UNITED STATES

 SECURITIES AND EXCHANGE COMMISSION

 Washington, D.C. 20549

 Form 10-K

 (Mark One)

 ANNUAL REPORT PURSUANT TO SECTION
13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

 For the fiscal year ended December 31,
 2024

 TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

 For the transition period from __________ to
 __________

 Commission file number: 001-37523

 (Exact name of registrant as specified in its charter)

 Delaware

 47-4078206

 (State or other jurisdiction of

incorporation or organization)

 (I.R.S. Employer
 Identification No.)

 4100 NORTH CHAPEL RIDGE ROAD SUITE 200
 LEHI, UTAH

 84043

 (Address of principal executive offices)

 (Zip Code)

 Registrant's telephone number, including
area code: (801) 756-2600

 Securities registered pursuant to Section 12(b)
of the Act:

 Title of each class

 Trading Symbol(s)

 Name of each exchange on which
 registered

 Class A Common Stock, par value

$0.0001 per share

 PRPL

 The NASDAQ Stock Market LLC

 Preferred Stock Purchase Rights

 N/A

 The NASDAQ Stock Market LLC

 Securities registered pursuant to Section 12(g)
of the Act: None

 Indicate by check mark if
the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No

 Indicate by check mark if
the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes
 No

the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes No

the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
(§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit
such files). Yes No

the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging
growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting
company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 Large accelerated filer

 Accelerated filer

 Non-accelerated filer

 Smaller reporting company

 Emerging growth company

 If an emerging growth company,
indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the Exchange Act.

the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control
over financial reporting under Section 404 (b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm
that prepared or issued its audit report.

 If securities are registered
pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing
reflect the correction of an error to previously issued financial statements.

any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the
registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b).

the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

 As of June 30, 2024, the
last business day of the registrant's most recently completed second fiscal quarter, the aggregate market value of the common stock
outstanding, other than shares held by persons who may be deemed affiliates of the registrant, computed by reference to the closing sales
price for the common stock as of June 30, 2024, as reported on NASDAQ, was $ 58.5 million.

 As of March 7, 2025, there
were 107,545,493 shares of Class A common stock, par value $0.0001 per share, and 164,982 shares of Class B common stock; par value $0.0001
per share of the registrant issued and outstanding.

 DOCUMENTS INCORPORATED BY REFERENCE

 Certain portions of the registrant's
definitive proxy statement relating to the Annual Meeting of Stockholders are specifically incorporated by reference in Part III, Items
10, 11, 12, 13 and 14 of this Annual Report on Form 10-K.

 PAGE

 Item 1.

 Business

 Item 1A.

 Risk Factors

 Item 1B.

 Unresolved Staff Comments

 Item 1C.

 Cybersecurity

 Item 2.

 Properties

 Item 3.

 Legal Proceedings

 Item 4.

 Mine Safety Disclosures

 Item 5.

 Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 Item 6.

 [Reserved]

 Item 7.

 Management's Discussion and Analysis of Financial Condition and Results of Operations

 Item 7A.

 Quantitative and Qualitative Disclosures About Market Risk

 Item 8.

 Financial Statements and Supplementary Data

 Item 9.

 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 Item 9A.

 Controls and Procedures

 Item 9B.

 Other Information

 Item 9C.

 Disclosure Regarding Foreign Jurisdictions that Prevent Inspection

 Item 10.

 Directors, Executive Officers and Corporate Governance

 Item 11.

 Executive Compensation

 Item 12.

 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 Item 13.

 Certain Relationships and Related Transactions, and Director Independence

 Item 14.

 Principal Accountant Fees and Services

 Item 15.

 Exhibits and Financial Statement Schedules

 Item 16.

 Form 10-K Summary

 Unless the context otherwise
requires, references in this Annual Report on Form 10-K to (i) "Purple," "the Company," "our company,"
"we," "our" and "us," or like terms, refer to Purple Innovation, Inc. and its subsidiaries, currently
Purple Innovation, LLC; (ii) "Purple Inc." refers to Purple Innovation, Inc. without its subsidiary; (iii) "Purple LLC"
refers to Purple Innovation, LLC, an entity of which Purple Inc. acts as the sole managing member and of whose common units we own approximately
99.9% as of March 7, 2025; (iv) "Business Combination" refers to the February 2, 2018 reverse recapitalization transaction
pursuant to which Purple Inc. acquired Purple LLC; (v) "Global Partner Acquisition Corp." and "GPAC" refer to
the Company prior to the closing of the Business Combination; (vi) "Common Stock" or "Class A Stock" refers to
the Company's Class A common stock, par value $0.0001 per share; (vii) "Class B Stock" refers to the Company's
Class B common stock, par value $0.0001 per share; and (viii) "2024 Annual Meeting" refers to the Company's 2024 annual
meeting of stockholders.

 i

 CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 This report, including, without
limitation, statements under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations,"
includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, or the Exchange Act. Statements in this report that are not descriptions of historical facts are forward-looking
statements that are based on management's current expectations and are subject to risks and uncertainties that could negatively
affect our business, results of operation, financial condition and stock price. These forward-looking statements relate to expectations
for future financial performance, business strategies or expectations for Purple. Specifically, forward-looking statements may include
statements relating to changes in the markets in which Purple competes, expansion plans and opportunities, our restructuring, our expectation
of opening additional Purple showrooms, increases in capital, advertising and operational expenses, and other statements preceded by,
followed by or that include the words "estimate," "plan," "project," "forecast," "intend,"
"expect," "anticipate," "believe," "seek," "target" or similar expressions.

 The forward-looking statements
contained in this report are made only as of the date hereof. It is routine for our internal projections and expectations to change throughout
the year, and any forward-looking statements based upon these projections or expectations may change prior to the end of the next quarter
or year. Forward-looking statements are based on our current expectations and beliefs concerning future developments and their potential
effects on us. Future developments affecting us may not be those that we have anticipated. These forward-looking statements involve a
number of risks, uncertainties (some of which are beyond our control) and other assumptions that may cause actual results or performance
to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include,
but are not limited to, those factors described under the heading "Risk Factors." Should one or more of these risks or uncertainties
materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these
forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise, except as may be required under applicable securities laws. These risks and others described
under "Risk Factors" may not be exhaustive.

 By their nature, forward-looking
statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the
future. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations,
financial condition and liquidity, and developments in the industry in which we operate may differ materially from those made in or suggested
by the forward-looking statements contained in this report. In addition, even if our results or operations, financial condition and liquidity,
and developments in the industry in which we operate are consistent with the forward-looking statements contained in this report, those
results or developments may not be indicative of results or developments in subsequent periods.

 ii

 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. We offer a variety
of innovative, branded and premium comfort products, including mattresses, pillows, cushions, bases, sheets and more. Our products are
the result of decades of innovation and investment in proprietary and patented comfort technologies and the development of our own manufacturing
processes. Our proprietary Hyper-Elastic Polymer gel technology underpins many of our comfort products and provides a range of benefits
that differentiate our products from our competitors. Specially engineered to relieve pressure, maintain an ideal body temperature, and
provide instantly adaptive support, Purple's patented technology has been tested rigorously within medical and consumer applications
for over 30 years. Originally designed for use in hospital beds and wheelchairs, we adapted this unique pressure-relieving material for
our mattresses, pillows and other cushion products.

 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 have integrated our operations to include research and development,
marketing and manufacturing. As a result, we have the ability to rapidly test, learn, adapt and scale our product offerings. In order
to solve complex manufacturing challenges such as large-format injection molding of our Hyper-Elastic Polymer cushioning material, we
designed and produced our own manufacturing equipment including our proprietary and patented molding machinery. These fully customized
machines are unique to Purple and, we believe, can handle both our size and scale requirements. 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.
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. To complement our DTC efforts, we have developed multiple wholesale relationships
with best-in-class retailers in the furniture, mattress specialty, and home d cor spaces. Our goal is to provide opportunities
for each customer to learn, shop, and buy in the way that works for them. 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. 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.

 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. We continue to strategically open new showrooms and anticipate continued expansion of our showrooms in the future.

 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. 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.
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. The sleep product industry has generally remained complacent until
the introduction of our proprietary Hyper-Elastic Polymer material, which we believe represents a meaningful innovation in pressure relief,
temperature neutrality, responsiveness, durability and limited motion transfer. We believe that our proprietary technology solves problems
that regular mattresses create and has proven that material innovations can have a positive impact on sleep.

 Beginning in 2015, the market
for sleep products underwent a fundamental transformation with the rise of e-commerce-based brands and direct-to-consumer distribution.
This market change disrupted the traditional category dynamics and drove the majority of category growth (versus traditional mattress
companies) for several years. 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. Amidst this changing category dynamic, Purple's product differentiation
and manufacturing capabilities paired with our strategic mix of showrooms, e-commerce and third-party retailers, has allowed us to gain
share and be a leader in the sleep products category.

 In 2022, we acquired Advanced
Comfort Technologies, Inc., dba Intellibed ("Intellibed"), a premium sleep and health wellness company that was a pre-existing
licensee of the founders of some of our technologies. This acquisition resulted in us owning the sole right to use all of our Hyper-Elastic
Polymer technologies in our beds. 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). 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. 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. Prior to Purple, there has been little
recent success disrupting the premium market, where the majority of category revenue and profit is realized. Competitors in the premium
market include Tempur Sealy and Sleep Number.

 While e-commerce home goods purchases have increased over the past
five years, traditional brick-and-mortar retailers command a significant part of the market for mattress products. This part of the retail
market is also highly fragmented and competitive. The leading brick-and-mortar specialty mattress retailer in the United States is Mattress
Firm and the leading furniture store is Ashley Furniture. These national retailers compete with both regional and local retailers as well
as furniture and department stores. Purple has also expanded into many of these regional and local furniture retailers.

 Across these channels, some
key factors that impact competition in our industry are comfort feel, product features, reliable logistics and manufacturing capabilities,
marketing efficacy and efficiency, brand differentiation, expertise of sales associates, customer care, pace of innovation and product
roadmap, price of products and services, financial stability and ability to invest in innovation.

 What Makes Purple Different?

 We believe we have a particular
set of competitive strengths that differentiate and position us for continued success:

 History of innovation that produced new comfort technology— We are a company built on innovation and licensing, with more than 30 years of expertise in comfort innovation. Purple is founded upon decades of history-developing innovative comfort solutions, including the invention of our proprietary and patented Hyper-Elastic Polymer technology. Our breakthrough mattress represents what we believe to be the first substantive innovation in the sleep product industry since the introduction of memory foam in 1992. We believe that the unique properties of our technology have resulted in several improvements to existing sleep products that are not addressed by foam, spring or air mattresses.

 Pressure Relief— Our Hyper-Elastic Polymer technology is designed around the science of column buckling which enables our mattresses to be both firm and soft. This offers support across the body's larger surface areas, such as the back, while providing pressure relief at local areas or points of pressure, such as the hips and shoulders. We believe Purple's founders were the first to leverage this technology in mattresses after their success in licensing their proprietary Hyper-Elastic Polymer technology to medical manufacturers for use in wheelchairs, critical care beds and hospital beds. The resulting feel is often described as buoyant and responsive.

 Temperature Neutral— The Hyper-Elastic Polymer material itself is temperature neutral, with the surface comprised mostly of air, made from thousands of open-air channels. The channels allow for high airflow and dissipation of heat and vapor. This is the opposite of foam beds, which absorb heat from the body and then radiate the heat back, constantly increasing the temperature. Our technology allows for continual sleeping without waking up hot.

 Responsive— Unlike memory foam, which compresses, gets hard and then takes time to recoil, our Hyper-Elastic Polymer technology is instantly responsive to the body as it moves. It will immediately flex to support the sleeper's position and spring back into place as the sleeper readjusts during the night.

 Durable— Hyper-Elastic Polymer material is a highly durable gel that we believe is more durable than most foams. The Hyper-Elastic Polymer technology also has numerous applications beyond mattress products including seat cushions and pillows. Hyper-Elastic Polymer technology is only one of numerous innovations we have developed to produce a range of unique and effective comfort products across the sleep, seat cushion and other categories.

 Proprietary technologies and manufacturing expertise provide a significant competitive advantage— We believe the combination of patent protection, proprietary manufacturing equipment and decades of accumulated knowledge creates a competitive advantage through barriers to imitation. We have hundreds of granted or pending patents and hundreds of patent filings that cover current and future products as well as proprietary manufacturing equipment we have designed and fabricated. In addition to intellectual property protection of key products and manufacturing capabilities, our team has in depth experience and unique insights derived from inventing and refining proprietary comfort technologies, machines and products. Our patented and proprietary molding processes and machines allow for large-format injection molding of gels efficiently and at scale.

 Growing a brand with a passionate following— Our brand mirrors our passion for uncompromising performance, quality
and durability, and our dedication to improving lives by delivering better sleep and better comfort. We believe our brand awareness rivals
category leaders. Our brand has extended beyond awareness of individual products and we have successfully marketed our full suite of products
to customers using our omni-channel strategy. We believe our customer satisfaction metrics are amongst the best in the industry, and that
our customers' high satisfaction with our product has continued to drive "word of mouth" recommendations, one of the
most persuasive ways consumers learn about our products.

 Balanced, omni-channel
 distribution strategy — We have sought opportunities to expand
 brand awareness in brick-and-mortar retailers where our beds can be displayed. Our goal is to support the customer wherever and however
 they want to learn, try, and buy. Whether in wholesale, Purple showrooms or our e-commerce channel, we are a leader in the sleep
 products market. Our flexible return policies and aggressive expansion into wholesale locations (commonly referred to as "doors")
 and our own showrooms allow for more of our targeted customers to feel and experience our products throughout the purchase process.
 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. As a result, we believe we will drive accelerated growth in the sleep products industry.

 Vertical integration enables
 nimble design, development and execution — We design and develop our products in-house
 and we have extensive research and development capabilities led by a team of engineers, industrial
 designers and marketing specialists. The ability to develop and test products in this manner enables
 us to not only prototype and deploy new ideas, but also design and develop corresponding manufacturing
 equipment and processes. In addition, we continuously refine our production methods to improve product
 quality and enhance efficiency. 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. 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. 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. 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. 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. We intend to effectively articulate the unique qualities of sleeping on our gel grid layer to be more effective and reach more consumers. 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. 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. 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. These savings will enable us to reinvest in innovation and marketing to drive growth.

 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. The columns in our Gelflex Grid mattresses instantly adapt to your body to cradle your hips and shoulders while supporting your spine's natural alignment for uniquely buoyant, supportive comfort. Our Gelflex Grid products are manufactured with non-toxic ingredients that are third-party tested and free from carcinogenic chemicals. Our patented Gelflex Grid technology is used in all Purple mattresses. We back up the quality and durability of our mattress with a 100-night trial and a 10-year warranty. 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. The Purple Harmony Pillow, the Purple Freeform Pillow, the Purple DreamLayer Pillow, the Purple Harmony Anywhere Pillow, the Purple Pillow, the Purple Twin Cloud Pillow, the Purple Cloud Pillow and the Kids Pillow. The Purple Harmony Pillow is the world's first pillow with a full wrap of honeycomb Gelflex Grid surrounding a soft, responsive latex core for blissfully cool comfort and responsive airy support. The newly launched Purple Freeform Pillow features the honeycomb Gelflex Grid with an all-new MicroFlex Moon Foam fill interior for luxurious, moldable comfort. It is our first fully adjustable pillow as the MicroFlex Moon Foam and optional neck roll chambers can be adjusted for personalized height, firmness and support. The newly launched Purple DreamLayer Pillow uses an all-new version of the Gelflex Grid combined with MicroAir Foam for a dreamy, melt-in comfort that provides contour-hugging support without the heat and delay of a traditional memory foam. The Purple Harmony Anywhere Pillow has all of the advantages and feel of the Purple Harmony Pillow in a portable, take-anywhere travel size. The Purple Pillow is designed entirely of Gelflex Grid for a firmer, no-fluff, ergonomic support with ultimate cooling and adjustable height layers. The Purple Twin Cloud Pillow is a hypoallergenic down-alternative that features our patented cover construction and two chambers of silky, down-like fibers for an extra fluffy, cloud-like comfort with two optional firmness settings. The Purple Cloud Pillow features the same fill as the Purple Twin Cloud Pillow, but a simpler, single chamber design for classic, cloud-like comfort. The Kids Purple Pillow is made entirely of Gelflex Grid, similar to the Purple Pillow, but is smaller and softer for smaller sleepers. We believe our pillows are unique and there is a sleep solution for every type of sleeper to get the best sleep of their life, with no other products in the market like them in appearance, design, functionality or comfort. 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 developed our own technology to enable customers to experience the full performance potential of our unique Gelflex Grid mattress (or any other mattress). Our sheet sets include pillowcases that also maximize the unique functionality of our pillows and come in both standard and deep pocket sizes.

 Waterproof Mattress Protector— Like our sheets, our new Purple Waterproof Mattress Protector mattress is designed to optimize the functionality of our Gelflex Grid in our mattress. Our premium mattress protector is stretchy, breathable and waterproof. 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. 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 platform bed assortment includes the Purple Bed Foundation and the Purple Metal Platform. The Purple Bed Foundation has the look of
a stylish upholstered bed frame and is easy to ship and assemble, with no tools required. 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. 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.

 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. Mattresses from our competitors are typically manufactured using one or more layers of springs,
standard polyurethane foam, memory foam, air chambers or latex foam and are undifferentiated from competitors within their product type.

 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 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. While the columns in this structure provide support where it is needed, they also buckle where it
is needed to reduce pressure by allowing shoulders and hips to sink into the cushion with reduced force pushing back on those areas of
the body unlike other cushion technologies. The soft and flexible columns also return to their original position as forces lessen and
are capable of immediately providing support.

 Proprietary Machinery

 Internally designed, developed
and built, our patented and proprietary molding machines are able to mold our Hyper-Elastic Polymer material into large-format king-sized
mattresses at scale. We have modified other molding machines to manufacture additional products containing Hyper-Elastic Polymer material.
We also acquired in the Intellibed acquisition the patented manufacturing machine and process that had been licensed by our founders,
preventing others from obtaining access to that technology. 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 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. Our marketing efforts are focused on building awareness of the Purple brand and illustrating the unique
way our products deliver better sleep and comfort. We leverage data-driven marketing across all communication channels to engage, acquire,
and retain customers. We also amplify the voices of our evangelical product owners, whose word-of-mouth recommendations are one of our
most powerful (and ownable) marketing vehicles. Deep engagement with current customers enables us to increase additional product sales
across our portfolio of offerings. The success we have achieved through our marketing campaigns has been key to rapidly building our branding
and awareness. 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.

 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.

 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. We sell directly to consumers through our website, our customer contact center and online marketplaces. With our website and
customer contact center, we help customers easily engage in relevant content, research our solutions, transact online or via our customer
contact center, or find the nearest retailer. We believe our online experience expands our brand and connections with consumers, enabling
deeper awareness, engagement and brand loyalty. We believe our 100-night trial, 10-year warranty, attractive financing options, strong
customer testimonials and excellent service provide confidence to consumers buying a mattress.

 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 began selling mattresses and other sleep products through our largest wholesale partner, Mattress Firm, in November
2017 and have continued to expand the number of wholesale partners where our mattresses and other sleep products are sold. 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.
Sales associates have been trained and we believe are effective in educating consumers regarding our unique benefits as well as shifting
the mix upward to our more premium and higher-margin mattresses. We expect to continue to grow our placements with wholesale partners
to give our customers the opportunity to feel the difference of our Hyper-Elastic Polymer technology for themselves.

 Operations

 Factories, Supply Chain and Manufacturing

 In August 2024, we initiated
a 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 (the "Restructuring Plan"). The Restructuring
Plan is comprised of the permanent closure of both Utah manufacturing facilities to consolidate mattress production in our Georgia plant.
Closure of the two Utah manufacturing facilities is planned to be completed in the second quarter of 2025. 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. We also have recently opened a 198,000 square foot distribution facility in Salt
Lake City, Utah, that in addition to the McDonough facility, will assemble, package and ship our products. We continually strive to improve
our manufacturing processes and create efficiencies in production through new equipment and process designs and resources. We also manage
our production labor and capacity utilization to promote efficient use of our manufacturing facilities. We believe our McDonough factory
provides 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. 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. These suppliers may be interchanged in order to maintain quality, cost
and delivery expectations.

 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. As a manufacturer of mattresses and related products, we handle
regulated substances, which subject us to various environmental laws. 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 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. We have not suffered a material adverse effect from non-compliance with federal,
state, local or foreign legislation, but there can be no assurance that material costs or liabilities will not be incurred in connection
with such legislation in the future.

 Research and Development

 Our research and development
teams are focused primarily on developing new comfort technologies and products. 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. 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. 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. 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. Our intellectual property portfolio is integral
to our continued success in this industry, particularly with respect to our Hyper-Elastic Polymer material as well as our molding processes
and machines.

 We own or have the exclusive right to use hundreds of granted or pending
patents and hundreds of patent filings on inventions and designs pertaining to our machines, processes, mattresses, pillows, seat cushions,
packaging techniques and other related existing and future products. 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. 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.

 Many of the common law marks
have registrations pending with the USPTO and other international jurisdictions. 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.

 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.

 While we may own or have the
exclusive rights in this intellectual property it is our responsibility to maintain that exclusivity through intellectual property enforcement
efforts when an infringement occurs. We continue to enforce those intellectual property rights and will continue to do so to maintain
our success in this industry.

 We protect and enforce our
intellectual property rights, including through litigation as necessary.

 Human Capital

 At Purple, our primary focus
is fostering the professional development of our employees through collaboration of engaged teams and helping them feel connected to Purple's
success. We try to achieve this through maintaining a safe and high-functioning work environment that cultivates an authentic
company culture. 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.

 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. 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. We will continue to invest
in new technology to enhance communication channels and optimize our human resource information system, enabling self-service functionalities
for managers and employees. In alignment with our core values, we will place emphasis on creating shared experiences that will facilitate
genuine connections and foster strong relationships within our workforce.

 Deliver competitive
and meaningful pay and benefits

 We
attempt to provide compensation packages that are both competitive and meaningful, encompassing salary and benefits that align to market
standards. We will continue to provide relevant employee perks that connect our employees with our Company's mission and actively
contribute to nurturing employee engagement.

 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.

 Available Information

 Our website address is www.purple.com.
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

 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.

 Information About Our Executive Officers

 As of the date of this report,
our executive officers are as follows:

 Name

 Age

 Title

 Director, Chief Executive Officer

 Todd E. Vogensen

 Chief Financial Officer and Treasurer

 Tricia S. McDermott-Spikes

 Chief Legal Officer and Secretary

 Eric S. Haynor

 Chief Operating Officer

 Jeffrey L. Hutchings

 Chief Innovation Officer

 Jeffery S. Kerby

 Chief of Owned Retail Officer

 John J. Roddy IV

 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. Olympic & Paralympic Committee governing body for all disciplines of competitive
cycling in the United States, from 2019 until 2021. He previously served as president and chief executive officer of New Balance Athletic
Shoes (U.K.) Ltd., from 2018 to 2019 and as president and chief executive officer of New Balance Athletics, Inc. from 2007 to 2018, each
a business unit of New Balance, Inc. a leading manufacturer and retailer of athletic footwear, apparel and accessories. From 1982 through
2007 Mr. DeMartini held various leadership positions with Procter & Gamble, The Gillette Company, and Tyson Foods, Inc. He also currently
serves on the board of directors of Welch's Foods and Q30 Innovations/Q30 Sports Canada, and formerly served on the board of directors
of Advanced Functional Fabrics of America, The American Apparel & Footwear Association, and Aloha. Mr. DeMartini received a Bachelor
of Science degree in Finance from San Diego State University.

 Todd
E. Vogensen has served as Chief Financial Officer since October 2023. Prior to joining the Company, Mr. Vogensen served as executive
vice president and chief financial officer of Party City Holdings Inc. from February 2020 to August 2023. In January 2013, Party
City Holdings Inc. filed a voluntary petition for reorganization relief pursuant to Chapter 11 of the U.S. Bankruptcy Code. Previously, Mr. Vogensen
served as executive vice president—chief financial officer at Chico's FAS, Inc. from June 2015 to January 2020. He joined
Chico's FAS in October 2009, and served in roles of increasing responsibility, including senior vice president – finance,
and vice president – investor relations. Previously, Mr. Vogensen served in executive finance roles at Michaels
Stores, Inc., Gap, Inc., Hewlett Packard Company and PricewaterhouseCoopers LLP. Mr. Vogensen received a Bachelor of Science
degree in Accounting from Arizona State University.

 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. 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. McDermott-Spikes
was with Perry Ellis International, Inc., where she served in roles of increasing responsibility and last served as general counsel and
secretary from November 2017 to February 2021. Ms. McDermott-Spikes is active in her community, having previously served on the boards
of Teach for America (Miami-Dade), Family Promise of Palm Beach County, the Association of Corporate Counsel (Charlotte), and the U.S.
Patent & Trademark Office, Trademark Public Advisory Committee as an appointee of the U.S. Secretary of State. Ms. McDermott-Spikes
continues her service on the Board of Trustees of the Blumenthal Performing Arts Center in Charlotte, NC, as chair of the Talent, Development
& Retention Committee and member of the Governance Committee. Ms. 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.

 Eric S. Haynor has
served as the Chief Operating Officer of the Company since June 2022. Prior to joining the company, Mr. Haynor spent most of his career
with Ecolab, a supplier of cleaning, sanitizing and maintenance products and services for the institutional, hospitality, healthcare and
industrial markets, in a variety of end-to-end supply chain roles. From August 2019 until he joined the Company in June 2022 he served
as senior vice president, industrial supply chain at Ecolab providing strategic direction for eight industrial business units. Prior to
that, he held the role of vice president, global equipment operations and strategy from June 2015 to August 2019 at Ecolab. From August
2009 to June 2015, Mr. Haynor led Ecolab's EMEA supply chain operations and from April 2005 to August 2009 he led Ecolab's
Asia Pacific supply chain operations. His early career was spent in a variety of developmental supply chain roles. Mr. Haynor is a graduate
of Michigan State University and holds a Bachelor of Science degree in Mechanical Engineering.

 Jeffrey L. Hutchings
has served as the Chief Innovation Officer of the Company since May 2022. Mr. Hutchings has more than 20 years of experience in strategic
business leadership in innovation, new product introduction and quality assurance. Prior to joining the Company, Mr. Hutchings served
as chief product officer at Skullcandy Inc., a designer and manufacturer of performance audio and gaming headphones and other accessory
related products, from December 2018 to May 2022 and as vice president of product from June 2015 to December 2018. Prior to that from
July 2010 to June 2015, Mr. Hutchings served in various engineering and director roles at HARMAN International. Mr. Hutchings holds a
Bachelor of Science degree in Computer Engineering from the University of Utah.

 Jeffery S. Kerby has
served as the Chief of Owned Retail Officer of the Company since January 2023. Prior to joining the Company, Mr. Kerby served as vice
president, head of stores of Sephora, a retailer of personal care and beauty products, since May 2019, responsible for leading 86 stores
throughout Canada. From March 2018 to January 2019, he served as the senior regional director of American Eagle, a specialty retailer
of clothing, accessories and personal care products, where he led American Eagle/Aerie stores in the Midwest United States and Canada
with 225 stores. Prior to joining American Eagle, Mr. Kerby was with L Brands' LaSensa, a Canadian retailer of women's lingerie
and apparel, from February 2017 to March 2018. Prior to that, Mr. Kerby was the vice president, head of stores/store operations for L
Brands' Victoria's Secret International from June 2015 to September 2016. From October 2008 to June 2015, Mr. 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. Roddy 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. 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. 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.

 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. These are not all of the risks we face and other factors not presently known to us or that we currently
believe are immaterial may also affect our business if they occur.

 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.

 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. ("Harvest Partners"), and HSCP Strategic IV, L.P. ("HSCP" and together with CCP,
Blackwell, Harvest Master, and Harvest Partners, the "Lenders"). Upon entry into the Amended and Restated Credit Agreement,
we received a term loan in the amount of $61.0 million. 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.

 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. 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. Before taking any action requiring a waiver under the Amended and Restated Credit Agreement, we must first
obtain approval from the Lenders, which may cause us to incur additional costs and may not be granted. Non-compliance could lead to defaults,
which could materially adversely affect our financial condition and results of operations, including possible acceleration of our debt
and, as well as other cross-defaulting debt obligations. Additionally, defaults could significantly impair our ability to secure alternative
financing and limit our business strategies. Our compliance with these covenants will depend on successfully implementing our business
strategy, as breaches could lead to defaults and acceleration of our debt, potentially forcing us into bankruptcy or liquidation.

 In addition, on March 12,
2025, we entered into an Amendment to the Amended and Restated Credit Agreement (the "2025 Amendment"), pursuant to which
the Lenders agreed to provide us with an incremental term loan of $19.0 million. The 2025 Amendment also amended the Amended and Restated
Credit Agreement to (i) provide for an additional term loan from the 2025 Term Loan Lenders (as defined in the 2025 Amendment) in an aggregate
amount not to exceed $20.0 million, subject to the approval of the Required Lenders in their discretion, (ii) provide for the payment
of substantial make-whole payments in the event we prepay the loans prior to their maturity, and (iii) provide that the incremental term
loan will be senior in right of repayment to the initial term loan.

 Under the Amended and Restated
Credit Agreement, we have mandatory prepayment obligations, including upon certain asset dispositions, equity issuances, debt incurrences
and extraordinary receipts of cash. As amended by the 2025 Amendment, we may be required to make substantial "make-whole"
payments to the Lenders. If required to prepay or pay such make-whole payments, we may lack the liquidity to do so, resulting in default.
Prepayments, including make-whole payments, would also divert resources from operating expenses, potentially harming relationships with
suppliers, hindering growth strategies, and jeopardizing our business continuity. In addition, such payments could result in holders of
our Class A Stock not receiving any consideration in a sale of our business, or if we were to liquidate, dissolve, or wind-up, either
voluntarily or involuntarily.

 We
may need additional funds to execute our business plan, maintain our liquidity, repay our debt and fund our operations. 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. For the years ended December 31, 2024, and 2023, we had negative cash flow from operating activities of
$18.0 million and $54.7 million, respectively. As of December 31, 2024, we had unrestricted cash and cash equivalents of $29.0 million
and borrowings of $70.7 million under our Amended and Restated Credit Agreement (as defined below), which will become due on December
31, 2026.

 On
March 12, 2025, we borrowed an additional $19.0 million under the Amended and Restated Credit Agreement pursuant to the 2025 Amendment
(as defined below), which will also become due on December 31, 2026. The 2025 Amendment (as defined below) also added certain make-whole
payments with respect to our borrowings under the Amended and Restated Credit Agreement, which would require substantial payments in connection
with certain pre-payments or refinancing of our outstanding borrowings.

 In
connection with the preparation of our 2024 financial statements, we undertook a going concern assessment and concluded the Company will
have sufficient liquidity for its operations for at least one year from the date these consolidated financial statements are issued. However,
there can be no assurance that we will be able to maintain the liquidity necessary to fund our long-term operations and growth strategies,
or repay our debt obligations when due. As a result, we may need to secure additional sources of liquidity to fund our long-term operating
activities and capital expenditures. However, there can be no assurance that we will be able to obtain additional financing as needed
on terms favorable to us, or at all. If we fail to meet liquidity and capital requirements, we may need to scale back or halt our growth
plans, risking slower growth, losing suppliers, failing to meet customer demands, and losing employees. We may also need to restructure
our obligations or pursue other measures to address any liquidity deficiency.

 Under
the Amended and Restated Credit Agreement, we can request additional loans, but the Lenders may deny requests, limiting our access to
future funds and adversely affecting our liquidity, financial condition and results of operations.

 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, on March 12, 2025, we issued to the Lenders,
as partial consideration for their entering into the 2025 Amendment, warrants (the "2025 Warrants" and together with the 2024
Warrants, the "Warrants") to purchase 6.2 million shares of our Common Stock (approximately 6% of our currently outstanding
Common Stock) at a price of $1.50 per share, subject to certain adjustments. The exercise of such warrants and/or any additional similar
securities in the future would dilute the value and amount of our Common Stock. Similarly, any new securities we may issue may carry preferences,
superior voting rights, or additional terms that could adversely affect shareholders of our Common Stock. Future capital raising efforts
may incur substantial costs, such as investment banking, legal, and accounting fees, and could lead to non-cash expenses that negatively
impact our financial condition.

 We
may not realize all the intended benefits of our Restructuring Plan and other cost-saving initiatives, which could adversely affect our
results of operations and our financial condition.

