend to effectively articulate the unique qualities of sleeping on our gel grid layer to be more effective and reach more consumers.
Removed
At our showrooms, consumers can experience our brand, learn about and engage with our technology and purchase our products, assisted by our highly-trained retail sales associates who are able to both increase door productivity and trade customers up to higher price points.
Added
In our selling channels, we expect refocusing our messaging on promoting our differentiation will drive more and better quality traffic while improving conversion both online and in stores, and increase our share of retailer sales in our wholesale channel. ● Prioritize gross margin improvements.
Removed
Our showrooms enable us to strengthen the relationship with the consumer and develop a more profitable DTC revenue mix.
Added
We expect continued gross margin gains to come from driving cost savings through plant consolidation efficiency gains, supplier diversification efforts, and improved scrap and yield results from continuous improvements efforts.
Removed
We anticipate continued expansion of our showrooms as we optimize the format. ● Expanded wholesale retail relationships— We continue to work closely with existing retail partners to improve productivity to increase market share and sales, and we are forming new partnerships to expand our wholesale footprint.
Added
We are also ramping up in-house pillow production, changing vendors for key mattress components like coils and mattress covers and improving our delivery program to drive cost improvements and better deliveries.
Removed
With our new Premium and Luxe collections, we believe we have an increased opportunity to tap into the large brick-and-mortar category of the sleep products market.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe market price of our Common Stock has fluctuated and may fluctuate significantly in response to numerous factors, some of which are beyond our control and may not be related to our results of operations, including but not limited to: ● announcements of new offerings, products, services or technologies, commercial relationships, acquisitions, or other events by us or our competitors; ● price and volume fluctuations in the overall stock market; ● significant volatility in the market price and trading volume of companies in our industry; ● fluctuations in the trading volume of our shares or the size of our public float; ● actual or anticipated changes or fluctuations in our results of operations; ● whether our results of operations meet the expectations of securities analysts or investors; ● actual or anticipated changes in the expectations of investors or securities analysts; ● litigation involving us, our industry, or both; ● regulatory developments in the United States, foreign countries, or both; ● general or industry economic conditions and trends; ● terrorist attacks, political upheaval, natural disasters, public health crises, or other major catastrophic events; ● sales of large blocks of our Common Stock, including SEC filings related to such potential sales; ● departures of key employees; ● an adverse impact on us from any of the other risks cited herein; or ● unsolicited takeover bids and proposals.
Biggest changeIt can fluctuate significantly due to various factors, some beyond our control and unrelated to our results of operations, including but not limited to: ● actual or anticipated changes or fluctuations in our results of operations or fluctuations in the trading volume of our shares or the size of our public float; ● actual or anticipated changes in the expectations of investors or securities analysts, including our results of operations, or the extent to which analysts cover our stock; ● fluctuations in the overall stock market and volatility in the market price and trading volume of companies in our industry, or general or industry economic conditions and trends; ● relevant regulatory developments in any jurisdiction, or litigation involving us or our industry; ● terrorist attacks, trade wars, political upheaval, natural disasters, public health crises, or other major catastrophic events; ● sales of large blocks of our Common Stock, including SEC filings related to such potential sales; or ● an adverse impact on us from any of the other risks cited herein.
Additionally, our Second Amended and Restated Certificate of Incorporation provides that the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or agents.
Our Second Amended and Restated Certificate of Incorporation provides that the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or agents.
Such future actions by Coliseum may require us to devote significant additional resources and time that would otherwise be directed to our business and operations or may demotivate current executives and discourage other executives from joining the Company.
Such future actions by Coliseum may require us to devote significant additional resources and time that would otherwise be directed at our business and operations or may demotivate current executives and discourage other executives from joining the Company.
Our Second Amended and Restated Certificate of Incorporation allows us to issue up to 300 million shares of our Common Stock, including 210 million shares of Common Stock and 90 million shares of Class B Stock, and up to five million shares of undesignated preferred stock.
Our Second Amended and Restated Certificate of Incorporation allows us to issue up to 300 million shares of our common stock, including 210 million shares of Class A common stock and 90 million shares of Class B common stock, and up to five million shares of undesignated preferred stock.
The acceleration of such a material lump-sum payment obligation under our Tax Receivable Agreement could materially adversely affect a third party’s acquisition of us, discourage a third party from attempting to acquire control of us or materially adversely affect the price payable for shares of our Common Stock pursuant to such a transaction.
The acceleration of such a material lump-sum payment obligation under our Tax Receivable Agreement could materially adversely affect a third party’s acquisition, discourage a third party from attempting to acquire control, or materially adversely affect the price payable for our Common Stock pursuant to such a transaction.
If we do not regain compliance within 180 calendar days, NASDAQ may grant a second compliance period of 180 calendar days or it may make a determination to delist our Common Stock, at which point we would have an opportunity to appeal the delisting determination to a hearings panel.
If we do not regain compliance within 180 calendar days, NASDAQ may grant a second compliance period of 180 calendar days or it may determine to delist our Common Stock, at which point we would have an opportunity to appeal the delisting determination to a hearings panel.
The market price of our Common Stock could decline as a result of sales in the market by a few large stockholders, such as Coliseum or the Holders, or the perception that these sales could occur, including as a result of the Registration Statement discussed above.
The market price of our Common Stock could decline as a result of sales by a few large stockholders, such as Coliseum or the Holders, or the perception that these sales could occur, including as a result of the registration statement.
We may be subject to laws, regulations, and administrative practices that require us to collect information from our customers, vendors, merchants, and other third parties for tax reporting purposes and report such information to various government agencies. The scope of such requirements continues to expand, requiring us to develop and implement new compliance systems.
We may be subject to laws and rules that require us to collect information from our customers, vendors, merchants, and other third parties for tax reporting purposes and report such information to government agencies. The scope of such requirements continues to expand, requiring us to develop and implement new compliance systems.
I f we fail to effectively remediate our material weakness or otherwise fail to maintain an effective system of internal controls, we may not be able to report our financial results accurately, may make a material misstatement in our financial statements, may experience a financial loss or may face litigation.
I f we fail to maintain an effective system of internal controls, we may not be able to report our financial results accurately, may make a material misstatement in our financial statements, may experience a financial loss or may face litigation.
For example, (i) one of our wholesale partners may be sold to one of our competitors, which could disrupt our relationship with that wholesale partner or prevent us from continuing to sell our products in favorable placements alongside the competitor’s products within the wholesale partner’s stores or at all in the wholesale partner’s stores, and (ii) one of our competitors owns a manufacturing company with which we have a manufacturing relationship, and that competitor could disrupt that relationship to harm our manufacturing efforts.
For example, (i) one of our competitors is purchasing one of our wholesale partners, which could disrupt our relationship or prevent us from continuing to sell our products in favorable placements alongside the competitor’s products or at all in the wholesale partner’s stores, and (ii) one of our competitors owns a manufacturing company with which we have a manufacturing relationship, and that competitor could disrupt that relationship to harm our manufacturing efforts.
Thus, our ability to utilize our NOLs, including net operating losses acquired from our Intellibed acquisition, and other tax attributes to reduce future tax liabilities may be substantially restricted.
Thus, our ability to utilize carryforwards of our net operating losses, including net operating losses acquired from the Intellibed acquisition, and other tax attributes to reduce future tax liabilities may be substantially restricted.
We, or the owners of any intellectual property rights licensed to us, may be subject to claims that we or such licensors have infringed the proprietary rights of others, which could require us and our licensors to obtain a license or change designs.
We may be subject to claims that we or the licensors of intellectual property rights licensed to us have infringed on proprietary rights, which could require us and our licensors to obtain a license or change designs.
We may not be able to successfully anticipate consumer trends and demand and our failure to do so may lead to a loss of consumer acceptance of the products we sell. Our success depends in part on our ability to anticipate and respond to changing trends and consumer demands in a timely manner.
We may not be able to successfully anticipate consumer trends and demand and our failure to do so may lead to a loss of consumer acceptance of the products we sell. Our success may depend on our ability to timely anticipate and respond to changing consumer trends.
To raise additional capital, we may in the future sell additional shares of our Common Stock or other securities convertible into or exchangeable for our Common Stock at prices that are lower than the prices paid by existing stockholders, and investors purchasing shares or other securities in the future could have rights superior to existing stockholders, which could result in substantial dilution to the interests of existing stockholders.
We have previously sold and may in the future sell additional shares of our Common Stock or convertible securities at prices that are lower than the prices paid by existing stockholders, and investors purchasing shares or other securities could have rights superior to existing stockholders, which could result in substantial dilution of existing stockholders.
It also provides that, unless we consent to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for any (i) derivative action or proceeding brought on our behalf; (ii) any action asserting a claim for or based on a breach of duty or obligation owed by any current or former director, officer or employee of ours to us or to our stockholders, including any claim alleging the aiding and abetting of such a breach; (iii) any action asserting a claim against us or any current or former director, officer or employee of ours arising pursuant to any provision of the Delaware General Corporation Law or our Second Amended and Restated Certificate of Incorporation or our Third Amended and Restated Bylaws; or (iv) any action asserting a claim related to or involving us that is governed by the internal affairs doctrine.
It also provides that, unless we consent to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for any (i) derivative action or proceeding brought on our behalf; (ii) any action asserting a claim for or based on a breach of duty or obligation owed by any current or former director, officer or employee of ours to us or to our stockholders, including any claim alleging the aiding and abetting of such a breach; (iii) any action asserting certain claims against us or any current or former director, officer or employee; or (iv) any action asserting a claim related to or involving us that is governed by the internal affairs doctrine.
We are also subject to laws such as the Toxic Substances Control Act, the Resource Conservation and Recovery Act, the Clean Air Act, the Clean Water Act, the Safe Drinking Water Act and the Comprehensive Environmental Response, Compensation and Liability Act, and related state and local statutes and regulations. 32 We are also subject to federal laws and regulations relating to international shipments, customs, and import controls.
For example, we are subject to the Toxic Substances Control Act, the Resource Conservation and Recovery Act, the Clean Air Act, the Clean Water Act, the Safe Drinking Water Act and the Comprehensive Environmental Response, Compensation and Liability Act, and related state and local statutes and regulations. We are subject to federal laws on international shipments, customs, and import controls.
Coliseum also has the ability to influence the outcome of any corporate actions which require stockholder approval, including but not limited to, the election of directors, significant corporate transactions, such as a merger or other sale of the Company or the sale of all or substantially all of our assets.
As a result of its significant beneficial ownership of our Common Stock, Coliseum has the ability to influence the outcome of any corporate actions which require stockholder approval, including but not limited to, the election of directors, significant corporate transactions including a merger or other sale of the Company or the sale of all or substantially all of our assets.
A holder of the Warrants will not have the right to exercise them, to the extent that after giving effect to such exercise, the holder (together with its affiliates) would beneficially own in excess of 49.9% of the shares of Common Stock outstanding immediately after giving effect to such exercise (the “Beneficial Ownership Cap”).
