{"url_path":"/sec/aent/10-q/2026/item-1a","section_key":"item-1a","section_title":"Item 1A Risk Factors**","topic":"sec","document":{"doc_type":"10-Q","doc_date":"2026-05-14","source_url":"https://www.sec.gov/Archives/edgar/data/1823584/0001493152-26-023051-index.html","accession_number":"0001493152-26-023051","cik":"0001823584","ticker":"AENT","issuer_name":"ALLIANCE ENTERTAINMENT HOLDING CORP","edgar_url":"https://www.sec.gov/Archives/edgar/data/1823584/0001493152-26-023051-index.html","primary_entity_key":"0001823584","primary_entity_name":"ALLIANCE ENTERTAINMENT HOLDING CORP"},"word_count":486,"has_tables":true,"body_markdown":"**Item\n1A. Risk Factors**\n\n \n\nIn\naddition to the risks described below, factors that could cause our actual results to differ materially from those in this Quarterly\nReport are any of the risks described in our Annual Report on Form 10-K for the year ending June 30, 2025, filed with the SEC on September\n10, 2025. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition.\nAdditional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations.\n\n \n\n**Risks\nRelated to the Acquisition and Integration of Endstate**\n\n \n\nOn\nDecember 31, 2025, we completed the acquisition of Endstate Authentic LLC (“Endstate”). The acquisition introduces operational,\nfinancial, and strategic risks that could adversely affect our business if we are unable to successfully integrate or operate the acquired\nbusiness. Endstate operates a digital authentication and loyalty-driven consumer brand that differs from our traditional wholesale and\ndistribution operations. Successfully integrating Endstate requires, among other things, aligning technology platforms, operational processes,\npersonnel, and corporate culture. We may experience challenges integrating Endstate’s systems and technology, retaining key employees,\nmaintaining relationships with customers and partners, or achieving anticipated growth and synergies. If the integration of Endstate\nis delayed or unsuccessful, or if Endstate’s business does not perform as expected, our results of operations, cash flows, and\nfinancial condition could be materially adversely affected.\n\n \n\n**The\nEndstate acquisition includes contingent consideration and other payment obligations that may adversely affect our liquidity and results\nof operations.**\n\n \n\nAs\npart of the Endstate acquisition, we assumed obligations that include contingent consideration arrangements, deferred consideration,\nand acquired royalty obligations. The contingent consideration is based on Endstate’s future financial performance and is subject\nto remeasurement at fair value each reporting period, with changes recognized in earnings. At March 31, 2026, we have accrued $5,500,000\nunder earnout. Actual amounts payable under these arrangements could exceed the currently estimated amounts and may require significant\ncash resources. In addition, changes in the estimated fair value of contingent consideration could negatively impact earnings and result\nin earnings volatility in future periods. These obligations could adversely affect our liquidity, financial flexibility, and results\nof operations.\n\n \n\n**Our\ngoodwill and intangible assets recorded in connection with the Endstate acquisition may become impaired.**\n\n \n\nIn\nconnection with the Endstate acquisition, we recorded additional goodwill and finite-lived intangible assets, including technology, trademarks,\nand customer relationships. The purchase price allocation for the acquisition is preliminary and subject to adjustment as valuation analyses\nare finalized. Goodwill and intangible assets are subject to impairment testing, which requires significant judgment and estimates regarding\nfuture cash flows, growth rates, and market conditions. If Endstate’s operating performance, consumer adoption, or market conditions\ndo not meet our expectations, we may be required to record impairment charges in future periods. Any such impairment could be material\nand would adversely affect our results of operations and financial condition."}