 In
2024, we implemented our Restructuring Plan to consolidate our Utah manufacturing operations into our McDonough, Georgia plant, and we
plan to undertake further cost-saving initiatives in 2025. However, the remaining costs under our Restructuring Plan may exceed estimates,
and we may not achieve all the expected financial benefits or savings. Relocating equipment to Georgia and expanding our workforce there
could be challenging. Replacing experienced Utah employees with less experienced Georgia staff may lead to a loss of knowledge, lower
productivity, and decreased efficiency and quality. Manufacturing in a single U.S. region could increase our distribution costs. Consolidating
plants may cause disruptions in our inventory and raw material supply. We may not fully sublease our Utah facilities, impacting our financial
condition. The Restructuring Plan, as well as past and future restructurings, including workforce reductions, could harm employee morale,
disrupt business operations, result in the loss of institutional knowledge, damage our reputation, and impair our ability to attract skilled
talent, negatively affecting the business.

 In
addition, we plan to implement additional cost savings measures in 2025 beyond those implemented pursuant to our 2024 Restructuring Plan.
We may not achieve the expected financial benefits or savings from these additional cost savings measures, which could further adversely
affect our results of operations and financial condition. 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.

 Our quarterly and annual results
of operations have fluctuated in the past and we expect our future results of operations will fluctuate due to a variety of factors, many
of which are beyond our control. 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. If we fail to meet or exceed the expectations of analysts
and investors or if analysts and investors have estimates and forecasts of our future performance that are unrealistic or that we do not
meet, the market price of our Common Stock could decline. In addition, if one or more of the analysts who cover us adversely change their
recommendation regarding our stock, the market price of our Common Stock could decline.

 Coliseum Capital Management,
LLC is our largest stockholder and Lender, and exercises substantial control over our Board composition, management team members and strategies.

 As reported by Coliseum in
its Schedule 13D/A filed on January 23, 2024, Coliseum Capital Management LLC ("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). 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").

 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. 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. In addition, Coliseum exercises substantial
control over us as the primary Lender under the Amended and Restated Credit Agreement.

 In
2022, Coliseum delivered to us an unsolicited bid to acquire the remaining outstanding shares of our Common Stock, submitted a notice
of its intent to nominate a slate of directors, which slate would have constituted a majority of the Board, and filed a lawsuit challenging
our issuance of a dividend of shares of preferred stock (the "Action"). 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. The Cooperation Agreement terminated
on the date following our 2024 annual meeting of stockholders. Under the terms of the Cooperation Agreement, our current Chair of the
Board, Mr. Gray, and four of our other current directors, Mr. Darling, Mr. Pate, Mr. Peterson and Ms. Serow, were appointed or nominated
to serve on our 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. 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. In addition, such actions could cause the price of our Common Stock to change based
on investors' perceptions of Coliseum's actions and Coliseum's influence over the Company and our Board.

 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. For example, under the Amended and Restated Credit Agreement, as amended by the
2025 Amendment, the Lenders, which include Coliseum, have loaned to us an aggregate of $80.0 million and we have issued Warrants to Coliseum
and the other Lenders to purchase an aggregate of 26.2 million shares of our common stock at $1.50 per share. Coliseum, our largest stockholder,
has appointed or nominated a total of five directors to serve on our Board, each of whom continues to serve on our Board, including, Adam
Gray, who continues to serve as Chairman. Any future transactions with the Lenders or any other related parties may give rise to conflicts
of interest or otherwise adversely affect our business.

 Our preliminary exploration
of potential strategic alternatives may not be successful, which may adversely affect our ability to compete with larger, including combined,
competitors.

 We regularly engage in dialogue
with market participants regarding potential business combinations, partnerships and other strategic alternatives. Based on certain recent
preliminary inquiries, the Board has formed a special committee of independent directors and we have engaged a financial advisor to support
them in evaluating any indications of interest and exploring other potential strategic alternatives. There can be no assurance that any
of such preliminary exploratory activities will result in our engaging in a strategic alternative transaction, or even if we do so, that
any such strategic alternative transaction will result in favorable terms and conditions for us or our shareholders. If we are unsuccessful
in engaging in a favorable strategic alternative, then our ability to grow our business and compete with larger, including combined, competitors
may be adversely affected. As a result, we may face liquidity challenges in the long-term and our ability to achieve consistent profitability
may be adversely affected.

 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. 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, so that shift adversely affected our gross
profit margins. If we fail to identify and respond to emerging trends, consumer acceptance of the products we manufacture and sell and
our image with current or potential customers may be harmed, which could reduce our net 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. Conversely, shortages of inventory or increases in time for fulfillment of our products that prove popular could also reduce
our sales.

 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.

 The sleep products industry
is highly competitive and fragmented, with competition from manufacturers (including those sourcing from low-cost countries), traditional
retailers, and online direct-to-consumer brands. Competition centers on price, quality, brand recognition, availability, and performance
across various distribution channels. This competitive environment exposes us to risks of losing market share, significant customers,
margins, and new customer acquisition. We have introduced new products in the luxury mattress market but have limited experience in this
sector. If we fail to compete effectively with other manufacturers and retailers of our products, our sales, profitability, cash flow,
and financial condition may be materially adversely affected.

 Many of our significant competitors,
including established manufacturers, retailers, and new entrants, offer products directly competing with ours. This increasing competition
from both domestic and international sources, including competitors that source from low-cost locations such as China and Vietnam, could
adversely affect our business, financial condition and results of operations. Competitors are expanding their distribution channels, with
many offering direct-to-consumer sales online. Major retailers like Mattress Firm, Amazon, and Walmart also sell competing products. Additionally,
foreign retailers may vertically integrate by acquiring U.S. mattress manufacturers or other retailers. Many of our competitors
have greater financial resources, technical expertise, larger customer bases, established industry relationships, and more mature distribution
channels. 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. We have limited
ability to predict competitors' actions, such as new product launches, pricing strategies, or marketing campaigns, which could impact
our market share and product margins. Competitors may also secure better terms from vendors, adopt more aggressive pricing, and invest
more in technology and marketing. With many competitors offering a wide range of products, it may be difficult for us to differentiate
through value, style, or functionality. Additionally, our products are often heavier, and some markets may not support affordable delivery,
limiting our reach. The retail sleep product industry has low barriers to entry, allowing new or existing retailers to increase competition.
This could delay or prevent us from gaining market share and negatively impact our growth and future results of operations.

 The
Sleep products industry has experienced significant consolidation in recent years, including vertical integrations, with competitors acquiring
brands to expand distribution networks, leverage economies of scale to gain market share and lower prices, gain greater bargaining power
with suppliers, enhance brand recognition, advance research and development, and extend marketing and retail distribution channels. Consolidation
among retailers may result in fewer sales channels or more restrictive terms for standalone brands. If we are unable to adapt to these
industry shifts, our growth, results of operations, and market share could be adversely impacted.

 Technological
changes, such as advances in artificial intelligence, may render our current technologies obsolete or require costly updates. 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. Our competitiveness
may depend on our ability to innovate and adapt to these changes and failure to keep pace may adversely affect our results of operations.

 Timely product delivery affects
our competitiveness. Failure to maintain or enhance our delivery processes and infrastructure could negatively impact our ability to compete.
Disruptions, delays, or increased freight costs with our carriers and freight forwarders could harm sales, increase cancellations, damage
our brand, and adversely affect our results of operations and our financial condition. If we fail to deliver products on time, our DTC
and wholesale customers may reduce or stop future orders, and we may face late charges from wholesale partners. 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.

 We rely on external suppliers
for key raw materials like polyurethane foam, oil, spring units, and our Hyper-Elastic Polymer ingredients. Any supply issues, quality
concerns, or price fluctuations could raise costs and hinder our ability to meet customer demand. These issues or concerns may be magnified
to the extent we rely on a limited number of suppliers or a sole supplier. Competitive pressures may also limit our ability to pass on
price increases, potentially leading to lost sales. Shortages of widely used components like foam and spring units, due to
factors like increased demand, weather events, or supply chain issues, could impact our production and operations. If a supplier fails
to deliver, we will need to find replacements, potentially on unfavorable terms. Any disruption in component supply could significantly
interrupt production and raise costs.

 Even with timely access to
raw materials, supply chain constraints, inflation, increased duties and tariffs, and other factors will increase shipping, labor, and
production costs. Rising costs for materials, transportation, and labor could impact our production efficiency, reduce gross margins,
and negatively affect our results of operations. Shipping costs and delays have in the past risen and may again in the future rise
due to port closures, congestion, and shortages of containers and ships. Future disruptions, such as pandemics, geopolitical conflicts,
and increased duties and tariffs, could worsen delays and increase material costs. These issues may impact our ability to maintain inventory,
meet demand, and affect our operations. Any significant supply chain interruptions or inability to source materials at acceptable prices
could harm our business.

 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. Any failure in these systems could disrupt our sales and various functions, including
order processing, inventory management, and product delivery. Upgrades or improvements to our systems may require significant capital,
time, and resources, potentially causing disruptions. Difficulties with system upgrades or failures, or an inability to adapt our systems
to business changes could negatively impact our operations. Our systems may face interruptions or degradation from hardware or software
issues, cyberattacks, natural disasters, power losses, fraud, political conflicts, or other events. Some systems may lack sufficient redundancy,
and our disaster recovery planning may not cover all scenarios. They are also vulnerable to natural disasters, security breaches, sabotage,
and data theft. Any such issues could negatively impact our results of operations.

 We collect and store personal
information from customers and suppliers, including customer payment details. We may share this information with third parties. Cyberattacks
targeting sensitive data are a known threat, and hackers may attempt to breach our systems or those of third parties. Employees, contractors,
or business partners could also intentionally or unintentionally compromise security. For example, we previously experienced an unauthorized
intrusion involving a former contractor's credentials, though no personal information was accessed. Future breaches could occur
if there are weaknesses in our internal controls over financial reporting related to information technology systems. We and third-party
partners have experienced and, in the future, may experience various cyber-attacks, including phishing, malware, and ransomware attacks.
In 2022, we experienced a spear-phishing attack that led to a $140,000 loss due to unauthorized changes to a vendor's bank account. We
expect continued exposure to similar threats. Additionally, increasing use of artificial intelligence by us and our third-party partners
may increase these risks. A breach releasing sensitive data could harm our reputation, result in financial losses, and increase our security
costs. Successful ransomware attacks could disrupt our operations, and while our insurance may cover some losses, it may not be sufficient
for all liabilities. We are subject to evolving data privacy and breach laws, both at the state level (e.g., the California Consumer Privacy
Act), the federal level, and internationally as we expand. These laws' rapid changes and potential inconsistencies increase compliance
costs and non-compliance risks. While we aim to comply, failure to do so could result in fines, administrative actions, and reputational
damage.

 Changes in economic
conditions, including the housing market and tariffs, have or will adversely affect our business, results of operations and financial
condition.

 We have experienced and may
continue to experience volatility due to global and U.S. market conditions including the housing market, mortgage interest rates, tariffs,
and inflation. These market conditions impact demand for mattresses and related products. We have experienced and may continue to experience
a negative impact on our demand as a result of the current housing market. The impact of newly implemented or threatened tariffs is uncertain
but will increase our costs and may negatively impact the demand for our products. We may not be able to pass along the costs of such
tariffs to our customers, which could adversely affect our results of operations and financial condition. 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.

 Disruptions to our manufacturing
operations, whether from the Restructuring Plan, a pandemic, natural disasters, lease issues, or equipment failures, could increase costs,
delay production and shipping, and negatively impact our business, operations, and financial condition. Workplace injuries, industrial
accidents, or violence could also lead to production suspensions and delays, affecting customer satisfaction, results of operations, financial
condition including our cash flow. The Restructuring Plan, which consolidated our manufacturing operations into one plant, may heighten
the risk of disruption, particularly from regional economic downturns, hurricanes, pandemics, utility shortages, or other events affecting
our Georgia plant, potentially harming our business.

 Future growth and profitability
may depend on our ability to improve our product line, successfully introduce new products, and effectively and efficiently market our
products to attract and retain customers.

 The
mattress, pillow, bedding, bed base, and cushion industries are highly competitive. Competitors may develop or acquire superior technology.
Our ability to grow market share depends on continually improving and expanding our product line and accessories. We invest significantly
in research and development to improve and expand our products. If these efforts fail to lead to meaningful improvements or consumer acceptance,
our results of operations, financial results, and reputation could suffer, potentially harming our business. A large portion of our gross
profit comes from mattress products. If we fail to develop or successfully market new models, such as those introduced in recent years,
our results of operations and business could be harmed.

 We
rely on effective marketing messages and efficient advertising to drive consumer awareness and sales. We continually adjust our strategies,
including messaging, budget, and channels. However, we may struggle to adapt to changing consumer preferences, competition, and advertising
efficiency. We rely on internet-based advertising through media and e-commerce platforms. If these platforms become less effective,
lose users, or fail to target our audience, our advertising may lose effectiveness and adversely affect our business. Advertising costs
on social media platforms such as Facebook have risen significantly, reducing efficiency, and we expect costs to keep increasing. We
rely on relationships with media partners, search engines, social media influencers, and e-commerce platforms to drive traffic and attract
customers. If we can't maintain or develop these relationships on favorable terms, or if our reputation suffers, our ability to grow could
be impacted. If we can't manage these costs or generate expected sales, our business could be adversely affected.

 Our
growth may be impacted by the effectiveness of our online experience for targeted audiences, including advertising and search optimization.
We also need to manage consumer sentiment, prevent false information about our products, and ensure website stability. The increased presence
of direct-to-consumer internet retailers and traditional mattress and furniture retailers and manufacturers has increased competition
for search terms, driving up marketing costs. The growing number of third-party review websites gives customers many platforms to
review our products, and negative reviews can significantly impact our reputation and brand and may adversely affect our results of operations.
If we can't manage relationships with reviewers to ensure accurate feedback, misleading reviews may harm our brand and hinder efforts
to improve it. Ineffective marketing messages, inefficient advertising, or poorly targeted programs may harm brand awareness, consumer
traffic, and our financial performance. Additionally, failure to prevent misleading information or negative sentiment on social media
could also negatively impact our results of operations and financial condition.

 Our
expansion into wholesale distribution and new sales channels, new products, market segments and geographic regions subjects us to additional
business, legal, financial, and competitive risks.

 Most
of our sales are through DTC channels, but we have expanded into wholesale distribution. However, we cannot guarantee success with wholesale
partners. We may struggle to generate additional sales through wholesale channels, and extending credit terms to wholesale partners could
expose us to the risk of unpaid or late invoices. Providing fixtures to wholesale partners could also pose challenges in recovery or reuse.
Wholesale customers may not purchase at expected volumes, and gross profit from wholesale sales are lower than DTC. If these issues arise,
they could harm our reputation, limit growth, and negatively impact our results of operations.

 We
may struggle to open additional Purple showrooms beyond those already established. Operating showrooms involves risks such as inventory
shrinkage, increased expenses, lease obligations, distribution challenges, and employee management. If we fail to operate these stores
profitably or if we close unprofitable stores, it could harm our reputation, limit growth, and negatively impact our business. Expanding
into new product offerings through e-commerce, wholesale, and Purple showrooms presents challenges, including potential service disruptions,
quality issues, and customer claims. Expanding sales channels may also require new products to avoid conflicts between channels. New products
may introduce warranty and return risks. 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. Disruptions in these
relationships or strategic decisions by partners could negatively affect our business. 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. We may also struggle to maintain or develop these relationships and may not be able to secure new ones on favorable terms.

 We
sell products through wholesale partnerships and may seek to expand these relationships. However, these wholesale partnerships may not
be profitable and could incur additional costs compared to our DTC operations. Wholesale relationships may be terminated or modified,
or wholesale partners may reduce orders or fail to meet their obligations, resulting in lost sales and adversely affecting our financial
performance, results of operations and financial condition. Disputes with partners or the termination or amendment of agreements could
lead to expenses, delayed payments, liabilities, and distractions from our strategic objectives. If we cannot renew or replace agreements
on favorable terms, it could harm our business. Wholesale partners may also compete against us in key channels, harming our business.
Maintaining these relationships may require significant resources and could limit our sales channels, adversely affecting other areas
of our business.

 We
are expanding Purple showrooms across the U.S., which may compete with our wholesale partners for customers. This omni-channel strategy
carries the risk of diminishing sales in other channels, increasing costs, and the potential loss of wholesale partners. Managing this
omni-channel strategy may require significant resources, potentially impacting other areas of our business. If our financial performance
falls short of expectations, we may struggle to secure favorable payment terms or obtain credit from commercial partners that have extended
credit to us.

 A reduction in the availability
of credit to consumers or the availability of more favorable credit terms with competitors could adversely affect our results of operations
and financial condition.

 We offer consumer financing
through third-party finance companies, with a significant portion of our sales financed in 2024. Macroeconomic factors and changes in
credit lending criteria may reduce available credit, and we may face higher costs to maintain lending approvals. Additionally, federal
regulations are placing more restrictions on consumer credit programs, including promotional credit offers. Some of our agreements with
third-party finance companies, which offer financing to our customers, may be terminated by them with 30 days' notice. They control financing
offers and credit standards and may provide better terms to our competitors or in channels outside our focus. 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.

 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.

 We
have in the past accumulated and may again in the future accumulate excess raw material inventory, which is vulnerable to shrinkage, theft,
obsolescence, or otherwise becoming unsellable, and excess finished product inventory. Excess inventory uses valuable warehouse space.
If our efforts to manage inventory are unsuccessful, excess stock and related inefficiencies could negatively impact our results of operations.
On the other hand, failing to maintain adequate inventory levels could lead to supply shortages, harming our ability to meet consumer
demand and negatively affecting operations. Lead times for products and components, especially those sourced internationally, can vary.
Risks from legal, economic, political, or health issues, as well as disruptions in global trade, including due to tariffs or trade wars,
could impact production and result in inadequate inventory levels. Sourcing challenges, particularly from China, due to trade tensions,
tariffs or other geopolitical factors, will also increase costs and disrupt supply. Any shortages or delays in meeting demand could harm
customer satisfaction, results of operations and financial condition.

 We rely on key suppliers,
some of which are our only sources for certain products, materials, or services. While alternative suppliers may be available, disruptions
or cost increases in the supply of materials could negatively affect our results of operations and financial condition. Additionally,
changes in a supplier's financial condition could delay their product delivery to us. Shipping delays from port closures, congestion,
and shortages of containers or ships could disrupt manufacturing, supply of materials, and inventory management. These delays may hinder
our ability to meet product demand and deliver on time, negatively impacting our business and results of operations.

 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. If members of our leadership
team leave or additional expertise is needed, finding qualified replacements may be challenging due to competition and potential uncertainties
from our ownership structure or stockholder activism. Delays in replacing members of the leadership team could disrupt growth and strategic
plans. If we fail to offer competitive compensation and incentives, it may adversely affect our business. 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.

 Our products, marketing, and
advertising are regulated by various U.S. authorities, including the Federal Trade Commission, as well as consumer protection laws specific
to the sleep product industry. These regulations may change or conflict with each other, leading to ongoing compliance costs, such as
quality control and compliance processes. 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. If harmful substances are released or
contamination is found on our properties, we may face significant liability. As a manufacturer of mattresses and related products, we
handle regulated substances, which subject us to various environmental laws. 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. Non-compliance may result in penalties or fines, adversely affecting our
financial condition and results of operations. We are subject to laws covering the internet, e-commerce, electronic devices, taxation,
privacy, data protection, pricing, consumer protection, employment, disabilities, and more. The application of traditional areas of the
law to newly developed technologies may be unclear, and unfavorable regulations could reduce demand for our products, increase costs,
or limit access to our products. Our ongoing efforts to enhance compliance and regularly test our site, as well as legal challenges
we may face, may increase our business costs. Additionally, we are subject to health and environmental regulations like California Proposition
65, which require resources for compliance, and with respect to which we have experienced and may in the future face claims, requiring
resources for defense. Laws addressing climate change could impose stricter standards, raise our costs, disrupt our business and negatively
impact our financial condition and results of operations. Negative public perception or climate-related litigation could harm our reputation
and business.

 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. Consumer Product
Safety Commission (CPSC) and other jurisdictions have fire retardancy standards for the mattress industry, with some states and Congress
considering stricter regulations. These standards require fire retardant materials, quality assurance programs, random product testing,
and documentation retention, which can be costly. If testing or inspections show our products don't meet flammability standards,
we could face production halts, recalls, fines, or penalties, negatively impacting our operations and financial condition. New legislation
on fire retardancy, bed bug prevention, or mattress recycling could lead to recalls or higher operating costs. Non-compliance may result
in penalties, business restrictions, or negative publicity. Conflicting regulations could raise costs, change manufacturing processes,
and harm product performance, negatively affecting our business.

 We could be subject
to additional sales tax or other indirect tax liabilities.

 We are subject to sales tax
or other indirect tax obligations as imposed by the various states and jurisdictions in the United States. The application of indirect
taxes (such as sales and use tax, value-added tax ("VAT"), goods and services tax, business tax and gross receipt tax to applicable e-commerce businesses
and to our users is a complex and evolving issue and we may be unable to timely or accurately determine our obligations with respect to
such indirect taxes, if any, in various jurisdictions. 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. 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.

 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. Failure to comply with such laws and regulations could result in significant penalties.

 Pending or unforeseen
litigation and the potential for adverse publicity associated with litigation could adversely affect our business, reputation, results
of operations or financial condition.

 We may be involved in legal
proceedings arising in the ordinary course of business, including commercial, product liability, employment and intellectual property
claims. Litigation is unpredictable, and it is possible that the outcome of future claims asserted, or adverse publicity resulting from
litigation, could adversely affect our business, reputation, results of operations or financial condition.

 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 focus on strengthening
and differentiating our product portfolio through innovation in design and materials. Our intellectual property, including trademarks,
patents, and trade secrets, is vital to our success. We rely on intellectual property laws and contractual protections, like confidentiality
and non-compete agreements, to safeguard our rights. If we cannot enforce these protections, it could negatively impact our operations.
We own U.S. and foreign patents for product designs, function, formulas, materials, and technologies, along with trademarks, trade secrets,
trade dress, and copyrights. Our success relies on protecting these intellectual property rights and avoiding infringement on third-party
rights.

 Despite our efforts, we may
not fully protect our intellectual property and proprietary rights. Counterfeit goods and patent/trademark infringements are increasing,
leading to higher enforcement costs, including actions with the International Trade Commission seeking general exclusion orders against
foreign entities. We expect significant financial and managerial resources to be spent on protecting our intellectual property rights.
Even with favorable outcomes, infringement and counterfeits could harm our business and intellectual property value. Laws may not adequately
safeguard our trademarks. Licensees could also harm our proprietary rights or reputation. Inadequate protection of our intellectual property
could negatively impact our results of operations.

 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.

 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. We have in the past and may in the future face claims regarding alleged intellectual
property infringement, though we believe our products do not infringe others' rights. However, we cannot guarantee that such claims, including
claims of invalidity and indemnification, will not arise or negatively impact our business. Defending against these claims could incur
costs and divert resources. Infringement claims could also result in injunctions preventing distribution of our products or forcing us
to alter our designs if licensing terms are unavailable or unreasonable.

 We previously licensed
certain intellectual property to EdiZONE, LLC ("EdiZONE"), for the purpose of enabling EdiZONE to meet its contractual obligations
to licensees. 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. EdiZONE agreed not to modify, extend, or enter new third-party licenses, with all rights reverting to us as these licenses
expire. One of EdiZONE's prior licenses grants exclusivity to a third party of an earlier technology that could prevent us from
selling a mattress made from that earlier technology in the European Union. This risk could be mitigated by redesigning our Hyper-Elastic
Polymer material using existing or new technologies. However, there is no guarantee that any of our future sales in the European Union
won't be challenged by EdiZONE's licensee, and any such redesigned mattresses may not succeed. If challenged, we are required
to indemnify EdiZONE. We have the right to enforce our intellectual property against licensees who violate their agreements or infringe
on our intellectual property. We must indemnify EdiZONE and cover enforcement costs. However, there is no guarantee that such enforcement
efforts would succeed, which could negatively impact our business.

 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.
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. If we fail to maintain a $1.00 minimum per share bid price for a period of 30 consecutive business
days, we have 180 calendar days to maintain our Common Stock at a $1.00 minimum per share bid price for 10 consecutive trading days. 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. On
November 11, 2024, we received written notice from NASDAQ that we were not in compliance with Nasdaq minimum share price rule, since the
closing price of our Common Stock had been below $1.00 per share for 30 consecutive business days. However, we regained such compliance
on February 3, 2025. It is possible that we may again fail to comply with such minimum bid price requirement in the future if our stock
price again falls below $1.00 for an extended period. Currently, our stock price has been below $1.00 since February 19, 2025.

 If we are unable to comply
with NASDAQ'S continued listing requirements, our Common Stock may be subject to delisting. 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.

 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. It 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.

 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.

 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. 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. 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. 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.

 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).
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.

 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. 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). 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. 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. 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.

 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.

 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. 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. 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.
Furthermore, the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty
or liability created by the Securities Act or the rules and regulations thereunder. This choice of forum provision may limit a stockholder's
ability to bring a claim in a judicial forum that the stockholder finds favorable for disputes with us or our directors, officers or employees,
which may discourage such lawsuits against us and our directors, officers or employees. Alternatively, if a court were to find the choice
of forum provision contained in our Certificate of Incorporation to be inapplicable or unenforceable in an action, we may incur additional
costs associated with resolving such action in other jurisdictions, which could have a material adverse effect on our business, financial
condition, results of operations.

 Future sales of our
Common Stock in the public market may depress our share price.

 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.

 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. ("C-3"), Harvest Master, Harvest Partners, and HSCP (the "Holders"), providing
for the registration of the Warrants, the shares of Common Stock issuable upon the exercise of the Warrants, and the Class A Common Stock
held by the Holders as of such date (the "Registrable Securities"). 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. These sales might also make it more difficult for us to sell equity securities at a time and
price that we deem appropriate.

 Our
stockholders may experience substantial dilution in the value of their investment or may otherwise have their interests impaired if we
issue additional debt or equity securities or securities convertible into equity securities, as well as due to the exercise of the currently
outstanding Warrants.

 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. 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.

 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. 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. The exercise of the Warrants will dilute the value of Class A common stock and stockholder voting power. In
addition, the Warrants include full-ratchet anti-dilution protections, subject to certain conditions, which could result in the Warrants
becoming exercisable for a significantly greater number of shares if we engage in a dilutive financing.

 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. 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.

 Our only significant
asset is our ownership of Purple LLC and such ownership may not be sufficient to enable us to satisfy our financial obligations.

 We are a holding company and
do not directly own any operating assets other than our ownership of interests in Purple LLC. We depend on Purple LLC for distributions,
loans and other payments to generate the funds necessary to meet our financial obligations, including our expenses as a publicly traded
company. The earnings from, or other available assets of, Purple LLC may not be sufficient to allow us to pay our financial obligations.

 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. 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. All control systems have inherent limitations, such
as human error, circumvention, or collusion, and cannot provide absolute assurance of detection or prevention. Controls may also become
inadequate over time due to changes, new fraudulent schemes, or deteriorating compliance, increasing the risk of undetected misstatements.
The accuracy of our financial reporting relies on effective internal controls, which can only provide reasonable assurance and may not
detect all misstatements. Any failure in internal controls or disclosure procedures could undermine the accuracy and timeliness of our
disclosures, potentially eroding investor confidence, requiring significant resources to fix, and exposing us to legal or regulatory actions.
For example, we identified a material weakness in our warranty reserve accounting during the preparation of our September 30, 2023, financial
statements. However, as of June 30, 2024, we concluded that the material weakness has been remediated and that our internal controls over
financial reporting are effective.

 We
continue to evaluate, design and implement controls and procedures designed to avoid material weaknesses. If our efforts are insufficient
or if new weaknesses arise, our financial statements may be misstated, potentially requiring restatements, incurring additional accounting,
legal costs, and exposing us to shareholder litigation. We cannot guarantee against future material
weaknesses in our internal control. Failure to maintain effective internal control could impact the accuracy and timeliness of our financial
reporting, potentially leading to sanctions from NASDAQ, the SEC, or other regulators. 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.

 Tax Risks Relating
to our Structure

 Obligations under the
Tax Receivable Agreement could materially adversely affect our future cash flow if we become profitable and begin paying income taxes.
Payments under the Tax Receivable Agreement may be accelerated or significantly exceed the actual benefits we realize.

 Our Tax Receivable Agreement
with our founders requires us to pay 80% of certain tax benefits realized from increases in asset tax basis and other tax benefits. As
of December 31, 2024, our preliminary estimate of liability under the agreement was $169.0 million. 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. If
we become profitable and realize tax savings covered by the Tax Receivable Agreement, we will incur payment obligations, which could negatively
impact our cash flow.

 The lump sum payment of $131.1
million required upon early termination of the Tax Receivable Agreement in the event of a change in control could negatively impact liquidity,
delay or prevent business transactions, and reduce the value of our Common Stock. If our cash resources are insufficient, we may need
to incur additional debt to meet these obligations, which could materially harm our financial condition. 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.

 Our ability to utilize
our net operating loss carryforwards and certain other tax attributes may be limited. Future use and amount of our Current NOLs and other
tax benefits is uncertain.

 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. Generally, an ownership change is defined as a change in its equity ownership by certain stockholders over a three-year
period of greater than 50 percentage points (by value). If finalized, Treasury Regulations currently proposed under Section 382 of the
Code may further limit our ability to utilize our pre-change NOLs or other tax attributes if we undergo a future ownership change. 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. 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. We may also
experience ownership changes in the future as a result of subsequent shifts in our stock ownership. As a result, if we generate taxable
income, our ability to use our pre-change NOL and tax credits carryforwards to reduce U.S. federal and state taxable income may be subject
to further limitations, which could result in increased future tax liabilities to us. Moreover, our federal NOLs from years prior to 2018
can be carried forward for a maximum of 20 years from the year in which the NOL was incurred, and our state NOLs are subject to carryforward
limitations that vary from state to state; as a result, all or a portion of those carryforwards could expire before being available to
reduce future income tax liabilities.

 On June 27, 2024, our Board
approved the NOL Rights Plan to protect stockholder value by attempting to safeguard our ability to use Current NOLs of approximately
$310.7 million to reduce potential future federal income tax obligations from becoming substantially limited by future ownership of our
Common Stock. At the Special Meeting, stockholders ratified the NOL Rights Plan. Under the NOL Rights Plan, the Board authorized and declared
a dividend of one Right for each outstanding share of Common Stock to stockholders of record at the close of business on July 26, 2024.
Upon a stockholder acquiring greater than a 4.9% ownership percentage threshold (or, if a stockholder has beneficial ownership of in excess
of 4.9%, then the ownership percentage that is one-half of one percentage point greater than their current beneficial ownership percentage),
the Rights will become exercisable to significantly dilute any stockholder who violates the ownership limitations of the NOL Rights Plan.
In connection with the NOL Rights Plan, the Board adopted, and our stockholders approved at the Special Meeting, the NOL Protective Charter
Amendment that adds an additional layer of protection to our Current NOLs until June 30, 2025 by voiding any transfer of Common Stock
that results in a stockholder acquiring beyond a 4.9% ownership percentage threshold (or, if a stockholder has current beneficial ownership
of in excess of 4.9%, then the ownership percentage that is one-half of one percentage point greater than their current beneficial ownership
percentage).

 Use of our Current NOLs and
other tax benefits depends on our ability to generate taxable income in the future. We cannot ensure whether we will have future taxable
income or, if we do, whether such income or our Current NOLs or other tax benefits at such time will exceed any potential limitation under
Code Section 382.

 The IRS may challenge
our Current NOLs and other tax benefits.

 As of December 31, 2024, the
amount of our Current NOLs has not been audited or validated by the Internal Revenue Service (the "IRS"). The IRS could challenge
the amount of our Current NOLs, which could result in an increase in our future liability for income taxes. In addition, determining whether
an ownership change under Code Section 382 has occurred is subject to uncertainty because of the complexity and ambiguity of the provisions
of Code Section 382 and because of limits on timely knowledge that any publicly traded company can have about the ownership of and transactions
in its securities. We cannot ensure that the IRS or another taxing authority will not claim in the future that we experienced an ownership
change under Code Section 382 and attempt to reduce the benefit of our Current NOLs and other tax benefits available, even if the NOL
Protective Charter Amendment is in place.

 There is continued risk
of ownership change under Code Section 382.

 Although the NOL Protective
Charter Amendment and NOL Rights Plan intend to reduce the likelihood of an ownership change under Code Section 382, we cannot ensure
that the NOL Protective Charter Amendment and the NOL Rights Plan will be effective. The amount by which a future ownership interest under
Code Section 382 may change could, for example, be affected by purchases of our Common Stock by stockholders who are 5% stockholders (as
defined under Code Section 382) or by purchases of stock or other interests in corporations, partnerships or other legal entities that
own 4.9% or more of our Common Stock, over which we have no control. Further, while the NOL Protective Charter Amendment and the NOL Rights
Plan allow for the exercise of currently outstanding conversion rights, exchange rights, warrants or options or otherwise, such exercises
may result in an ownership change under Code Section 382. It may also be in our best interests, considering all relevant facts and circumstances
at the time, to permit the acquisition of our Common Stock in excess of the specified limitations or to issue new or redeem existing equity
in the future, all of which may increase the likelihood of an ownership change under Code Section 382.