Coliseum will only have the right to exercise its Warrants to the extent that it (together with its affiliates) would not beneficially own in excess of 49.9% of the shares of Common Stock outstanding immediately after such exercise (the “Beneficial Ownership Cap”).
Lack of availability and quality of raw materials, labor, components and shipping services, or increases in the cost of such inputs, have caused and may continue to cause delays that could result in our inability to provide goods to our customers or could increase our costs, either of which could adversely affect our results of operations.
Production or shipment issues that lead to lower demand could materially impact our business and results of operations Lack of availability and quality of raw materials, labor, components and shipping services, or increases in the cost of such inputs, have caused and may continue to cause delays in our inability to provide goods to our customers or could increase our costs, either of which could adversely affect our results of operations.
In December 2022, we amended our bylaws to add requirements relating to stockholder nominations of directors, including a requirement that stockholder nominees complete a written questionnaire and that stockholder nominees make themselves available for interviews by our Board upon request.
We have amended our bylaws to add requirements relating to stockholder nominations of directors, including that stockholder nominees complete a written questionnaire and make themselves available for interviews by our Board.
We currently estimate the liability associated with this lump-sum payment as of December 31, 2023 to be approximately $119.8 million on a discounted basis.
We currently estimate the liability associated with this lump-sum payment as of December 31, 2024, to be approximately $131.1 million on a discounted basis.
We have engaged in significant related-party transactions with Coliseum and other parties that may give rise to conflicts of interest, result in losses to us or otherwise adversely affect our results of operations and the value of our business.
We have engaged in significant related-party transactions with Coliseum and other parties that may give rise to conflicts of interest or otherwise adversely affect our results of operations and the value of our business. We have engaged in numerous related-party transactions with significant stockholders, directors, and their affiliated entities.
After the Cooperation Agreement terminates, there can be no assurance that Coliseum will not make another unsolicited bid to acquire the remaining outstanding shares of our Common Stock not already beneficially owned by Coliseum or attempt to nominate replacement members to the Board.
There can be no assurance that Coliseum will not make another unsolicited bid to acquire the remaining outstanding shares of our Common Stock or attempt to nominate additional or replacement members to the Board.
As we continue to increase our innovations and create new products and technologies, and as we enter new product categories, we may be limited by the intellectual property rights of others.
As we increase our innovations, create new products and technologies, and enter new product categories, we may be limited by the intellectual property rights of others. We respect the intellectual property rights of others but our ability to innovate and increase product offerings may be limited by the intellectual property rights of other parties.
In connection with the Business Combination, we entered into the Tax Receivable Agreement with our founders, which generally provides for our payment to our former founders of 80% of certain tax benefits that we realize as a result of certain increases in our asset tax basis and of certain other tax benefits.
Prior to us being a public company, we entered into the Tax Receivable Agreement with our founders (the “Tax Receivable Agreement”), which provides for our payment to our former founders of 80% of certain tax benefits that we realize as a result of certain increases in our asset tax basis and of certain other tax benefits.
Item 1A. Risk Factors The risk factors summarized and detailed below could materially harm our business, results of operation and/or financial condition, impair our future prospects and/or cause the price of our Common Stock to decline. Any defined terms used in the Risk Factor Summary are defined in the full Risk Factors.
Item 1A. Risk Factors The risk factors detailed below could materially harm our business, results of operation and/or financial condition, impair our future prospects and/or cause the price of our Common Stock to decline.
In the event of our liquidation, our lenders and holders of our debt would receive distributions of our available assets before distributions to holders of our Common Stock, and holders of securities senior to the Common Stock would receive distributions of our available assets before distributions to the holders of our Common Stock.
In the event of our liquidation, holders of our debt would receive distributions of our assets before distributions to holders of our Common Stock, including substantial make-whole payments, and holders of securities senior to the Common Stock would receive distributions of our assets before distributions to the holders of our Common Stock.
Risks Relating to Our Business and Our Operations Our level of indebtedness and related covenants could limit our operational and financial flexibility and adversely affect our business if we breach such covenants or default on such indebtedness.
Risks Relating to Our Business and Our Operations Our indebtedness, related covenants, and certain prepayment obligations, including make-whole payments, could limit operational and financial flexibility and adversely affect our business if we breach such covenants or default on such indebtedness.
We have in the past experienced and may in the future experience significant fluctuations in our results of operations, which could make our future results of operations difficult to predict or cause our results of operations to fall below analysts’ and investors’ expectations.
Additionally, such cost saving measures may adversely affect our ability to generate additional revenue in the future. We have in the past experienced and may in the future experience significant fluctuations in our results of operations, which could make our future results of operations difficult to predict or cause our results of operations to fall below analysts’ and investors’ expectations.
Provisions of Delaware law, our Second Amended and Restated Certificate of Incorporation, and our Third Amended and Restated Bylaws could hamper a third party’s acquisition of us or discourage a third party from attempting to acquire control of us. You may not have the opportunity to participate in these transactions.
Provisions of Delaware law, our Second Amended and Restated Certificate of Incorporation, our Third Amended and Restated Bylaws and the existence of a significant stockholder who is our primary lender, could discourage a third party from attempting to acquire control of us. Stockholders may not have the opportunity to participate in these transactions.
If we experience a change of control (as defined under the Tax Receivable Agreement, which includes certain mergers, asset sales and other forms of business combinations and change of control events), we could be required to make an immediate lump-sum payment to our former founders under the terms of the Tax Receivable Agreement (as defined herein).
If we experience a change of control (as defined under the Tax Receivable Agreement), we could be required to make an immediate lump-sum payment to our former founders under the terms of the Tax Receivable Agreement (as defined herein).
Because our decision to incur debt and issue securities in future offerings may be influenced by market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings or debt financings.
Because future debt and equity offerings may be influenced by market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings or debt financings. Market conditions could impose less favorable terms for the issuance of our securities in the future.
Generally, we must maintain a minimum amount in stockholders’ equity, a minimum number of holders of our Common Stock, and a $1.00 minimum per share bid price for our Common Stock.
To continue listing our Common Stock on NASDAQ, we must maintain certain governance, financial, distribution and stock price levels. Generally, we must maintain a minimum amount in stockholders’ equity, a minimum number of holders of our Common Stock, and a $1.00 minimum per share bid price for our Common Stock.
Under Section 382 and related provisions of the Internal Revenue Code of 1986, as amended (the “Code”), if a corporation undergoes an “ownership change” generally defined as a greater than 50 percentage point change (by value) in its equity ownership by certain stockholders over a three-year period), the corporation’s ability to use its pre-change net operating loss carryforwards (“NOLs”) and other pre-change tax attributes to offset its post-change income may be limited.
Under Section 382 and related provisions of the Internal Revenue Code of 1986, as amended (the “Code”), if a corporation undergoes an “ownership change”, the corporation’s ability to use its pre-change net operating loss carryforwards (“NOLs”) and other pre-change tax attributes to offset its post-change income may be limited.
Under the Amended and Restated Credit Agreement, we are subject to a number of affirmative and negative covenants, including covenants regarding dispositions of property, investments, forming or acquiring subsidiaries, business combinations or acquisitions, incurrence of additional indebtedness, and transactions with affiliates, among other customary covenants.
The Amended and Restated Credit Agreement imposes various affirmative and negative covenants, including covenants regarding dispositions of property, investments, forming or acquiring subsidiaries, business combinations or acquisitions, incurrence of additional indebtedness, paying dividends or making distributions and transactions with affiliates, among other customary covenants.
On January 23, 2024, to refinance existing obligations, we entered into a Second Amendment to Term Loan Agreement (the “Second Amendment”) and concurrently therewith an Amended and Restated Credit Agreement (the “Amended and Restated Credit Agreement) with Coliseum Capital Partners, L.P.
On January 23, 2024, to refinance existing obligations, we entered into a Second Amendment to Term Loan Agreement (the “Second Amendment”) and an Amended and Restated Credit Agreement (the “Amended and Restated Credit Agreement) with Coliseum Capital Partners, L.P. (“CCP”), Blackwell Partners LLC – Series A (“Blackwell”), Harvest Small Cap Partners Master, Ltd.(“Harvest Master”), Harvest Small Cap Partners, L.P.
These obligations could also limit the price that investors might be willing to pay in the future for our Common Stock. 40 Provisions in our Second Amended and Restated Certificate of Incorporation could make it very difficult for an investor to bring any legal actions against us and our directors or officers and may limit our stockholders’ ability to obtain a favorable judicial forum.
Our Second Amended and Restated Certificate of Incorporation could make it very difficult for an investor to bring any legal actions against us, our directors, or our officers and may limit our stockholders’ ability to obtain a favorable judicial forum.
For example, on January 23, 2024, we issued to the Lenders as partial consideration for their entering into the Amended and Restated Credit Agreement warrants (the “Warrants”) to purchase 20 million shares of our Common Stock (approximately 19% of our currently outstanding Common Stock) at a price of $1.50 per share, subject to certain adjustments.
Future equity or debt financings may involve issuing securities likely to be dilutive to our existing stockholders, such as warrants, as we did on January 23, 2024 when we issued to the Lenders, as partial consideration for their entering into the Amended and Restated Credit Agreement, warrants (the “2024 Warrants”) to purchase 20.0 million shares of our Common Stock (approximately 19% of our currently outstanding Common Stock) at a price of $1.50 per share, subject to certain adjustments.
In addition, as the primary Lender under the Amended and Restated Credit Agreement, Coliseum exercises substantial control over us, including control of the composition of our Board and management, as well as our corporate strategies.
In addition, Coliseum exercises substantial control over us as the primary Lender under the Amended and Restated Credit Agreement.
If this were to occur, we could face significant material adverse consequences, including: ● a limited availability of market quotations for our securities; ● reduced liquidity for our securities; ● a determination that our Common Stock is a “penny stock” which will require brokers trading in our Common Stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities; ● a limited amount of news and analyst coverage; and ● a decreased ability to issue additional securities or obtain additional financing in the future.
If NASDAQ delists our Common Stock from trading on its exchange or if we decide to voluntarily delist from NASDAQ and/or deregister our Common Stock under the federal securities laws, we could face significant material adverse consequences, including but not limited to (i) a limited availability of market quotations for our Common Stock; (ii) reduced liquidity for our Common Stock; (iii) a determination that our Common Stock is a “penny stock” which will require brokers trading in our Common Stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities; (iv) a limited amount of news and analyst coverage, and in the event of deregistration of our Common Stock, less public disclosure about us; and (v) a decreased ability to issue additional securities or obtain additional financing in the future.
For example, on January 23, 2024, we issued to the Lenders under the Amended and Restated Credit Agreement warrants to purchase up to 20,000,000 shares of our Common Stock at a price of $1.50 per share, subject to certain adjustments.
For example, in February 2023 we issued 13.4 million shares of Common Stock pursuant to a public offering, on January 23, 2024, we issued to the Lenders under the Amended and Restated Credit Agreement the 2024 Warrants to purchase 20.0 million shares of our Common Stock at a price of $1.50 per share, subject to adjustments, and on March 12, 2025, we issued to the Lenders under the 2025 Amendment the 2025 Warrants to purchase 6.2 million shares of our Common Stock at a price of $1.50 per share, subject to adjustments.