 The Current NOL protections
under the NOL Protective Charter Amendment and NOL Rights Plan will expire by their terms on June 30, 2025.

 The NOL Protective Charter
Amendment and the NOL Rights Plan may potentially adversely affect the market for, and negatively impact the value of, our Common Stock.

 The NOL Protective Charter
Amendment and the NOL Rights Plan intend to prohibit or deter a stockholder's ability to acquire, directly, indirectly or constructively,
additional shares of our Common Stock in excess of specific limitations. A stockholder's ability to dispose of our Common Stock
may be limited by reducing potential acquirers for such shares. A stockholder's ownership of our Common Stock may become subject
to the restrictions of the NOL Protective Charter Amendment, or may trigger applicable thresholds under the NOL Rights Plan, upon actions
taken by Persons (as such term is defined in the NOL Protective Charter Amendment or the NOL Rights Plan, as applicable) related to, or
affiliated with, such stockholder.

 Because the NOL Protective
Charter Amendment and the NOL Rights Plan were approved by our stockholders at the Special Meeting, we have included a legend reflecting
the transfer restrictions included in the NOL Protective Charter Amendment and the Rights issued pursuant to the NOL Rights Plan on certificates
representing newly issued or transferred shares of our Common Stock and disclosed such Rights and restrictions to Persons holding our
Common Stock in uncertificated form, and to the public generally. Because certain buyers, including Persons who wish to acquire more than
4.9% of our Common Stock and certain institutional holders who may not be comfortable holding our Common Stock with restrictive legends,
may choose not to purchase our Common Stock, the NOL Protective Charter Amendment and the NOL Rights Plan could have an adverse effect
on the marketability and trading value of our Common Stock in an amount that could more than offset any value preserved from protecting
our Current NOLs. The NOL Protective Charter Amendment and NOL Rights Plan could also have a negative impact on the trading value of our
Common Stock by deterring Persons or groups of Persons from acquiring our Common Stock, including in acquisitions that might result in
some or all our stockholders receiving a premium above market value.

 The NOL Protective Charter
Amendment and the NOL Rights Plan may have an anti-takeover effect.

 While the NOL Protective Charter
Amendment is not intended to prevent, or even discourage, a proposal to acquire the Company, the NOL Protective Charter Amendment may
have a potential anti-takeover effect because, among other things, it will restrict the ability of a Person, entity or group to accumulate
more than 4.9% of our Common Stock and the ability of Persons, entities or groups now owning more than 4.9% of our Common Stock to acquire
any significant amount of additional shares of our Common Stock, in each case, without the approval of our Board. Similarly, while the
NOL Rights Plan is not intended to prevent, or even discourage, a proposal to acquire the Company the NOL Rights Plan may have a potential
anti-takeover effect because, among other things, an Acquiring Person (as such term is defined in the NOL Rights Plan) may have its ownership
interest diluted upon the occurrence of a triggering event. The overall effects of the NOL Protective Charter Amendment and NOL Rights
Plan may be to render more difficult or discourage a merger, tender offer, proxy contest or assumption of control by a substantial holder
of our Common Stock and have an adverse effect on the marketability and the trading value of our Common Stock. However, the NOL Protective
Charter Amendment and NOL Rights Plan should not interfere with any merger or other business combination approved by the Board.

 Item 1B.
Unresolved Staff Comments

 None.

 Item
1C. Cybersecurity Risk Management, Strategy, and Governance

 In
the ordinary course of our business, we receive, process, use, store and share digitally large amounts of data, including user data as
well as confidential, sensitive, proprietary and personal information. We depend largely upon our information technology systems in the
conduct of all aspects of our operations. Maintaining the integrity and availability of our information technology systems and this information,
as well as appropriate limitations on access and confidentiality of such information, is important to our operations and business strategy.
To this end, we have implemented processes and systems designed to assess, identify, and manage risks from potential unauthorized occurrences
on or through our information technology systems to prevent adverse effects on the confidentiality, integrity, and availability of these
systems and the data residing in them.

 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. Our 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. His expertise
extends to evaluating and hiring cybersecurity personnel and outsourced managed services, defining incident response plans, conducting
tabletop exercises, and establishing communication protocols with internal executives, board members, and vendors. He has firsthand experience
in responding to actual cybersecurity incidents, showcasing a deep understanding of the challenges and complexities within the cybersecurity
landscape in the retail sector. 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.
He holds multiple professional certifications, including CISSP, PMP and multiple SANS certifications. Our chief technology officer and
senior director of cybersecurity and compliance report to the Audit Committee on these matters.

 We
maintain a cybersecurity risk management program designed to identify, assess, manage, mitigate, and respond to cybersecurity threats.
Our cybersecurity risk management processes are being integrated into our overall risk management processes. We are making efforts to
incorporate cybersecurity considerations as a part of our business processes. We engage with external cybersecurity experts, including
assessors, consultants, and auditors, to enhance our cybersecurity measures and ensure compliance with industry best practices. For example,
a comprehensive cyber risk assessment, both physical and logical, was conducted by a third party, serving as an external penetration
test to validate our security posture. We have established processes to oversee and manage cybersecurity risks associated with our use
of third-party service providers, ensuring they adhere to our security standards. We review third-party service provider contracts to
ensure they contain data privacy and security provisions, aligning with our standards and regulatory requirements. Additionally, we have
established a Technology Review Committee ("TRC") tasked with the role of evaluating new software tools and technologies
before their implementation. 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.

 Board
of Directors Oversight

 The
oversight of our cybersecurity is assigned to the Audit Committee of our Board of Directors. The Audit Committee receives regular reports
and briefings from management on our cybersecurity threat risk management and strategy processes, including on topics such as our data
security posture, results from third-party assessments, progress towards pre-determined risk-mitigation-related goals, incident response
plans, and cybersecurity threat risks or incidents and developments, as well as the steps management has taken to respond to these risks.
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

 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. 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. Our 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, 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.

 Item
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
4. Mine Safety Disclosures

 Not
applicable.

 PART
II

 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. The number
of holders of record of our Common Stock does not include stockholders for which shares are held in "nominee" or "street"
name.

 We
have not paid any cash dividends on our Common Stock to date. The payment of cash dividends in the future will be dependent upon our
revenues and earnings, if any, capital requirements, general financial condition, our compliance with restrictive covenants in the Amended
and Restated Credit Agreement and other future indebtedness that we may incur, opportunities to invest in future growth initiatives,
and the discretion of our Board of Directors at such time. Our Board of Directors is not currently contemplating and does not anticipate
declaring any cash dividends on our Common Stock in the foreseeable future.

 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 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. The comparisons reflected in the graph are not intended to forecast the future performance
of our Common Stock and may not be indicative of our future performance. The 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

 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. 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. 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. 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. 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.

 Issuer
Purchases of Equity Securities

 None.

 Item
6. [Reserved]

 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. All statements other than statements of historical facts are statements that could be deemed forward-looking
statements. These statements are based on current expectations, estimates, forecasts, and projections about the industries in which we
operate and the beliefs and assumptions of our management. Words such as "expects," "anticipates," "targets,"
"goals," "projects," "intends," "plans," "believes," "momentum,"
"seeks," "estimates," "continues," "endeavors," "strives," "may,"
variations of such words, and similar expressions are intended to identify such forward-looking statements. In addition, any statements
that refer to projections of our future financial performance, our anticipated growth and trends in our businesses (including the discussion
under the heading "Outlook for Growth"), and other characterizations of future events or circumstances are forward-looking
statements. Readers are cautioned that these forward-looking statements are only predictions and are subject to risks, uncertainties,
and assumptions that are difficult to predict, including those under "Part I, Item 1A. Risk Factors," and elsewhere
herein. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. We undertake
no obligation to revise or update any forward-looking statements for any reason.

 The
following discussion is intended to provide a more comprehensive review of our results of operations and financial condition than can
be obtained from reading our consolidated financial statements alone. This discussion should be read in conjunction with our consolidated
financial statements and the notes thereto included in "Part II Item 8. Financial Statements."

 Overview
of Our Business

 Our
mission is to help people feel and live better through innovative comfort solutions.

 We are an omni-channel company that began as a digitally-native vertical
brand founded on comfort product innovation with premium offerings. We design and manufacture a variety of innovative, branded and premium
comfort products, including mattresses, pillows, cushions, frames, sheets, duvets, duvet covers and other products. Our products are the
result of over 30 years of innovation and investment in proprietary and patented comfort technologies and the development of our own manufacturing
processes. Our proprietary Hyper-Elastic Polymer gel technology underpins many of our comfort products and provides a range of benefits
that differentiate our offerings from other competitors' products. 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. Purple Inc. was incorporated in Delaware on May 19, 2015
as a special purpose acquisition company under the name of GPAC. On February 2, 2018, we consummated a transaction structured similar
to a reverse recapitalization (the "Business Combination") pursuant to which Purple Inc. acquired an equity interest in Purple
LLC as holder of all Class A units and became its sole managing member. As the sole managing member of Purple LLC, Purple Inc., through
its officers and directors, is responsible for all operational and administrative decision making and control of the day-to-day business
affairs of Purple LLC without the approval of any other member. 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. For further discussion see Note 4 —
 Acquisition.

 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. 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. 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. 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. 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.

 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. 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.

 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. The Restructuring Plan includes the permanent closure of both Utah manufacturing facilities to
consolidate mattress production in our Georgia plant, and a headcount reduction at our Utah headquarters to drive additional operating
efficiencies. Closure of the two Utah manufacturing facilities is projected to be completed in the second quarter of 2025 while consolidation
into the Georgia facility was finalized in December 2024. The reduction in workforce at our Utah headquarters was completed in August
2024. During 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.
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. Actual results may differ from these estimates, and the completion of our plan could result
in additional restructuring, impairment or other related charges not reflected.

 In addition, we plan to implement
additional cost savings measures in 2025 beyond those implemented pursuant to our 2024 Restructuring Plan.

 Debt
Financing s

 On January 23, 2024, Purple
LLC, Purple Inc. and Intellibed (collectively, the "Loan Parties") entered into the Amended and Restated Credit Agreement,
which amended and restated the then existing term loan agreement ("Term Loan Agreement"), with CCP and other lenders (collectively,
the "Lenders") and Delaware Trust Company, as administrative agent. The Lenders agreed to assume our obligations under the
Term Loan Agreement and agreed to refinance our existing obligations. 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
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. 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). 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%. We may request an additional term loan from the Lenders in an aggregate amount not
to exceed $19.0 million on terms requested by us to the extent agreed to by the Lenders at their discretion. The Amended and Restated
Credit Agreement also removed restrictions and requirements typically associated with an asset-based loan. 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.

 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 2025 Amendment also amended the Amended and Restated Credit Agreement to (i) provide for an additional term loan from the 2025 Term
Loan Lenders in an aggregate amount not to exceed $20.0 million, subject to the approval of the Required Lenders in their discretion,
(ii) provide for the payment of substantial make-whole payments in the event we prepay the loans prior to their maturity, and (iii) provide
that the incremental term loan will be senior in right of repayment to the initial term loan.

 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. The 2024 Warrants will expire on the
10-year anniversary of issuance, or earlier upon redemption. 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. The 2024 Warrants contain certain provisions
that do not meet the criteria for equity classification and therefore were recorded as liabilities. The liability for the 2024 Warrants
was recorded at a fair value of $19.6 million on the date of issuance with the offset included in debt issuance costs. This liability
is subsequently re-measured to fair value at each reporting date or exercise date with changes in the fair value included in earnings.
During 2024, we recognized a gain of $3.5 million in our consolidated statement of operations for a decrease in the fair value of the
2024 Warrants outstanding at December 31, 2024.

 In connection with the 2025
Amendment, we issued to the Lenders the 2025 Warrants to purchase 6.2 million shares of our Class A Stock. The 2025 Warrants have the
same terms as the 2024 Warrants, except that they expire on March 12, 2035 and certain adjustments to the exercise price are subject to
a floor of $0.6979.

 Registration
Rights Agreements

 In connection with the issuance
of the Warrants, we entered into the Registration Rights Agreement with holders of the Warrants (the "Holders"), providing
for the registration of Registrable Securities, subject to customary terms and conditions. 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.

 NOL
Rights Plan

 On June 27, 2024, our Board
of Directors ("Board") adopted and we entered into a limited-duration stockholder rights agreement (the "NOL Rights
Plan") with a stated expiration date of June 30, 2025. Our Board approved the NOL Rights Plan to protect stockholder value by attempting
to safeguard our ability to use our June 30, 2024 estimated $238 million of net operating losses (the "Current NOLs") to reduce
potential future federal income tax obligations from becoming substantially limited by future ownership of our common stock. Upon adopting
the NOL Rights Plan, 0.3 million shares of our authorized shares of preferred stock were designated as Series C Preferred Shares. Pursuant
to the NOL Rights Plan, our Board authorized and declared a dividend of one right for each outstanding share of common stock to stockholders
of record at the close of business on July 26, 2024. Upon a stockholder acquiring greater than a 4.9% ownership percentage threshold (or,
if a stockholder has beneficial ownership of in excess of 4.9%, then the ownership percentage that is one-half of one percentage point
greater than their current beneficial ownership percentage), the rights will become exercisable to significantly dilute any stockholder
who violates the ownership limitations of the NOL Rights Plan. The NOL Rights Plan was ratified at a special meeting of our stockholders
on October 15, 2024 (the "Special Meeting"). The NOL Rights Plan will automatically expire by its terms on June 30, 2025.

 NOL
Protective Charter Amendment

 In connection with the NOL
Rights Plan, our Board adopted a NOL Protective Charter Amendment that adds an additional layer of protection to our Current NOLs until
June 30, 2025 by voiding any transfer of common stock that results in a stockholder acquiring beyond a 4.9% ownership percentage threshold
(or, if a stockholder has current beneficial ownership of in excess of 4.9%, then the ownership percentage that is one-half of one percentage
point greater than their current beneficial ownership percentage). The NOL Protective Charter Amendment was approved by our stockholders
at the Special Meeting. The NOL Protective Charter Amendment will automatically expire by its terms on June 30, 2025.

 Review of Strategic Alternatives

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

 Executive
Summary – Results of Operations

 Net revenues decreased $22.7 million, or 4.4%, to $487.9 million in
2024 compared to $510.5 million in 2023. This decrease was primarily driven by industry-wide demand softness for home-related products
coupled with a reduction in advertising spend to focus on more profitable marketing. 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. The growth in Purple showroom net revenues was primarily due to an increase in average
selling prices related to both strategic price adjustments and a sizeable shift in product mix to our higher priced Rejuvenate Products.
Net revenues also benefited in 2024 from a full year's impact of five new Purple showrooms that opened in 2023. In addition to demand
softness, our wholesale channel net revenues were negatively impacted in 2024 by intentionally exiting our relationship with certain customers.

 Gross profit increased $9.3
million, or 5.4%, to $181.1 million in 2024 compared to $171.8 million in 2023 and our gross profit percentage improved to 37.1% in 2024
from 33.7% in 2023. These increases 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. The improved production effectiveness in 2024 was largely attributable
to supply chain initiatives and operational efficiency improvements implemented over the last 12 months. Gross profit and the related
percentage were both negatively impacted by $15.4 million of charges recorded pursuant to the Restructuring Plan. Although $1.6 million
of additional restructuring related charges are projected to be recorded in cost of revenues through the second quarter of 2025, we expect
the Restructuring Plan will further streamline our manufacturing operations and provide increased gross profits going forward.

 Operating expenses decreased
$12.2 million, or 4.3% to $273.3 million in 2024 compared to $285.5 million in 2023. 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 was offset in part by $20.0 million in charges related to the Restructuring Plan.

 Other expense, net was $5.9
million in 2024 compared to $7.5 million in 2023. Other expense, net in 2024 included interest expense of $17.5 million associated primarily
with the Related Party Loan, offset in part by other income of $11.5 million related to two payments received in full settlement of a
previously filed business interruption claim.

 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. Excluding the impact of the $35.4 million
in restructuring, impairment and other related charges recorded in 2024, gross profit would have increased $24.7 million and operating
expenses would have decreased $32.2 million.

 Outlook
for Growth

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

 Focus on pioneering new technologies to maintain our competitive advantage. 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. 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. 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. 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. We intend to effectively articulate the unique qualities of sleeping on our gel grid layer to be more effective and reach more consumers. 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. 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. 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. These savings will enable us to reinvest in innovation and marketing to drive growth.

 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. In addition, we may, in the future, adapt these
focuses in response to changes in the market or our business.

 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. Predicting future events is inherently an imprecise activity and as such requires
the use of judgment. We base our assumptions, estimates and judgments on historical experience, current trends and other factors that
management believes to be relevant at the time our consolidated financial statements are prepared. On a regular basis, management reviews
the accounting policies, assumptions, estimates and judgments to ensure that our consolidated financial statements are presented fairly
and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could
differ from our assumptions and estimates, and such differences could be material.

 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.

 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. 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. Our allowance for credit losses increased from a de minimis amount at December
31, 2023 to $1.1 million as of December 31, 2024. 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. 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. 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 (undiscounted and without interest charges - plus proceeds expected
from disposition, if any). If the estimated undiscounted cash flows are less than the carrying value of the assets, the Company calculates
an impairment loss. The impairment loss calculation compares the carrying value of its assets to the assets' estimated fair value.
When the Company recognizes an impairment loss, the carrying amount of the impaired assets are reduced to estimated fair value based on
discounted cash flows, quoted market prices or other valuation techniques. 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. 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.

 In conjunction with the Restructuring
Plan initiated by us in August 2024, we recorded impairment charges of $2.5 million on various long-lived assets associated with entering
into a sublease on one of the Utah manufacturing facilities that is expected to close during the first quarter of 2025.

 The Restructuring Plan initiated
by us in August 2024 was determined to be a triggering event for potential impairment of intellectual property that was being accounted
for as an indefinite-lived intangible asset. 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. Our warranty liability assessment methodology includes estimates in both our DTC and wholesale channels.
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. Estimates for warranty costs are based primarily on historical trends and warranty claim rates
incurred. 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. We classify as non-current those estimated warranty costs expected to be
paid out in greater than one year. As of December 31, 2024, the current and non-current portions of our warranty liabilities
were $6.1 million and $26.1 million, respectively, compared to $9.8 million and $25.8 million, respectively, at December 31, 2023.
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. However, if actual results are not consistent with our estimates or assumptions, we may be exposed to losses or
gains that could be material.

 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. A separate discussion regarding our financial condition and results of operations for the year ended December 31, 2023 compared
to the year ended December 31, 2022 can be found under Item 7 of Part II of our Annual Report on Form 10-K for the fiscal year ended December
31, 2023, filed with the SEC on March 12, 2024.

 Results 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:

 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

 66.3

 Cost of revenues - restructuring related charges

 15,442

 3.2

 —

 —

 Total cost of revenues

 306,745

 62.9

 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
)

 (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
)

 Revenues, Net

 Net revenues decreased $22.7
million, or 4.4%, to $487.9 million in 2024 compared to $510.5 million in 2023. This decrease was primarily driven by macroeconomic pressures
impacting U.S. consumer behavior that fueled the ongoing impact of industry-wide demand softness for home-related products, a reduction
in advertising spend to focus on more profitable marketing, and the lapping effect on 2024 net revenues associated with the successful
launch of our new premium mattress products in 2023. Also, our wholesale channel net revenues were negatively impacted by intentionally
exiting our relationship with certain customers. From a sales channel perspective in 2024, DTC net revenues decreased $13.0 million, or
4.4%, and wholesale net revenues decreased $9.6 million, or 4.5%, as compared to 2023. Within DTC in 2024, e-commerce net revenues decreased
$17.3 million, or 7.7%, while Purple showroom net revenues increased $4.3 million, or 5.8%, as compared to 2023. The growth in Purple
showroom net revenues was driven by an increase in average selling prices related to both strategic price adjustments and a sizeable shift
in product mix to our higher priced Rejuvenate Products. Net revenues also benefited in 2024 from a full year's impact of five new
Purple showrooms that opened in 2023.

 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. 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. These savings
were offset in part by the restructuring-related charges mentioned above. Although $1.6 million of additional restructuring related charges
are projected to be recorded in cost of revenues through the second quarter of 2025, we expect the Restructuring Plan will further streamline
our manufacturing operations and provide increased gross profits going forward. These future charges incorporate certain estimates that
are provisional and include management judgments and assumptions that could change materially as we complete the execution of our plan.
Actual results may differ from these estimates and the completion of our plan could result in additional restructuring, impairment or
other related charges not currently anticipated.

 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. 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. As a percentage of net revenues,
advertising spend was 13.4% in 2024 compared to 14.2% in 2023. The lower percentage of revenues reflected the impact of using more efficient
advertising techniques in 2024 as compared to the use of expanded marketing efforts in 2023.

 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. These reductions were partially offset by a $2.0 million increase in compensation
and benefits expense related to the special recognition bonus and severance costs associated with the Restructuring Plan. There will be
no additional severance cost associated with the Restructuring Plan recorded in general and administrative expense.

 Research and Development

 Research and development costs
increased $1.1 million, or 8.9%, to $13.0 million in 2024 compared to $11.9 million in 2023. This increase was primarily due to a loss
incurred on the write off of a software development project coupled with increased investment in new research and development initiatives.

 Restructuring, Impairment and Other Related
Charges

 In August 2024, we initiated
a Restructuring Plan to permanently close our two Utah manufacturing facilities and consolidate mattress production in our Georgia
plant. The Restructuring Plan also provided for a headcount reduction at our Utah headquarters to drive additional operating efficiencies.
Of the $36.4 million total costs in 2024 relating to the Restructuring Plan, $20.0 million were recorded as restructuring, impairment
and other related charges which included $3.1 million of employee-related costs, $0.1 million of accelerated depreciation, $5.2 million
related to write-downs of long-lived assets to be disposed of or equipment in progress that will not be put in service, $11.0 million
of impairment charges which included $2.5 million associated with entering into a sublease for one of the Utah manufacturing facilities
to be closed and $8.5 million for the write-off of an indefinite-lived intangible asset, and $0.6 million for other related charges. We
expect to record additional restructuring and other related charges of $3.0 million through the second quarter of 2025. These charges
incorporate certain estimates that are provisional and include management judgments and assumptions that could change materially as we
complete the execution of our plan. Actual results may differ from these estimates and the completion of our plan could result in additional
restructuring, impairment or other related charges not currently anticipated.

 Loss on Impairment of Goodwill

 We recorded a $6.9 million
loss on impairment of goodwill in the third quarter of 2023 because of an impairment assessment performed that determined goodwill was
impaired. 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.

 Operating Loss

 Operating loss decreased $21.5
million, or 18.9%, to $92.2 million in 2024 compared to $113.7 million in 2023. The smaller operating loss primarily resulted from an
increase in gross profit, a decrease in advertising spend, a decrease in general and administrative expense and a loss on impairment of
goodwill in 2023. These decreases in operating loss were partially offset by restructuring and impairment charges recorded in 2024 related
to the Restructuring Plan. We expect to record additional $4.6 million of costs relating to the Restructuring Plan through the second
quarter of 2025. These charges include certain estimates that are provisional and incorporate management judgments and assumptions that
could change materially as we complete the execution of our plan. Actual results may differ from these estimates, and the completion of
our plan could result in additional restructuring, impairment or other related charges not currently expected.

 Interest Expense

 Interest expense totaled $17.5
million in 2024 compared to $2.0 million in 2023. This increase was primarily due to $16.8 million of interest incurred on the Related
Party Loan that was entered into in January 2024 to refinance the term loan and revolving line of credit associated with the 2023 Credit
Agreements. We elected for interest to be capitalized to the outstanding loan balance in accordance with the terms of the Amended and
Restated Credit Agreement which resulted in $9.7 million of interest expense being added to the Related Party Loan during 2024. 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. 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. 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. 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. 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. 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.

 Change in Fair Value – Warrant Liabilities

 In January 2024, in connection
with the Amended and Restated Credit Agreement, we issued to the Lenders Warrants to purchase 20.0 million shares of our Class A Stock.
These Warrants contain certain provisions that do not meet the criteria for equity classification and therefore are recorded as liabilities.
The initial liability for these Warrants was recorded at a fair value of $19.6 million on the date of issuance with the offset included
in debt issuance costs. This liability is being re-measured to fair value at each reporting date or exercise date with changes in the
fair value included in earnings. At December 31, 2024, the Warrants had a fair value of $16.1 million. 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.

 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. 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.

 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. In accordance with the terms of the Amended and Restated Credit Agreement
and to manage our cash obligations, we have elected to pay interest in kind and have it added to the principal amount of the loan. Our
working capital needs depend largely upon the timing of cash receipts from product sales, payments to vendors and others, changes in inventories,
and operating lease payment obligations. Our cash and cash equivalents and working capital positions were $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. Our capital expenditures in 2024 have primarily consisted
of additional investments made in our manufacturing operations and showroom facilities. Additional details regarding our current debt
are described above under " Recent Developments in our Business – Debt Financing "

 Our financial statements have
been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets and liabilities
and commitments in the normal course of business. In connection with our preparation of our consolidated financial statements for the
year ended December 31, 2024, we conducted an evaluation as to whether there were conditions and events, considered in the aggregate,
which raised substantial doubt as to our ability to continue as a going concern within one year after the date of the issuance of such
financial statements. We had cash and cash equivalents of approximately $29.0 million and
an accumulated deficit of $573.9 million at December 31, 2024, and a net loss of $97.9 million and net cash used
in operating and investing activities of $25.4 million for the year ended December 31, 2024. We entered into the 2025
Amendment, pursuant to which we received $19.0 million on March 12, 2025, in additional term loan proceeds from the 2025 Term Loan Lenders.

 We have also taken a number of
other actions to increase cash flow. In August 2024, we implemented the Restructuring Plan to consolidate manufacturing operations to
create efficiencies and cost savings. We have realized and plan to continue to realize direct material cost savings through supply chain
initiatives and supplier diversification efforts. We have taken additional cost-saving initiatives in 2025 to maintain liquidity to support
our operations and strategies.

 Accordingly, we
concluded that we will have sufficient liquidity to fund our operations for at least one year from the date of this Annual Report on
Form 10-K.

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

 Other Contractual Obligations

 Other material contractual
obligations primarily include operating lease payment obligations. Refer to Note 9 of our consolidated financial statements for additional
information on leases.

 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):

 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

 41,754

 Cash, end of the period

 $

 29,011

 $

 Net cash used in operating activities was $17.9 million in 2024 compared
to $54.7 million in 2023. Operating activities in 2024 reflected a net loss of $98.1 million offset in part by non-cash adjustments of
$75.9 million and working capital changes of $4.3 million. The non-cash adjustments primarily consisted of depreciation and amortization
totaling $35.3 million, non-cash restructuring, impairment and other related charges of $20.2 million, paid-in-kind interest on the Related
Party Loan of $9.7 million, non-cash interest from amortization of debt issuance costs of $7.2 million, and losses on the extinguishment
of debt of $3.4 million. The working capital changes were primarily comprised of a $4.7 million decrease in accounts receivable and a
$6.0 million decrease in inventories, offset in part by a $6.4 million decrease in accounts payable. Operating activities in 2023 reflected
a net loss of $121.2 million offset in part by non-cash adjustments of $44.1 million and working capital changes of $22.4 million. The
non-cash adjustments primarily consisted of depreciation and amortization totaling $25.1 million, an impairment charge to write off $6.9
million of goodwill, stock-based compensation of $4.9 million, and losses on the extinguishment of debt of $4.3 million. 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. 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. 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. 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. 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.

 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.

 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. The 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. 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.

 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 8. Financial Statements and Supplementary
Data

 Reference is made to Pages
F-1 through F-49 comprising a portion of this Annual Report on Form 10-K.

 Page

 Report of Independent Registered Public Accounting Firm (BDO USA, P.C., Salt Lake City, Utah; PCAOB ID#243)

 Consolidated Balance Sheets as of December 31, 2024 and 2023

 Consolidated Statements of Operations for the years ended December 31, 2024, 2023 and 2022

 Consolidated Statements of Stockholders' Equity (Deficit) for the years ended December 31, 2024, 2023 and 2022

 Consolidated Statements of Cash Flows for the years ended December 31, 2024, 2023 and 2022

 Notes to Consolidated Financial Statements

 Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure

 None.

 Item 9A. Controls and Procedures

 As a non-accelerated filer,
we are exempt from the auditor attestation requirements with respect to internal control over financial reporting under Section 404(b)
of the Sarbanes Oxley Act of 2002.

 Evaluation of Disclosure Controls and Procedures

 Under the supervision and
with the participation of our management, including our Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"
and together with the CEO, the "Certifying Officers"), we evaluated the effectiveness of the design and operation of our disclosure
controls and procedures (as such term is defined in Rule 13a-15(e) under the Exchange Act). Our disclosure controls and procedures are
designed to provide reasonable assurance that the information required to be disclosed in our reports filed or submitted under the Exchange
Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those
systems determined to be effective can provide only reasonable assurance of achieving their control objectives. Disclosure controls and
procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports
filed or submitted under the Exchange Act is accumulated and communicated to management, including our Certifying Officers, or persons
performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

 Based upon this evaluation,
and the above criteria, our Certifying Officers concluded that the Company's disclosure controls and procedures were effective as
of December 31, 2024.

 Management's Annual Report on Internal
Controls Over Financial Reporting

 Our management is responsible
for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the
Exchange Act).

 The Company's internal
control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of the Company's financial statements for external reporting purposes in accordance with GAAP. The Company's internal
control over financial reporting includes those policies and procedures that:

 Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions of the Company;

 Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorization of management and the directors of the Company; and,

 Provide reasonable assurance regarding prevention or timely detection of unauthorized use or disposition of the Company's assets that could have a material effect on the financial statements.

 Because of its inherent limitations,
internal control over financial reporting may not prevent or detect all misstatements. Also, projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.

 A material weakness is a deficiency,
or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material
misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis.

 Under the supervision and
with the participation of our management, including our Certifying Officers, we conducted an evaluation of the effectiveness of our internal
control over financial reporting as of December 31, 2024, based on the criteria established in Internal Control — Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management concluded
that our internal control over financial reporting was effective as of December 31, 2024.

 Previously Reported Material Weakness

 As previously reported, we
identified a material weakness related to the review and evaluation of wholesale customer contracts, specifically as it relates to variable
consideration, including wholesale warranty obligations. Specifically, we did not design and maintain effective controls over the review
and evaluation of the accounting relating to contract terms agreed upon with our wholesale customers and the identification and calculation
of the related wholesale accrued warranty liabilities.

 In response to this material
weakness, management, with oversight of the Audit Committee of the Board, designed and effectively implemented a control over the review
of all wholesale customer contracts to ensure the terms contained therein are appropriately evaluated and recorded. This control includes
increased rigor and participation among our legal and accounting personnel regarding the appropriate consideration and application of
contractual terms. We also implemented new controls over credit memo review and approval and the evaluation and review of accrued wholesale
warranty liabilities. Based on these measures, management has tested the new controls, found them effective, and concluded that the previously
reported material weakness described above has been remediated as of June 30, 2024.

 Changes in Internal Control over Financial Reporting

 There were no changes in our
internal control over financial reporting during the quarter ended December 31, 2024 that have materially affected, or are reasonably
likely to materially affect, our internal control over financial reporting.

 Item 9B. Other Information

 10b5-1 Trading Arrangements

 During the quarter ended December 31, 2024, none
of our directors or executive officers adopted, modified or terminated a "Rule 10b5-1 trading arrangement" or a "non-Rule
10b5-1 trading arrangement" as such terms are defined under Item 408 of Regulation S-K.

 Special Incentive Bonus
Equity Grants

 On
March 12, 2025, the Board unanimously approved special incentive bonus equity grants to certain members of the Company's senior
leadership team, including, among others, Todd Vogensen, Chief Financial Officer, John J. Roddy, Chief Human Resources Officer, and Eric
S. Haynor, Chief Operating Officer. Mr. Vogensen, Mr. Roddy, and Mr. Haynor will receive grants of 450,000, 175,000, and 350,000 restricted
stock units, respectively, pursuant to the terms of restricted stock unit grant agreements and the Company's 2017 Equity Incentive
Plan. Such restricted stock units will vest at the sooner of (a) a change in control, as defined in the award agreements, or (b) March
12, 2028, provided that if the recipient's employment with the Company is involuntarily terminated other than for cause, a pro rata
number of restricted stock units will vest as of such termination date. The foregoing summary of the restricted stock units does not purport
to be complete and is qualified in its entirety by reference to the full text of the form of restricted stock unit grant agreement, a
copy of which will be filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ending March 31, 2025.

 Amendment to Senior Leadership
Team Special Recognition Bonus

 On
January 26, 2024, the Board unanimously approved a special recognition bonus payment to certain members of the Company's senior
leadership team, including, among others, Todd Vogensen, Chief Financial Officer, John J. Roddy, Chief People Officer, and Eric S. Haynor,
Chief Operating Officer. Each participant is eligible to earn a special recognition bonus payment equal to 15 months of their regular
salary. The special recognition bonus payment is payable, subject to the employee's continued employment with the Company, 10% on
August 1, 2024, 20% on February 1, 2025, and 70% on August 1, 2025.

 On
March 12, 2025, the Board amended the special recognition bonus payments and entered into letter agreements (the "Letter
Agreements") with the participants to provide that if a change in control occurs prior to August 1, 2025 and the participant
remains employed with the Company until the consummation of the change in control, then 100% of the remaining special recognition
bonus payment for such participant shall vest and become payable upon the consummation of such change in control. The foregoing
description of the Letter Agreements does not purport to be complete and is qualified in its entirety by reference to the full text
of the form of Letter Agreements, a copy of which will be filed as an exhibit to the Company's Quarterly Report on Form 10-Q
for the quarter ending March 31, 2025.

 Amendment to Chief Executive
Officer Special Recognition Bonus

 On
January 26, 2024, the Board unanimously approved an amendment to the amended and restated employment agreement of Robert T. DeMartini,
the Company's Chief Executive Officer (the "2024 CEO Amendment"). Under the 2024 CEO Amendment, the Company agreed that,
among other things, Mr. DeMartini will be eligible to earn an incremental aggregate cash bonus equal to $850,000 that will vest 10% on
August 1, 2024, 20% on February 1, 2025, and 70% on August 1, 2025, provided he continues to be employed by the Company and subject to
Mr. DeMartini's obligation to repay any such bonus actually received in the event his employment is terminated other than by the
Company without cause prior to June 30, 2026, subject to certain conditions.

 On
March 12, 2025, the Board adopted an amendment (the "2025 CEO Amendment") to Mr. DeMartini's amended and restated employment
agreement, as amended by the 2024 CEO Amendment (the "Amended and Restated Employment Agreement"), to provide that if a change
in control occurs prior to August 1, 2025 and Mr. DeMartini remains employed by the Company until the consummation of the change in control,
then 100% of the unpaid cash bonus payment for Mr. DeMartini shall vest and become payable upon the consummation of such change in control
and the bonus repayment condition tied to his employment with the Company until June 30, 2026 shall no longer be applicable. Other than
the changes provided by the 2025 CEO Amendment, no other changes were made to Mr. DeMartini's Amended and Restated Employment Agreement.
The foregoing description of the 2025 CEO Amendment does not purport to be complete and is qualified in its entirety by reference to the
full text of the 2025 CEO Amendment, a copy of which will be filed as an exhibit to the Company's Quarterly Report on Form 10-Q
for the quarter ending March 31, 2025.

 Departure of Chief Marketing
Officer

 On March 7, 2025, Keira Krausz, the Company's Chief Marketing
Officer, and the Company agreed that Ms. Krausz' last day of employment with the Company was March 11, 2025. Because Ms. Krausz's
departure is the result of a termination without cause, the Company expects to pay approximately $237,865.57 in termination payments to
Ms. Krausz, subject to the Company and Ms. Krausz entering into a mutually agreeable release.

 Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent
Inspections

 Not applicable.

 Item 10. Directors, Executive Officers and
Corporate Governance

 Information
concerning our executive officers is included in Part I of this report under the caption "Information About Our Executive Officers."

 We
have adopted a Code of Ethics that applies to all officers, directors, employees and contractors. The Code of Ethics is posted on our
website at  We intend to disclose on our website any amendments, or waiver from, a provision to
the Code of Ethics by posting the information on our website at the address specified above.

 The remaining information
required under this item will be included under the captions "Directors and Corporate Governance" and "Delinquent Section
16(a) Reports" in the Company's definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed
with the SEC not later than 120 days after the close of the Company's year ended December 31, 2024, and is incorporated herein
by reference thereto.

 Item 11. Executive Compensation

 The information required under
this item is incorporated herein by reference to the Company's definitive proxy statement pursuant to Regulation 14A, which proxy
statement will be filed with the SEC not later than 120 days after the close of the Company's year ended December 31, 2024.

 Item 12. Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters

 The information required under
this item is incorporated herein by reference to the Company's definitive proxy statement pursuant to Regulation 14A, which proxy
statement will be filed with the SEC not later than 120 days after the close of the Company's year ended December 31, 2024.

 Item 13. Certain Relationships and Related
Transactions, and Director Independence

 The information required under
this item is incorporated herein by reference to the Company's definitive proxy statement pursuant to Regulation 14A, which proxy
statement will be filed with the SEC not later than 120 days after the close of the Company's year ended December 31, 2024.

 Item 14. Principal Accountant Fees and Services

 The information required under
this item is incorporated herein by reference to the Company's definitive proxy statement pursuant to Regulation 14A, which proxy
statement will be filed with the SEC not later than 120 days after the close of the Company's year ended December 31, 2024.

 Item 15. Exhibits and Financial Statement Schedules

 (a)

 The following documents are filed as part of this Report:

 (1)

 Financial Statements

 The following financial statements
are included in Part II, Item 8 of this Form 10-K:

 Report of Independent Registered Public Accounting Firm (BDO USA, P.C., Salt Lake City, Utah; PCAOB ID#243)

 Consolidated Balance Sheets

 Consolidated Statements of Operations

 Consolidated Statements of Stockholders' Equity (Deficit)

 Consolidated Statements of Cash Flows

 Notes to the Consolidated Financial Statements

 (2)

 Financial Statements Schedule

 All other financial statement
schedules are omitted because they are not applicable or the amounts are immaterial and not required, or the required information is presented
in our consolidated financial statements and notes thereto in Item 15 of Part IV below.

 (3)

 Exhibits

 We hereby file as part of
this report the exhibits listed in the attached Exhibit Index.

 EXHIBIT INDEX

 Exhibit No.

 Description

 2.5#

 Merger Agreement, dated as of August 31, 2022, by and among Purple Innovation, Inc., Gelato Intermediate, LLC, Gelato Merger Sub, Inc., Advanced Comfort Technologies, Inc., and D. Scott Peterson (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K (File No. 001-37523) filed with the SEC on September 1, 2022).

 3.1

 Second Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Quarterly Report on Form 10-Q (File No. 001-37523) filed with the SEC on November 6, 2019).

 3.2

 Third Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K (File No. 001-37523) filed with the Commission on April 21, 2023).

 3.3

 Certificate of Designation of the Preferred Stock of the Company, dated September 26, 2022 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K (File No. 001-37523) filed with the SEC on September 27, 2022).

 3.4

 Certificate of Designation of Proportional Representation Preferred Linked Stock of the Company, dated February 14, 2023 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K (File No. 001-37523) filed with the SEC on February 14, 2023).

 3.6

 Certificate of Elimination of the Series A Junior Participating Preferred Stock, dated April 27, 2023 (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed April 27, 2023).

 3.7

 Certificate of Elimination of the Proportional Representation Preferred Linked Stock, dated April 27, 2023 (incorporated by reference to Exhibit 3.2 to the Company's Current Report on Form 8-K filed April 27, 2023).

 3.8

 Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K (File No. 001-37523) filed with the SEC on October 16, 2024).

 3.9

 Certificate of Designation of the Preferred Stock of the Company, dated June 28, 2024 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K (File No. 001-37523) filed with the SEC on June 28, 2024).

 4.1

 Form of Class A Common Stock certificate (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K (File No. 001-37523) filed with the SEC on October 16, 2024).

 4.2*

 Description of Registered Securities.

 4.3

 Stockholder Rights Agreement, dated June 27, 2024, by and between the Company and Pacific Stock Transfer Company, as rights agent (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K (File No. 001-37523) filed with the SEC on June 28, 2024).

 10.1+

 Form of Option Award Agreement (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q (File No. 001-37523) filed with the SEC on May 15, 2018).

 10.2+

 Form of Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q (File No. 001-37523) filed with the SEC on May 15, 2018).

 10.3+

 Form of Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q (File No. 001-37523) filed with the SEC on May 15, 2018).

 10.4+

 Form of Stock Appreciation Right Award Agreement (incorporated by reference to Exhibit 10.4 to the Quarterly Report on Form 10-Q (File No. 001-37523) filed with the SEC on May 15, 2018).

 10.5+

 Form of Stock Bonus Award Agreement (incorporated by reference to Exhibit 10.5 to the Quarterly Report on Form 10-Q (File No. 001-37523) filed with the SEC on May 15, 2018).

 10.6

 Subscription Agreement, dated February 1, 2018, between Global Partner Acquisition Corp., Global Partner Sponsor I LLC, Coliseum Capital Partners, L.P. and Blackwell Partners LLC – Series A (incorporated by reference to Exhibit 10.15 to the Current Report on Form 8-K (File No. 001-37523) filed with the SEC on February 8, 2018).

 10.7

 Exchange Agreement, dated February 2, 2018, by and between Purple Innovation, Inc., Purple Innovation, LLC and InnoHold, LLC (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K (File No. 001-37523) filed with the SEC on February 8, 2018).

 10.8

 Registration Rights Agreement, dated February 2, 2018, between Global Partner Acquisition Corp., Coliseum Capital Partners, L.P., Blackwell Partners, LLC and Coliseum Co-Invest Debt Fund, L.P. (incorporated by reference to Exhibit 10.18 to the Current Report on Form 8-K (File No. 001-37523) filed with the SEC on February 8, 2018).

 10.9

 Tax Receivable Agreement, dated February 2, 2018, by and between Purple Innovation, Inc. and InnoHold, LLC (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K (File No. 001-37523) filed with the SEC on February 8, 2018).

 10.10+

 Purple Innovation, Inc. Amended and Restated 2017 Equity Incentive Plan (incorporated by reference to Exhibit 99.1 to the S-8 (File No. 333-272712) filed with the SEC on June 16, 2023).

 10.11+

 Form of Restricted Share Unit Agreement pursuant to the Purple Innovation, Inc. 2017 Incentive Plan (incorporated by reference to Exhibit 99.2 to the Company's Current Report on Form 8-K (File No. 001-37523) filed on April 19, 2023).

 10.12

 Second Amended and Restated Confidential Assignment and License Back Agreement between the Company and EdiZONE (incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q (File No. 001-37523) filed with the SEC on November 14, 2018).

 10.13

 Master Retailer Agreement dated September 18, 2018 by and between Purple Innovation LLC and Mattress Firm, Inc. (incorporated by reference to Exhibit 10.10 to the Quarterly Report on Form 10-Q (File No. 001-37523) filed with the SEC on May 7, 2019).

 10.14+

 Restated and Amended Purple Innovation, Inc. 2019 Long-Term Equity Incentive Plan dated July 12, 2021 (incorporated by reference to Exhibit 99.2 to the Current Report on Form 8-K (File No. 001-37523) filed with the SEC on July 13, 2021).

 10.15

 Lease Agreement dated June 10, 2019 between Purple Innovation, LLC and North Slope One, LLC (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q (File No. 001-37523) filed with the SEC on August 13, 2019).

 10.16

 First Amendment to Lease dated November 19, 2019 between the Company and North Slope One, LLC (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K (File No. 001-37523) filed with the SEC on November 25, 2019).

 10.17

 Amendment to TNT Holdings Amended and Restated Lease Agreement dated April 23, 2020 (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q (File No. 001-37523) filed with the SEC on May 11, 2020).

 10.18

 Lease Agreement between Purple Innovation, LLC and PNK S2, LLC dated July 21, 2020 (incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q (File No. 001-37523) filed with the SEC on August 14, 2020).

 10.19

 License Transfer and IP Assignment Agreement between Purple Innovation, LLC and EdiZONE, LLC dated August 14, 2020 (incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q (File No. 001-37523) filed with the SEC on November 10, 2020).

 10.20

 Amendment to Lease Agreement between Purple Innovation, LLC and PNK S2, LLC dated March 4, 2021 (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q (File No. 001-37523) filed with the SEC on May 17, 2021).

 10.21

 Second Amendment to Lease Agreement between Purple Innovation, LLC and PNK S2, LLC dated March 26, 2021 (incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q (File No. 001-37523) filed with the SEC on May 17, 2021).

 10.22+

 Form of Restricted Share Unit Agreement (incorporated by reference to Exhibit 99.3 to the Current Report on Form 8-K (File No. 001-37523) filed with the SEC on July 13, 2021).

 10.23+

 Amended and Restated Restricted Share Unit Agreement dated March 15, 2023, between the Company and Robert T. DeMartini (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed March 21, 2023).

 10.24+

 Amended and Restated Restricted Share Unit Agreement (Reissued) dated March 15, 2023, between the Company and Robert T. DeMartini (incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed March 21, 2023).

 10.25+

 Amended and Restated Restricted Share Unit Agreement (Reissued Excess Subject to Approval) dated March 15, 2023, between the Company and Robert T. DeMartini (incorporated by reference to Exhibit 10.5 to the Company's Current Report on Form 8-K filed on March 21, 2023).

 10.26+

 Purple Innovation, Inc. 2021 Short-Term Cash Incentive Plan dated July 12, 2021 (incorporated by reference to Exhibit 99.5 to the Current Report on Form 8-K (File No. 001-37523) filed with the SEC on July 13, 2021).

 10.27+

 Amended and Restated Employment Agreement, dated as of March 19, 2022, by and among Robert T. DeMartini and Purple Innovation, Inc. (incorporated by reference to Exhibit 99.1 to the Current Report on Form 8-K (File No. 001-37523) filed with the SEC on March 22, 2022).

 10.28+

 Offer letter dated as of April 29, 2022, signed by Eric Haynor (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K (File No. 001-37523) filed with the SEC on May 3, 2022).

 10.29+

 Amended and Restated Option Grant Agreement dated March 15, 2023, between the Company and Robert T. DeMartini (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed March 21, 2023).

 10.30+

 Amended and Restated Option Grant Agreement (Reissued Excess Subject to Approval) dated March 15, 2023, between the Company and Robert T. DeMartini (incorporated by reference to exhibit 10.6 to the Company's Current Report on Form 8-K filed on March 21, 2023).

 10.31+

 Purple Innovation, Inc. 2023 Short-Term Cash Incentive Plan, dated as of April 13, 2023 (incorporated by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K (File No. 001-37523) filed on April 19, 2023).

 10.32+

 Form of Performance-Based Share Unit Agreement (incorporated by reference to Exhibit 99.3 to the Company's Current Report on Form 8-K (File No. 001-37523) filed on April 19, 2023).

 10.33

 Cooperation Agreement between Purple Innovation, Inc. and Coliseum Capital Management, LLC, dated April 19, 2023 (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed April 21, 2023).

 10.34

 Amended and Restated Credit Agreement, dated January 23, 2024, by and among Purple Innovation, Inc., Purple Innovation, LLC, Intellibed, LLC, Coliseum Capital Partners, L.P., Blackwell Partners LLC – Series A, Harvest Small Cap Partners Master, Ltd., Harvest Small Cap Partners, L.P., HSCP Strategic IV, L.P., and Delaware Trust Company (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K (File No. 001-37523) filed on January 23, 2024).

 10.35+

 Offer Letter Entered into between Purple Innovation, LLC and Todd E. Vogensen dated September 19, 2023 (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K (File No. 001-37523) filed on September 21, 2023).

 10.36

 Form of Warrant (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K (File No. 001-37523) filed on January 23, 2024).

 10.37

 Amended and Restated Registration Rights Agreement, dated January 23, 2024, by and among Purple Innovation, Inc., Coliseum Capital Partners, L.P., Blackwell Partners LLC – Series A, Coliseum Capital Co-Invest III, L.P., Harvest Small Cap Partners Master, Ltd., Harvest Small Cap Partners, L.P., and HSCP Strategic IV, L.P. (incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K (File No. 001-37523) filed on January 23, 2024).

 10.38

 Amended and Restated Pledge and Security Agreement, dated January 23, 2024, by and among Purple Innovation, Inc., Purple Innovation, LLC, Intellibed, LLC, and Delaware Trust Company (incorporated by reference to Exhibit 10.4 to the Company's Current Report on Form 8-K (File No. 001-37523) filed on January 23, 2024).

 10.39+

 Amendment to the Amended and Restated Employment Agreement dated January 26, 2024, between the Company and Robert T. DeMartini (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K (File No. 001-37523) filed on January 26, 2024).

 10.40+

 Offer Letter, dated as of September 21, 2023, between Purple Innovation, LLC and Tricia McDermott, dated September 21, 2023 (incorporated by reference to Exhibit 99.1 to the Company's Registration Statement on Form S-8 (File No. 001-37523) filed with the SEC on March 14, 2024).

 10.41 *

 Amendment to Amended and Restated Credit Agreement, dated as of March 12, 2025, by and among Purple Innovation, Inc., Purple Innovation, LLC, Intellibed, LLC, Coliseum Capital Partners, L.P., Blackwell Partners LLC – Series A, and CSC Delaware Trust Company.

 10.42*

 Form of Warrant.

 10.43 *

 Second Amended and Restated Registration Rights Agreement, dated as of March 12, 2025, by and among Purple Innovation, Inc., Coliseum Capital Partners, L.P., Blackwell Partners LLC – Series A and Coliseum Capital Co-Invest III, L.P.

 19.1*

 Insider Trading Policy.

 21.1*

 List of Subsidiaries of the Registrant.

 23.1*

 Consent of Independent Registered Public Accounting Firm

 24.1*

 Power of Attorney (included on signature page)

 31.1*

 Certification of the Principal Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a)

 31.2*

 Certification of the Principal Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a)

 32.1*

 Certification of the Principal Executive Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350

 32.2*

 Certification of the Principal Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350

 97.1

 Compensation Clawback Policy (incorporated by reference to Exhibit 97.1 to the Company's Annual Report on Form 10-K (File No. 001-37523) filed with the SEC on March 12, 2024).

 101.INS

 101.SCH

 101.CAL

 101.DEF

 101.LAB

 101.PRE

 *

 Filed herewith

 #

 Schedules and exhibits to the Merger Agreement have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company hereby undertakes to furnish supplementally a copy of any omitted schedules and exhibits to the Securities and Exchange Commission upon request.

 +

 Indicates management contract or compensatory plan.

 Confidential treatment of certain provisions has been granted by the Securities and Exchange Commission.

 Certain schedules and exhibits to this agreement have been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted exhibit or schedule will be furnished supplementally to the SEC or its staff upon request.

 Item 16. Form 10-K Summary

 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 Page

 Report of Independent Registered Public Accounting Firm (BDO USA, P.C., Salt Lake City, Utah; PCAOB ID# 243)

 Consolidated
Balance Sheets as of December 31, 2024 and 2023

 Consolidated Statements of Operations for the years ended December 31, 2024, 2023 and 2022

 Consolidated Statements of Stockholders' Equity (Deficit) for the years ended December 31, 2024, 2023 and 2022

 Consolidated Statements of Cash Flows for the years ended December 31, 2024, 2023 and 2022

 Notes to Consolidated Financial Statements

 F- 1

 Report of Independent Registered Public Accounting Firm

 Shareholders and Board of Directors

 Purple Innovation, Inc.

 Lehi, Utah

 Opinion on the Consolidated Financial Statements

 We have audited the accompanying consolidated
balance sheets of Purple Innovation, Inc. (the "Company") as of December 31, 2024 and 2023, the related consolidated statements
of operations, stockholders' equity (deficit), and cash flows for each of the three years in the period ended December 31, 2024,
and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated
financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and
the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity
with accounting principles generally accepted in the United States of America.

 Basis for Opinion

 These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial
statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United
States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and
the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 We conducted our audits in accordance with the
standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we
engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding
of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's
internal control over financial reporting. Accordingly, we express no such opinion.

 Our audits included performing procedures to assess
the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide
a reasonable basis for our opinion.

 Critical Audit Matter

 The critical audit matter communicated below is
a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated
to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and
(2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter
in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit
matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

 F- 2

 Accrued Warranty Liabilities

 As of December 31, 2024, the Company's accrued
warranty liabilities were $32.2 million. As discussed in Note 2 to the consolidated financial statements, the Company provides a limited
warranty on the majority of its products sold. Accrued warranty liabilities are estimated based on the results of historical trends and
warranty claim rates incurred, and are adjusted for any current or expected trends. Estimated warranty costs for the Company's direct
to consumer customers are recognized at the time of sale in cost of revenues and warranty costs for the Company's wholesale customers
are recognized at the time of sale as an offset to net revenues.

 We identified the estimate of accrued warranty
liabilities as a critical audit matter because of certain assumptions used by management to estimate warranty costs at the time of sale,
specifically, estimated future warranty claims and estimated costs to remedy warranty claims. The principal consideration for our determination
was the subjective judgment required to determine the future warranty claim rate used to estimate warranty claims through the end of the
warranty period and an increased extent of audit effort to address this matter.

 The primary procedures we performed to address
this critical audit matter included:

 Evaluating
management's ability to estimate future warranty claims by comparing management's prior-year assumption of expected claims
to actuals claims incurred during the year.

 Testing
management's process used to estimate accrued warranty liabilities, including the appropriateness of the methodology, the mathematical
accuracy of the calculation, and the sources of data from which the assumptions were derived.

 Evaluating
the reasonableness of estimated future warranty claims and the estimated costs to remedy warranty claims by:

 o
 Testing the key inputs that served as the basis for the estimate,
including the historical claims made, actual warranty costs incurred and costs expected to be reimbursed by the customer.

 o
 Inquiring of operational management regarding their knowledge
of any existing product warranty claims or product issues and evaluating whether management appropriately considered these issues in
the estimation of accrued warranty liabilities.

 /s/ BDO USA, P.C.

 We have served as the Company's auditor since
2017.

 Salt Lake City, Utah

 March 13, 2025

 F- 3

 Consolidated Balance Sheets

 (In thousands, except for par value)

 2024

 2023

 Assets

 Current assets:

 Cash and cash equivalents

 $
 29,011

 $

 Accounts receivable, net

 33,057

 37,802

 Inventories

 56,863

 66,878

 Prepaid expenses

 6,023

 8,536

 Other current assets

 1,414

 1,737

 Total current assets

 126,368

 141,810

 Property and equipment, net

 93,874

 128,661

 Operating lease right-of-use assets

 75,516

 95,767

 Intangible assets, net

 8,890

 22,196

 Other long-term assets

 3,197

 2,191

 Total assets

 $
 307,845

 $
 390,625

 Liabilities and Stockholders' Equity

 Current liabilities:

 Accounts payable

 $
 40,639

 $
 49,831

 Accrued compensation

 9,415

 5,064

 Customer prepayments

 6,411

 5,718

 Accrued rebates and allowances

 10,013

 13,243

 Accrued warranty liabilities – current portion

 6,114

 9,793

 Operating lease obligations – current portion

 15,661

 14,843

 Other current liabilities

 12,750

 12,490

 Total current liabilities

 101,003

 110,982

 Related party debt

 55,394

 —

 Long-term debt, net of current portion

 —

 26,909

 Accrued warranty liabilities, net of current portion

 26,091

 25,798

 Operating lease obligations, net of current portion

 87,072

 109,094

 Warrant liabilities

 16,067

 —

 Other long-term liabilities

 2,009

 2,235

 Total liabilities

 287,636

 275,018

 Commitments and contingencies (Note 15)

 Stockholders' equity:

 Class A common stock; $ 0.0001 par value, 210,000 shares authorized; 107,545 and 105,507 issued and outstanding at December 31, 2024 and 2023, respectively

 Class B common stock; $ 0.0001 par value, 90,000 shares authorized; 165 and 205 issued and outstanding at December 31, 2024 and 2023, respectively

 —

 —

 Additional paid-in capital

 594,053

 591,380

 Accumulated deficit

 ( 573,866
)

 ( 475,969
)

 Total stockholders' equity attributable to Purple Innovation, Inc.

 20,198

 115,422

 Noncontrolling interest

 Total stockholders' equity

 20,209

 115,607

 Total liabilities and stockholders' equity

 $
 307,845

 $
 390,625

 The accompanying notes are an integral part of
these consolidated financial statements.

 F- 4

 Consolidated Statements of Operations

 (In thousands, except per share amounts)

 Year Ended December 31,

 2024

 2023

 2022

 Revenues, net

 $
 487,877

 $
 510,541

 $
 573,201

 Cost of revenues:

 Cost of revenues

 291,303

 365,110

 Cost of revenues – restructuring related charges

 15,442

 —

 —

 Total cost of revenues

 306,745

 365,110

 Gross profit

 181,132

 171,825

 208,091

 Operating expenses:

 Marketing and sales

 171,263

 182,313

 165,388

 General and administrative

 69,117

 84,446

 76,702

 Research and development

 12,962

 11,898

 8,755

 Restructuring, impairment and other related charges

 19,973

 —

 —

 Loss on impairment of goodwill

 —

 6,879

 —

 Total operating expenses

 273,315

 285,536

 250,845

 Operating loss

 ( 92,183
)

 ( 113,711
)

 ( 42,754
)

 Other (expense) income:

 Interest expense

 ( 17,510
)

 ( 1,967
)

 ( 3,536
)

 Other income (expense), net

 11,548

 ( 1,198
)

 Loss on extinguishment of debt

 ( 3,394
)

 ( 4,331
)

 —

 Change in fair value – warrant liabilities

 3,504

 —

 4,343

 Tax receivable agreement income

 —

 —

 161,970

 Total (expense) other income, net

 ( 5,852
)

 ( 7,496
)

 163,200

 Net (loss) income before income taxes

 ( 98,035
)

 ( 121,207
)

 120,446

 213,169

 Net loss

 ( 98,098
)

 ( 121,215
)

 ( 92,723
)

 Net loss attributable to noncontrolling interest

 ( 201
)

 ( 458
)

 ( 253
)

 Net loss attributable to Purple Innovation, Inc.

 $
)

 $
)

 $
)

 Net loss per share:

 Basic

 $
 ( 0.91
)

 $
 ( 1.17
)

 $
 ( 1.13
)

 Diluted

 $
 ( 0.91
)

 $
 ( 1.17
)

 $
 ( 1.13
)

 Weighted average common shares outstanding:

 Basic

 107,139

 103,602

 81,779

 Diluted

 107,324

 103,936

 81,779

 The accompanying notes are an integral part of
these consolidated financial statements.

 F- 5

 Consolidated Statements of Stockholders'
Equity (Deficit)

 (In thousands)

 Class
 A
 Common Stock

 Class
 B
 Common Stock

 Additional

 Paid-in

 Accumulated

 Total

 Stockholders'
 Equity
 attributable
 to Purple
 Innovation,

 Noncontrolling

 Total

 Shares

 Par Value

 Shares

 Par Value

 Capital

 Deficit

 Inc.

 Interest

 Equity

 Balance
 — December 31, 2021

 66,493

 $

 $
 —

 $
 407,591

 $
 ( 262,742
)

 $
 144,856

 $

 $
 145,618

 Net
 loss

 —

 —

 —

 —

 —

)

)

 ( 253
)

 ( 92,723
)

 Stock-based
 compensation

 —

 —

 —

 —

 3,366

 —

 3,366

 —

 3,366

 Exercise
 of stock options

 —

 —

 —

 —

 —

 of stock upon underwritten offering, net of costs

 16,100

 —

 —

 92,865

 —

 92,866

 —

 92,866

 of stock for Intellibed acquisition

 8,613

 —

 —

 26,105

 —

 26,106

 —

 26,106

 Accrued
 distributions

 —

 —

 —

 —

 ( 228
)

 —

 ( 228
)

 —

 ( 228
)

 of stock under equity compensation plans

 —

 —

 —

 —

 —

 —

 —

 —

 Impact
 of transactions affecting NCI

 —

 —

 —

 —

 ( 399
)

 —

 ( 399
)

 —

 Balance
 – December 31, 2022

 91,380

 $

 $
 —

 $
 529,466

 $
 ( 355,212
)

 $
 174,263

 $

 $
 175,171

 Net
 loss

 —

 —

 —

 —

 —

)

)

 ( 458
)

 ( 121,215
)

 Stock-based
 compensation

 —

 —

 —

 —

 4,875

 —

 4,875

 —

 4,875

 Exchange
 of stock

 —

 ( 243
)

 —

 —

 —

 —

 —

 —

 Proportional
 Representation Preferred Linked Stock redemption fee

 —

 —

 —

 —

 ( 105
)

 —

 ( 105
)

 —

 ( 105
)

 of stock upon underwritten offering, net of costs

 13,400

 —

 —

 56,997

 —

 56,999

 —

 56,999

 Escrow
 shares cancelled in connection with Intellibed acquisition

 ( 41
)

 —

 —

 —

 ( 118
)

 —

 ( 118
)

 —

 ( 118
)

 of stock under equity compensation plans

 —

 —

 —

 —

 —

 —

 —

 —

 Impact
 of transactions affecting NCI

 —

 —

 —

 —

 —

 ( 265
)

 —

 Balance
 – December 31, 2023

 105,507

 $

 $
 —

 $
 591,380

 $
 ( 475,969
)

 $
 115,422

 $

 $
 115,607

 Net
 loss

 —

 —

 —

 —

 —

)

)

 ( 201
)

 ( 98,098
)

 Stock-based
 compensation

 —

 —

 —

 —

 2,815

 —

 2,815

 —

 2,815

 Exchange
 of stock

 —

 ( 40
)

 —

 —

 —

 —

 —

 —

 of stock for Intellibed acquisition

 1,500

 —

 —

 —

 —

 —

 —

 —

 —

 of stock under equity compensation plans

 —

 —

 —

 ( 115
)

 —

 ( 115
)

 —

 ( 115
)

 Impact
 of transactions affecting NCI

 —

 —

 —

 —

 ( 27
)

 —

 ( 27
)

 —

 Balance
 – December 31, 2024

 107,545

 $

 $
 —

 $
 594,053

 $
 ( 573,866
)

 $
 20,198

 $

 $
 20,209

 The accompanying notes are an integral part of
these consolidated financial statements.

 F- 6

 Consolidated Statements of Cash Flows

 (In thousands)

 Years
 Ended December 31,

 2024

 2023

 2022

 Cash flows from operating activities:

 Net loss

 $
 ( 98,098
)

 $
 ( 121,215
)

 $
 ( 92,723
)

 Adjustments to reconcile net
 loss to net cash used in operating activities:

 Depreciation and amortization

 35,355

 25,106

 17,487

 Non-cash interest

 7,229

 1,237

 1,072

 Paid-in-kind interest

 9,679

 —

 —

 Non-cash restructuring, impairment
 and other related charges

 20,238

 —

 —

 Loss on impairment of goodwill

 —

 6,879

 —

 Loss on extinguishment of debt

 3,394

 4,331

 —

 Loss on disposal of property and
 equipment

 1,680

 Change in fair value – warrant
 liabilities

 ( 3,504
)

 —

 ( 4,343
)

 Tax receivable agreement income

 —

 —

 ( 161,970
)

 Stock-based compensation

 2,815

 4,875

 3,366

 Gain from effective settlement
 of preexisting relationship

 —

 —

 ( 1,421
)

 Deferred income taxes

 —

 —

 213,548

 Changes in operating assets
 and liabilities:

 Accounts receivable

 4,745

 ( 3,651
)

 ( 4,112
)

 Inventories

 5,989

 5,903

 28,956

 Prepaid expenses and other assets

 2,345

 1,574

 1,757

 Operating leases, net

 ( 2,412
)

 1,404

 7,709

 Accounts payable

 ( 6,376
)

 4,382

 ( 33,609
)

 Accrued compensation

 4,351

 ( 1,627
)

 ( 2,892
)

 Customer prepayments

 1,266

 ( 6,456
)

 Accrued rebates and allowances

 ( 3,230
)

 3,439

 ( 365
)

 Accrued warranty liabilities

 ( 3,386
)

 11,128

 6,854

 Other accrued
 liabilities

 1,553

 ( 1,373
)

 ( 2,251
)

 Net cash
 used in operating activities

 ( 17,850
)

 ( 54,662
)

 ( 28,773
)

 Cash flows from investing activities:

 Cash, cash equivalents and restricted
 cash acquired from acquisition, net of cash paid

 —

 —

 3,660

 Excess restricted cash returned
 to acquiree

 —

 ( 826
)

 —

 Purchase of property and equipment

 ( 7,244
)

 ( 14,391
)

 ( 35,376
)

 Investment
 in intangible assets

 ( 286
)

 ( 844
)

 ( 2,785
)

 Net cash
 used in investing activities

 ( 7,530
)

 ( 16,061
)

 ( 34,501
)

 Cash flows from financing activities:

 Proceeds from term loan

 —

 25,000

 —

 Proceeds from revolving line
 of credit

 —

 17,000

 —

 Proceeds from related party
 loan

 61,000

 —

 —

 Payments on term loan

 ( 25,000
)

 ( 24,656
)

 ( 17,531
)

 Payments on revolving line of
 credit

 ( 5,000
)

 ( 12,000
)

 ( 55,000
)

 Payments for debt issuance costs

 ( 3,466
)

 ( 6,143
)

 ( 1,242
)

 Proceeds from stock offering

 —

 60,300

 98,210

 Payments for stock offering
 costs

 —

 ( 3,301
)

 ( 5,344
)

 Proceeds from exercise of stock
 options

 —

 —

 Proportional Representation
 Preferred Linked Stock redemption fee

 —

 ( 105
)

 —

 Tax receivable
 agreement payments

 —

 ( 269
)

 ( 5,847
)

 Net cash
 provided by financing activities

 27,534

 55,826

 13,412

 Net increase (decrease) in cash,
 cash equivalents and restricted cash

 2,154

 ( 14,897
)

 ( 49,862
)

 Cash,
 cash equivalents and restricted cash, beginning of the year

 41,754

 91,616

 Cash, cash
 equivalents and restricted cash, end of the year

 $
 29,011

 $

 $
 41,754

 Supplemental disclosures of cash
 flow information:

 Cash paid
 during the year for interest, net of amounts capitalized

 $

 $

 $
 2,693

 Cash paid during the year for
 income taxes

 $

 $

 $

 Supplemental schedule of non-cash
 investing and financing activities:

 Property
 and equipment included in accounts payable

 $

 $
 3,232

 $
 4,162

 of stock for acquisition

 $
 —

 $
 —

 $
 26,106

 Escrow
 shares cancelled in connection with Intellibed acquisition

 $
 —

 $

 $
 —

 Accrued
 distributions

 $
 —

 $
 —

 $

 The accompanying notes are an integral part of
these consolidated financial statements.