This exclusive forum provision would not apply to suits brought to enforce any liability or duty created by the Securities Act of 1933, as amended, (the “Securities Act”) or the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or any other claim for which the federal courts have exclusive jurisdiction.
This exclusive forum provision would not apply to certain suits brought to enforce certain liability or duty or any other claim for which the federal courts have exclusive jurisdiction.
Fluctuations in our results of operations could cause our performance to fall below the expectations of analysts and investors, and adversely affect the price of our Common Stock. Because our business is changing and evolving rapidly, our historical results of operations may not necessarily be indicative of our future results of operations.
Fluctuations in our results of operations could cause our performance to fall below the expectations of analysts and investors and adversely affect the price of our Common Stock.
This concentrated voting control will limit your ability to influence corporate matters and could adversely affect the market price of our Common Stock.
This concentrated voting control will limit other stockholders’ ability to influence corporate matters, including control of the composition of our Board and management, as well as our corporate strategies, and could adversely affect the market price of our Common Stock or the sale of the Company.
If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our core business, and adversely affect our Common Stock. 39 Anti-takeover provisions in our Second Amended and Restated Certificate of Incorporation, our Third Amended and Restated Bylaws as well as provisions of Delaware law, contain anti-takeover provisions, any of which could delay or discourage a merger, tender offer, or assumption of control of our Company not approved by our Board of Directors that some stockholders may consider favorable.
Anti-takeover provisions in our Second Amended and Restated Certificate of Incorporation, our Third Amended and Restated Bylaws as well as provisions of Delaware law, contain anti-takeover provisions, any of which could delay or discourage a merger, tender offer, or assumption of control of our Company not approved by our Board of Directors that some stockholders may consider favorable.
If we misjudge market trends, we may significantly overstock inventory and be forced to take significant inventory markdowns, which would have a negative impact on our gross profit and cash flow. Conversely, shortages of inventory or increases in time for fulfillment of our products that prove popular could also reduce our sales.
If we misjudge market trends, we may significantly overstock inventory and be forced to take significant inventory markdowns, which would have a negative impact on our gross profit and cash flow.
In the future, we may attempt to increase our capital resources by entering into additional debt or debt-like financing that is unsecured or secured by up to all of our assets, or by issuing additional debt or equity securities, which could include issuances of secured or unsecured notes, preferred stock, hybrid securities or securities convertible into or exchangeable for equity securities.
We may attempt to increase our capital by entering additional secured or unsecured debt or debt-like financing, or by issuing additional debt or equity securities, including issuances of secured or unsecured notes, preferred stock, hybrid securities or convertible securities.
We depend on our executive employees, and if we lose the services of members of the executive team, we may not be able to run our business effectively. Our future success depends in part on our ability to attract and retain key executive, merchandising, marketing, sales, finance, operations and engineering personnel.
If we lose members of the leadership team we may not be able to run our business effectively. Our success depends on attracting and retaining key personnel in areas like executive leadership, marketing, sales, innovation, and operations.
Significant payment obligations under our Tax Receivable Agreement are accelerated upon a change of control of our Company, thereby discouraging a potential acquisition of our Company and adversely affecting any potential control premium payable for shares of our Common Stock.
The existence of such a large stockholder may limit the potential for third party offers to acquire the Company. Significant payment obligations under our Tax Receivable Agreement are accelerated upon a change of control and may discourage the potential acquisition of our Company and adversely affect any potential control premium payable for shares of our Common Stock.
These provisions could also limit the price that investors might be willing to pay in the future for Common Stock.
These provisions or circumstances could also limit the price that investors might be willing to pay in the future for Common Stock, including the potential to realize a premium for shares pursuant to a change in control transaction.
On April 19, 2023, Coliseum and the Company entered into a cooperation agreement (the “Cooperation Agreement”) settling the Action, which included among other items the appointment of certain new directors and standstill provisions related to the acquisition of additional stock, the nomination of directors, and other matters.
On April 19, 2023, Coliseum and the Company entered into a cooperation agreement (the “Cooperation Agreement”) settling the Action, which included among other items the appointment of certain new directors and agreement to certain standstill provisions, as discussed further in Note 16 – Related Party Transactions Coliseum Capital Management, LLC of the Notes to the Condensed Consolidated Financial Statements.
Any inability to report and file our financial results accurately and timely could adversely affect the value of our Common Stock. As a public company, we are required to establish and maintain internal control over financial reporting and disclosure controls and procedures and to comply with other requirements of the Sarbanes-Oxley Act and the rules promulgated by the SEC.
Any inability to report and file our financial results accurately and timely could adversely affect the value of our Common Stock. We are required to maintain internal controls over financial reporting and disclosure, as mandated by the Sarbanes-Oxley Act and SEC rules. However, even with these controls, management cannot guarantee that they will prevent all errors or fraud.
This could negatively impact our ability to grow our business and our results of operations. Disruption of operations in our manufacturing facilities has and could increase our costs of doing business or lead to delays in shipping our products and could materially adversely affect our results of operations and our ability to grow our business.
Continued inflation may reduce consumer discretionary spending, negatively affecting demand for our products. Disruption of our manufacturing has and could increase our costs of doing business or lead to delays in shipping and could materially adversely affect our business, our results of operations, and our financial condition.
Prior to the Business Combination, we entered into an Amended and Restated Confidential Assignment and License Back Agreement with EdiZONE, an entity beneficially owned and controlled our founders, pursuant to which EdiZONE transferred tangible and intellectual property to us and we licensed back to EdiZONE certain intellectual property previously licensed by EdiZONE to third parties prior to the Business Combination in order to enable EdiZONE to continue to meet certain pre-existing license obligations to those third parties.
Some of those licensees are competitors and have exclusive rights that we may be required to observe. Before the Business Combination, we entered into an Amended and Restated Confidential Assignment and License Back Agreement with EdiZONE, controlled by our founders, pursuant to which EdiZONE transferred intellectual property to us and licensed back certain intellectual property to meet pre-existing third-party obligations.
We are subject to risk if our information technology systems fail to perform adequately or are disrupted by natural disasters or other catastrophes or if we are unable to protect the integrity and security of our information systems. We depend largely upon our information technology systems in the conduct of all aspects of our operations.
Our information technology systems may fail to perform adequately, may be disrupted by natural disasters or other catastrophes, or we may be unable to protect the privacy, integrity and security of our information systems. Our operations and our revenue rely heavily on information technology systems.
Adverse publicity or climate-related litigation that impacts our Company could also have a negative impact on our business. 33 Regulatory requirements relating to the manufacture and disposal of mattresses may increase our product costs and increase the risk of disruption to our business.
Negative public perception or climate-related litigation could harm our reputation and business. 19 Regulatory requirements relating to the manufacture and disposal of mattresses may increase our product costs and increase the risk of disruption to our business. The U.S.
Failure to timely file will cause us to be ineligible to utilize short form registration statements on Form S-3, which may impair our ability to obtain capital in a timely fashion to execute our business strategies or issue shares to effect an acquisition.
Failure to timely file will cause us to be ineligible to utilize short form registration statements on Form S-3, which may also impair our ability to raise capital, execute business strategies, or issue shares for acquisitions. Additionally, it could erode investor confidence and negatively affect our stock price.
Further, market conditions could require us to accept less favorable terms for the issuance of our securities in the future. NASDAQ may delist our securities from its exchange, which could harm our business and limit our stockholders ’ liquidity. Our Common Stock is currently listed on NASDAQ, which has qualitative and quantitative listing criteria.
Risks Relating to our Common Stock NASDAQ may delist our securities from its exchange, which could harm our business and limit our stockholders ’ liquidity. Our Common Stock is currently listed on NASDAQ, which has listing criteria. We cannot assure that our Common Stock will continue to be listed on NASDAQ in the future.
Failure to comply with such laws or administrative practices or a successful assertion by such states or foreign jurisdictions requiring us to collect taxes where we did not, could result in substantial tax liabilities for past sales, as well as penalties and interest.
Failure to comply or a successful assertion by states requiring us to collect taxes where we did not, could result in substantial tax liabilities for past sales, as well as penalties and interest. If the tax authorities challenge our filings or request an audit, our tax liability may increase. We are currently undergoing routine audits in a few states.
If we are not able to maintain compliance with our covenants under the Amended and Restated Credit Agreement, we may need to seek amendments or waivers to the Amended and Restated Credit Agreement in the future and may also need to obtain alternative sources of liquidity.
If we fail to comply with the covenants under the Amended and Restated Credit Agreement, we may need to seek future amendments or waivers and/or alternative liquidity sources, such as subordinated debt, which may not be favorable or available.
As a result, you may not have the opportunity to participate in, or realize a potential control premium for your shares pursuant to, such a change of control transaction.
As a result, stockholders may not have the opportunity to participate in or realize a potential control premium for shares pursuant to such a change of control transaction. These obligations could also limit the price that investors might be willing to pay in the future for our Common Stock.
For example, as retail stores reopened following the elimination or easing of restrictions in connection with the COVID-19 pandemic, consumers shifted away from online retail purchases towards brick-and-mortar shopping.
Those changes and resulting changes in our product mix and distribution strategy could adversely affect our business and results of operations. For example, as retail stores reopened following the COVID-19 pandemic, consumers shifted away from online retail purchases towards brick-and-mortar shopping.
Our gross profit margins for sales through wholesale customers are lower than those in our DTC channel and, as a result, this shift in customer preference has and may continue to adversely affect our gross profit margins.
Our gross profit margins for sales through wholesale customers are lower than those in our DTC channel, so that shift adversely affected our gross profit margins.
We operate in the highly competitive sleep products industry, and if we are unable to compete successfully, we may lose customers and our results of operations could be adversely affected. The sleep products industry is highly competitive and fragmented.
Conversely, shortages of inventory or increases in time for fulfillment of our products that prove popular could also reduce our sales. 14 We operate in the highly competitive sleep products industry, and if we are unable to compete successfully, our results of operations could be adversely affected.
Our business could suffer if we are unsuccessful in making, integrating and maintaining commercial agreements, strategic alliances and other business relationships. To successfully operate our business, we rely on commercial agreements and strategic relationships with suppliers, service providers and certain wholesale partners and customers. As we grow, we may acquire other businesses to incorporate into our operations.
Expanding into new markets or regions could expose us to additional regulations, leading to increased compliance and distribution costs. Our business could suffer if we are unsuccessful in making, integrating and maintaining commercial agreements, strategic alliances and other business relationships. We rely on commercial agreements and strategic relationships with suppliers, service providers, and wholesale partners.
As of December 31, 2023, we have not completed a study to assess whether an ownership change has occurred, as defined by IRC Sections 382 and 383, or whether there have been ownership changes since the Company's formation due to the complexity and cost associated with such study, and the fact that there may be additional such ownership changes in the future.
As of December 31, 2024, we completed a study to assess whether an ownership change has occurred, as defined by IRC Section 382, or whether there have been ownership changes since the Company’s formation. The results of this study indicate that we experienced one ownership change on December 31, 2021.