 F- 7

 Notes to the Consolidated Financial Statements

 1. Organization

 The Company's mission
is to help people feel and live better through innovative comfort solutions.

 Purple Innovation, Inc., collectively
with its subsidiary (the "Company" or "Purple Inc."), is an omni-channel Company that began as a digitally-native
vertical brand founded on comfort product innovation with premium offerings. The Company designs and manufactures a variety of innovative,
branded and premium comfort products, including mattresses, pillows, cushions, bases, sheets, and other products. The Company markets
and sells its products through its direct-to-consumer e-commerce channels, retail brick-and-mortar wholesale partners, Purple showrooms,
and third-party online retailers.

 The Company was incorporated
in Delaware on May 19, 2015 as a special purpose acquisition company under the name of Global Partnership Acquisition Corp ("GPAC").
On February 2, 2018, the Company consummated a transaction structured similar to a reverse recapitalization (the "Business Combination")
pursuant to which the Company acquired a portion of the equity of Purple Innovation, LLC ("Purple LLC"). At the closing of
the Business Combination (the "Closing"), the Company became the sole managing member of Purple LLC, and GPAC was renamed
Purple Innovation, Inc.

 As the sole managing member
of Purple LLC, Purple Inc. through its officers and directors is responsible for all operational and administrative decision making and
control of the day-to-day business affairs of Purple LLC without the approval of any other member.

 On August 31, 2022, the Company
acquired all the issued and outstanding stock of Advanced Comfort Technologies, Inc., dba Intellibed ("Intellibed") pursuant
to an Agreement and Plan of Merger (the "Merger Agreement"), in which Gelato Merger Sub, Inc., a wholly owned subsidiary of
Purple Inc., merged with and into Intellibed, with Intellibed continuing as a wholly owned subsidiary of Purple Inc. On October 3, 2022,
Purple Inc. contributed 100 % of the membership interest in Intellibed to Purple LLC and Intellibed became a wholly owned subsidiary of
Purple LLC. Refer to Note 4 — Acquisition for more information.

 2. Summary
of Significant Accounting Policies

 This summary of significant
accounting policies is presented to assist in understanding the Company's consolidated financial statements. The consolidated financial
statements and notes are representations of the Company's management, which is responsible for their integrity and objectivity.

 Basis of Presentation and Principles of
Consolidation

 The consolidated financial
statements include the accounts of Purple Inc., its controlled subsidiary Purple LLC, and Intellibed, Purple LLC's wholly owned
subsidiary, from the date of acquisition. All intercompany balances and transactions have been eliminated in consolidation. As of December
31, 2024, Purple Inc. held 99.8 % of the common units of Purple LLC and other Purple LLC Class B Unit holders held 0.2 % of the common units
in Purple LLC. The Company's consolidated financial statements did not include consolidated statements of comprehensive income since
it had no items of other comprehensive income in any of the periods presented.

 Liquidity

 The accompanying financial
statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets
and liabilities and commitments in the normal course of business. In connection with the preparation of the consolidated financial statements
for the year ended December 31, 2024, the Company conducted an evaluation as to whether there were conditions and events, considered
in the aggregate, which raised substantial doubt as to its ability to continue as a going concern within one year after the date of the
issuance of such financial statements. The Company had cash and cash equivalents of
approximately $ 29.0 million and an accumulated deficit of $ 573.9 million at December 31, 2024,
and a net loss of $ 97.9 million and net cash used in operating and investing activities of $ 25.4 million for the year ended
December 31, 2024. T he Company entered into an Amendment to the Amended and Restated Credit Agreement (the "2025
Amendment"), pursuant to which it received $ 19.0 million on March 12, 2025 in additional term loan proceeds from the 2025 Term Loan
Lenders pursuant to the 2025 Amendment (see Note 23— Subsequent Events).

 F- 8

 The Company has also taken a number of other actions to increase cash flow. In August 2024, the Company
implemented the Restructuring Plan to consolidate manufacturing operations to create efficiencies and cost savings. The Company has
realized and plans to continue to realize direct material cost savings through supply chain initiatives and supplier diversification
efforts. The Company has taken additional cost-saving initiatives in 2025 to maintain liquidity to support our operations and
strategies.

 Accordingly, the Company
has concluded that it will have sufficient liquidity to fund its operations
for at least one year from the date these consolidated financial statements are issued.

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

 Variable Interest Entities

 Purple LLC is a variable interest
entity. The Company determined that it is the primary beneficiary of Purple LLC as it is the sole managing member and has the power to
direct the activities most significant to Purple LLC's economic performance as well as the obligation to absorb losses and receive
benefits that are potentially significant. At December 31, 2024, Purple Inc. had a 99.8 % economic interest in Purple LLC and consolidated
 100 % of Purple LLC's assets, liabilities and results of operations in the Company's consolidated financial statements contained
herein. The holders of Class B Units held 0.2 % of the economic interest in Purple LLC as of December 31, 2024. Refer to Note 17— Stockholders'
Equity for more information.

 Reclassification

 Certain prior year amounts
in the consolidated financial statements have been reclassified to conform to the current year presentation with no effect on
previously reported net loss, cash flows or stockholders' equity. Accrued compensation, previously included in the consolidated
balance sheets within other current liabilities, is now presented separately. Also, the change in accrued compensation, previously reflected
in the consolidated statement of cash flows within the change in other accrued liabilities, is now presented separately.

 Use of Estimates

 The accompanying consolidated
financial statements have been prepared in accordance with generally accepted accounting principles in the United States ("GAAP")
and applicable rules and regulations of the Securities and Exchange Commission ("SEC") and reflect the financial position,
results of operations and cash flows of the Company. The preparation of consolidated financial statements in conformity with GAAP requires
the Company to establish accounting policies and to make estimates and judgments that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period. The Company bases its estimates on historical experience and on various other assumptions
believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.
The Company regularly makes estimates and assumptions including, but not limited to, estimates that affect revenue recognition, accounts
receivable and the allowance for credit losses, valuation of inventories, sales returns, warranty returns, fair value of assets acquired
and liabilities assumed in a business combination, impairment reviews of long-lived assets and definite-lived intangible assets, warrant
liabilities, stock based compensation, the recognition and measurement of loss contingencies, the recognition and measurement of restructuring
and related charges, estimates of current and deferred income taxes, deferred income tax valuation allowances, and amounts associated
with the Company's tax receivable agreement with InnoHold, LLC ("InnoHold"). Predicting future events is inherently
an imprecise activity and, as such, requires the use of judgment. Actual results could differ materially from those estimates.

 F- 9

 Restructuring

 Restructuring actions may
result in various costs, including employee-related costs, accelerated depreciation expense, write-downs of long-lived assets and inventory,
impairment of long-lived and indefinite-lived assets, contract termination costs and other associated costs. Employee-related costs represent
one-time termination benefits for severance and other post-employment costs that are recognized as incurred upon communication of the
plan to the identified employees. If the employee must provide future service beyond a minimum retention period, the benefits are expensed
ratably over the future service period. Accelerated depreciation expense represents additional expense resulting from shortening the useful
lives of production and other assets to coincide with the end of production and other activities under an approved restructuring plan.
Write-downs of long-lived assets represent losses on assets expected to be disposed of or equipment in progress that will not be put in
service. Costs to terminate contracts are recognized upon entering a termination agreement with the provider. Other associated restructuring
costs are expensed as incurred. Any impairment or write-down of assets resulting from restructuring activities are recognized immediately
in the period the related plan is approved. Refer to Note 5 –Restructuring, Impairment and Other Related Charges for more
information.

 Business Combinations

 The Company accounts for business
combinations using the acquisition method of accounting, in accordance with ASC 805, Business Combinations. The Company records
an acquisition based on the fair value of the consideration transferred and then allocates the purchase price to the identifiable
assets acquired and liabilities assumed based on their respective preliminary estimated fair values as of the acquisition date. Goodwill
on the acquisition date is measured as the excess of the fair value of consideration transferred over the net of the acquisition date
fair values of the assets acquired and the liabilities assumed. While best estimates and assumptions are used to accurately value assets
acquired and liabilities assumed at the acquisition date as well as contingent consideration, where applicable, the Company's estimates
are inherently uncertain and subject to refinement. If the Company obtains new information within the measurement period (up to one year
from the acquisition date) about facts and circumstances that existed as of the acquisition date that, if known, would have affected the
measurement of the amounts recognized as of that date, the Company records adjustments to the assets acquired and liabilities assumed
with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets
acquired or liabilities assumed, whichever comes first, any subsequent adjustments are reflected in the consolidated statement of operations.

 In the event an acquisition
involves an entity with which the Company has a preexisting relationship, the Company will generally recognize a gain or loss
within the consolidated statement of operations to settle that relationship as of the acquisition date. Transaction costs associated with
business combinations are expensed as incurred.

 Cash and Cash Equivalents

 The Company considers all
highly liquid investments with an original maturity of three months or less to be cash equivalents. The carrying value of cash and cash
equivalents approximates fair value because of the short-term maturity of those instruments.

 F- 10

 Accounts Receivable and Allowance for Credit
Losses

 Accounts receivable are recorded
net of an allowance for expected losses and consist primarily of receivables from wholesale customers and receivables from third-party
consumer financing partners and credit card processors. The allowance is recognized in an amount equal to anticipated future write-offs
 over the expected life of the receivables. Management estimates the allowance for credit
losses based on historical experience, customer payment practices and current economic trends. Actual
credit losses could differ from those estimates. Account balances are charged-off against the allowance when management believes
it is probable the receivable will not be recovered.

 The Company had the following
activity in its allowance for credit losses (in thousands):

 2024

 2023

 2022

 Balance at beginning of period

 $

 $

 $

 Additions charged to expense

 1,075

 —

 Reductions to allowance, net

 ( 1
)

 —

 ( 19
)

 Balance at end of period

 $
 1,100

 $

 $

 Inventories

 Inventories are comprised
of raw materials, work-in-process and finished goods and are stated at the lower of cost or net realizable value. Manufactured inventory
consists of raw material, direct labor and manufacturing overhead costs. Inventory cost is calculated using a method that approximates
average cost. The Company reviews the components of its inventory on a regular basis for excess and obsolete inventory and makes appropriate
adjustments when necessary. Once established, the original cost of the inventory less the related inventory reserves represents the new
cost basis of such products.

 Property and Equipment

 Property and equipment are
stated at cost, net of depreciation. Property and equipment are depreciated using the straight-line method over the estimated useful lives
of the respective assets, ranging from 1 to 17 years, as follows:

 Years

 Equipment

 5 - 10

 Furniture and fixtures

 2 - 7

 Office equipment

 3 - 5

 Leasehold improvements

 1 - 17

 Major renewals and betterments
that increase value or extend useful life are capitalized. The Company records depreciation and amortization in cost of sales for long-lived
assets used in the manufacturing process, and within each line item of operating expenses for all other long-lived assets. Leasehold improvements
are amortized over the shorter of the useful life of the leasehold improvements or the contractual term of the lease, with consideration
of lease renewal options if exercise is reasonably certain. The cost and related accumulated depreciation of assets sold or retired is
removed from the accounts with any resulting gain or loss included in the consolidated statement of operations. Estimated useful lives
of property and equipment are periodically reviewed and, when appropriate, changes are made and accounted for prospectively. When certain
events or changes in operating conditions occur, asset lives may be adjusted and an impairment assessment may be performed on the recoverability
of the carrying amounts.

 As a result of initiating
closure of its two Utah manufacturing facilities in August 2024, the Company shortened the estimated useful lives of the production equipment
at these two facilities to reflect the remaining period these assets will remain in service. Closure of these two facilities is expected
to be completed during the first quarter of 2025. Reducing the estimated useful lives of these assets increased both depreciation expense
and the Company's net loss in 2024 by $ 11.2 million. Refer to Note 5 –Restructuring, Impairment and Other Related Charges
for more information.

 The Company capitalizes interest
on borrowings during the active construction period of major capital projects. Interest capitalization ceases once a project is substantially
complete or no longer undergoing construction activities to prepare it for its intended use. Capitalized interest is added to the cost
of the underlying assets and is amortized over the useful lives of the assets. When no debt is specifically identified as being incurred
in connection with a construction project, the Company capitalizes interest on amounts expended on the project using the weighted average
cost of the Company's outstanding borrowings.

 F- 11

 Leases

 The Company determines if
an agreement contains a lease at the inception of a contract. For leases with an initial term greater than 12 months, a related lease
liability is recorded on the balance sheets at the present value of future payments discounted at the estimated fully collateralized incremental
borrowing rate (discount rate) corresponding with the lease term. In addition, a right-of-use ("ROU") asset is recorded as
the initial amount of the lease liability, plus any lease payments made to the lessor before or at the lease commencement date and any
initial direct costs incurred, less any tenant improvement allowance incentives received. The Company elected not to separate lease and
non-lease components for all real estate leases.

 The Company calculates the
present value of future payments using its incremental borrowing rate when the discount rate implicit in the lease is not known. The incremental
borrowing rate is the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term at an amount
equal to the lease payments in a similar economic environment. The Company determines the applicable incremental borrowing rate at the
lease commencement date based on the rates of its secured borrowings, which is then adjusted for the appropriate lease term and risk premium.
In determining the Company's ROU assets and corresponding lease liabilities, the Company applies these incremental borrowing rates
to the minimum lease payments within each lease agreement.

 Lease expense is recognized
on a straight-line basis over the lease term. Tenant incentive allowances received from the lessor are amortized through the ROU asset
as a reduction of rent expense over the lease term. Any variable lease costs are expensed as incurred. Leases with an initial term
of 12 months or less (short-term leases) are not recorded as ROU assets and corresponding lease liabilities. Short-term lease expense
is recognized on a straight-line basis over the lease term. ROU assets are assessed for impairment as part of long-lived assets, which
is performed whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable.

 Goodwill

 The
Company accounts for goodwill in a business combination as the excess of the cost over the fair value of net assets acquired and is assigned
to the reporting unit in which the acquired business will operate. The Company does not amortize goodwill but tests it for impairment
each fiscal year or whenever events or changes in circumstances indicate the carrying amount may not be recoverable.

 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 Company may elect to perform a qualitative assessment to determine whether it is
more likely than not that a reporting unit is impaired. If the qualitative assessment is not performed or if the Company determines that
it is not more likely than not that the fair value of the reporting unit exceeds the carrying value, the Company determines the fair value
of its reporting units based on an average weighting of both projected discounted future results and the use of comparative market multiples.
If the carrying amount of the reporting unit exceeds its fair value, goodwill is considered impaired and a loss recognized in the amount
equal to that excess. During the year ended December 31, 2023, the Company determined goodwill was impaired and recorded an impairment
charge to write off the entire $ 6.9 million balance of goodwill. Refer to Note 4— Acquisition for more information.

 Intangible Assets

 Intangible assets include
a customer relationship intangible associated with the Intellibed acquisition, developed technologies by Purple and Intellibed, trade
names and trademarks, internal-use software, domain name costs, intellectual property and other patent and trademark related costs. Definite-lived
intangible assets are being amortized using the straight-line method over their estimated lives, ranging from two to 15 years.

 For
software developed or obtained for internal use, the Company capitalizes direct external costs associated with developing or obtaining
internal-use software. In addition, the Company capitalizes certain payroll and payroll-related costs for employees who are directly involved
with the development of such applications. Capitalized costs related to internal-use software under development are treated as construction-in-progress
until the program, feature or functionality is ready for its intended use, at which time amortization commences. Capitalized software
costs are amortized on a straight-line basis over three years.

 F- 12

 Asset Impairment Charges

 Long-Lived Assets and Definite-lived
Intangible Assets – The Company reviews its long-lived assets and definite-lived intangible assets for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. When evaluating long-lived assets and
definite-lived intangible assets for potential impairment, the Company first determines if there are any indicators of impairment and
if the carrying amount of the long-lived assets and definite-lived intangible assets might not be recoverable. If there are indicators
of impairment, then the Company performs a recoverability test by comparing the carrying value of the assets to the estimated future cash
flows (undiscounted and without interest charges - plus proceeds expected from disposition, if any). If the estimated undiscounted cash
flows are less than the carrying value of the assets, the Company calculates an impairment loss. The impairment loss calculation compares
the carrying value of its assets to the assets' estimated fair value. When the Company recognizes an impairment loss, the carrying
amount of the impaired assets are reduced to estimated fair value based on discounted cash flows, quoted market prices or other valuation
techniques. Assets to be disposed of are reported at the lower of the carrying amount of the asset or fair value less costs to sell. If
the Company recognizes an impairment loss for a depreciable long-lived asset, the adjusted carrying amount of the asset becomes its new
cost basis and will be depreciated (amortized) over the remaining useful life of that asset. The Company concluded there were indicators
of impairment that existed at December 31, 2024 and a recoverability test was required. Based on the results of this recoverability test,
the Company determined its long-lived and definite-lived assets were not impaired as of December 31, 2024 and no resultant impairment
charges were recorded. There were no impairment charges realized on long-lived assets and definite-lived intangible assets during the
years ended December 31, 2023 and 2022.

 In conjunction with a restructuring
action initiated in August 2024, the Company recorded impairment charges of $ 2.5 million on various long-lived assets associated with
entering into a sublease on one of the Utah manufacturing facilities that is expected to close during the first quarter of 2025. Refer
to Note 5 –Restructuring, Impairment and Other Related Charges for more information.

 Indefinite-lived Intangible
Assets – Intangible assets that have indefinite lives are not amortized but are reviewed for impairment annually or when events
or changes in circumstances indicate the carrying value of these assets might exceed their current fair values. Impairment testing is
based upon the best information available including estimates of fair value which incorporate assumptions marketplace participants would
use in making their estimates of fair value. Accounting guidance provides for the performance of either a quantitative assessment or a
qualitative assessment before calculating the fair value of an asset. If events or market conditions affect the estimated fair value to
the extent that an indefinite-lived intangible asset is impaired, the Company will adjust the carrying value of these assets in the period
in which impairment occurs.

 The restructuring action initiated
by the Company in August 2024 was determined to be a triggering event for potential impairment of intellectual property that was being
accounted for as an indefinite-lived intangible asset. The resultant impairment assessment performed by the Company 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.

 Revenue Recognition

 The Company markets and sells
its products through the DTC channel, which includes Purple.com (direct-to-consumer e-commerce), Purple showrooms, their customer contact
center and online marketplaces, and the wholesale channel through retail brick-and-mortar and online wholesale partners. Revenue is recognized
when the Company satisfies its performance obligations under the contract which involves transferring the promised products to the customer.
This principle is achieved in the following steps:

 Identify the contract with the customer.
 A contract exists when (i) the Company enters into an enforceable contract with a customer that defines each party's rights
regarding the goods to be transferred and identifies the payment terms related to these goods, (ii) the contract has commercial substance
and, (iii) the Company determines that collection of substantially all consideration for the goods that are transferred is probable based
on the customer's intent and ability to pay the promised consideration. The Company does not have significant costs to obtain contracts
with customers.

 Identify the performance obligations
in the contract. The Company's contracts with customers do not include multiple performance obligations to be completed over
a period of time. The performance obligations generally relate to delivering products to a customer, subject to the shipping terms of
the contract. The Company has made an accounting policy election to account for shipping and handling activities performed after a customer
obtains control of the goods, including "white glove" delivery services, as activities to fulfill the promise to transfer
the goods. The Company does not offer extended warranty or service plans. The Company does not provide an option to its customers to purchase
future products at a discount and therefore there are no material option rights.

 F- 13

 Determine the transaction price.
Payment for sale of products through the direct-to-consumer e-commerce channel and Purple showrooms is collected at point of sale in advance
of shipping the products. Amounts received for unshipped products are recorded as customer prepayments. Payment by traditional wholesale
customers is due under customary fixed payment terms. None of the Company's contracts contain a significant financing component.
Revenue is recorded at the net sales price, which includes estimates of variable consideration such as product returns, volume rebates,
wholesale warranty returns, and other adjustments. The estimates of variable consideration are based on historical return experience,
historical and projected sales data, and current contract terms. Variable consideration is included in revenue only to the extent that
it is probable that a significant reversal of the revenue recognized will not occur when the uncertainty associated with the variable
consideration is subsequently resolved. Taxes collected from customers relating to product sales and remitted to governmental authorities
are excluded from revenues.

 Allocate the transaction price to
performance obligations in the contract. The Company's contracts with customers do not include multiple performance obligations.
Therefore, the Company recognizes revenue upon transfer of the product to the customer's control at contractually stated pricing.

 Recognize revenue when or as we satisfy
a performance obligation. The Company satisfies performance obligations at a point in time upon either shipment or delivery of goods,
in accordance with the terms of each contract with the customer. With the exception of third-party "white glove" delivery
and certain wholesale partners, revenue generated from product sales is recognized at shipping point, the point in time the customer obtains
control of the products. Revenue generated from sales through third-party "white glove" delivery is recognized at the point
in time when the product is delivered to the customer. Revenue generated from certain wholesale partners is recognized at a point in time
when the product is shipped or when it is delivered to the wholesale partner's warehouse. The Company does not have service revenue.

 Sales Returns

 The Company's policy provides customers up to 100-days to return
a mattress, pet bed or pillow and up to 30-days to return all other products (except power bases) for a full refund. Estimated sales
returns, which are recorded as a reduction of revenue at the time of sale and recorded in other current liabilities on the consolidated
balance sheets, are based on historical trends and product return rates and are adjusted for any current or expected trends as appropriate.
Actual sales returns could differ from these estimates. The Company regularly assesses and adjusts the estimate of accrued sales returns
by updating the return rates for actual trends and projected costs. The Company classifies the estimated sales returns as a current liability
as they are expected to be paid out in less than one year.

 The Company had the following
activity for accrued sales returns (in thousands):

 2024

 2023

 2022

 Balance at beginning of period

 $
 5,404

 $
 5,107

 $
 7,116

 Additions that reduced net revenue

 38,913

 34,090

 35,479

 Deduction from reserves for current year returns

 ( 37,802
)

 ( 33,793
)

 ( 37,488
)

 Balance at end of period

 $
 6,515

 $
 5,404

 $
 5,107

 F- 14

 Accrued Warranty Liabilities

 The Company provides a limited
warranty on most of the products it sells. 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 return 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 on the results
of historical trends and warranty claim rates incurred, and are adjusted for any current or expected trends as appropriate. Actual warranty
claim costs could differ from these estimates. The Company regularly assesses and adjusts the estimate of accrued warranty claims by updating
claims rates for actual trends and projected claim costs. The Company expects the estimated warranty liability to continue to increase
as the Company has not reached a full 10 years of history on its 10-year mattress warranty. The Company classifies estimated warranty
costs expected to be paid beyond a year as a long-term liability.

 The Company had the following
activity for accrued warranty liabilities (in thousands):

 2024

 2023

 2022

 Balance at beginning of period

 $
 35,591

 $
 24,463

 $
 16,241

 Additions charged to cost of sales

 3,291

 5,866

 9,856

 Additions that reduced net revenue

 6,288

 11,996

 3,453

 Deduction from reserves for current year claims

 ( 12,965
)

 ( 6,734
)

 ( 5,087
)

 Balance at end of period

 $
 32,205

 $
 35,591

 $
 24,463

 Cost of Revenues

 Costs associated with net
revenues are recorded as cost of revenues in the same period in which related sales have been recorded. Cost of revenues includes the
costs of receiving, producing, inspecting, warehousing, insuring, and shipping goods during the period, as well as depreciation and amortization
of long-lived assets used in these processes. Cost of sales also includes shipping and handling costs associated with the delivery of
goods to customers.

 In conjunction with a restructuring
action initiated in August 2024, the Company recorded restructuring charges of $ 15.4 million in cost of revenues for accelerated depreciation
of production equipment and inventory write-downs. Refer to Note 5 –Restructuring, Impairment and Other Related Charges for
more information.

 Cooperative Advertising, Rebate and Other
Promotion Programs

 The Company enters into programs
with certain wholesale partners to provide funds for advertising and promotions as well as volume and other rebate programs. When sales
are made to these customers, the Company records liabilities pursuant to these programs. The Company periodically assesses these liabilities
based on actual sales to determine whether all the cooperative advertising earned will be used by the customer or whether the customer
will meet the requirements to receive rebate funds. Estimates are required at any point in time regarding the ultimate reimbursement to
be claimed by the customers. Subsequent revisions to the estimates are recorded and charged to earnings in the period in which they are
identified. Rebates and certain cooperative advertising amounts are classified as a reduction of revenue and presented within net revenues
in the accompanying consolidated statements of operations. Cooperative advertising expenses that can be identified as a distinct good
or service and for which fair value can be reasonably estimated are recorded, when incurred, as components of marketing and sales expense
in the accompanying consolidated statements of operations. Marketing and sales expense in 2024, 2023 and 2022 included $ 2.3 million, $ 2.0
million and $ 4.1 million, respectively, related to shared advertising costs that the Company incurred under its cooperative advertising
programs.

 F- 15

 Advertising Costs

 The Company incurs advertising
costs associated with print, digital and broadcast advertisements. Advertising costs are expensed when the advertisements are run for
the first time and included in marketing and selling expenses in the accompanying consolidated statements of operations. Advertising expense
was $ 65.2 million, $ 72.4 million and $ 66.6 million for the years ended December 31, 2024, 2023 and 2022, respectively.

 Debt Issuance Costs and Discounts

 Debt issuance costs and discounts that relate to borrowings are presented
in the consolidated balance sheets as a direct reduction from the carrying amount of the related debt liability and are amortized into
interest expense using an effective interest rate over the duration of the debt. Debt issuance costs that relate to revolving lines of
credit are carried as an asset in the consolidated balance sheets and amortized to interest expense on a straight-line basis over the
term of the related line of credit facility. Refer to Note 12 – Debt for more information.

 Warrant Liabilities

 The Company issued warrants
to purchase 20.0 million shares of the Company's Class A common stock to the lenders associated with a related party credit agreement
entered into in January 2024. These warrants contain a repurchase provision which, upon the occurrence of a fundamental transaction as
defined in the warrant agreement, could give rise to an obligation of the Company to pay cash to the warrant holders. In addition, other
provisions may lead to a reduction in the exercise price of the warrants. The fundamental transaction provisions of the warrants resulted
in them being recorded as a liability at fair value on their issue date, with the corresponding offset included in debt issuance costs.
The initial liability is subsequently re-measured to fair value at each reporting date or exercise date with changes in the fair value
included in earnings. The Company uses a Monte Carlo Simulation model to determine the fair value of the liability associated with these
warrants. The model uses various key assumptions and inputs, including exercise price of the warrants, fair market value of the Company's
common stock, risk free interest rate, warrant life, expected volatility and the probability of a warrant re-price event. Refer to Note
12 – Debt and Note 13 – Warrant Liabilities for more information.

 The Company issued 12.8 million
sponsor warrants pursuant to a private placement conducted simultaneously with its initial public offering. The Company recorded its sponsor
warrants as liabilities since they did not meet the criteria for equity classification. Because the sponsor warrants met the definition
of a derivative, these warrants were measured at fair value at inception and at each reporting date thereafter with changes in fair value
recognized in earnings in the period of change. The Company used the Black-Scholes model to determine the fair value of the liability
associated with the sponsor warrants. The model used key assumptions and inputs such as exercise price, fair market value of common stock,
risk free interest rate, warrant life and expected volatility. Unexercised sponsor warrants totaling 1.9 million expired in February 2023
and were cancelled pursuant to the terms of the warrant agreement. These sponsor warrants had no fair value on the date of expiration.

 Fair Value Measurements

 The Company uses the fair
value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. Fair value is the price that would be
received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date,
essentially an exit price, based on the highest and best use of the asset or liability. The levels of the fair value hierarchy are:

 Level 1—Quoted market prices in
active markets for identical assets or liabilities;

 Level 2—Significant other observable
inputs (e.g., quoted prices for similar items in active markets, quoted prices for identical or similar items in markets that are not
active, inputs other than quoted prices that are observable, such as interest rate and yield curves, and market-corroborated inputs);
and

 Level 3—Unobservable inputs in
which there is little or no market data, which require the reporting unit to develop its own assumptions.

 The classification of fair
value measurements within the established three-level hierarchy is based upon the lowest level of input that is significant to the measurements.
Financial instruments, although not recorded at fair value on a recurring basis include cash, cash equivalents and restricted cash, receivables,
accounts payable, and the Company's debt obligations. The carrying amounts of cash, cash equivalents and restricted cash, accounts
receivable and accounts payable approximate fair value because of the short-term nature of these accounts.

 The estimated fair value of
the Company's debt arrangements are based on Level 2 inputs, which include observable inputs estimated using discounted cash flows
and market-based expectations for interest rates, credit risk and the contractual terms of debt instruments is shown in the table below
(in thousands):

 Level

 2024

 2023

 2023 Credit Agreement

 $
 —

 $
 30,000

 2024 Credit Agreement

 56,617

 —

 F- 16

 The warrants issued in 2024
and the sponsor warrants (refer to Note 12 – Warrant Liabilities for more information.) are Level 3 instruments and use internal
models to estimate fair value based on certain significant unobservable inputs which require determination of relevant inputs and assumptions.
Accordingly, changes in these unobservable inputs may have a significant impact on fair value. Such inputs include risk free interest
rate, expected average life, expected dividend yield, and expected volatility. These Level 3 liabilities generally decrease (increase)
in value based upon an increase (decrease) in risk free interest rate and expected dividend yield. Conversely, the fair value of these
Level 3 liabilities generally increase (decrease) in value if the expected average life or expected volatility increases (decreases).

 The following table presents
information about the Company's liabilities that are measured at fair value on a recurring basis and indicates the fair value hierarchy
of the valuation inputs the Company utilized to determine such fair value (in thousands):

 Level

 2024

 $
 16,067

 Unexercised sponsor warrants
totaling 1.9 million expired in February 2023 and were cancelled pursuant to the terms of the warrant agreement. These sponsor warrants
had no fair value on the date of expiration.

 The following table summarizes
the Company's total Level 3 liability activity for the years ended December 31, 2024, 2023 and 2022 (in thousands):

 Sponsor

 Total
 Level 3
 Liabilities

 Fair value as of December 31, 2021

 $
 4,343

 $
 —

 $
 4,343

 Change in valuation inputs (1)

 ( 4,343
)

 —

 ( 4,343
)

 Fair value as of December 31, 2022

 $
 —

 $
 —

 $
 —

 Change in valuation inputs (1)

 —

 —

 —

 Fair value as of December 31, 2023

 $
 —

 $
 —

 $
 —

 Initial measurement at time of issuance

 —

 19,571

 19,571

 Change in valuation inputs (1)

 —

 ( 3,504
)

 ( 3,504
)

 Fair value as of December 31, 2024

 $
 —

 $
 16,067

 $
 16,067

 (1)
 Changes in valuation inputs are recognized as the change in fair value – warrant liabilities in the consolidated statement of operations.

 Stock Based Compensation

 The Company accounts for stock-based
compensation under the provisions of ASC 718, Compensation—Stock Compensation. This standard requires the Company to record
an expense associated with the fair value of stock-based compensation over the requisite service period.

 During 2023 and 2022, the
Company granted stock options under the Company's 2017 Equity Incentive Plan (the "2017 Equity Incentive Plan") to certain
officers, executives and employees of the Company. The fair value for these awards was determined using the Black-Scholes option valuation
model at the date of grant. Stock based compensation on these awards is expensed on a straight-line basis over the vesting period. Option
pricing models require the input of subjective assumptions including the expected term of the stock option, the expected price volatility
of the Company's common stock over the period equal to the expected term of the grant, and the expected risk-free rate. Changes
in these assumptions can materially affect the fair value estimate. The Company recognizes forfeitures of stock option awards as they
occur. There were no stock options granted in 2024.