Failure to comply with such laws may subject us to fines, administrative actions, and reputational harm. 38 Risks Relating to our Common Stock The market price of our Common Stock is volatile and may decline regardless of our results of operations, and you may not be able to resell your shares at or above your purchase price.
The market price of our Common Stock is volatile and may decline regardless of our results of operations, and Stockholders may not be able to resell shares at or above their purchase price. The market price of our Common Stock has been highly volatile, and stockholders may not be able to resell shares at or above their purchase price.
Litigation is inherently unpredictable, and it is possible that the ultimate outcome of one or more claims asserted in the future that we are currently not aware of, or adverse publicity resulting from any such litigation, could adversely affect our business, reputation, results of operations or financial condition. 35 Risks Relating to our Intellectual Property and Use of Technology We may not be able to protect our product designs, brand and other proprietary rights adequately, which could adversely affect our competitive position and reduce the value of our products and brands, and may result in costly litigation to protect our intellectual property rights.
Risks Relating to our Intellectual Property We may not be able to adequately protect our product designs, brand and other proprietary rights, which could adversely affect our competitive position, reduce the value of our products and brands, and may result in costly litigation to protect our intellectual property rights.
We are also restricted from paying dividends or making other distributions or payments on our capital stock, subject to limited exceptions. 16 These restrictions may prevent us from taking actions that we believe would be in the best interests of the business and may make it difficult for us to successfully execute our business strategy or effectively compete with companies that are not similarly restricted.
These restrictions may prevent us from taking actions that we believe would be in the best interests of the business and complicate our ability to execute our business strategy or compete with less restricted companies.
As reported by Coliseum in its Schedule 13D/A filed on January 23, 2024, Coliseum beneficially owns 58.5 million shares of Common Stock (which includes 46.9 million shares of Common Stock currently owned and 11.6 million shares of Common Stock that could be acquired upon exercise of its Warrants).
In addition, we are subject to the provisions of Section 203 of the Delaware General Corporation Law, which may prohibit certain transactions with stockholders owning 15% or more of our outstanding voting stock or require us to obtain stockholder approval prior to engaging in such transactions. 22 As reported by Coliseum in its Schedule 13D/A filed on January 23, 2024, Coliseum beneficially owns 58.5 million shares of Common Stock (which includes 46.9 million shares of Common Stock currently owned and 11.6 million shares of Common Stock that could be acquired upon exercise of its Warrants).
We attempt to maintain desirable amounts of raw material inventory and finished products, which in the case of over or under supply could leave us vulnerable to shortages or shrinkage of components and products that may harm our ability to profitably satisfy consumer demand and could adversely affect our results of operations.
Reduced credit availability from economic changes, regulatory shifts, terminated agreements, or competitors offering better terms could negatively impact our results of operations and financial condition. 18 Over or under supply of raw material inventory and finished products could leave us vulnerable to shortages or shrinkage that may harm our ability to satisfy consumer demand and could adversely affect our results of operations.
Sales of a substantial number of shares of our Common Stock in the public market, or the perception that these sales might occur, could depress the market price of our Common Stock and could impair our ability to raise capital through the sale of additional equity securities or other securities convertible into or exchangeable for equity securities, regardless of whether there is any relationship between such sales and the performance of our business.
Sales or the perception of future sales of a substantial number of shares of our Common Stock could depress the market price of our Common Stock and impair our ability to raise capital through the sale of additional equity or other convertible securities, regardless of any relationship between such sales and the performance of our business. 23 In connection with the issuance of Warrants pursuant to the Amended and Restated Credit Agreement and the 2025 Amendment, the Company entered into a Second Amended and Restated Registration Rights Agreement (the “Registration Rights Agreement”) with CCP, Blackwell, Coliseum Capital Co-Invest III, L.P.
If we are unable to attract and retain qualified executives and other employees, including through competitive compensation and other incentives, our business may be adversely affected. For example, due to our recent results of operations and stock price, our short-term incentive plans, long-terms incentive plans, and option grants may not be adequate to retain executives and other participating employees.
For example, due to our recent results of operations and stock price, our short-term incentive plans, long-terms incentive plans, and option grants may not be adequate to retain our leadership team and other participating employees. Additionally, we do not have key-person insurance for our executives. Regulatory and Litigation Risks Regulatory requirements may require costly expenditures and expose us to liability.
An increasing number of states and foreign jurisdictions have considered or adopted laws or administrative practices, with or without notice, that impose additional obligations on remote sellers and online marketplaces to collect transaction taxes such as sales, consumption, value added, or similar taxes.
Many statutes and regulations that impose these taxes were established before the adoption and growth of the internet and e-commerce. States may consider or adopt laws or administrative practices, which impose additional obligations on remote sellers and online marketplaces to collect transaction taxes such as sales, consumption, value added, or similar taxes.
In addition, our ability to adopt new services and develop new technologies may be inhibited by industry-wide standards, new laws and regulations, resistance to change from clients or merchants, or third parties’ intellectual property rights.
These new technologies may be superior to the technologies we currently use in our products and services. Adopting new technologies could be hindered by industry standards, regulations, resistance from clients, expense, or third-party intellectual property rights.
However, because we have not been profitable or paid income taxes recently, as of December 31, 2023, we determined the likelihood of a future Tax Receivable Agreement liability was not probable and therefore no liability has been recorded.
This liability may increase if we realize future tax benefits, face changes in tax rates, or if payments are accelerated. However, since we have not been profitable recently, we determined as of December 31, 2024, that the likelihood of incurring a liability was not probable and no liability was recorded.
These competitors, or new entrants into the market, may compete aggressively and gain market share with existing or new products, and may pursue or expand their presence in the sleep products industry. We cannot be sure we will have the resources or expertise to compete successfully in the future.
They may aggressively pursue market share with new or existing products, and we cannot guarantee we will have the resources or expertise to compete successfully. Additionally, competitors with better e-commerce platforms could hurt our sales.
In addition, we are subject to federal, state and local laws and regulations relating to pollution, environmental protection, recycling, and occupational health and safety. We may not be in compliance with all such requirements at all times. We have been required in the past to make changes to our facilities in order to comply with these requirements.
We are subject to federal, state, and local environmental, health, and safety regulations, including those related to environmental protection, recycling, and occupational health and safety. While we strive for compliance, past changes to our facilities have been required, and we will continue to invest in meeting these standards.
Even in the absence of an early termination of the Tax Receivable Agreement, change of control of our Company or a payment that is more than 90 days late under the Tax Receivable Agreement, there may be a material adverse effect on our liquidity if the payments under the Tax Receivable Agreement exceed the actual income or franchise tax savings that we realize from the tax attributes subject to the Tax Receivable Agreement or if distributions to us by Purple LLC are not sufficient to permit us to make payments under the Tax Receivable Agreement after we have paid taxes and other expenses.
Even without early termination, a change of control, or late payments, our liquidity could be adversely affected if payments under the Tax Receivable Agreement exceed the tax savings we realize, or if distributions from Purple LLC are insufficient to cover payments after taxes and expenses.
We may need additional funds to execute our business plan, maintain our liquidity, repay our debt and fund operations and we may not be able to obtain such funds on acceptable terms or at all. We have recently incurred negative cash flows on an annual basis and may continue to experience negative cash flow in the future.
We may not be able to obtain such funds on acceptable terms or at all. We have experienced recurring operating losses and negative cash flows and may continue to generate operating losses and consume significant cash resources in the future.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur chief technology officer has over 40 years of experience and has held various leadership roles in information technology, including serving as a chief information officer and chief technology officer for the last 12 years. He has successfully implemented and managed large enterprise resource planning systems, e-commerce websites, stores and enterprise infrastructure, both cloud-based and on-premise.
Biggest changeOur chief technology officer has over 41 years of experience and has held various leadership roles in information technology, including serving as a chief information officer and chief technology officer for the last 13 years. He has successfully implemented and managed large enterprise resource planning systems, e-commerce websites, stores and enterprise infrastructure, both cloud-based and on-premise.
Our senior director of cybersecurity and compliance has a 15-year track record as an information technology and information security professional, complemented by an Executive MBA. His career is distinguished by a decade of leadership as the commander of the United States Army cyber protection team (174 CPT), where he gained cybersecurity experience at USCYBERCOM and ARCYBER.
Our senior director of cybersecurity and compliance has a 16-year track record as an information technology and information security professional, complemented by an Executive MBA. His career is distinguished by a decade of leadership as the commander of the United States Army cyber protection team (174 CPT), where he gained cybersecurity experience at USCYBERCOM and ARCYBER.
The TRC consists of experts from various domains within our organization, including information technology security, compliance, legal, and operations. This TRC conducts assessments to ensure that any new software tools meet our standards for security, compliance and operational efficiency. 46 Board of Directors Oversight The oversight of our cybersecurity is assigned to the Audit Committee of our Board of Directors.
The TRC consists of experts from various domains within our organization, including information technology security, compliance, legal, and operations. This TRC conducts assessments to ensure that any new software tools meet our standards for security, compliance and operational efficiency. 27 Board of Directors Oversight The oversight of our cybersecurity is assigned to the Audit Committee of our Board of Directors.
In 2023, we did not identify any cybersecurity breaches that materially affected, or are reasonably likely to materially affect, our business strategy, results of operations, or financial condition. Management’s Role Our management team is responsible for monitoring, preventing, detecting, mitigating and remediating cybersecurity incidents.
In 2024, we did not identify any cybersecurity breaches that materially affected, or are reasonably likely to materially affect, our business strategy, results of operations, or financial condition. Management’s Role Our management team is responsible for monitoring, preventing, detecting, mitigating and remediating cybersecurity incidents.
In addition, management updates the Audit Committee as necessary regarding any material cybersecurity incidents as well as any incidents with lesser impact potential. The Audit Committee received one report from our Senior Director of Cybersecurity and Compliance in 2023.
In addition, management updates the Audit Committee as necessary regarding any material cybersecurity incidents as well as any incidents with lesser impact potential. The Audit Committee received one report from our Senior Director of Cybersecurity and Compliance in 2024.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe believe our McDonough location, our first manufacturing plant outside of Utah, serves our customers on the east coast more efficiently than from our Utah locations. Our facility in Salt Lake City was acquired in the Intellibed acquisition in August 2022. We also lease a building with approximately 61,000 square feet in Draper, Utah that serves as our innovation center.
Biggest changeOur facility in Salt Lake City was acquired in the Intellibed acquisition in August 2022. In January 2025, we leased an approximately 198,000 square foot distribution and fulfillment facility in West Valley City, Utah, that will be opened in April 2025. We also lease a building with approximately 61,000 square feet in Draper, Utah that serves as our innovation center.
In addition, we lease approximately 30,000 square-feet of office space in Lehi, Utah for our corporate headquarters. As of December 31, 2023, we had 60 Purple showrooms under lease with 10 located in California, five in Texas, five in Utah and 37 located in 23 other states throughout the United States.