 During 2023 and 2022, the
Company granted stock awards under the 2017 Equity Incentive Plan to independent directors on the Company's board of directors (the
"Board") for services performed. Since all of these awards vested immediately, stock-based compensation was recorded on the
grant date using the publicly quoted closing price of the Company's common stock on that date as fair value. There were no stock
awards granted to independent directors in 2024.

 F- 17

 During 2024, 2023 and 2022,
the Company granted restricted stock units under the Company's 2017 Equity Incentive Plan to certain employees of the Company. A
portion of the restricted stock units granted included a market vesting condition. The estimated fair value of the restricted stock units
that do not have the market vesting condition is recognized on a straight-line basis over the vesting period. The estimated fair value
of the stock units that included a market vesting condition was measured on the grant date using a Monte Carlo Simulation of a Geometric
Brownian Motion stock path model and incorporated the probability of vesting occurring. The estimated fair value of these awards is recognized
over the derived service period (as determined by the valuation model), with such recognition occurring regardless of whether the market
condition is met.

 Income Taxes

 Deferred tax assets and liabilities
are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax bases. In assessing the realizability of deferred tax assets, management considers
whether it is more-likely-than-not that the deferred tax assets will be realized. Deferred tax assets and liabilities are calculated by
applying existing tax laws and the rates expected to apply to taxable income in the years in which those temporary differences are expected
to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the year of the
enacted rate change. The Company's effective tax rate is primarily impacted by changes in its valuation allowance.

 The Company accounts for uncertainty
in income taxes using a recognition and measurement threshold for tax positions taken or expected to be taken in a tax return, which are
subject to examination by federal and state taxing authorities. The tax benefit from an uncertain tax position is recognized when it is
more likely than not that the position will be sustained upon examination by taxing authorities based on technical merits of the position. The
amount of the tax benefit recognized is the largest amount of the benefit that has a greater than 50% likelihood of being realized
upon ultimate settlement. The effective tax rate and the tax basis of assets and liabilities reflect management's estimates of the
ultimate outcome of various tax uncertainties. The Company recognizes penalties and interest related to uncertain tax positions within
the provision (benefit) for income taxes line in the accompanying consolidated statements of operations.

 The Company files U.S. federal
and certain state income tax returns. The income tax returns of the Company are subject to examination by U.S. federal and state taxing
authorities for various time periods, depending on those jurisdictions' rules, generally after the income tax returns are filed.

 Tax Receivable Agreement

 In connection with the Business
Combination, the Company entered into a tax receivable agreement with InnoHold, which provides for the payment by the Company to InnoHold
of 80 % of the net cash savings, if any, in U.S. federal, state and local income tax that the Company actually realizes (or is deemed to
realize in certain circumstances) in periods after the Closing as a result of (i) any tax basis increases in the assets of Purple LLC
resulting from the distribution to InnoHold of the cash consideration, (ii) the tax basis increases in the assets of Purple LLC resulting
from the redemption by Purple LLC or the exchange by the Company, as applicable, of Class B Paired Securities or cash, as applicable,
and (iii) imputed interest deemed to be paid by the Company as a result of, and additional tax basis arising from, payments it makes under
the agreement.

 As noncontrolling interest
holders exercise their right to exchange or cause Purple LLC to redeem all or a portion of its Class B Units, a liability under the tax
receivable agreement may be recorded based on 80 % of the estimated future cash tax savings that the Company may realize as a result of
increases in the basis of the assets of Purple LLC attributed to the Company as a result of such exchange or redemption. The amount of
the increase in asset basis, the related estimated cash tax savings and the attendant liability to be recorded will depend on the price
of the Company's Class A common stock at the time of the relevant redemption or exchange. The estimation of liability under the
agreement is imprecise and subject to significant assumptions regarding the amount and timing of future taxable income.

 Segment Information

 Operating
segments are defined as components of an enterprise for which separate financial information is evaluated regularly by the chief operating
decision maker ("CODM"). The role of the CODM is to make decisions about allocating resources and assessing performance. The
Company's operations are based on an omni-channel distribution strategy that allows the Company to offer a seamless shopping experience
to its customers across multiple sales channels. The Company concluded its business operates in one operating segment as all the Company's
sales channels are complementary and analyzed in the same manner. Also, the CODM reviews financial information presented on a consolidated
basis for the purpose of allocating resources and evaluating financial performance as the Company does not accumulate discrete financial
information with respect to separate divisions and does not have distinct operating or reportable segments.
Since the Company operates in one operating segment, most of the required financial segment information can be found throughout the consolidated
financial statements. The Company's chief executive officer has been identified as its CODM. Refer to Note 21 – Segment
Information and Concentrations for more information.

 F- 18

 Net Loss Per Share

 Basic net loss per common
share is calculated by dividing net loss attributable to common stockholders by the weighted average number of shares of Class A common
stock outstanding during each period. Diluted net loss per share reflects the weighted-average number of common shares outstanding during
the period used in the basic net loss computation plus the effect of common stock equivalents that are dilutive. The Company uses the
"if-converted" method to determine the potential dilutive effect of conversions of its outstanding Class B common stock, and
the treasury stock method to determine the potential dilutive effect of its outstanding warrants and share-based payment awards.

 Recent Accounting Pronouncements

 Disclosure Improvements

 In October 2023, the Financial Accounting Standards Board (the "FASB")
issued ASU 2023-06 Disclosure Improvements: Codification Amendments in Response to the SEC's Disclosure Update and
Simplification Initiative. This ASU amends the disclosure or presentation requirements related to various subtopics in the FASB Accounting
Standards Codification. For SEC registrants, the effective date for each amendment will be the date on which the SEC's removal of
that related disclosure requirement from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. The Company
will monitor the removal of various requirements from the current regulations in order to determine when to adopt the related amendments
but does not anticipate the adoption of the new guidance will have a material impact on the Company's Consolidated Financial Statements.
The Company will continue to evaluate the impact of this guidance on its consolidated financial statements.

 Enhanced Segment Disclosures

 In November 2023, the FASB issued ASU 2023-07, Segment Reporting
(Topic 280): Improvements to Reportable Segment Disclosures, which requires public entities, including those that have a single reportable
segment, to provide enhanced disclosures about significant expenses. The ASU requires disclosure to include significant segment expenses
that are regularly provided to the CODM, a description of other segment items by reportable segment, and any additional measures of a
segment's profit or loss used by the CODM when deciding how to allocate resources. The ASU also requires all annual disclosures
currently required by Topic 280 to be included in interim periods. The update is effective for fiscal years beginning after December 15,
2023 and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted and requires retrospective
application to all prior periods presented in the financial statements. This standard was adopted by the Company beginning with its 2024
consolidated financial statements. The adoption of this standard resulted in the addition of required segment disclosures for 2024 and
all prior periods included in these consolidated financial statements.

 Improvements
to Income Tax Disclosures

 In
December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The ASU
amends existing income tax disclosure guidance, primarily requiring more detailed disclosures for income taxes paid and the effective
tax rate reconciliation. This ASU is effective for fiscal years beginning after December 15, 2024,
may be applied prospectively or retrospectively, and allows for early adoption. The Company is currently evaluating the impact
this update will have on the income tax disclosures in its consolidated financial statements.

 Expense
Disaggregation Disclosures

 In November 2024, the FASB
issued ASU No. 2024-03, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic
220-40): Disaggregation of Income Statement Expenses, which requires disclosure of certain costs and expenses on an interim and annual
basis in the notes to the consolidated financial statements. The prescribed cost and expense categories requiring disaggregated
disclosures include purchases of inventory, employee compensation, depreciation and intangible asset amortization, along with certain
other expense disclosures already required by GAAP that would need to be integrated within the new tabular disaggregated expense disclosures.
Additionally, the amendments also require the disclosure of total selling expenses and an entity's definition of those expenses. The guidance
is effective for annual reporting periods beginning after December 15, 2026 and interim periods within annual reporting periods beginning
after December 15, 2027. Early adoption is permitted. The guidance is to be applied either (1) prospectively to financial
statements issued for reporting periods after the effective date or (2) retrospectively to any or all prior periods presented in the financial
statements. The Company is currently evaluating the potential impact this update will have on its expense disclosures in the notes
to the consolidated financial statements.

 F- 19

 3. Underwritten Offerings of Class A Common
Stock

 In February 2023, the Company
completed an underwritten offering of 13.4 million shares of Class A common stock at a price of $ 4.50 per share. The underwriters
did not exercise their over-allotment option. The aggregate net proceeds received by the Company from the offering, after deducting offering
fees and expenses of $ 3.3 million, totaled $ 57.0 million.

 In March 2022, the Company
completed an underwritten offering of 16.1 million shares of Class A common stock, which included the underwriters exercising
their over-allotment option in full to purchase an additional 2.1 million shares. The underwriters purchased the Class A common
stock from the Company at a price of $ 5.65 per share, except that any shares sold by the underwriters to Coliseum Capital Partners, L.P.
("CCP") and Blackwell Partners LLC – Series A ("Blackwell"), up to an aggregate of 29.81 % of the shares
of Class A common stock pursuant to the offering, were purchased from the Company by the underwriters at a price of $ 6.10 per share. The
aggregate net proceeds received by the Company from the offering, after deducting offering fees and expenses of $ 5.3 million, totaled
$ 92.9 million.

 4. Acquisition

 On August 31, 2022, pursuant
to the Merger Agreement, the Company acquired Intellibed, a premium sleep and health wellness company, offering gel-based mattresses scientifically
designed for maximum back support, spinal alignment and pressure point relief. The addition of Intellibed increased product offerings
to customers, expanded market opportunities, capitalized on synergies of the combined companies, and increased opportunities for innovation.
In addition, the acquisition allowed the Company to consolidate ownership of its intellectual property licensed to Intellibed and more
fully capitalize on growing demand for products with gel technologies.

 The acquisition date fair
value of the consideration transferred for Intellibed was $ 28.2 million, which consisted of the following (in thousands):

 Fair value of Class A common stock issued at closing

 $
 23,069

 Fair value of Class A common stock held in escrow

 1,349

 Fair value of contingent consideration

 1,471

 Fair value of effective settlement of preexisting relationships

 1,672

 Transaction expenses paid on behalf of Intellibed

 Due to seller

 Fair value of total purchase consideration

 $
 28,182

 The fair value of common stock
issued at closing consisted of approximately 8.1 million shares of Class A common stock valued using the acquisition date closing price
of $ 2.86. The fair value of common stock held in escrow consisted of 0.5 million shares of Class A common stock valued using the acquisition
date closing price of $ 2.86. These shares were originally held in escrow pending resolution of net working capital adjustments and certain
indemnification matters.

 Contingent consideration represents
the fair value of 1.5 million shares of Class A common stock issuable to Intellibed security holders if the closing price of the Company's
stock did not equal or exceed certain thresholds during the period beginning on the six-month anniversary of the closing date and ending
on the 18-month anniversary of the closing date. The contingent shares were valued using a Monte-Carlo simulation model. Because the contingent
consideration was payable with a fixed number of shares of the Company's Class A common stock, it was classified as equity and did
not require remeasurement in subsequent periods. During March 2024, the Company issued 1.5 million shares of Class A common stock to Intellibed
security holders since the Company's stock price did not meet any of the indicated thresholds during the contingency period.

 The fair value of effective
settlement of preexisting relationships included $ 1.4 million related to the fair value of a preexisting legal matter with Intellibed
that was effectively settled on the acquisition date and $ 0.3 million related to the fair value of a preexisting royalty liability owed
by Intellibed to the Company that was also effectively settled on the acquisition date. As a result of effectively settling the preexisting legal
matter with Intellibed, the Company recorded a gain of $ 1.4 million as other income (expense), net in the consolidated statement
of operations for the year ended December 31, 2022. As a result of effectively settling the preexisting royalty liability, the Company
and Intellibed recorded a corresponding receivable and payable, respectively, for the same $ 0.3 million amount that was then eliminated
in consolidation.

 F- 20

 During the measurement period
that ended August 31, 2023, the Company finalized the determination of the working capital adjustments and the fair values allocated to
various assets and liabilities, income tax provision, intangible assets and the residual amount allocated to goodwill. The table below
reflects final measurement period adjustments made to various assets acquired and liabilities assumed based on updated information, and
revisions to reflect the final fair value analysis associated with the two intangible assets. The corresponding offsets for these final
measurement period adjustments was goodwill. The $ 0.1 million decrease in the acquisition date fair value of net assets acquired and liabilities
assumed reflected the impact of certain Class A common shares initially held in escrow being returned to the Company upon final determination
of the working capital adjustments. The following table summarizes the preliminary fair value of the assets acquired and liabilities assumed
as of the date of acquisition, the final measurement period adjustments and the final adjusted balances (in thousands):

 Net tangible assets (liabilities):

 At Date of
 Acquisition

 Measurement
 Period
 Adjustments

 Final
 Adjusted Balances

 Cash, cash equivalents and restricted cash

 $
 4,194

 $
 ( 418
)

 $
 3,776

 Accounts receivable

 5,051

 ( 443
)

 4,608

 Inventory

 4,182

 ( 1,135
)

 3,047

 Other current assets

 Property and equipment

 7,000

 —

 7,000

 Operating lease right-of-use assets

 5,491

 —

 5,491

 Other long-term assets

 —

 Accounts payable

 ( 2,285
)

 ( 460
)

 ( 2,745
)

 Other current liabilities

 ( 2,818
)

 ( 313
)

 ( 3,131
)

 Operating lease obligations

 ( 4,373
)

 —

 ( 4,373
)

 Deferred tax liabilities

 ( 3,868
)

 ( 416
)

 ( 4,284
)

 Net tangible assets (liabilities)

 12,768

 ( 2,985
)

 9,783

 Goodwill

 6,441

 6,879

 Customer relationships

 8,476

 2,400

 10,876

 Developed technology

 Net assets acquired and liabilities assumed

 $
 28,300

 $
 ( 118
)

 $
 28,182

 The amount of goodwill that
resulted from the purchase price allocation was attributed to expected synergies from the assembled workforce, an increase in development
capabilities, increased offerings to customers, expanded market opportunities, and enhanced opportunities for growth and innovation. Goodwill
was not being amortized but instead tested for impairment at least annually or more frequently if certain indicators of impairment were
present. The goodwill recorded was not deductible for income tax purposes.

 F- 21

 The ongoing decline in the
Company's market capitalization, along with other qualitative considerations was determined to be a triggering event for potential
goodwill impairment. Accordingly, the Company performed a goodwill impairment analysis as of September 30, 2023. 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. As a result of the impairment assessment performed, the Company determined goodwill was impaired and recorded
an impairment charge to write off the entire $ 6.9 million balance of goodwill. The impairment charge was recorded in the 2023 consolidated
statement of operations as a loss on impairment of goodwill.

 The two identified definite
lived intangible assets, comprised of customer relationships and developed technology, are being amortized over their estimated useful
lives of 10 and two years, respectively. The customer relationships intangible asset represents the estimated fair value of the underlying
relationships with Intellibed customers, valued utilizing the multi-period excess earnings method. The developed technology intangible
represents the fair value of Intellibed industry-specific cloud and mobile software and related technologies, valued using the cost to
recreate method.

 The acquired cash, cash equivalents
and restricted cash balance included $ 1.7 million of cash deposited by Intellibed in a separate account pursuant to an escrow agreement
with the Company. The purpose of the escrow cash amount was to cover Intellibed's estimated state income tax liabilities, sales
tax liabilities and related filing expenses that existed prior to the acquisition date. If the actual liabilities were less than estimated,
any excess cash was to be returned to the previous shareholders of Intellibed. If payments for these items exceeded the escrow balance,
the Company would have been required to pay the excess. The Company recorded the escrow account balance of $ 1.7 million as an acquired
restricted cash balance on the date of acquisition and used $ 0.9 million of the escrow account balance for actual expenses incurred. The
excess escrow balance of $ 0.8 million was returned by the Company to the previous shareholders of Intellibed during the third quarter
of 2023.

 The Company included the financial
results of Intellibed in its consolidated financial statements from the date of acquisition and recorded net revenues and pre-tax income
of $ 9.7 million and $ 1.6 million, respectively, for the period from August 31, 2022 through December 31, 2022. The $ 3.9 million of transaction
costs associated with the acquisition were recorded as general and administrative expense in the consolidated statement of operations
for the year ended December 31, 2022.

 The following table provides
unaudited pro forma financial information as if Intellibed had been acquired by the Company as of January 1, 2022. The unaudited pro forma
information reflects adjustments for transaction and litigation expenses, immediate restructuring savings and additional depreciation
and amortization resulting from the fair value adjustments to assets acquired. The pro forma results do not include any other anticipated
cost synergies or effects of the combined companies. Accordingly, the following pro forma amounts for the year ended December 31, 2022
are not necessarily indicative of the results to be expected had the acquisition been completed on the date indicated, nor is it
indicative of the future results of operations of the combined company (in thousands):

 Net revenues

 $
 603,739

 Net (loss) income

 ( 86,119
)

 The unaudited pro forma amounts
above include the following adjustments:

 A $ 4.4 million decrease in operating expenses to eliminate costs directly related to the acquisition that do not have a continuing impact on results of operations.

 A $ 1.5 million decrease in operating expenses to eliminate costs directly related to immediate restructuring that do not have a continuing impact on results of operations.

 A $ 2.2 million increase in operating expenses to reflect the additional depreciation and amortization expense related to the increase in property and equipment assets and definite lived intangible assets.

 The combined pro forma results were tax effected using the Company's effective tax rate for the period.

 F- 22

 5. Restructuring, Impairment and Other Related
Charges

 In August 2024, the Company
initiated a restructuring plan to strategically realign the Company's focus on the achievement of operational efficiencies
that are expected to improve profitability and provide for reinvesting in technology and marketing initiatives (the "Restructuring
Plan"). The Company's Restructuring Plan includes the permanent closure of its Grantsville and Salt Lake City, Utah manufacturing
facilities to consolidate mattress production in its Georgia plant, and a headcount reduction at the Company's Utah headquarters
to drive additional operating efficiencies. Closure of the two Utah manufacturing facilities will be completed by the end of the first
quarter of 2025 while consolidation into the Georgia facility was finalized in December 2024. The reduction in workforce at the Utah headquarters
was completed in August 2024.

 The following table summarizes
the restructuring, impairment and other related charges the Company recognized in the 2024 consolidated statement of operations (in thousands):

 Cost of
 Revenues

 Operating
 Expenses

 Restructuring,
 Impairment
 and Other
 Related
 Charges

 Total

 Cash charges:

 Employee-related costs

 $

 $

 $
 3,098

 $
 4,281

 Other costs

 —

 —

 Total cash charges

 3,626

 4,809

 Non-cash charges:

 Accelerated depreciation

 11,175

 —

 11,310

 Inventory write-downs

 4,026

 —

 —

 4,026

 Write-down of long-lived assets

 —

 —

 5,245

 5,245

 Impairment of assets

 —

 —

 10,967

 10,967

 Total non-cash charges

 15,201

 —

 16,347

 31,548

 Total restructuring, impairment and other related charges

 $
 15,442

 $

 $
 19,973

 $
 36,357

 Accelerated depreciation primarily
represents $ 11.2 million of increased depreciation expense associated with shortening the useful lives of the production equipment at
the two Utah manufacturing facilities that are being closed to reflect the remaining period these assets will remain in service.

 The $ 5.2 million write-down of long-lived assets represents the write-down
to salvage value of other property and equipment located at the two Utah manufacturing facilities that are being closed.

 Impairment of assets included
impairment charges of $ 2.5 million associated with entering into a sublease for the Salt Lake City, Utah manufacturing facility that is
being closed and related impairment charges associated with certain leasehold improvements of the property. The fair values of the impaired
assets were determined by the Company to be Level 3 under the fair value hierarchy (refer to Note 2— Fair Value Measurements
for the definition of Level 3 inputs) and were estimated based on internal expertise related to current marketplace conditions and
estimated future discounted cash flows. These assets were adjusted to their estimated fair values at the time of impairment. If estimated
fair values subsequently decline, the carrying values of the assets will be adjusted accordingly.

 F- 23

 Impairment of assets also
included the write-off of an $ 8.5 million indefinite-lived intangible asset. Initiating the Restructuring Plan was determined to be a
triggering event for potential impairment of this asset. As a result of the impairment assessment performed, the Company determined this
indefinite-lived intangible asset was impaired and recorded an impairment charge to write off the entire $ 8.5 million balance.

 The lease for the Company's
Grantsville, Utah manufacturing facility included a five-year renewal option that was reasonably certain of being exercised and included
in the lease term when the ROU asset and lease liability were originally measured. Because of the expected closure of this facility as
part of the Restructuring Plan, the renewal option was no longer deemed reasonably certain of being exercised and a reassessment of the
lease terms was completed. As a result, the original lease term was shortened and the Company recorded a $ 10.5 million reduction to the
ROU asset and corresponding lease liability in the 2024 consolidated balance sheet, using the applicable discount rate at the effective
date of the reassessment.

 The following table summarizes
2024 activity associated with employee-related and other costs recorded pursuant to the Restructuring Plan, as presented in the indicated
line item of the consolidated statement of operations, that will be settled in cash and are included in accounts payable or accrued compensation
on the condensed consolidated balance sheets (in thousands):

 Balance at December 31, 2023

 $
 —

 Employee-related costs – cost of revenues

 Employee-related costs – operating expenses

 Employee-related costs – restructuring charges

 3,098

 Other costs – restructuring charges

 Cash paid

 ( 3,816
)

 Balance at December 31, 2024

 $

 The following table summarizes
the estimated restructuring and other related charges associated with the Restructuring Plan to be recognized in the future (in thousands):

 Cost of
 Revenues

 Operating
 Expenses

 Restructuring,
 Impairment
 and Other Related
 Charges

 Total

 Cash charges

 $
 —

 $
 —

 $
 2,926

 $
 2,926

 Non-cash charges

 1,592

 —

 1,656

 Total estimated charges to be recognized in future (a)

 $
 1,592

 $
 —

 $
 2,990

 $
 4,582

 (a)
 These charges include certain estimates that are provisional and include management judgments and assumptions that could change materially as the Company completes the execution of the Restructuring Plan. Actual results may differ from these estimates, and the completion of the plan could result in additional restructuring, impairment or other related charges not reflected above.

 6. Revenue from Contracts with Customers

 The Company markets and sells
its products through direct-to-consumer e-commerce channels, retail brick-and-mortar wholesale partners, Purple showrooms, and third-party
online retailers. Revenue is recognized when the Company satisfies its performance obligations under the contract which involves transferring
the promised products to the customer, subject to shipping terms, as described in Note 2 – Summary of Significant Accounting
Policies.

 Disaggregated Revenue

 The Company classifies revenue
into two categories: DTC and wholesale. The DTC category is comprised of the e-commerce channel that sells directly to consumers who purchase
online and through the contact center, online marketplaces, and the Purple showrooms channel that sells directly to consumers who purchase
at a Company showroom location. The wholesale channel includes all product sales to the Company's retail brick and mortar and online
wholesale partners where consumers make purchases at their retail locations or through their online channels.

 F- 24

 The following tables present
the Company's revenue disaggregated by sales channel (in thousands):

 Channel

 2024

 2023

 2022

 e-commerce

 $
 206,300

 $
 223,607

 $
 267,370

 Wholesale

 204,214

 213,843

 242,698

 Showrooms

 77,363

 73,091

 63,133

 Revenues, net

 $
 487,877

 $
 510,541

 $
 573,201

 Contract Balances

 Payments for the sale of products
through the direct-to-consumer e-commerce channel, Purple showrooms and our contact center are collected at point of sale in advance of
shipping the products. The amounts received for unshipped products are recorded as customer prepayments. Customer prepayments totaled
$ 6.4 million and $ 5.7 million at December 31, 2024 and 2023, respectively. During 2024, 2023 and 2022, the Company recognized all of the
revenue that was deferred in customer prepayments at December 31, 2023, 2022 and 2021, respectively.

 7. Inventories

 Inventories consisted of the
following (in thousands):

 As of December 31,

 2024

 2023

 Raw materials

 $
 20,193

 $
 23,232

 Work-in-process

 6,602

 5,962

 Finished goods

 30,068

 37,684

 Inventories

 $
 56,863

 $
 66,878

 8. Property and Equipment

 Property and equipment consisted of the following
(in thousands):

 As of December 31,

 2024

 2023

 Equipment

 $
 70,900

 $
 72,424

 Equipment in progress

 13,130

 15,077

 Leasehold improvements

 57,936

 60,563

 Furniture and fixtures

 32,699

 31,084

 Office equipment

 1,611

 2,737

 Total property and equipment

 176,276

 181,885

 Accumulated depreciation

 ( 82,402
)

 ( 53,224
)

 Property and equipment, net

 $
 93,874

 $
 128,661

 F- 25

 Equipment in progress reflects
equipment, primarily related to mattress manufacturing, which is being constructed and was not in service at December 31, 2024 or
2023. Interest capitalized on borrowings during the active construction period of major capital projects totaled $ 1.1 million, $ 1.5 million
and $ 0.7 million during the years ended December 31, 2024, 2023 and 2022, respectively. Depreciation expense was $ 31.0 million, $ 19.7
million and $ 16.2 million for the years ended December 31, 2024, 2023 and 2022, respectively. Included in depreciation expense for the
year ended December 31, 2024 was $ 11.3 million of accelerated depreciation recorded in conjunction with the Restructuring Plan. Refer
to Note 5— Restructuring and Impairment Charges for more information.

 9. Leases

 The Company leases its manufacturing
and distribution facilities, corporate offices, Purple showrooms and certain equipment under non-cancelable operating leases with various
expiration dates through 2036. The Company's office and manufacturing leases provide for initial lease terms up to 16 years, while
Purple showrooms have initial lease terms of up to 10 years. Certain leases may contain options to extend the term of the original lease.
The exercise of lease renewal options is at the Company's discretion. Any lease renewal options are included in the lease term if
exercise is reasonably certain at lease commencement. The Company also leases vehicles and other equipment under both operating and finance
leases with initial lease terms of three to five years. The ROU asset for finance leases was $ 1.0 million and $ 0.7 million as of December
31, 2024 and 2023, respectively.

 The following table presents
the Company's lease costs (in thousands):

 2024

 2023

 2022

 Operating lease costs

 $
 19,460

 $
 19,466

 $
 15,743

 Variable lease costs

 4,338

 4,121

 2,311

 Short-term lease costs

 —

 —

 Total lease costs

 $
 23,798

 $
 23,587

 $
 18,065

 The table below reconciles
the undiscounted cash flows for each of the first five years and total remaining years to the operating lease liabilities recorded on
the consolidated balance sheet at December 31, 2024 (in thousands):

 Year ended December 31,

 2025

 $
 21,361

 2026

 20,623

 2027

 18,012

 2028

 17,661

 2029

 14,502

 Thereafter

 33,215

 Total operating lease payments

 125,374

 Less – lease payments representing interest

 ( 22,641
)

 Present value of operating lease payments

 $
 102,733

 F- 26

 As of December 31, 2024 and
2023, the weighted-average remaining term of operating leases was 6.8 years and 8.0 years, respectively, and the weighted-average discount
rate was 6.09 % and 5.77 %, respectively, for operating leases recognized on the consolidated balance sheets.

 The following table provides
supplemental information related to the Company's consolidated statement of cash flows (in thousands):

 2024

 2023

 2022

 Cash paid for amounts included in present value of operating lease liabilities (b)

 $
 23,033

 $
 20,817

 $
 15,109

 ROU assets obtained in exchange for operating lease liabilities

 8,516

 8,435

 38,599

 (b)
 – Operating cash flows paid for operating leases are included within the change in operating leases, net within the Consolidated Statements of Cash Flows offset by non-cash ROU asset amortization and lease liability accretion.

 10. Intangible
Assets

 The following table provides the components of
intangible assets (in thousands, except useful life):

 As of December
31, 2024

 As of December 31, 2023

 Useful life

 Gross

 Accumulated

 Net Carrying

 Gross

 Accumulated

 Net
Carrying

 (years)

 Cost

 Amortization

 Impairment

 Value

 Cost

 Amortization

 Value

 Indefinite-lived non-amortizing:

 Intellectual property

 $
 8,456

 $
 —

 $
 ( 8,456
)

 $
 —

 $
 8,456

 $
 —

 $
 8,456

 Trademarks

 —

 —

 —

 Definite-lived amortizing:

 Internet domain

 ( 430
)

 —

 ( 370
)

 Customer relationships

 10,876

 ( 4,492
)

 —

 6,384

 10,876

 ( 2,286
)

 8,590

 Developed technology

 ( 644
)

 —

 —

 ( 429
)

 Internal-use software

 7,746

 ( 5,740
)

 —

 2,006

 8,423

 ( 4,048
)

 4,375

 Intangible assets, net

 $
 28,652

 $
 ( 11,306
)

 $
 ( 8,456
)

 $
 8,890

 $
 29,329

 $
 ( 7,133
)

 $
 22,196

 Amortization expense for intangible
assets was $ 4.2 million, $ 5.3 million and $ 1.2 million for the years ended December 31, 2024, 2023 and 2022, respectively.

 Estimated amortization expense for definite-lived
intangible assets is expected to be as follows for the next five years (in thousands):

 Year ended December 31,

 2025

 $
 3,035

 2026

 2,111

 2027

 1,391

 2028

 2029

 Thereafter

 Total future amortization for definite-lived intangible assets

 $
 8,860

 F- 27

 11. Other Current Liabilities

 The Company's other
current liabilities consisted of the following (in thousands):

 As of December 31,

 2024

 2023

 Accrued sales returns

 $
 6,515

 $
 5,404

 Accrued sales and use tax

 2,994

 1,949

 Long-term debt and unamortized issuance costs - current portion

 —

 2,129

 Asset retirement obligation

 1,440

 —

 Insurance financing

 1,328

 1,079

 Accrued interest

 —

 Other

 1,423

 Total other current liabilities

 $
 12,750

 $
 12,490

 12. Debt

 Debt consisted of the following
(in thousands):

 As of December 31,

 2024

 2023

 Related party loan

 $
 70,679

 $
 —

 Term loan

 —

 25,000

 Revolving line of credit

 —

 5,000

 Less: unamortized debt issuance costs

 ( 15,285
)

 ( 962
)

 Total debt

 55,394

 29,038

 Current portion of debt and unamortized issuance costs (c)

 —

 ( 2,129
)

 Debt, net of current portion

 $
 55,394

 $
 26,909

 (c)
 – Amount is included in other current liabilities in the consolidated balance sheet s.

 2024 Credit Agreement

 On January 23, 2024, Purple
LLC, Purple Inc. and Intellibed (collectively, the "Loan Parties") entered into an amended and restated credit agreement (the
"Amended and Restated Credit Agreement"), which amended and restated the then existing term loan agreement ("Term Loan
Agreement"), with CCP and other lenders (collectively, the "Lenders") and Delaware Trust Company, as administrative
agent. The Lenders agreed to assume the Loan Parties' obligations under the Term Loan Agreement and refinance their existing obligations.
A term loan in the amount of $ 61.0 million (the "Related Party 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 asset based lending loans outstanding, paid fees, premiums and expenses
incurred in connection with this transaction, and provided net proceeds to the Company (after payments of outstanding debt, unpaid accrued
interest and expenses) equal to approximately $ 27.0 million. Interest on the Related Party Loan is payable each month and the principal
outstanding matures and is due on December 31, 2026. The Related Party 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). 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 %. The Loan Parties may request an additional term loan from the Lenders
in an aggregate amount not to exceed $ 19.0 million on terms requested by them to the extent agreed to by the Lenders at their discretion.
The Amended and Restated Credit Agreement also removed restrictions and requirements typically associated with an asset-based loan. The
Amended and Restated Credit Agreement and agreements ancillary thereto provide for certain remedies to the Lenders in the event of customary
events of default. There were no events of default at December 31, 2024 and therefore the debt is classified as long-term in the consolidated
balance sheets.

 In connection with the Amended
and Restated Credit Agreement, the Company issued to the Lenders warrants to purchase 20.0 million shares of the Company's Class
A common stock (Refer to Note 13 – Warrant Liabilities for more information) and incurred fees and expenses of $ 3.5 million
that were recorded as debt issuance costs in the first quarter of 2024. The Company has elected for interest to be capitalized and added
to the principal amount of the loan. For the year ended December 31, 2024, interest expense under the Related Party Loan consisted of
paid-in-kind interest of $ 9.7 million and debt issuance cost amortization of $ 7.2 million. There was no interest expense incurred under
the Amended and Restated Credit Agreement in 2023 and 2022.

 F- 28

 The Amended and Restated Credit
Agreement granted a security interest to the Lenders in substantially all of the assets (subject to certain limited exceptions) of the
Loan Parties to secure the Loan Parties' loans and other obligations under the Amended and Restated Credit Agreement, including
a security interest in the intellectual property owned by the Loan Parties.

 The Loan Parties (other than
Purple LLC) provided an unconditional guaranty of the payment of all obligations and liabilities of Purple LLC under the Amended and Restated
Credit Agreement.