In addition, we lease approximately 30,000 square-feet of office space in Lehi, Utah for our corporate headquarters. As of December 31, 2024, we had 58 Purple showrooms under lease with 12 located in California, six in Texas, four in Utah and 36 located in 23 other states throughout the United States.
Removed
Item 2. Properties We lease three manufacturing facilities in Grantsville, Utah, Salt Lake City, Utah and McDonough, Georgia. These factories total 1.5 million square feet (35 acres under roof), including approximately 574,000 square-feet at our Grantsville facility, 844,000 square feet at our McDonough facility and 67,000 square feet at our Salt Lake City facility.
Added
Item 2. Properties We lease a manufacturing facility in McDonough, Georgia with approximately 844,000 square feet. In August 2024, we initiated our Restructuring Plan to strategically realign our operational focus to achieve operations efficiencies that are expected to improve profitability and provide for reinvesting in technology and marketing initiatives.
Added
The Restructuring Plan is comprised of the permanent closure of two Utah manufacturing facilities to consolidate mattress production in our Georgia plant. The closure of the manufacturing facilities in Grantsville, Utah with 574,000 square feet and Salt Lake City, Utah with 67,000 square feet is planned to be completed in the second quarter 2025.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings Information regarding legal proceedings can be found in Note 13, “Commitments and Contingencies,” of the Notes to our Consolidated Financial Statements, included in Part II, Item 8 of this Report, “Financial Statements and Supplementary Data,” and is incorporated herein by reference. Item 4. Mine Safety Disclosures Not applicable. 47 PART II
Biggest changeItem 3. Legal Proceedings Information regarding legal proceedings can be found in Note 13, “ Commitments and Contingencies ” and Note 23, “ Subsequent Events – Class Action Lawsuit ” of the Notes to our Consolidated Financial Statements, included in Part II, Item 8 of this Report, “Financial Statements and Supplementary Data,” and is incorporated herein by reference.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe graph and related information shall not be deemed to be “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing with the SEC, except to the extent that the Company specifically incorporates it by reference into such filing. 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 Purple Innovation, Inc. $ 100.00 $ 147.88 $ 559.25 $ 225.30 $ 81.32 $ 17.49 S&P 500 Home Furnishings Index 100.00 126.60 121.59 138.07 77.47 78.44 The NASDAQ Stock Market (U.S.) Index 100.00 135.23 194.24 238.78 157.74 226.24 48 Recent Sales of Unregistered Securities None.
Biggest changeThe graph and related information shall not be deemed to be “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing with the SEC, except to the extent that the Company specifically incorporates it by reference into such filing. 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 12/31/24 Purple Innovation, Inc. $ 100.00 $ 378.19 $ 152.35 $ 54.99 $ 11.83 $ 8.96 S&P 500 Home Furnishings Index 100.00 96.04 109.06 61.16 61.96 71.32 The NASDAQ Stock Market (U.S.) Index 100.00 143.64 174.36 116.65 167.30 215.22 29 Recent Sales of Unregistered Securities On January 23, 2024, in connection with the Amended and Restated Credit Agreement, we issued Warrants to purchase 20.0 million shares of our Class A common stock to the Lenders.
Comparative Stock Performance The following graph illustrates the cumulative total return over the last five years from December 31, 2018 through December 31, 2023, for (i) our Common Stock, (ii) the Standard and Poor’s (S&P) 500 Home Furnishings Index, and (iii) the NASDAQ Stock Market (U.S.) Index.
Comparative Stock Performance The following graph illustrates the cumulative total return over the last five years from December 31, 2019 through December 31, 2024, for (i) our Common Stock, (ii) the Standard and Poor’s (S&P) 500 Home Furnishings Index, and (iii) the NASDAQ Stock Market (U.S.) Index.
The graph assumes $100 was invested on January 1, 2019 in each of our Common Stock, the S&P 500 Home Furnishings Index, and the NASDAQ Stock Market (U.S.) Index, and that any dividends were reinvested.
The graph assumes $100 was invested on December 31, 2019 in each of our Common Stock, the S&P 500 Home Furnishings Index, and the NASDAQ Stock Market (U.S.) Index, and that any dividends were reinvested.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities Our Common Stock is listed on NASDAQ under the symbol “PRPL”. As of March 12, 2024, there were approximately 116 holders of record of shares of our Common Stock and 10 holders of record of shares of our Class B Stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities Our Common Stock is listed on NASDAQ under the symbol “PRPL”. As of March 7, 2025, there were approximately 83 holders of record of shares of our Common Stock and 7 holders of record of shares of our Class B Stock.
Our Class B Stock is not listed or quoted on any exchange and is not transferrable by the holders, subject to certain limited exceptions, including the exchange of Class B Stock for shares of Common Stock pursuant to the exchange agreement, dated February 2, 2018, between the Company, Purple LL, InnoHold and Class B Unit holders who became a party thereto The number of holders of record of our Common Stock does not include stockholders for which shares are held in “nominee” or “street” name.
Our Class B Stock is not listed or quoted on any exchange and is not transferrable by the holders, subject to certain limited exceptions, including the exchange of Class B Stock for shares of Common Stock. The number of holders of record of our Common Stock does not include stockholders for which shares are held in “nominee” or “street” name.
Added
On March 12, 2025, in connection with the 2025 Amendment, we issued Warrants to purchase 6.2 million shares of our Class A common stock to the Lenders. The Warrants will expire on the 10-year anniversary of their issuance, or earlier upon redemption.
Added
The Holders do not have the rights or privileges of holders of Class A common stock or any voting rights until they exercise their Warrants.
Added
After the issuance of shares of Class A common stock upon exercise of the Warrants, each Holder will be entitled to one vote for each share of Class A common stock held on all matters to be voted on by stockholders generally.
Added
A Holder of Warrants will not have the right to exercise its Warrants, to the extent that after giving effect to such exercise, the Holder (together with its affiliates) would beneficially own in excess of 49.9% of the shares of Class A common stock outstanding immediately after giving effect to such exercise We believe that such issuances were exempt from registration pursuant to Section 4(a)(2) of the Securities Act as privately negotiated, isolated, non-recurring transactions not involving any public solicitation.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeResults of Operations Results of Operations for the Year Ended December 31, 2023 compared to the year ended December 31, 2022 The following table sets forth for the periods indicated, our results of operations and the percentage of total net revenues represented by each line item in our consolidated statements of operations: Years Ended December 31, 2023 % of Net Revenues 2022 % of Net Revenues Revenues, net $ 510,541 100.0 % $ 573,201 100.0 % Cost of revenues 338,716 66.3 365,110 63.7 Gross profit 171,825 33.7 208,091 36.3 Operating expenses: Marketing and sales 182,313 35.7 165,388 28.9 General and administrative 84,446 16.5 76,702 13.4 Research and development 11,898 2.3 8,755 1.5 Loss on impairment of goodwill 6,879 1.3 — — Total operating expenses 285,536 55.9 250,845 43.8 Operating loss (113,711 ) (22.3 ) (42,754 ) (7.5 ) Other (expense) income: Interest expense (1,967 ) (0.4 ) (3,536 ) (0.6 ) Other (expense) income, net (1,198 ) (0.2 ) 423 0.1 Loss on extinguishment of debt (4,331 ) (0.8 ) — — Change in fair value – warrant liabilities — — 4,343 0.8 Tax Receivable Agreement income — — 161,970 28.3 Total other (expense) income, net (7,496 ) (1.5 ) 163,200 28.5 Net (loss) income before income taxes (121,207 ) (23.7 ) 120,446 21.0 Income tax expense (8 ) — (213,169 ) (37.2 ) Net loss (121,215 ) (23.7 ) (92,723 ) (16.2 ) Net loss attributable to noncontrolling interest (458 ) (0.1 ) (253 ) — Net loss attributable to Purple Innovation, Inc. $ (120,757 ) (23.7 ) $ (92,470 ) (16.1 ) 56 Revenues, Net Net revenues decreased $62.7 million, or 10.9%, to $510.5 million for 2023 compared to $573.2 million for 2022.
Biggest changeResults of Operations for the Year Ended December 31, 2024 compared to the year ended December 31, 2023 The following table sets forth for the periods indicated, our results of operations and the percentage of total net revenues represented by each line item in our consolidated statements of operations: Years Ended December 31, 2024 % of Net Revenues 2023 % of Net Revenues Revenues, net $ 487,877 100.0 % $ 510,541 100.0 % Cost of revenues: Cost of revenues 291,303 59.7 338,716 66.3 Cost of revenues - restructuring related charges 15,442 3.2 — — Total cost of revenues 306,745 62.9 338,716 66.3 Gross profit 181,132 37.1 171,825 33.7 Operating expenses: Marketing and sales 171,263 35.1 182,313 35.7 General and administrative 69,117 14.2 84,446 16.5 Research and development 12,962 2.7 11,898 2.3 Restructuring, impairment and other related charges 19,973 4.1 — — Loss on impairment of goodwill — — 6,879 1.3 Total operating expenses 273,315 56.0 285,536 55.9 Operating loss (92,183 ) (18.9 ) (113,711 ) (22.3 ) Other income (expense): Interest expense (17,510 ) (3.6 ) (1,967 ) (0.4 ) Other income (expense), net 11,548 2.4 (1,198 ) (0.2 ) Loss on extinguishment of debt (3,394 ) (0.7 ) (4,331 ) (0.8 ) Change in fair value – warrant liabilities 3,504 0.7 — — Total other expense, net (5,852 ) (1.2 ) (7,496 ) (1.5 ) Net loss before income taxes (98,035 ) (20.1 ) (121,207 ) (23.7 ) Income tax expense (63 ) — (8 ) — Net loss (98,098 ) (20.1 ) (121,215 ) (23.7 ) Net loss attributable to noncontrolling interest (201 ) — (458 ) (0.1 ) Net loss attributable to Purple Innovation, Inc. $ (97,897 ) (20.1 ) $ (120,757 ) (23.7 ) 36 Revenues, Net Net revenues decreased $22.7 million, or 4.4%, to $487.9 million in 2024 compared to $510.5 million in 2023.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Forward-Looking Statements This Annual Report on Form 10-K, including the Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains forward-looking statements regarding future events and our future results that are subject to the safe harbors created under the Securities Act and the Exchange Act.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Forward-Looking Statements This Annual Report on Form 10-K, including Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains forward-looking statements regarding future events and our future results that are subject to the safe harbors created under the Securities Act and the Exchange Act.
However, if actual results are not consistent with our estimates or assumptions, we may be exposed to losses or gains that could be material. Impairment We review our long-lived assets and definite-lived intangible assets for impairment as of December 31 and whenever events or changes in indicate the carrying amount may not be recoverable.
However, if actual results are not consistent with our estimates or assumptions, we may be exposed to losses or gains that could be material. Impairment We review our long-lived assets and definite-lived intangible assets for impairment as of December 31 and whenever events or changes in circumstances indicate the carrying amount may not be recoverable.
Recent Accounting Pronouncements For a description of accounting standards recently issued or adopted, including the respective dates of adoption and expected effects on our results of operations and financial condition, refer to Note 2 of our consolidated financial statements included in this Annual Report on Form 10-K.
Recent Accounting Pronouncements For a description of accounting standards recently issued or adopted, including the respective dates of adoption and expected effects on our results of operations and financial condition, refer to Note 2 of our consolidated financial statements included in this Annual Report on Form 10-K. 40
At December 31, 2023, Purple Inc. had a 99.8% economic interest in Purple LLC while other Class B unit holders had the remaining 0.2%. On August 31, 2022, we acquired all the issued and outstanding stock of Intellibed to consolidate ownership of our licensed intellectual property while enhancing our innovation and manufacturing capabilities and financial profile.
At December 31, 2024, Purple Inc. had a 99.8% economic interest in Purple LLC while other Class B unit holders had the remaining 0.2%. On August 31, 2022, we acquired all the issued and outstanding stock of Intellibed to consolidate ownership of our licensed intellectual property while enhancing our innovation and manufacturing capabilities and financial profile.
Any prepayments on or after August 7, 2024 but before August 7, 2025 are subject to a prepayment penalty of 1.25%, and any prepayments on or after August 7, 2025 are subject to a prepayment penalty of 2.50%.
Any prepayments of principal on or after August 7, 2024 but before August 7, 2025 are subject to a prepayment penalty of 1.25%, and any prepayments of principal on or after August 7, 2025 are subject to a prepayment penalty of 2.50%.
There is no guarantee that we will be able to effectively execute on these opportunities, which are subject to risks, uncertainties, and assumptions that are difficult to predict, including the risks described under “Part I, Item 1A. Risk Factors” and elsewhere herein. Therefore, actual results may differ materially and adversely from those described above.
There is no guarantee that we will be able to effectively execute on these initiatives, which are subject to risks, uncertainties, and assumptions that are difficult to predict, including the risks described under “Part I, Item 1A. Risk Factors” and elsewhere herein. Therefore, actual results may differ materially and adversely from those described above.
While we had no outstanding borrowings under the 2020 Credit Agreement at that time, the termination was accounted for as an extinguishment of debt and $3.1 million of unamortized debt issuance costs were recorded as loss on extinguishment of debt in 2023.
While the Company had no outstanding borrowings under the 2020 Credit Agreement at that time, the termination was accounted for as an extinguishment of debt and $3.1 million of unamortized debt issuance costs were recorded as loss on extinguishment of debt in 2023.
Our estimates of the amount and timing of sales returns, uncollectible accounts and variable consideration are based primarily on historical trends, product return rates and current contract terms. Accrued sales returns increased from $5.1 million at December 31, 2022 to $5.4 million as of December 31, 2023.
Our estimates of the amount and timing of sales returns, uncollectible accounts and variable consideration are based primarily on historical trends, product return rates and current contract terms. Accrued sales returns increased from $5.4 million at December 31, 2023 to $6.5 million as of December 31, 2024.
These cash proceeds were partially offset by a $24.7 million payment to pay off the term loan from the 2020 Credit Agreement, $12.0 million in repayments against the ABL Loans, $6.1 million in payments on debt issuance costs, and $0.4 million of other payments.
These cash proceeds were partially offset by a $24.7 million payment to pay off the term loan from the 2020 Credit Agreement, $12.0 million in repayments against the revolving debt outstanding from the 2023 Credit Agreement, $6.1 million in payments on debt issuance costs, and $0.4 million of other payments.
The Company will be responsible for the payment of the Holders’ expenses in connection with any offering or sale of Registrable Securities by the Holders, including underwriting discounts or selling commissions, placement agent or broker fees or similar discounts, commissions or fees relating to the sale of certain Registrable Securities.
We are responsible for the payment of the Holders’ expenses in connection with any offering or sale of Registrable Securities by the Holders, including underwriting discounts or selling commissions, placement agent or broker fees or similar discounts, commissions or fees relating to the sale of certain Registrable Securities.
Our allowance for credit losses was not material at both December 31, 2023 and 2022. We do not believe there is a reasonable likelihood that there will be any material changes in our accounting methodology, future estimates or assumptions used to measure our estimated liability for sales returns and exchanges, our allowance for credit losses or variable consideration.
We do not believe there is a reasonable likelihood that there will be any material changes in our accounting methodology, future estimates or assumptions used to measure our estimated liability for sales returns and exchanges, our allowance for credit losses or variable consideration.
Financing activities during 2023 included $57.0 million of net proceeds received from a stock offering, $25.0 million from the Term Loan Agreement entered into in August 2023, and $17.0 million in draws on the ABL Loans.
Financing activities during 2023 included $57.0 million of net proceeds received from a stock offering, $25.0 million from the Term Loan Agreement entered into in August 2023, and $17.0 million in draws on the revolving debt pursuant to the 2023 Credit Agreement.
In addition, we may, in the future, adapt these focuses in response to changes in the market or our business. 53 Critical Accounting Policies and Estimates In connection with the preparation of our consolidated financial statements in conformity with United States generally accepted accounting principles (“GAAP”), we are required to make estimates and assumptions about future events and apply judgments that affect the reported amounts of assets, liabilities, sales, expenses and the related disclosures.
Critical Accounting Policies and Estimates In connection with the preparation of our consolidated financial statements in conformity with United States generally accepted accounting principles (“GAAP”), we are required to make estimates and assumptions about future events and apply judgments that affect the reported amounts of assets, liabilities, sales, expenses and the related disclosures.
Principal uses of funds consist of interest payments on our Loan , capital expenditures, working capital needs, and operating lease payment 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 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.
A holder of the Warrants will not have the right to exercise them, to the extent that after giving effect to such exercise, the holder (together with its affiliates) would beneficially own in excess of the Beneficial Ownership Cap.
A holder of the 2024 Warrants will not have the right to exercise them, to the extent that after giving effect to such exercise, the holder (together with its affiliates) would beneficially own in excess of 49.9% of the shares of Class A Stock outstanding immediately after giving effect to such exercise.
Our unrestricted cash and working capital positions were $26.9 million and $30.8 million, respectively, as of December 31, 2023 compared to $40.0 million and $61.6 million, respectively, as of December 31, 2022. Cash used for capital expenditures decreased from $38.2 million in 2022 to $15.2 million in 2023.
Our cash and cash equivalents and working capital positions were $29.0 million and $25.4 million, respectively, as of December 31, 2024 compared to $26.9 million and $30.8 million, respectively, as of December 31, 2023. Cash used for capital expenditures decreased from $15.2 million in 2023 to $7.4 million in 2024.
The Loan bears interest at a rate equal to (i) the secured overnight financing rate as administered by the Federal Reserve Bank of New York plus 0.10%, with a floor of 3.5% per annum, plus (ii) 8.25% per annum (or, if Purple LLC elects to pay interest in kind to reduce it cash obligations, 10.25% per annum).
The loan bears interest at a rate equal to (i) the secured overnight financing rate plus 0.10%, with a floor of 3.5% per annum, plus (ii) 8.25% per annum (or, because Purple LLC has elected to pay interest in kind to reduce its cash obligations, 10.25% per annum).
Interest on the Loan is payable each month and the principal outstanding is due on December 31, 2026, the maturity date of the Loan. We may elect for interest to be capitalized and added to the principal amount.
Interest on the new loan is payable each month and the principal outstanding matures and is due on December 31, 2026. To reduce cash obligations, we have elected for interest to be capitalized and added to the principal amount of the loan.
Cash Flows for the year ended December 31, 2023 compared to the year ended December 31, 2022 The following summarizes our cash flows for the years ended December 31, 2023 and 2022 as reported in our consolidated statements of cash flows (in thousands): Years Ended December 31, 2023 2022 Net cash used in operating activities $ (54,662 ) $ (28,773 ) Net cash used in investing activities (16,061 ) (34,501 ) Net cash provided by financing activities 55,826 13,412 Net decrease in cash (14,897 ) (49,862 ) Cash, beginning of the period 41,754 91,616 Cash, end of the period $ 26,857 $ 41,754 Cash used in operating activities increased $25.9 million to $54.7 million in 2023 as compared to 2022.
Cash Flows for the year ended December 31, 2024 compared to the year ended December 31, 2023 The following summarizes our cash flows for the years ended December 31, 2024 and 2023 as reported in our consolidated statements of cash flows (in thousands): Years Ended December 31, 2024 2023 Net cash used in operating activities $ (17,850 ) $ (54,662 ) Net cash used in investing activities (7,530 ) (16,061 ) Net cash provided by financing activities 27,534 55,826 Net decrease in cash 2,154 (14,897 ) Cash, beginning of the period 26,857 41,754 Cash, end of the period $ 29,011 $ 26,857 Net cash used in operating activities was $17.9 million in 2024 compared to $54.7 million in 2023.
Other expense in 2023 was primarily comprised of a $1.7 million loss on the disposal of property and equipment, partially offset by other income of $0.5 million.
Other expense in 2023 consisted of a $1.7 million loss on the disposal of property and equipment, partially offset by other income of $0.5 million. Loss on Extinguishment of Debt Loss on extinguishment of debt totaled $3.4 million in 2024 compared to $4.3 million in 2023.
Liquidity and Capital Resources Our principal sources of funds are cash flows from operations and cash and cash equivalents on hand, supplemented with borrowings made pursuant to our Amended and Restated Credit Agreement and proceeds received from offerings of our equity capital.
Liquidity and Capital Resources Our principal sources of funds are cash inflows generated from operations and cash and cash equivalents on hand, supplemented with borrowings made pursuant to our credit agreements and proceeds received from offerings of our equity capital. Principal uses of funds consist of capital expenditures, working capital needs, and operating lease payment obligations.
The estimated warranty costs associated with products sold through DTC channels are expensed at the time of sale and included in cost of revenues. The estimated warranty costs associated with products sold through the wholesale channel are recorded at the time of sale and included as an offset to net revenues.
The estimated warranty costs associated with products sold through the wholesale channel are recorded at the time of sale and included as an offset to net revenues. Estimates for warranty costs are based primarily on historical trends and warranty claim rates incurred.
A term loan in the amount of $61.0 million (the “Loan”) was funded by the Lenders that repaid in full the $25.0 million of Term Loans outstanding, repaid in full the $5.0 million of ABL Loans outstanding, paid fees, premiums and expenses incurred in connection with this transaction, and provided net proceeds to us (after payments of outstanding debt, unpaid accrued interest, and expenses) equal to approximately $27.0 million.
Pursuant to the Amended and Restated Credit Agreement, we borrowed $61.0 million from the Lenders (the “Related Party Loan”) that was used to repay the $25.0 million of term loans outstanding, the $5.0 million of revolving debt outstanding, loan fees, premiums and expenses incurred in connection with this transaction and provided net proceeds to us (after payments of outstanding debt, unpaid accrued interest, and expenses) of approximately $27.0 million.
Interest Expense Interest expense totaled $2.0 million for 2023 compared to $3.5 million for 2022. Interest expense in 2023 was primarily comprised of $2.1 million related to the 2023 Credit Agreements entered into in August 2023 and $1.3 million related to the 2020 Credit Agreement that was terminated upon entering into the 2023 Credit Agreements.