 The Amended and Restated Credit
Agreement also provides for standard indemnification of the Lenders and contains representations, warranties and certain covenants of
the Loan Parties. While any amounts are outstanding under the Amended and Restated Credit Agreement, the Loan Parties 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 Loan Parties are also restricted from paying dividends or making other distributions or payments on their capital
stock, subject to limited exceptions. As of December 31, 2024, the Company was in compliance with all covenants under the Amended and
Restated Credit Agreement.

 2023 Credit Agreements

 On August 7, 2023, the Loan
Parties entered into the Term Loan Agreement. Also, on August 7, 2023, the Loan parties entered into a separate financing arrangement
with a group of financial institutions (collectively the "ABL Lenders") that provided for a revolving asset-based credit facility
(the "ABL Agreement"). Pursuant to entering into these agreements (collectively, the "2023 Credit Agreements"),
the Company incurred fees and expenses of $ 3.1 million that were recorded as debt issuance costs in the third quarter of 2023.

 The Term Loan Agreement provided
for up to $ 25.0 million of term loans, with up to $ 5.0 million of incremental term loans available, subject to certain conditions (collectively,
the "Term Loans"). Proceeds from the Term Loans were used for general corporate purposes. The borrowing rates under the Term
Loan Agreement were based on SOFR, plus a credit spread adjustment of 0.15 % per annum, plus 8.5 % per annum, with a SOFR floor of 2.0 %
per annum. The Term Loans were to be repaid at the earlier of (a) a three-year amortization schedule ending on August 7, 2026 or (b) the
payment in full of the ABL Agreement. The Term Loans could be prepaid in whole or in part at any time, but subject to a prepayment premium.
There were also potential mandatory prepayment obligations based on certain asset dispositions, casualty events and extraordinary receipts.
Once repaid, no portion of the Term Loans could be reborrowed.

 The
ABL Agreement provided for up to $ 50.0 million of revolving loans subject to a borrowing base calculation and minimum availability requirements
(with sub-facilities for swing line loans and the issuance of letters of credit), with incremental increases available up to $ 20.0 million
(the "ABL Loans"), subject to certain conditions, availability reserves, minimum availability requirements, borrowing base
calculations, and restrictive covenants. In October 2023, the ABL Lenders implemented an availability reserve of $ 5.0 million, which
reduced the amount available under the borrowing base. Outstanding principal and accrued interest on the ABL Loans were to be repaid
on August 7, 2026.

 F- 29

 Term
loans totaling $ 25.0 million were fully drawn at closing and, subsequent to the closing in August 2023, the Company executed $ 17.0 million
in ABL loan draws and then repaid $ 12.0 million of those borrowings prior to the end of 2023. The outstanding balance of ABL Loans totaled
$ 5.0 million at December 31, 2023. In connection with the Amended and Restated Credit Agreement, all obligations under the 2023 Credit
Agreements were paid in full and the agreements were terminated. The termination was accounted for as an extinguishment of debt and $ 3.4
million of unamortized debt issuance costs related to the 2023 Credit Agreements were recorded as a loss on extinguishment of debt in
the first quarter of 2024. Interest expense under the 2023 Credit Agreements was $ 0.4 million and $ 2.1 million for the years ended December
31, 2024 and 2023, respectively. There was no interest expense incurred under the 2023 Credit Agreements in 2022.

 2020
Credit Agreement

 On
September 3, 2020, Purple LLC entered into a financing arrangement with a group of financial institutions (the "2020 Credit Agreement").
The 2020 Credit Agreement provided for a $ 45.0 million term loan and a $ 55.0 million revolving line of credit. The term loan was to be
repaid in accordance with a five-year amortization schedule or prepaid in whole or in part at any time without premium or penalty, subject
to reimbursement of certain costs. The revolving credit facility had a term of five years and carried the same interest provisions as
the term debt. A commitment fee was due quarterly based on the applicable margin applied to the unused total revolving commitment. In
connection with the Company's execution of the 2023 Credit Agreements, the Company terminated its 2020 Credit Agreement. The Company
had no outstanding borrowings under the 2020 Credit Agreement at the time of termination.

 On February 17, 2023, the
Company entered into a fifth amendment to the 2020 Credit Agreement. The amendment, among other things, revised various covenants associated
with the 2020 Credit Agreement. As a condition of entering into the amendment, the Company repaid the $ 24.7 million outstanding balance
on the term loan plus accrued interest. Pursuant to this amendment, the Company incurred fees and expenses of $ 2.9 million that were
recorded as debt issuance costs in the consolidated balance sheets. The amendment was accounted for as an extinguishment of debt and
$ 1.2 million of unamortized debt issuance costs related to the term loan were recorded as loss on extinguishment of debt in the 2023
consolidated statement of operations.

 Interest
expense under the 2020 Credit Agreement totaled $ 1.3 million and $ 4.1 million for the years ended December 31, 2023 and 2022, respectively.
There was no interest expense incurred under the 2020 Credit Agreement in 2024.

 As
of December 31, 2024, the scheduled maturities of debt outstanding for each of the next five years and thereafter are as follows
(in thousands):

 Year ended December 31,

 Total

 2025

 $
 —

 2026

 70,679

 2027

 —

 2028

 —

 2029

 —

 Thereafter

 —

 Total

 $
 70,679

 13.
Warrant Liabilities

 On January 23, 2024, in connection with the Amended and Restated Credit
Agreement, the Company issued to the Lenders warrants to purchase 20.0 million shares of the Company's Class A common stock (the
"Warrants"). Each Warrant entitles the registered holder to purchase one share of the Company's Class A 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 holders do not have the rights or privileges of holders of Class A common stock or any voting rights until they exercise
their Warrants. 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. A holder of the 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.
The Warrants contain a repurchase provision which, upon the occurrence of a fundamental transaction as defined in the warrant agreement,
could give rise to an obligation of the Company to pay cash to the warrant holders. In addition, other provisions may lead to a reduction
in the exercise price of the Warrants. The Warrants also include full-ratchet anti-dilution protections, subject to certain conditions,
which could result in the Warrants becoming exercisable for a significantly greater number of shares if we engage in a dilutive financing.
The Company determined the fundamental transaction provisions require the Warrants to be accounted for as a liability at fair value on
the date of the transaction, with changes in fair value recognized in earnings in the period of change. As a result, the liability for
these Warrants was recorded at fair value on the date of issuance with the offset included in debt issuance costs. This liability is subsequently
re-measured to fair value at each reporting date or exercise date with changes in the fair value included in earnings.

 F- 30

 The
Company used a Monte Carlo Simulation model to determine the fair value of the liability associated with the Warrants. The model used
key assumptions and inputs, such as exercise price, fair market value of common stock, risk free interest rate, warrant life, expected
volatility and the probability of a warrant re-price event. The following are the assumptions used in calculating fair value of the Warrants
on the date of issuance:

 Trading price of common stock on measurement date

 $
 0.82

 Exercise price

 $
 1.50

 Risk free interest rate

 4.14
 %

 Warrant life in years

 10.0

 88.62
 %

 Expected dividend yield

 —

 Probability of an event causing a warrant re-price

 25.0
 %

 The
following are the assumptions used in calculating fair value of the Warrants on December 31, 2024:

 Trading price of common stock on measurement date

 $
 0.78

 Exercise price

 $
 1.50

 Risk free interest rate

 4.45
 %

 Warrant life in years

 9.1

 88.00
 %

 Expected dividend yield

 —

 Probability of an event causing a warrant re-price

 25.0
 %

 The
Warrants had a fair value of $ 16.1 million as of December 31, 2024. The Company recognized a gain of $ 3.5 million in its consolidated
statement of operations for the year ended December 31, 2024 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.

 The
Company issued 12.8 million sponsor warrants pursuant to a private placement conducted simultaneously with its initial public offering.
Each of these warrants entitled the registered holder to purchase one-half of one share of the Company's Class A common stock at
a price of $ 5.75 per half share ($ 11.50 per full share), subject to adjustment pursuant to the terms of the warrant agreement. These
sponsor warrants contained certain provisions that did not meet the criteria for equity classification and therefore were recorded as
liabilities. The liability for these warrants was recorded at fair value on the date of the Business Combination and subsequently re-measured
to fair value at each reporting date or exercise date with changes in the fair value included in earnings.

 Unexercised
sponsor warrants totaling 1.9 million expired in February 2023 and were cancelled pursuant to the terms of the warrant agreement. These
sponsor warrants had no fair value on the date of expiration. The 1.9 million sponsor warrants outstanding at December 31, 2022 had a
negligible fair value and no sponsor warrants were exercised in 2022.

 The
Company determined the fair value of the sponsor warrants on December 31, 2022 using a Black-Scholes model with the following assumptions:

 Trading price of common stock on measurement date

 $
 4.79

 Exercise price

 $
 5.75

 Risk free interest rate

 4.04
 %

 Warrant life in years

 0.1

 80.59
 %

 Expected dividend yield

 —

 During
the year ended December 31, 2022, the Company recognized a gain of $ 4.3 million in its consolidated statement of operations related to
a decrease in the fair value of the sponsor warrants that were outstanding at the end of the period.

 F- 31

 14.
Other Long-Term Liabilities

 Other
long-term liabilities consist of the following (in thousands):

 2024

 2023

 Asset retirement obligations

 $
 1,098

 $
 2,230

 Other

 Total other long-term liabilities

 $
 2,009

 $
 2,235

 The
Company's asset retirement obligations ("ARO") relate to two manufacturing facilities that are leased. One of the properties
is the Company's manufacturing facility in Grantsville, Utah which is expected to be closed in the first quarter of 2025 (For further
discussion see Note 5— Restructuring, Impairment and Other Related Charges). The ARO liabilities represent future estimated
costs associated with the restoration of the facilities to their original state at the end of the respective lease terms. The fair value
of a liability for an ARO is recorded in the period in which it is incurred, discounted to its present value using a credit-adjusted-risk-free
interest rate, with a corresponding amount capitalized by increasing the carrying amount of the related long-lived asset. These
liabilities are accreted each period, and the capitalized cost is depreciated over the useful life of the related asset. Revisions
to estimated ARO liabilities result in an adjustment to the related capitalized asset and corresponding liability. Because the Company
utilizes unobservable inputs in the estimation of its ARO liabilities, the fair values were determined to be Level 3 under the fair
value hierarchy (For further discussion regarding the definition of Level 3 inputs see Note 2— Fair Value Measurements).

 The
Company had the following activity for its ARO liabilities (in thousands):

 2024

 2023

 Balance at beginning of period

 $
 2,230

 $
 2,099

 Revisions in estimated retirement obligations

 —

 Accretion expense

 Payments

 ( 102
)

 —

 Balance at end of period

 2,538

 2,230

 ARO liability classified as other current liabilities

 ( 1,440
)

 —

 ARO liability classified as other long-term liabilities

 $
 1,098

 $
 2,230

 15.
Commitments and Contingencies

 Chief
Executive Officer Cash Bonus Award

 On
January 26, 2024, the Board approved an amendment to the Chief Executive Officer's employment agreement. Under the amendment, the
Company agreed that, among other things, the Chief Executive Officer will be eligible to earn a cash payment of up to $ 5.0 million, less
tax and other required withholdings, based on the volume weighted average price per share of the Company's Class A common stock
on NASDAQ during the period from March 16, 2026 through June 30, 2026 subject to his continued employment with the Company. The amount
earned will be payable in quarterly installments commencing with the first payroll period following June 30, 2026. The Company determined
the provisions surrounding the future bonus payment require it to be accounted for as a liability at fair value on the date of the transaction,
with changes in fair value recognized in earnings in the period of change. The Company recorded a de minimis amount of compensation expense
in its 2024 consolidated statement of operations related to the fair value of the future bonus payment.

 Senior
Leadership Team Special Recognition Bonus

 On
January 26, 2024, the Board unanimously approved a special recognition bonus payment to certain members of the Company's senior
leadership team. The bonus was awarded to incentivize retention and continued engagement with the Company during these challenging times
in the bedding industry. Each participant is eligible to earn a special recognition bonus payment equal to 15 months of their regular
salary. The special recognition bonus payment is paid as follows, subject to the employee's continued employment with the Company:
 10 % was paid in August 2024, 20 % is to be paid in February 2025, and the remaining 70 % is to be paid in August 2025. The Company recorded
compensation expense of $ 3.1 million in its 2024 consolidated statement of operations related to this special recognition bonus.

 F- 32

 Performance
Cash Long-Term Incentive Award

 On
June 20, 2024, the Board unanimously approved a performance cash long-term incentive award to those employees eligible to participate
in the Company's Long-Term Incentive Plan. The incentive award payment is based on a performance goal of the volume weighted average
price per share of the Company's Class A common stock on NASDAQ on March 31, 2027. The Company determined the provisions surrounding
the performance cash long-term incentive award require it to be accounted for as a liability at fair value at each reporting period,
with changes in fair value recognized in earnings in the period of change. The Company recorded a de minimis amount of compensation expense
in the 2024 consolidated statement of operations related to this future award payment.

 Settlement
of Insurance Claim

 In
2024, the Company received two payments totaling $ 11.6 million for full settlement of a previously filed business interruption claim
which was recorded as other income, net in the 2024 consolidated statement of operations.

 Rights
of Securities Holders

 On January 23, 2024, in connection with the issuance of the 2024 Warrants,
the Company entered into an amended and restated registration rights agreement with holders of the Warrants (the "Holders"),
providing for the registration under the Securities Act of 1933, as amended, of the 2024 Warrants, the shares issuable upon the exercise
of the 2024 Warrants and Class A common stock held by the Holders as of such date, subject to customary terms and conditions. On March
12, 2025 in connection with the issuance of the 2025 Warrants, the Company entered into a Second Amended and Restated Registration Rights
Agreement (the "Registration Rights Agreement") with the Holders, providing for the registration of the Warrants, the shares
of Common Stock issuable upon the exercise of the Warrants, and the Class A Common Stock held by the Holders as of such date (the "Registrable
Securities"). The Registration Rights agreement entitles the Holders to demand registration of the Registrable Securities and to
piggyback on the registration of securities by the Company and other Company securityholders. 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.

 NOL
Rights Plan

 On June 27, 2024, the Board
adopted and the Company entered into a limited-duration stockholder rights agreement (the "NOL Rights Plan") with a stated
expiration date of June 30, 2025. The Board adopted the NOL Rights Plan to protect stockholder value by attempting to safeguard the Company's
ability to use its June 30, 2024 estimated $ 238 million of net operating losses (the "Current NOLs") to reduce potential future
federal income tax obligations from becoming substantially limited by future ownership changes in the Company's common stock under
Code Section 382. On October 15, 2024, at a special meeting of stockholders (the "Special Meeting"), the Company's stockholders
ratified the NOL Rights Plan. Refer to Note 17 – Stockholders' Equity – NOL Rights Plan for more information.

 NOL
Protective Charter Amendment

 To
further safeguard the Company's ability to use its Current NOLs, on July 27, 2024, the Board adopted and recommended that the Company's
stockholders approve an amendment to the Company's Certificate of Incorporation (the "NOL Protective Charter Amendment")
that adds an additional layer of protection of the Current NOLs until June 30, 2025 by voiding certain transfers of common stock that
could result in an ownership change under Code Section 382. At the Special Meeting, the Company's stockholders approved the NOL
Protective Charter Amendment. Refer to Note 17 – Stockholders' Equity – NOL Protective Charter Amendment for
more information.

 F- 33

 Non-Income
Related Taxes

 The
U.S. Supreme Court ruling in South Dakota v. Wayfair, Inc., No.17-494, reversed a longstanding precedent that remote sellers are
not required to collect state and local sales taxes. The Company cannot predict the effect of these and other attempts to impose sales,
income or other taxes on e-commerce. The Company currently collects and reports on sales tax in all states in which it does business.
However, the application of existing, new or revised taxes on the Company's business, in particular, sales taxes, value-added tax
and similar taxes would likely increase the cost of doing business online and decrease the attractiveness of selling products over the
internet. The application of these taxes on the Company's business could also create significant increases in internal costs necessary
to capture data and collect and remit taxes. There have been, and will continue to be, substantial ongoing costs associated with complying
with the various indirect tax requirements in the numerous markets in which the Company conducts or will conduct business.

 Legal
Proceedings

 On
December 16, 2022, Purple's founders filed a complaint against Purple Inc. in the Fourth Judicial District Court in the State
of Utah. In that suit, the plaintiffs alleged that they each entered into employment agreements with Purple LLC in February 2018.
The plaintiffs contended that certain corporate transactions reduced their "ownership interest and voting power in
Purple" and that, as a result, they should have continued to be paid a salary when they retired from Purple LLC. The
plaintiffs calculated that they were each owed "no less than $ 500,000 " in unpaid salary. In October 2023, the Court
granted Purple Inc.'s motion and ordered that the claims brought by the plaintiffs be dismissed in full, with prejudice. The
Court entered a final judgment dismissing the case in January 2024. The plaintiffs have filed an appeal to the Utah Court of
Appeals. The parties argued before the Utah Court of Appeals on January 23, 2025. The Court's decision is anticipated in the
second quarter of 2025. The Company maintains insurance to cover the costs of defending against claims of this nature and intends to
continue to vigorously defend against these claims in the course of the plaintiffs' appeal.

 On
April 3, 2023, Purple's founders filed a complaint against Purple LLC in the Delaware Court of Chancery. The complaint alleges
that Purple LLC breached the limited liability company agreement of Purple LLC by failing to pay the full amount of tax distributions
owed under the agreement. The plaintiffs seek damages of approximately $ 3.0 million in allegedly unpaid tax distributions as well as
legal fees and expenses incurred in connection with the litigation. On June 13, 2023, Purple LLC filed an answer to the complaint denying
the plaintiffs' allegations, setting forth its affirmative defenses, and requesting dismissal of all claims and entry of judgment
in Purple LLC's favor. The outcome of the litigation cannot be predicted at this early stage in the proceedings. Purple LLC
denies all allegations and intends to vigorously defend against these claims.

 On
January 17, 2024, two customers filed a punitive class action lawsuit (the "Class Action Lawsuit") against Purple LLC in
California Superior Court in the County of San Francisco alleging unlawful marketing and pricing practices, fraud and unjust enrichment.
The suit sought damages and other relief on behalf of all persons who purchased Purple LLC products during the applicable statutory periods
in California. On July 15, 2024, the Company entered into a settlement agreement (the "Settlement Agreement") with the plaintiffs
in connection with the Class Action Lawsuit. On August 16, 2024 the United States District Court for the Northern District of California
dismissed the Class Action Lawsuit and approved the Settlement Agreement. Upon receipt of the executed release of all claims by the plaintiffs,
the Company made a cash payment pursuant to the Settlement Agreement.

 On
April 16, 2024, Purple's founders, in their capacity as a former landlord of Purple LLC, brought a lawsuit against Purple LLC,
as lessee, for amounts allegedly owed under a real estate lease which the parties terminated effective September 30, 2023. In the suit,
the plaintiffs allege approximately $ 2.5 million in damages, based primarily on a dispute regarding whether Purple LLC left the premises
in the condition required by the lease. The plaintiffs further claim approximately $ 0.8 million in holdover rent, as well as unspecified
amounts in interest, late fees, liquidated damages, attorney fees and costs. Purple LLC denies all allegations and intends to vigorously
defend against these claims.

 On
July 24, 2024, a former part-time employee filed a class action lawsuit against Purple LLC in California Superior
Court in the County of Alameda alleging failure to pay all wages, failure to pay overtime pay rate, failure to provide all meal
periods, and other employment-related causes of action. The suit seeks damages, interest, attorneys' fees, costs and other relief
on behalf of all non-exempt California employees of Purple LLC during the applicable statutory periods. On September 30, 2024, the plaintiffs
filed an amended complaint adding a claim for penalties under California's Private Attorneys General Act. Subsequent to this, Purple
LLC and the plaintiffs agreed to mediate the claims and to stay formal discovery pending mediation, which is currently scheduled to take
place on May 8, 2025. Purple LLC denies all allegations and intends to vigorously defend against these claims.

 F- 34

 The
Company is from time to time involved in various other claims, legal proceedings and complaints arising in the ordinary course of business.
The Company does not believe that adverse decisions in any such pending or threatened proceedings, or any amount that the Company might
be required to pay by reason thereof, would have a material adverse effect on the financial condition or future results of the Company.

 16.
Related-Party Transactions

 The
Company has engaged in various transactions with entities or individuals which are considered related parties.

 Coliseum
Capital Management LLC

 Immediately following the Business Combination, Adam Gray was appointed
to the Board. Mr. Gray is a manager of Coliseum Capital, LLC, which is the general partner of CCP and Coliseum Co-Invest Debt Fund, L.P.
("CDF"), and he is also a managing partner of Coliseum Capital Management, LLC ("CCM"), which is the investment
manager of Blackwell and also manages investment funds and accounts. Mr. Gray has voting and dispositive control over securities held
by CCP, CDF and Blackwell. In April 2023, Adam Gray was appointed Chairman of the Board of the Company as part of an agreement to resolve
litigation that had been brought by Coliseum against the Company. Refer to Note 12— Debt — 2024 Credit Agreement
for more information on the Related Party Loan.

 Purple
Founder Entities

 Purple LLC began leasing its Alpine facility from entities controlled
by the Purple Founders in 2010. On September 3, 2021, in accordance with the terms of that original lease, Purple LLC gave notice that
it intended to exercise its right to an early termination of the lease to occur on September 30, 2022. On July 20, 2022, the Company entered
into an amendment to its Alpine facility lease agreement that rescinded the Company's previous notice of termination and extended
the lease term to remain in effect until September 30, 2023. The Company vacated the Alpine facility and returned the property back to
its owner on September 30, 2023, in accordance with the terms of the lease agreement and notice of termination. In conjunction with leasing
the Alpine facility, Purple LLC incurred rent expense of $ 0.8 million and $ 1.0 million for the years ended December 31, 2023 and 2022,
respectively. Refer to Note 15— Commitments and Contingencies—Legal Proceedings for information regarding a complaint
filed by Purple's founders regarding this matter.

 17.
Stockholders' Equity

 Class
A Common Stock

 The
Company has 210.0 million shares of Class A common stock authorized. Holders of the Company's Class A common stock are entitled
to one vote for each share held on all matters to be voted on by the stockholders. Holders of Class A common stock and holders of Class
B common stock voting together as a single class have the exclusive right to vote for the election of directors and on all other matters
properly submitted to a vote of the stockholders. At December 31, 2024, 107.5 million shares of Class A common stock were outstanding.

 Class
B Common Stock

 The Company has 90.0 million
shares of Class B common stock authorized. Holders of the Company's Class B common stock will vote together as a single class with
holders of the Company's Class A common stock on all matters properly submitted to a vote of the stockholders. Shares of Class B
common stock may be issued only to InnoHold, their respective successors and assigns, as well as any permitted transferees of InnoHold.
A holder may transfer their shares of Class B common stock to any transferee (other than the Company) only if such holder also simultaneously
transfers an equal number of such holder's shares of Class B common stock to such transferee. The Class B common stock is not entitled
to receive dividends, if declared by the Board, or to receive any portion of any such assets in respect of their shares upon liquidation,
dissolution, distribution of assets or winding-up of the Company in excess of the par value of such stock. At December 31, 2024, 0.2 million
shares of Class B common stock were outstanding.

 F- 35

 Preferred
Stock

 The
Company has 5.0 million shares of preferred stock authorized. The preferred stock may be issued from time to time in one or more series.
The Board is expressly authorized to provide for the issuance of shares of the preferred stock in one or more series and to establish
from time to time the number of shares to be included in each such series and to fix the voting rights, designations and other special
rights or restrictions. At December 31, 2024, there were no shares of preferred stock outstanding. On June 27, 2024, 0.3 million shares
of the Company's authorized shares of preferred stock were designated as Series C Junior Participating Preferred Stock, par value
$ 0.0001 per share ("Series C Preferred Shares").

 NOL
Rights Plan

 On June 27, 2024, the Board
adopted and the Company entered into the NOL Rights Plan, which is designed to preserve approximately $ 238 million of the Company's
Current NOLs under Section 382 of the of the Internal Revenue Code of 1986, as amended ("Code Section 382"). At the Special
Meeting, the Company's stockholders ratified the NOL Rights Plan. The Company's ability to use the Current NOLs to offset
future taxable income may be significantly limited if the Company experiences an "ownership change" under Code Section 382,
which occurs if one or more stockholders or groups of stockholders that is deemed to own at least 5 % of the Company's common stock
increases their aggregate ownership by more than 50 percentage points over its lowest ownership percentage within a rolling three-year
period. The NOL Rights Plan is intended to prevent an ownership change by acting as a deterrent to any Person (as such term is defined
in the NOL Rights Plan) acquiring 4.9 % or more of the outstanding common stock of the Company (or, in the case of a Grandfathered Person
(as such term is defined in the NOL Rights Plan), an additional one-half of one percentage point of the outstanding common Stock of the
Company above their current ownership percentage). Any Person that acquires shares of the Company's common Stock in violation of
the limitations of the NOL Rights Plan is known as an "Acquiring Person." For purposes of the NOL Rights Plan, "common
stock" includes (i) the Class A common stock; (ii) the Class B common stock; and (iii) any interest that would be treated as "stock"
of the Company pursuant to Treasury Regulation § 1.382-2T(f)(18). Notwithstanding the foregoing, the NOL Rights Plan allows for the
exercise of currently outstanding conversion rights, exchange rights, warrants or options, or otherwise, without triggering the NOL Rights
Plan. Refer to Note 13 – Warrant Liabilities for further discussion of the Company's outstanding warrants.

 The
NOL Rights Plan provided for the issuance of a dividend of one preferred share purchase right (a "Right") for each share
of common stock outstanding on July 26, 2024. Each Right entitles the holder to purchase from the Company one one-thousandth of a share
of Series C Preferred Share for a purchase price of $ 2.75, subject to adjustment as provided in the NOL Rights Plan. Each Series C Preferred
Share is designed to be the economic equivalent of one share of common stock.

 Unless
the Board determines to effect an exchange (as discussed below), each Right will become exercisable on the "Distribution Time",
which is the earlier to occur of (i) the tenth day following a public announcement, or the public disclosure of facts indicating, that
a Person has become an Acquiring Person or (ii) the tenth business day (or such later date as may be determined by action of the Board
prior to such time as any Person becomes an Acquiring Person) following the commencement of a tender offer or exchange offer the consummation
of which would result in a Person becoming an Acquiring Person. After the Distribution Time, any Rights held by an Acquiring Person will
be void and will not be exercisable. As a result, any Acquiring Person will be subject to significant dilution upon the occurrence of
the Distribution Time. At any time after a Person becomes an Acquiring Person, but before such Acquiring Person holds more than 50 % of
the common stock, the Board, in its sole discretion, may instead extinguish the Rights by exchanging one share of Class A common stock
for each Right, other than Rights held by the Acquiring Person.

 The
Rights will expire on the earliest to occur of (i) the close of business on June 30, 2025; (ii) the time at which the Rights are redeemed
(as discussed below) or exchanged by the Company; (iii) the repeal of Code Section 382, if the Board determines that the NOL Rights Plan
is no longer necessary for the preservation of the Current NOLs; or (v) the beginning of a taxable year of the Company to which the Board
determines that no Current NOLs may be carried forward. At any time prior to the expiration of the NOL Rights Plan, the Company may redeem
the Rights in whole, but not in part, at a price of $ 0.0001 per Right (subject to adjustment and payable in cash, Class A common stock
or other consideration deemed appropriate by the Board). Immediately upon the action of the Board authorizing any redemption or at a
later time as the Board may establish for the effectiveness of the redemption, the Rights will terminate and the only right of the holders
of Rights will be to receive the redemption price.

 The
initial issuance of the Rights as a dividend had no tax, financial accounting or reporting impact. The fair value of the Rights is nominal,
since the Rights were not exercisable when issued and no value is attributable to them. Additionally, the Rights do not meet the definition
of a liability under GAAP and therefore are not being accounted for as a long-term obligation. Accordingly, unless the Rights become
exercisable upon the occurrence of the Distribution Time as discussed above, the NOL Rights Plan and the Rights issued thereunder have
no impact on the Company's consolidated financial statements.

 F- 36

 NOL
Protective Charter Amendment

 On
June 27, 2024, concurrently with the adoption of NOL Rights Plan, the Board adopted, and recommended that the Company's stockholders
approve at the Special Meeting, the NOL Protective Charter Amendment that adds an additional layer of protection of the Current NOLs
until June 30, 2025 by voiding any transfer of common stock that results in any Person holding 4.9 % or more of the outstanding common
stock of the Company (or, in the case of a Person already holding more than 4.9 % of the outstanding common stock of the Company as of
the date of the NOL Protective Charter Amendment, one-half of one percentage point of the outstanding common stock of the Company above
their current ownership percentage). At the Special Meeting, the Company's stockholders approved the NOL Protective Charter Amendment.

 Any
acquisition of common stock in violation of the NOL Protective Charter Amendment will be void as of the date it is attempted. Upon the
Company's written demand, the purported acquiring stockholder must transfer the excess acquired common stock to the Company's
transfer agent (along with any dividends or other distributions paid with respect to such excess acquired common stock). The Company's
transfer agent is then required to sell such excess acquired common stock in an arm's-length transaction (or series of transactions)
that would not constitute a violation under the NOL Protective Charter Amendment. The net proceeds of the sale together with any other
distributions with respect to such excess acquired common stock received by the Company's transfer agent, after deduction of all
costs incurred by the transfer agent, will be transferred first to the purported transferee in an amount, if any, up to the cost (or
in the case of gift, inheritance or similar transfer, the fair market value of the excess securities on the date of the prohibited transfer)
incurred by the purported transferee to acquire such excess securities, and the balance of the proceeds, if any, will be transferred
to a charitable beneficiary. Further, the Company may hold any stockholder liable, to the fullest extent of the law, for any intentional
violation of the NOL Protective Charter Amendment.

 In connection with the Amended
and Restated Credit Agreement, the Company issued to the Lenders Warrants to purchase 20.0 million shares of the Company's Class
A common stock. Each Warrant entitles the registered holder to purchase one share of the Company's Class A common stock at a price
of $ 1.50 per share, subject to adjustment. While the Warrants are exercisable, the Company may call the Warrants for redemption in whole
and not in part at any time at a price of $ 0.01 per share of Class A common stock issuable upon exercise of the Warrants upon not less
than 45 days' prior written notice of redemption to each holder, provided that this redemption right is only available if the reported
last sale price of the Class A common stock equals or exceeds $ 24.00 per share on each of 20 trading days within a 30 -trading day period
ending three business days before the Company sends the notice of redemption to the holders. A holder of the 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.

 Sponsor

 There
were 12.8 million sponsor warrants issued pursuant to a private placement simultaneously with the Company's initial public offering.
Unexercised sponsor warrants totaling 1.9 million expired in February 2023 and were cancelled pursuant to the terms of the warrant agreement.
These sponsor warrants had no fair value on the date of expiration.

 Noncontrolling
Interest

 Noncontrolling
interest ("NCI") is the membership interest in Purple LLC held by holders other than the Company. At both December 31, 2024
and 2023, the combined NCI percentage in Purple LLC was 0.2 %. The Company has consolidated the financial position and results of operations
of Purple LLC and reflected the proportionate interest held by all such Purple LLC Class B Unit holders as NCI.

 F- 37

 18.
Net Loss Per Common Share

 The
following table sets forth the calculation of basic and diluted weighted average shares outstanding and loss per share for the periods
presented (in thousands, except per share amounts):

 2024

 2023

 2022

 Numerator:

 Net loss attributable to Purple Innovation, Inc. – basic

 $
)

 $
)

 $
)

 Less: Net loss attributable to noncontrolling interest

 ( 201
)

 ( 458
)

 —

 Net loss attributable to Purple Innovation, Inc. – diluted

 $
 ( 98,098
)

 $
 ( 121,215
)

 $
)

 Denominator

 Weighted average shares – basic

 107,139

 103,602

 81,779

 Add: Dilutive effect of Class B shares

 —

 Weighted average shares – diluted

 107,324

 103,936

 81,779

 Net loss per common share:

 Basic

 $
 ( 0.91
)

 $
 ( 1.17
)

 $
 ( 1.13
)

 Diluted

 $
 ( 0.91
)

 $
 ( 1.17
)

 $
 ( 1.13
)

 The Company excludes from
the diluted net loss per common share computation potentially dilutive securities related to warrants, equity awards and convertible shares
of Class B common stock when their exercise or performance vesting price is greater than the average market price of the Company's
common stock or they are otherwise anti-dilutive. Potentially dilutive securities that have been excluded from the calculation of diluted
net loss per common share are as follows (in thousands):

 2024

 2023

 2022

 20,000

 —

 —

 Sponsor warrants

 —

 Restricted stock units

 2,006

 1,423

 Stock options

 Class B common stock

 —

 —

 19.
Equity Compensation Plans

 2017
Equity Incentive Plan

 The 2017 Equity Incentive
Plan provides for grants of stock options, stock appreciation rights, restricted stock and other stock-based awards. Directors, officers
and other employees and subsidiaries and affiliates, as well as others performing consulting or advisory services for the Company and
its subsidiaries, will be eligible for grants under the 2017 Equity Incentive Plan. The aggregate number of shares of common stock which
may be issued or used for reference purposes under the 2017 Equity Incentive Plan or with respect to which awards may be granted may not
exceed 7.9 million shares. As of December 31, 2024, 2.4 million shares remain available for issuance under the 2017 Equity Incentive Plan.
During the years ended December 31, 2024, 2023 and 2022, stock-based compensation associated with equity awards issued under the 2017
Equity Incentive Plan totaled $ 2.8 million, $ 4.9 million and $ 3.4 million, respectively, while the related tax benefits recognized on
these awards were $ 0.9 million, $ 1.5 million and $ 0.9 million, respectively.