In addition, interest expense in 2024 included $7.2 million of debt issuance cost amortization associated with the Related Party Loan. Interest expense in 2023 was primarily comprised of $2.1 million related to the 2023 Credit Agreements entered into in August 2023 and $1.3 million related to the 2020 Credit Agreement that was terminated upon entering into the 2023 Credit Agreements.
This was offset in part by a current tax benefit of $0.7 million recorded in 2022. Noncontrolling Interest 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 $0.3 million and $0.2 million in 2022 and 2021, respectively.
Income tax expense in 2024 was related to various state taxes. Noncontrolling Interest 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 $0.2 million and $0.5 million for 2024 and 2023, respectively.
Management believes the accounting estimates discussed below are the most critical because they require management’s most difficult, subjective or complex judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain.
Management believes the accounting estimates discussed below are the most critical because they require management’s most difficult, subjective or complex judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain. 34 Revenue Recognition Our revenue recognition accounting methodology contains uncertainties because it requires management to make assumptions and to apply judgment to estimate the amount and timing of future sales returns, uncollectible accounts and variable consideration.
As of December 31, 2023, the current and non-current portions of our warranty liabilities were $9.8 million and $25.8 million, respectively, compared to $5.8 million and $18.7 million, respectively, at December 31, 2022. We do not believe there is a reasonable likelihood that a material change in the estimates or assumptions we use to calculate our warranty liability will occur.
We do not believe there is a reasonable likelihood that a material change in the estimates or assumptions we use to calculate our warranty liability will occur.
The recoverability of goodwill is measured at the reporting unit level by comparing the reporting unit’s carrying amount, including goodwill, to the fair value of the reporting unit. The ongoing decline in our market capitalization, along with other qualitative considerations was determined to be a triggering event for potential goodwill impairment.
An ongoing decline in our market capitalization, along with other qualitative considerations, was determined to be a triggering event for potential goodwill impairment. The Company, considered as a single reporting unit, estimated the implied fair value of its goodwill using a variety of valuation methods, including both the income and market approaches.
These sponsor warrants had no fair value on the date of expiration and a de minimis fair value at the end of 2022. During 2022, we recognized a gain of $4.3 million related to a decrease in the fair value of the warrants outstanding at the end of 2022.
We recognized a gain of $3.5 million related to a decrease in the fair value of the Warrants outstanding at the end of the period compared to the fair value of the Warrants on the date of issuance. 38 Income Tax Expense We had income tax expense of $0.1 million in 2024 compared to a de minimis amount of income tax expense in 2023.
We expect the estimated warranty liability to continue to increase as we have not yet reached the full 10 years of history on our 10-year mattress warranty. We classify as non-current those estimated warranty costs expected to be paid out in greater than one year.
We regularly assess and adjust the estimate of accrued warranty claims by updating claims rates for any current or expected trends and changes in projected claim costs. We expect the estimated warranty liability to continue to increase as we have not yet reached the full 10 years of history on our 10-year mattress warranty.
If there are any indications of impairment, we perform a recoverability test by comparing the carrying value of the assets to the estimated future cash flows. Cash flow models are reliant on various assumptions, including projected business results and long-term growth factors. During 2023, there were indicators of impairment and a recoverability test was required.
Assets to be disposed of are reported at the lower of the carrying amount of the asset or fair value less costs to sell. Cash flow models are reliant on various assumptions, including projected business results and long-term growth factors. The Company determined there were indicators of impairment that existed at December 31, 2024 and a recoverability test was required.
We market and sell our products via our DTC channels, online marketplaces and retail wholesale partners. Organization Our business consists of Purple Inc. and its consolidated subsidiary, Purple LLC. Purple Inc. was incorporated in Delaware on May 19, 2015 as a special purpose acquisition company under the name of GPAC.
Purple Inc. was incorporated in Delaware on May 19, 2015 as a special purpose acquisition company under the name of GPAC.
As we move into 2024, we believe we can achieve efficiencies with regard to our media investment, by targeting specific segments most likely to purchase Purple and by focusing more effort on those consumers currently in the market for a sleep product. We believe we have set the right course for the next stage of growth for the Company.
For further discussion see Note 4 — Acquisition. 30 Recent Developments in Our Business Operational Developments During 2024, we have been realizing efficiencies with our media investments by targeting specific segments most likely to purchase Purple and by focusing more effort on those consumers currently in the market for a sleep product.
The termination was accounted for as an extinguishment of debt and $3.1 million of unamortized debt issuance costs related to the 2020 Credit Agreement were recorded as a loss on extinguishment of debt in 2023. 50 On January 23, 2024, we entered into the Second Amendment and concurrently therewith the Amended and Restated Credit Agreement, which amended and restated the Term Loan Agreement, with the Lenders and Delaware Trust Company, as administrative agent.
In January 2024, we entered into the Amended and Restated Credit Agreement that terminated and paid off the outstanding borrowings under our 2023 Credit Agreement. This termination was accounted for as an extinguishment of debt and $3.4 million of unamortized debt issuance costs were recorded as loss on extinguishment of debt.
Warrants In connection with the Amended and Restated Credit Agreement, we also issued the Warrants to the Lenders on January 23, 2024 to purchase 20.0 million shares of our Common Stock equal to 19% of the shares of Common Stock issued and outstanding.
Warrants In connection with the Amended and Restated Credit Agreement, we issued to the Lenders the 2024 Warrants to purchase 20.0 million shares of our Class A Stock. Each 2024 Warrant entitles the registered holder to purchase one share of our Class A Stock at a price of $1.50 per share, subject to adjustment.
Capital expenditures of $15.2 million in 2023 primarily consisted of additional investments made to our manufacturing operations and the addition of new showroom facilities. Our capital expenditures of $38.2 million in 2022 primarily consisted of additional investments made for 27 new showroom facilities opened during the year.
Capital expenditures of $7.5 million and $15.2 million in 2024 and 2023, respectively, consisted primarily of additional investments made to our manufacturing operations and showroom facilities. Net cash provided by financing activities totaled $27.5 million in 2024 compared to $55.8 million in 2023.
As a result of the impairment assessment performed, we concluded goodwill was impaired and recorded an impairment charge to write off the entire $6.9 million balance of goodwill. Accrued Warranty Liabilities We provide a limited warranty on most of the products we sell. Our warranty liability assessment methodology includes estimates in both our DTC and wholesale channels.
The resultant impairment assessment performed by us determined this asset no longer had any supportable value and an $8.5 million impairment charge to write off the entire balance of the asset was recorded in 2024. Accrued Warranty Liabilities We provide a limited warranty on most of the products we sell.
Based on the results of the recoverability test, we concluded that the long-lived assets and definite-lived assets were not impaired as of December 31, 2023 and no impairment charges were recorded. We do not amortize goodwill but test it for impairment each December 31 or whenever events or changes in circumstances indicate the carrying amount may not be recoverable.
Based on the results of this recoverability test, the Company concluded its long-lived and definite-lived assets were not impaired as of December 31, 2024 and no resultant impairment charges were recorded.
The decline in net revenues from a sales channel perspective in 2023 consisted of DTC net revenues decreasing $33.8 million, or 10.2%, and wholesale net revenues declining $28.9 million, or 11.9%. Within DTC, e-commerce net revenues decreased $43.8 million, or 16.4%, while Purple showroom net revenues increased $10.0 million, or 15.8%.
From a sales channel perspective in 2024, e-commerce net revenues decreased $17.3 million, or 7.7%, Purple showroom net revenues increased $4.3 million, or 5.8% and wholesale net revenues decreased $9.6 million, or 4.5%, as compared to 2023.
Our capital expenditures in 2023 primarily consisted of additional investments made in our manufacturing operations and showroom facilities. After entering into the Amended and Restated Credit Agreement in January 2024, our unrestricted cash balance increased to approximately $48.0 million.
Our capital expenditures in 2024 have primarily consisted of additional investments made in our manufacturing operations and showroom facilities.
This amendment was accounted for as an extinguishment of debt and $1.2 million of unamortized debt issuance costs were recorded as loss on extinguishment of debt in 2023. 58 Change in Fair Value – Warrant Liabilities Unexercised 1.9 million sponsor warrants expired in February 2023 and were cancelled.
In February 2023, we accounted for an amendment to the 2020 Credit Agreement as an extinguishment of debt and $1.2 million of unamortized debt issuance costs were recorded as loss on extinguishment of debt in 2023. In connection with the execution of the 2023 Credit Agreements in August 2023, the Company terminated its 2020 Credit Agreement.
Financing activities in 2022 included $92.9 million of net proceeds received from an underwritten stock offering, offset in part by a $55.0 million revolving line of credit payment, a $15.0 million prepayment made on the term loan, a $5.8 million payment on the Tax Receivable Agreement, and $3.8 million in other debt-related payments.
Financing activities in 2024 included $61.0 million of proceeds received from the Related Party Loan, offset in part by a $25.0 million payment to pay off the term loan from the 2023 Credit Agreement, $5.0 million in repayments against the revolving debt outstanding from the 2023 Credit Agreement, and $3.5 million in payments on debt issuance costs associated with entering into the Amended and Restated Credit Agreement.
However, if actual results are not consistent with our estimates or assumptions, we may be exposed to losses or gains that could be material. Income Taxes Accounting for income taxes requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in our financial statements or tax returns.
However, if actual results are not consistent with our estimates or assumptions, we may be exposed to losses or gains that could be material. 35 Results of Operations A discussion regarding our financial condition and results of operations for the year ended December 31, 2024 compared to the year ended December 31, 2023 is presented below.
Change in Fair Value – Warrant Liabilities The 1.9 million sponsor warrants outstanding had a negligible fair value at December 31, 2022 compared to a fair value of $4.3 million at December 31, 2021.
At December 31, 2024, the Warrants had a fair value of $16.1 million.
The larger operating loss primarily resulted from a decrease in gross profit that was driven by reduced sales and a lower gross profit percentage, an increase in marketing and sales costs related to the launch of our new products and showroom expansion, an increase in general and administrative expense resulting from legal and professional fees incurred by the Special Committee, and a loss on impairment of goodwill.
This decrease was driven by an $11.1 million decrease in marketing and sales costs due primarily to a decline in advertising spend, a $15.3 million decrease in general and administrative expense due largely to non-recurring legal and professional costs incurred by the Board’s special committee in 2023 and a $6.9 loss on impairment of goodwill recorded in 2023.
This decrease reflected the impact of our gross profit percentage declining to 33.7% of net revenues in 2023 as compared to 36.3% in 2022. Our reduced gross profit percentage was primarily impacted by the transition to our new product lineup in 2023.
This decrease was offset in part by $15.4 million of charges associated with the Restructuring Plan. Our gross profit percentage, which increased to 37.1% of net revenues in 2024 from 33.7% in 2023, reflected improved production effectiveness in 2024 coupled with the negative impact in 2023 of non-recurring costs associated with the transition to our new product lineup.