 F- 38

 Class
A Common Stock Awards

 There were no stock awards
granted in 2024.

 In June 2023, the Company
granted stock awards under the 2017 Equity Incentive Plan to non-executive directors on the Board. The stock awards vested immediately
and the Company issued 0.2 million shares of Class A common stock and recognized $ 0.6 million in expense during the year ended December
31, 2023, which represented the fair value of the stock awards on the grant date.

 In
May 2022, the Company granted stock awards under the 2017 Equity Incentive Plan to independent directors on the Board. The stock awards
vested immediately and the Company issued 0.1 million shares of Class A common stock and recognized $ 0.6 million in expense during the
year ended December 31, 2022, which represented the fair value of the stock awards on the grant date.

 Amended
and Restated Grant Agreements

 On March 15, 2023, in accordance
with the 2017 Equity Incentive Plan, the Company entered into amended and restated grant agreements relating to stock options and restricted
stock unit awards previously granted to the Company's chief executive officer in March 2022 and June 2022. The amended agreements
revised the vesting schedule of the awards included in each grant. Pursuant to these agreements, 0.3 million of restricted stock units
and stock options fully vested on March 25, 2023, another 0.3 million of restricted stock units and stock options, which included conditionally
granted awards that were approved by shareholders at the 2023 Annual Meeting, vested on March 25, 2024, and the remaining 0.3 million
of conditionally granted awards approved by shareholders at the 2023 Annual Meeting will vest in full on March 25, 2025. These amendments
resulted in the acceleration of $ 0.8 million of stock-based compensation expense into fiscal 2023 compared to the expense that would have
been recorded based on vesting under the original agreements.

 Employee
Stock Options

 There were no employee stock
options granted in 2024.

 In
June 2023, the 0.3 million of conditionally granted stock options to the Company's chief executive officer were approved by shareholders.
These stock options have an exercise price of $ 6.82 per option, expire in four years and vest over a two-year period. The fair value
of this award, which was determined to be $ 0.1 million on the effective date, is being expensed over the vesting period on a straight-line
basis.

 In
March and June 2022, the Company granted 0.5 million and 0.1 million stock options, respectively, under the 2017 Equity Incentive Plan
to its chief executive officer at an exercise price of $ 6.82 per option. The stock options expire in five years and were to vest over
a three-year period. In April 2022, with the chief executive officer's consent, the Company rescinded and cancelled 0.4 million
of the stock options granted in March 2022 because of annual limits set forth in the 2017 Equity Incentive Plan. The Company determined
the fair value of the net award of 0.2 million stock options to be $ 0.4 million which was expensed on a straight-line basis over the
vesting period.

 F- 39

 The following are the weighted average assumptions used in calculating
the fair value of the total stock options granted in 2023 and 2022 using the Black-Scholes method:

 Year Ended December 31,

 2023

 2022

 Weighted average grant date value

 $
 0.22

 $
 2.02

 Risk free rate

 4.48
 %

 2.67
 %

 Dividend yield

 —

 —

 44.98
 %

 54.22
 %

 Expected term in years

 2.58

 3.45

 The
following table summarizes the Company's total stock option activity for the year ended December 31, 2024:

 Exercise
 Price

 Remaining
 Contractual
 Term in
 Years

 Intrinsic
 Value $

 Options outstanding as of December 31, 2023

 $
 8.13

 2.2

 $
 —

 Granted

 —

 —

 —

 —

 Forfeited

 —

 —

 —

 —

 Expired

 ( 334
)

 9.67

 —

 —

 Options outstanding as of December 31, 2024

 7.17

 2.2

 —

 Outstanding
and exercisable stock options as of December 31, 2024 are as follows:

 Options Outstanding

 Options Exercisable

 Exercise Prices

 Number of
 Outstanding

 Remaining Life
 (Years)

 Number of
 Exercisable

 Remaining Life
 (Years)

 Intrinsic
 Value

 $
 6.82

 2.3

 2.3

 $
 —

 13.12

 0.4

 0.4

 —

 2.2

 2.1

 $
 —

 F- 40

 The
following table summarizes the Company's unvested stock option activity for the year ended December 31, 2024:

 Grant Date
 Fair Value

 Nonvested options as of December 31, 2023

 $
 0.41

 Granted

 —

 —

 Vested

 ( 170
)

 0.59

 Forfeited

 —

 —

 Nonvested options as of December 31, 2024

 0.22

 The
Company recognized $ 0.5 million and $ 0.7 million in stock-based compensation expense related to stock options during the years ended
December 31, 2023 and 2022, respectively. For the year ended December 31, 2024, stock-based compensation expense related to stock
options was de minimis.

 For
stock options outstanding as of December 31, 2024, there was a de minimis amount of unrecognized stock compensation cost with a remaining
recognition period of 0.3 years.

 Cash received and the total
intrinsic value from the exercise of stock options in 2022 was $ 0.2 million and $ 0.1 million, respectively. There were no stock options
exercised in 2024 and 2023. The tax benefit associated with the exercise of these stock options in 2022 was $ 0.4 million. There were no
stock options exercised in 2024 and 2023. The fair value of stock options vested in 2024, 2023 and 2022 totaled $ 0.1 million, $ 0.6 million
and $ 0.7 million, respectively.

 Employee
Restricted Stock Units

 In
2024, 2023 and 2022, the Company granted 1.8 million, 2.4 million and 1.1 million, respectively, of restricted stock units under the
2017 Equity Incentive Plan to certain members of the Company's management team. Of the restricted stock units granted in those
years, 0.4 million, 1.2 million and 0.6 million, respectively, included a market vesting condition. The restricted stock awards granted
in 2024, 2023 and 2022 that did not have a market vesting condition had weighted average grant date fair values of $ 1.00, $ 2.75 and $ 5.53
per share, respectively. The estimated fair value of these awards is recognized on a straight-line basis over the vesting period.

 The
restricted stock awards granted in 2024, 2023 and 2022 that did have a market vesting condition had weighted average grant date fair
values of $ 1.13, $ 1.92 and $ 3.71 per share, respectively. For these awards, the estimated fair value was measured on the grant date and
incorporated the probability of vesting occurring. The estimated fair value is recognized over the derived service period (as determined
by the valuation model), with such recognition occurring regardless of whether the market condition is met. The Company determined the
weighted average grant date fair value of these awards using a Monte Carlo Simulation of a Geometric Brownian Motion stock path model
with the following weighted average assumptions:

 Year Ended December 31,

 2024

 2023

 2022

 Trading price of common stock on measurement date

 $
 1.50

 $
 2.72

 $
 5.33

 Risk free interest rate

 4.46
 %

 4.29
 %

 2.89
 %

 Expected life in years

 3.0

 2.7

 2.9

 97.1
 %

 89.9
 %

 85.1
 %

 Expected dividend yield

 —

 —

 —

 F- 41

 In
March and June 2022, the Company granted 0.5 million and 0.1 million restricted stock units, respectively, under the 2017 Equity Incentive
Plan to the Company's chief executive officer. These restricted stock awards had a grant date fair value of $ 6.32 and $ 4.81 per
share, respectively. In April 2022, with the chief executive officer's consent, the Company rescinded and cancelled 0.4 million
of the restricted stock units granted in March 2022 because of annual limits set forth in the 2017 Equity Incentive Plan. The Company
determined the fair value of the net award of 0.2 million restricted stock units to be $ 1.2 million which is being expensed on a straight-line
basis over the vesting period.

 The
following table summarizes the Company's restricted stock unit activity for the year ended December 31, 2024:

 Grant Date
 Fair Value

 Nonvested restricted stock units as of December 31, 2023

 3,057

 $
 2.97

 Granted

 1,828

 1.03

 Vested

 ( 571
)

 3.57

 Forfeited

 ( 506
)

 3.31

 Nonvested restricted stock units as of December 31, 2024

 3,808

 1.91

 The
Company recorded restricted stock unit expense of $ 2.8 million, $ 3.7 million and $ 2.1 million during the years ended December 31, 2024,
2023 and 2022, respectively.

 For
restricted stock units outstanding as of December 31, 2024, there was $ 3.3 million of total unrecognized stock compensation cost with
a remaining recognition period of 1.6 years.

 Aggregate
Non-Cash Stock Compensation

 The
Company has accounted for all stock-based compensation under the provisions of ASC 718 Compensation—Stock Compensation. This standard
requires the Company to record a non-cash expense associated with the fair value of stock-based compensation over the requisite service
period. The table below summarizes the aggregate non-cash stock compensation recognized in the statement of operations for stock awards,
employee stock options and employee restricted stock units (in thousands).

 2024

 2023

 2022

 Cost of revenues

 $

 $

 $

 Marketing and sales

 General and administrative

 1,621

 3,730

 2,033

 Research and development

 Total non-cash stock compensation

 $
 2,815

 $
 4,875

 $
 3,366

 20.
Employee Retirement Plan

 In
2018, the Company established a 401(k) plan that qualifies as a deferred compensation arrangement under Section 401 of the IRS Code.
All eligible employees over the age of 18 and with 4 months' service are eligible to participate in the plan. The plan provides
for the Company to match employee contributions up to 5 % of eligible earnings. Company contributions immediately vest. The
Company matching contribution expense was $ 3.9 million, $ 3.8 million and $ 3.6 million for the years ended December 31, 2024,
2023 and 2022, respectively.

 F- 42

 21.
Segment Information and Concentrations

 The Company designs and manufactures
a variety of innovative, branded and premium comfort products, including mattresses, pillows, cushions, bases, sheets, and other products.
The Company has one reportable segment that operates an omni-channel distribution strategy which
allows the Company to offer a seamless shopping experience to its customers across multiple sales channels. The Company's
 one segment markets and sells products through its direct-to-consumer e-commerce channels, retail brick-and-mortar wholesale partners,
Purple showrooms, and third-party online retailers.

 The accounting policies for
the Company's one segment are the same as those described in Note 2, Summary of Significant Accounting Policies. The CODM
assesses performance for the segment and decides how to allocate resources based on consolidated net income or loss as reported in the
consolidated statement of operations. The measure of segment assets is reported on the consolidated balance sheets as total consolidated
assets. The Company does not have intra-entity sales or transfers.

 The CODM uses consolidated net income (loss) to evaluate earnings generated
from segment assets (return on assets) in deciding whether to reinvest profits into its single reportable segment or into other parts
of the entity, such as for acquisitions. Consolidated net income (loss) is also used to monitor budget versus actual results. The monitoring
of budgeted versus actual results are used in assessing the segment's performance and in establishing management's compensation.

 The
following table summarizes segment revenue, significant segment expenses, other segment items and segment profit or loss (in thousands):

 Year Ended December 31,

 2024

 2023

 2022

 Revenues, net

 $
 487,877

 $
 510,541

 $
 573,201

 Reductions (additions):

 Cost of revenues

 291,303

 365,110

 Cost of revenues – restructuring related charges

 15,442

 —

 —

 Advertising expense

 65,198

 72,372

 66,645

 Marketing sales expense

 33,778

 36,741

 39,388

 Wholesale marketing and sales expense

 20,081

 23,016

 21,340

 Showroom marketing and sales expense

 52,206

 50,184

 38,015

 General and administrative expense

 69,117

 84,446

 76,702

 Research and development expense

 12,962

 11,898

 8,755

 Restructuring, impairment and other related charges

 19,973

 —

 —

 Loss on impairment of goodwill

 —

 6,879

 —

 Other segment items, net (d)

 5,852

 7,496

 ( 1,230
)

 Tax receivable agreement income

 —

 —

 ( 161,970
)

 213,169

 Net loss attributable to noncontrolling interest

 ( 201
)

 ( 458
)

 ( 253
)

 Segment net loss

 $
)

 $
)

 $
)

 (d)
 Other segment items, net include interest expense, other (income) expense, net, loss on extinguishment of debt, and change in fair value of warrant liabilities.

 The Company classifies products
into two major categories: sleep products and other. Sleep products include mattresses, platforms, adjustable bases, mattress protectors,
pillows and sheets. Other products include cushions and various other products. In 2024, 2023 and 2022, sales of other products accounted
for less than 3 % of net revenues.

 The Company defines international
revenues as sales to customers located outside of the United States. In 2024, 2023 and 2022, international customers accounted for less
than 2 % of net revenues.

 The
Company had one individual customer that accounted for approximately 29 % and 23 % of accounts receivable at December 31, 2024 and 2023,
respectively, and approximately 13 %, 10 % and 15 % of net revenue during the years ended December 31, 2024, 2023 and 2022, respectively.

 F- 43

 The
Company currently obtains materials and components used in production from outside sources. As a result, the Company is dependent upon
suppliers that in some instances, are the sole source of supply. The Company is continuing efforts to dual-source key components. The
failure of one or more of the Company's suppliers to provide materials or components on a timely basis could significantly impact
the results of operations. The Company believes that it can obtain these raw materials and components from other sources of supply in
the ordinary course of business, although an unexpected loss of supply over a short period of time may not allow for the replacement
of these sources in the ordinary course of business.

 The
Company maintains its cash balances in financial institutions based in the United States that are insured by the Federal Deposit Insurance
Corporation (FDIC) up to $ 250,000 for each financial institution per entity. At times, the Company's cash balance deposited at
financial institutions exceed the federally insured deposit limits. The Company has not experienced any losses in such accounts and believes
it is not exposed to any significant credit risk related to these deposits.

 22.
Income Taxes

 The Company's (loss)
income before income taxes of $( 98.0) million, $( 121.2) million and $ 120.4 million during the years ended December 31, 2024, 2023 and
2022, respectively, consisted entirely of income earned in the United States.

 Income
tax expense for the years ended December 31, 2024, 2023 and 2022 consist of the following (in thousands):

 Year
 ended December 31,

 2024

 2023

 2022

 Current:

 Federal

 $

 ( 114

)

 $

 ( 167

)

 $

 ( 1,030

)

 State

 Total current

 ( 686

)

 Deferred:

 Federal

 —

 ( 42

)

 169,180

 State

 —

 —

 44,675

 Total deferred

 —

 ( 42

)

 213,855

 $

 $

 $

 213,169

 Income
tax expense differs from the amount computed at the federal statutory corporate income tax rate as follows (in thousands):

 Year
 ended December 31,

 2024

 2023

 2022

 Tax (provision) benefit at Federal
 statutory rate

 $

 ( 20,587

)

 $

 ( 25,454

)

 $

 25,293

 State income tax provision (benefit), net of federal
 benefit

 ( 5,238

)

 ( 6,235

)

 Noncontrolling interest

 Tax receivable agreement liability

 —

 —

 ( 34,014

)

 Change in fair value – warrant liabilities

 ( 736

)

 —

 ( 912

)

 Change in valuation allowance

 26,963

 35,592

 189,870

 Remeasurement due to rate change

 ( 586

)

 ( 31

)

 2,530

 Research and development tax credits

 ( 482

)

 ( 1,113

)

 ( 1,763

)

 Remeasurement of investment in Purple LLC

 —

 ( 4,028

)

 29,822

 Nondeductible compensation

 —

 Stock-based compensation

 2,303

 Other

 ( 329

)

 ( 311

)

 $

 $

 $

 213,169

 F- 44

 Deferred
income taxes at December 31, 2024 and 2023 consisted of the following (in thousands):

 2024

 2023

 Basis difference in Purple LLC investment

 $
 153,872

 $
 156,521

 Tax over book basis in capital contributions

 79,400

 78,158

 Start-up costs

 Stock-based compensation

 Interest carryforwards

 6,503

 2,314

 Research and development tax credits

 3,590

 2,712

 Charitable contribution carryforwards

 Net operating losses

 82,137

 62,550

 Total net deferred income tax asset

 326,657

 303,780

 Less: Valuation allowance

 ( 326,657
)

 ( 303,780
)

 Net deferred income tax asset

 $
 —

 $
 —

 The Company's sole material
asset is Purple LLC, which is treated as a partnership for U.S. federal income tax purposes and for purposes of certain state and local
income taxes. Purple LLC's net taxable income and any related tax credits are passed through to its members and included in the
members' tax returns, even though such net taxable income or tax credits may not have actually been distributed. While the Company
consolidates Purple LLC for financial reporting purposes, the Company will be taxed on its share of earnings of Purple LLC not attributed
to the noncontrolling interest holders, which will continue to bear their share of income tax on its allocable earnings of Purple LLC.
The primary factors impacting expected tax are tax exempt income from the tax receivable agreement, remeasurement of the deferred taxes
associated with the investment in Purple LLC, and the impact of recording a valuation allowance.

 During 2022, the Company entered into a three-year cumulative loss
position and determined that it would not be able to generate sufficient taxable income to utilize its deferred tax assets. Based on this
and other negative evidence, the Company concluded it was more likely than not that its deferred tax assets would not be realized and
that a full valuation allowance for its deferred tax assets was required. At both December 31, 2024 and 2023, the Company continued to
maintain a full valuation allowance on its deferred tax assets based on its three-year cumulative loss position.

 In
connection with the Business Combination, the Company entered into a tax receivable agreement with InnoHold, which provides for the payment
by the Company to InnoHold of 80 % of the net cash savings, if any, in U.S. federal, state and local income tax that the Company actually
realizes (or is deemed to realize in certain circumstances) in periods after the Closing as a result of (i) any tax basis increases in
the assets of Purple LLC resulting from the distribution to InnoHold of the cash consideration, (ii) the tax basis increases in the assets
of Purple LLC resulting from the redemption by Purple LLC or the exchange by the Company, as applicable, of Class B Paired Securities
or cash, as applicable, and (iii) imputed interest deemed to be paid by the Company as a result of, and additional tax basis arising
from, payments it makes under the agreement.

 As
noncontrolling interest holders exercise their right to exchange or cause Purple LLC to redeem all or a portion of their Class B Units,
a liability may be recorded based on 80 % of the estimated future cash tax savings that the Company may realize as a result of increases
in the basis of the assets of Purple LLC attributed to the Company as a result of such exchange or redemption. The amount of the increase
in asset basis, the related estimated cash tax savings and the attendant liability to be recorded will depend on the price of the Company's
Class A common stock at the time of the relevant redemption or exchange.

 During 2022, the Company concluded that the tax receivable agreement
liability was not probable and correspondingly reduced its tax receivable agreement liability to zero. As a result, the Company recognized
tax receivable agreement income of $ 162.0 million in the Company's consolidated statement of operations for the year ended December
31, 2022. There was no tax receivable agreement liability recorded during 2024 or 2023.

 F- 45

 As of December 31, 2024, the
Company estimates it will have approximately $ 65.2 million of tax-affected U.S. net operating loss carryforwards ("NOLs"),
of which $ 64.7 million do not have an expiration date and $ 0.5 million expire in 2037. The Company also had approximately $ 16.9 million
of tax-affected NOL carryforwards to reduce future state taxable income at December 31, 2024, which have various carryforward periods
and begin to expire in 2026, if unused. 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 and other pre-change tax attributes to offset its post-change income may be limited. Generally, an ownership
change is defined as a change in its equity ownership by certain stockholders over a three-year period of greater than 50 percentage points
(by value). If finalized, Treasury Regulations currently proposed under Section 382 of the Code may further limit our ability to utilize
our pre-change NOLs or other tax attributes if we undergo a future ownership change. 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. 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. We may also experience ownership changes in the
future as a result of subsequent shifts in our stock ownership. As a result, if we generate taxable income, our ability to use our pre-change
NOL and tax credits carryforwards to reduce U.S. federal and state taxable income may be subject to further limitations, which could result
in increased future tax liabilities to us. Moreover, our federal NOLs from years prior to 2018 can be carried forward for a maximum of
20 years from the year in which the NOL was incurred, and our state NOLs are subject to carryforward limitations that vary from state
to state; as a result, all or a portion of those carryforwards could expire before being available to reduce future income tax liabilities.
Refer to Note 17 – Stockholders' Equity – NOL Rights Plan for information on plan adopted by the Board to preserve
Current NOLs.

 The
Company estimates federal research and development ("R&D") tax credit carryforwards will be approximately $ 2.6 million
as of December 31, 2024, which begin to expire in 2042, if unused. The Company also had approximately $ 1.8 million of state tax credit
carryforwards to reduce future state tax liability at December 31, 2024, which have various carryforward periods and begin to expire
in 2030, if unused.

 The effects of uncertain tax
positions are recognized in the consolidated financial statements if these positions meet a "more-likely-than-not" threshold.
For those uncertain tax positions that are recognized in the consolidated financial statements, liabilities are established to reflect
the portion of those positions it cannot conclude "more-likely-than-not" to be realized upon ultimate settlement. The Company's
policy is to recognize interest and penalties related to unrecognized tax benefits on the income tax expense line in the accompanying
consolidated statement of operations. Accrued interest and penalties would be included on the related tax liability line in the consolidated
balance sheets.

 The following table summarizes the Company's unrecognized tax
benefits for the years ended December 31, 2024, 2023 and 2022 (in thousands):

 Unrecognized Tax
 Benefits

 Unrecognized tax benefits as of December 31, 2021

 $
 —

 Increase due to current year tax positions

 Increase due to prior year tax positions

 Increase due to acquisition

 Unrecognized tax benefits as of December 31, 2022

 Increase due to current year tax positions

 Increase due to prior year tax positions

 Decrease due to lapse of statute of limitations

 ( 153
)

 Unrecognized tax benefits as of December 31, 2023

 Increase due to current year tax positions

 Increase due to prior year tax positions

 Decrease due to lapse of statute of limitations

 ( 114
)

 Unrecognized tax benefits as of December 31, 2024

 $
 1,052

 The
Company remains subject to income tax examinations for its U.S. federal income taxes for 2018 through 2024. The Company also
remains subject to income tax examinations for U.S. state and local income taxes generally for 2018 through 2024.

 F- 46

 23.
Subsequent Events

 New Lease Agreement

 In January 2025, the Company
entered into a new lease agreement for a distribution and fulfilment center located in West Valley City, Utah. The lease term
commenced in January 2025 and will expire in May 2030. Using the applicable discount rate, the new lease resulted in an ROU asset
of $ 6.3 million and an increase to operating lease liabilities of $ 6.8 million. The landlord provided the Company with a tenant improvement
allowance of $ 0.6 million in connection with the new lease agreement, for which the related expenditures to be paid by the Company
will be reimbursed by the landlord.

 NASDAQ Listing Qualification
Notice

 On February 4, 2025, the Company
received written notice from the Listing Qualifications Department of The NASDAQ Stock Market LLC ("Nasdaq") that it had regained
compliance with Listing Rule 5550(a)(2) ("Bid Price Rule") since the closing bid price of the Company's common stock
was at or above the $ 1.00 minimum price per share for a period of ten consecutive business days, from January 21, 2025, to February 3,
2025.

 As previously reported, the
Company was notified on November 11, 2024, that it had fallen out of compliance with the Bid Price Rule, because its common stock failed
to maintain the required minimum bid price of $ 1.00 per share for a period of 30 consecutive business days.

 Class Action Lawsuits

 On February 10, 2025, a
shareholder of the Company filed a class action lawsuit in the Court of Chancery of the State of Delaware against
Purple Inc. and the individual members of the Board alleging that Section 29 of the NOL Rights Plan violates Delaware General Corporate
Law Sections 102(b)(7) and 141(a). The suit seeks declaratory relief, attorneys' fees, costs, and other relief on behalf of the
class. The Company denies all allegations and intends to vigorously defend against these claims.

 On February 26, 2025, a consumer
filed a class action lawsuit in the U.S. District Court, Eastern District of New York, against Purple LLC alleging website accessibility
violations under the ADA and state law. The lawsuit seeks declaratory relief, class certification, attorneys' fees, costs, and other
relief on behalf of the class. The Company denies all allegations and intends to vigorously defend against these claims.

 Amendment to Amended and Restated Credit Agreement

 On March 12, 2025, the Loan
Parties entered into an Amendment to Amended and Restated Credit Agreement (the "Amendment") with the 2025 Term Loan Lenders
(as defined in the Amendment), which amends the Amended and Restated Credit Agreement. The Amendment, among other things, provides for
an increase in the initial principal amount of the senior secured term loan facility by $ 19.0 million (the "Incremental Loan")
from an aggregate principal amount of up to $ 61.0 million (the "Initial Loan") to an initial aggregate principal amount of
up to $ 80.0 million (the "Loan"), and allows the Loan Parties to request one or more additional term loans from the Lenders
in an initial aggregate principal amount not to exceed $ 20.0 million on terms to be agreed to by the parties and subject to the approval
of the Required Lenders (as defined in the Amended and Restated Credit Agreement). The Incremental Loan will bear interest at the same
rate as the Initial Loan, which may be paid in cash or in kind at the Company's option.

 F- 47

 The Amendment also provides
that (i) the Incremental Loan shall be senior in right of repayment to the Initial Term Loan and (ii) in any voluntary or mandatory prepayment
in part or in full of the Incremental Loan for any reason, the Company will be required to pay an amount equal to the greater of (i) the
Make-Whole Premium (as defined below) and (ii) 2.50 % of the aggregate principal amount of the Incremental Loan so prepaid, replaced or
assigned. The "Make-Whole Premium" is determined as follows: on the date of prepayment, the excess of (A) (x) 100 % of the
principal amount of such Incremental Loan, plus (y) the present value at such date of all remaining scheduled interest payments due on
such Incremental Loan from the prepayment date through the Maturity Date, assuming that all such interest accrues at the Make-Whole Premium
Rate (as defined in the Amendment), computed using a discount rate equal to the Treasury Rate as of such prepayment date plus 50 basis
points, over (B) the principal amount of such Incremental Loan on such prepayment date.

 In addition, the Company also
paid fees of (i) 2 % of the outstanding principal and accrued and unpaid interest under the Initial Loan held by the 2025 Term Loan Lenders,
paid in kind and (ii) 2 % of the initial aggregate principal amount of the Incremental Loan paid to the 2025 Term Loan Lenders, deducted
from the proceeds at closing.

 In connection with the Amendment,
the Company issued to the 2025 Term Loan Lenders warrants (the "Warrants") to purchase 6,229,508 shares of the Company's
Class A Stock at a price of $ 1.50 per share, subject to certain adjustments. The warrants include full-ratchet anti-dilution protections,
subject to a floor of $ 0.6979 with respect to adjustments to the exercise price. The Warrants expire on March 12, 2035. The foregoing
summary of the Warrants does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Warrants,
a form of which is attached as Exhibit 10.42 to this report and is incorporated by reference herein.

 In connection with the issuance
of the Warrants, on March 12, 2025, the Company entered into a Second Amended and Restated Registration Rights Agreement (the "Registration
Rights Agreement") with CCP, Blackwell, and Coliseum Capital Co-Invest III, L.P., (the "Holders"), providing for the
registration under the Securities Act of 1933, as amended (the "Securities Act") of the Warrants, the shares issuable upon
the exercise of the Warrants, other warrants held by the Holders (and shares issuable upon exercise thereof) and the Class A Stock held
by the Holders as of such date (the "Registrable Securities"), subject to customary terms and conditions. The Registration
Rights Agreement entitles the Holders to demand registration of the Registrable Securities and also to piggyback on the registration of
Company securities by the Company and other Company securityholders. 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.

 The Registration Rights Agreement
provides that on or prior to April 10, 2025, or May 25, 2025 if Form S-3 is not then available to the Company, the Company will be required
to prepare and file with the SEC pursuant to Rule 415 of the Securities Act a registration statement to register the resale of the Registrable
Securities.

 F- 48

 Special Incentive Bonus
Equity Grants

 On
March 12, 2025, the Board unanimously approved special incentive bonus equity grants to certain members of the Company's senior
leadership team, including, among others, Todd Vogensen, Chief Financial Officer, John J. Roddy, Chief Human Resources Officer, and Eric
S. Haynor, Chief Operating Officer. Mr. Vogensen, Mr. Roddy, and Mr. Haynor will receive grants of 450,000, 175,000, and 350,000 restricted
stock units, respectively, pursuant to the terms of restricted stock unit grant agreements and the Company's 2017 Equity Incentive
Plan. Such restricted stock units will vest at the sooner of (a) a change in control, as defined in the award agreements, or (b) March
12, 2028, provided that if the recipient's employment with the Company is involuntarily terminated other than for cause, a pro
rata number of restricted stock units will vest as of such termination date.

 Amendment to Senior
Leadership Team Special Recognition Bonus

 On
January 26, 2024, the Board unanimously approved a special recognition bonus payment to certain members of the Company's senior
leadership team, including, among others, Todd Vogensen, Chief Financial Officer, John J. Roddy, Chief People Officer, and Eric S. Haynor,
Chief Operating Officer. Each participant is eligible to earn a special recognition bonus payment equal to 15 months of their regular
salary. The special recognition bonus payment is payable, subject to the employee's continued employment with the Company, 10 % on
August 1, 2024, 20 % on February 1, 2025, and 70 % on August 1, 2025.

 On
March 12, 2025, the Board amended the special recognition bonus payments and entered into letter agreements (the "Letter Agreements")
with the participants to provide that if a change in control occurs prior to August 1, 2025 and the participant remains employed with
the Company until the consummation of the change in control, then 100 % of the remaining special recognition bonus payment for such participant
shall vest and become payable upon the consummation of such change in control.

 Amendment to Chief
Executive Officer Special Recognition Bonus

 On
January 26, 2024, the Board unanimously approved an amendment to the amended and restated employment agreement of Robert T. DeMartini,
the Company's Chief Executive Officer (the "2024 CEO Amendment"). Under the 2024 CEO Amendment, the Company agreed that,
among other things, Mr. DeMartini will be eligible to earn an incremental aggregate cash bonus equal to $ 850,000 that will vest 10 % on
August 1, 2024, 20 % on February 1, 2025, and 70 % on August 1, 2025, provided he continues to be employed by the Company and subject to
Mr. DeMartini's obligation to repay any such bonus actually received in the event his employment is terminated other than by the
Company without cause prior to June 30, 2026, subject to certain conditions.

 On
March 12, 2025, the Board adopted an amendment (the "2025 CEO Amendment") to Mr. DeMartini's amended and restated employment
agreement, as amended by the 2024 CEO Amendment (the "Amended and Restated Employment Agreement"), to provide that if a change
in control occurs prior to August 1, 2025 and Mr. DeMartini remains employed by the Company until the consummation of the change in control,
then 100 % of the unpaid cash bonus payment for Mr. DeMartini shall vest and become payable upon the consummation of such change in control
and the bonus repayment condition tied to his employment with the Company until June 30, 2026 shall no longer be applicable. Other than
the changes provided by the 2025 CEO Amendment, no other changes were made to Mr. DeMartini's Amended and Restated Employment Agreement.

 F- 49

 Signatures

 Pursuant
to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

 Purple Innovation, Inc.

 March 13, 2025

 By:

 /s/

 Name:

 Title:

 Chief Executive Officer

 (Principal Executive Officer)

 POWER
OF ATTORNEY

 KNOW ALL PERSONS BY THESE
PRESENTS, that each person whose signature appears below constitutes and appoints Robert T. DeMartini and Tricia S. McDermott-Spikes,
jointly and severally, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution,
for him or her, and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report
on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and
thing requisite or necessary to be done in and about the premises hereby ratifying and confirming all that said attorneys-in-fact and
agents, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

 Pursuant
to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

 Name

 Position

 Date

 /s/

 Chief Executive Officer
 and Director

 March

 (Principal Executive Officer)

 /s/
 Todd E. Vogensen

 Chief Financial Officer

 March

 Todd E. Vogensen

 (Principal Financial Officer)

 /s/
 George T. Ulrich

 Vice President, Accounting
 and Financial Reporting

 March

 George T. Ulrich

 (Principal Accounting Officer)

 /s/
 Adam L. Gray

 Chairman of the Board of
 Directors

 March

 Adam L. Gray

 /s/
 S. Hoby Darling

 March

 S. Hoby Darling

 /s/
 Gary T. DiCamillo

 March

 Gary T. DiCamillo

 /s/
 Claudia Hollingsworth

 March

 Claudia Hollingsworth

 /s/
 R. Carter Pate

 March

 R. Carter Pate

 /s/
 D. Scott Peterson

 March

 D. Scott Peterson

 /s/
 Erika Serow

 March

 Erika Serow

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