Marketing and Sales Marketing and sales expense increased $16.9 million, or 10.2%, to $182.3 million for 2023 compared to $165.4 million for 2022.
Marketing and Sales Marketing and sales expense decreased $11.1 million, or 6.1%, to $171.3 million in 2024 compared to $182.3 million in 2023.
Each Warrant entitles the registered holder to purchase one share of our Common Stock at a price of $1.50 per share, subject to adjustment. The Warrants will expire on the 10-year anniversary of issuance, or earlier upon redemption.
The 2024 Warrants will expire on the 10-year anniversary of issuance, or earlier upon redemption.
The increase in advertising spend began in mid-May to support the launch of our new Premium and Luxe product lineups. The increase in wholesale marketing and sales costs was primarily due to our wholesale partners transitioning to the new Premium and Luxe product lineup during the third and fourth quarters of 2023.
This decrease was primarily due to a $7.2 million decrease in advertising spend and a $2.9 million decrease in wholesale marketing and sales costs compared to the corresponding amounts in the prior year when we invested heavily to support the launch of our new product lineups.
Interest expense was reduced by capitalized interest of $1.5 million and $0.7 million during 2023 and 2022, respectively. Other (Expense) Income, Net Other expense was $1.2 million for 2023 compared to other income of $0.4 million for 2022.
Interest expense in 2023 was reduced by capitalized interest of $1.5 million. Other Income (Expense), Net Other income was $11.5 million in 2024 compared to other expense of $1.2 million in 2023. Other income in 2024 was primarily comprised of two payments totaling $11.6 million received in full settlement of a previously filed business interruption claim.
This increase was primarily due to a $3.7 million increase in payroll and benefits expense and $1.2 million in costs associated with the Intellibed acquisition, offset in part by a $0.7 million decrease in legal and professional fees.
General and Administrative General and administrative expense decreased $15.3 million, or 18.2%, to $69.1 million in 2024 compared to $84.4 million in 2023. This decrease was primarily due to $11.3 million of non-recurring legal and professional costs incurred by the Board’s special committee in 2023 coupled with a $4.9 million reduction in other professional fees in 2024.
Cost of Revenues Cost of revenues decreased $26.4 million, or 7.2%, to $338.7 million for 2023 compared to $365.1 million for 2022. This decrease was due in part to lower sales volume.
Cost of Revenues Total cost of revenues decreased $32.0 million, or 9.4%, to $306.7 million in 2024 compared to $338.7 million in 2023. This decrease was due to lower sales volume coupled with lower production costs that were largely attributable to supply chain initiatives and operational efficiency improvements implemented over the last 12 months.
Net loss attributable to Purple Innovation, Inc. was $120.8 million for the year ended December 31, 2023 compared to $92.5 million for the year ended December 31, 2022. The net loss in 2023 reflected an operating loss of $113.7 million and other expense of $7.5 million.
Net loss attributable to Purple Inc. was $97.9 million in 2024 compared to a net loss of $120.8 million in 2023. The $22.9 million decrease in net loss was primarily due to a $9.3 million increase in gross profit and a $12.2 million decrease in operating expenses.
In connection with our execution of the Amended and Restated Credit Agreement, all obligations under the 2023 Credit Agreements were paid in full and the 2023 Agreements were terminated.
In connection with our execution of the Amended and Restated Credit Agreement, all obligations under the previously outstanding term loans and revolving credit facility were paid in full and the respective related agreements (collectively, the “2023 Credit Agreement”) were terminated. 31 On March 12, 2025, we entered into the 2025 Amendment, pursuant to which the 2025 Term Loan Lenders (as defined in the 2025 Amendment) agreed to provide us with an incremental term loan of $19.0 million.
The increase in cash used in operating activities was offset in part by proceeds received from an underwritten stock offering. The increase in cash used in operating activities primarily reflected the impact of a $28.5 million increase in our net loss. 63 Cash used in investing activities was $16.1 million for 2023 compared to $34.5 million for 2022.
The working capital changes were primarily comprised of an $11.1 million increase in accrued warranties, a $4.4 million increase in accounts payable accounts and a $5.9 million decrease in inventories. Net cash used in investing activities was $7.5 million in 2024 compared to $16.1 million in 2023.
Removed
For further discussion see Note 4 — Acquisition. 49 Recent Developments in Our Business Operational Developments – Launch of New Premium and Luxe Product Lineups Beginning in 2022 and continuing into 2023, we expanded our focus on product development and increased our innovation capabilities. As a result, in May 2023, we launched our new Premium and Luxe product lineups.
Added
We market and sell our products via our DTC channel, which includes Purple.com (our direct-to-consumer e-commerce), Purple showrooms, our customer contact center and online marketplaces, and our wholesale channel through retail brick-and-mortar and online wholesale partners. Organization Our business consists of Purple Inc. and its consolidated subsidiary, Purple LLC.
Removed
This launch was supported by enhancements to our in-store presence and refinements to our marketing programs and brand messaging. While the response to our new products and enhanced brand positioning has been extremely positive, in 2023, we have continued to experience softening demand for home-related products that can be attributed to the overall market conditions.
Added
We are concentrating efforts on driving gross margin improvement through various methods such as selective pricing actions, continued mix shift towards our Restore and Rejuvenate collections, and by driving cost savings through supply chain initiatives and manufacturing efficiency.
Removed
Also, as consumer spending habits have moved away from the COVID era e-commerce spike to brick and mortar buying, we have grown the number of Purple showrooms to 60 as of December 31, 2023. In addition, we have focused on growing our placements with wholesale partners and improving wholesale door productivity.
Added
We have also delivered direct material cost savings from our supplier diversification efforts, improved scrap and yield results from continuous improvements, and our outbound freight costs reflect cost improvements along with improved delivery reliability.
Removed
Over the course of the third and fourth quarters, we transitioned all of our wholesale partners to our new line of mattress products. Improving the sales productivity of both our wholesale partners and existing showrooms remains a primary focus and critical component of our strategy to respond to shifting demand patterns.
Added
Moreover, we believe consolidation of our manufacturing footprint pursuant to our Restructuring Plan is an important step to advance our grid innovation and build momentum to achieve positive operating cash flow and market share growth over the long- term. The fourth quarter 2024 was significant for us as we achieved profitability and positive cash flow.
Removed
We are also diligently working to improve e-commerce conversion by testing how to best optimize increased traffic on our website. We experienced several years of hyper growth during the pandemic and increased investments to support current and future expansion.
Added
This was the direct result of our disciplined execution, operational improvements and cost saving initiatives throughout the year. Other key highlights during the fourth quarter of 2024 included significant improvements in Purple showroom profitability and the successful launch of our product in Costco retail locations.
Removed
After right-sizing our operations, improving our execution, and refining our strategies to drive share gains in the premium mattress category, we are now building the framework for improved operational maturity and accountability to position us for accelerated growth.
Added
In 2025, we announced the re-launching of our Rejuvenate line in the second quarter 2025 through our DTC channels, followed by a full wholesale channel roll-out expected to be complete by the third quarter 2025.
Removed
With the introduction of our new product lineups, we initiated a new marketing campaign and enhanced brand positioning and increased media investment at the top of the acquisition funnel.
Added
The new Rejuvenate 2.0 will have a newly innovated grid technology that when stacked with our original Gelflex grid, creates a unique combination that continues to differentiate us in the market while driving superior comfort and support for an even more premium sleep experience.
Removed
As a result, during the fourth quarter of 2023, our new product lineup became fully accessible across all sales channels which led to our highest level of quarterly net revenues since the fourth quarter of 2021.
Added
Restructuring Activities 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.
Removed
Coliseum Cooperation Agreement On February 21, 2023, Coliseum on behalf of its funds and managed accounts, filed a lawsuit against us and several members of our Board of Directors alleging that we and the named directors authorized an improper dividend of preferred stock in bad faith to impede stockholder voting rights and interfered with Coliseum’s nomination of a competing slate of director candidates ahead of our 2023 Annual Meeting.
Added
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.
Removed
On April 19, 2023, we entered into a Cooperation Agreement with Coliseum to resolve the litigation. The details of the Cooperation Agreement, which became effective on April 27, 2023, are discussed further in Note 14 — Related Party Transactions — Coliseum Capital Management, LLC.
Added
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.
Removed
Shelf Registration Statement and Equity Financing On January 30, 2023, the Form S-3 shelf registration statement we filed with the SEC in December 2022 became effective.
Added
During 2024, we recognized $36.4 million in costs relating to the Restructuring Plan., which included $4.3 million of employee-related costs, $11.3 million of accelerated depreciation, $9.3 million related to write-downs of inventory and long-lived assets to be disposed of or equipment in progress that will not be put in service, $11.0 million of impairment charges associated with entering into a sublease for one of the Utah manufacturing facilities to be closed and impairment of an intangible asset, and $0.5 million of other related costs.
Removed
As a result, we may offer and sell from time to time, in one or more series or issuances and on terms that we will determine at the time of the offering, any combination of the securities described in the registration statement, up to an aggregate amount of $90.0 million.
Added
We expect to record additional restructuring and other related charges in the amount of $4.6 million through 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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe Term and ABL Loans entered into in August 2023 bore interest at variable rates which exposed us to market risks relating to changes in interest rates. As of December 31, 2023, we had $25.0 million of variable rate debt outstanding under our Term Loans and $5.0 million of variable rate debt outstanding under our ABL Loans.
Biggest changeThe Related Party Loan entered into in January 2024 bears interest at a variable rate which exposes us to market risks relating to changes in interest rates. As of December 31, 2024, we had $70.7 million of variable rate debt associated with the Related Party Loan.
We do not use derivative financial instruments for speculative or trading purposes, but this does not preclude our adoption of specific hedging strategies in the future. 64
We do not use derivative financial instruments for speculative or trading purposes, but this does not preclude our adoption of specific hedging strategies in the future.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Interest Rate Risk Our results of operations are subject to risk from interest rate fluctuations on our outstanding borrowings. Interest rate risk is highly sensitive due to many factors, including United States monetary and tax policies, United States and international economic factors and other factors beyond our control.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Interest Rate Risk Our results of operations are subject to risk from interest rate fluctuations on our outstanding borrowings. Interest rate risk is highly sensitive due to many factors, including U.S. monetary and tax policies, U.S. and international economic factors and other factors beyond our control.
Based on the $61.0 million Loan entered into in January 2024, pursuant to the Second Amendment and the Amended and Restated Credit Agreement, an increase of 100 basis points in the effective interest rate on the amount outstanding would result in an increase in interest expense of approximately $0.6 million over the next 12 months.
Based on this debt level, an increase of 100 basis points in the effective interest rate on the outstanding debt amount would result in an increase in interest expense of approximately $0.7 million over the next 12 months.
Removed
Based on these debt levels, an increase of 100 basis points in the effective interest rate on the combined outstanding debt amount would have resulted in an increase in interest expense of approximately $0.3 million over the next 12 months, assuming we had not paid off these debts in January 2024, pursuant to the Second Amendment and the Amended and Restated Credit Agreement.

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