NASDAQ: AENT

To
support its recent strategic expansion into collectibles and fan-focused categories, Alliance recently launched three new divisions:

■
Alliance
Home Entertainment, the exclusive distributor of Paramount Pictures’ physical media content as of January 1, 2025, and of Amazon
MGM Studios’ physical media content as of January 1, 2026, offering full-service support across production, marketing, and retail
execution.

■

Handmade
by Robots, In December 2024, the Company acquired Handmade by Robots (“HMBR”),
a designer of licensed vinyl collectible figures, for approximately $7.55 million in a transaction
accounted for as a business combination under ASC 805. See Note 16 – Business Combinations and Asset Purchase.

■
Alliance
Authentic, a new division focused on licensed collectibles and branded merchandise, including partnerships with Handmade by Robots,
Master Replicas, and Wētā Workshop.

Alliance’s
competitive advantage is driven by its commitment to three pillars, Service, Selection, and Technology, which enable the Company to serve
as a trusted partner across the entertainment and collectibles landscape.

Founded
in 1990 (formerly CD Listening Bar, Inc.), Alliance has grown through organic expansion and sixteen accretive acquisitions, including
Phantom Sound and Vision, MSI Music, Infinity Resources, ANconnect, Mecca Electronics, Distribution Solutions, Mill Creek, COKeM, Think3Fold,
and Super D (Alliance Entertainment). This growth is supported by the Company’s scalable operating platform and experienced management
team.

On
December 31, 2025, the Company completed the acquisition of Endstate Authentic LLC (“Endstate”), a digital authentication and
loyalty-driven consumer brand. The transaction was accounted for as a business combination under ASC 805. Accordingly, the assets acquired
and liabilities assumed have been recorded at their estimated fair values as of the acquisition date. Results of operations for Endstate
are included in the Company’s consolidated financial statements beginning on the acquisition date. Additional information related to
this acquisition is provided in Note 22 – Business Combinations..

On
February 10, 2023, Alliance completed its business combination with Adara Acquisition Corp., which was accounted for as a reverse
recapitalization with Alliance treated as the accounting acquirer (the “Merger”). The Company continues to recognize
certain warrant and equity-related impacts from this transaction, including the outstanding contingent Class E shares and
warrant liabilities, as discussed further in Notes 15 and 20.

1

Alliance’s
Business

With
more than thirty five years of distribution experience, Alliance serves customers of every size, providing a suite of services to
resellers and retailers worldwide. We believe that our efficient processing and essential seller tools noticeably reduce the costs
associated with administrating multiple vendor relationships and streamline the overall purchasing experience. Alliance believes
that it is a single source for all customer entertainment product needs. As a solutions-based operation, Alliance seeks to drive
sales for their suppliers with broad product selection and cost-efficient processing.

Alliance’s
distribution business is built around three areas, where our marketplace value is created: Service, Selection and Technology.

Service

Alliance
provides efficient, Omni-Channel expansion solutions for retailers, including:

●
E-Commerce
and Direct to Consumer (DTC)

Alliance
provides leading product and e-commerce distribution and inventory solutions. Alliance provides a full, enterprise-level infrastructure
and whitelists dropships orders directly to consumers on behalf of its omni customers. The entire ordering, confirmation and invoicing
process is automated. The functionality allows customers to focus on sales while Alliance performs all stocking, warehousing, and shipping
functions.

●
Vendor
Managed Inventory

Alliance
is a leader in vendor managed inventory (VMI) solutions providing solutions tailored to customers to support their inventory needs. These
value-add services provide a highly technical, critical business function for our partners using traiting of locations and min/max system
of supply.

●
Subsidiary
Brands — We operate under the following subsidiaries which focus on the following product brand areas:

Alliance:
Alliance was a competitor to CD Listening Bar prior to its 2013 combination with CD Listening Bar, through which the two businesses were
merged. Alliance primarily serviced Barnes & Noble, Best Buy, and hundreds of independent retailers.

COKeM:
Alliance acquired COKeM International Ltd. in September 2020. COKeM is a video game and accessory distributor, providing full-service
distribution and fulfillment across a wide array of industries and product categories. Alliance acquired Mecca Electronics in 2018,
and in 2021 Mecca Electronics was merged into COKeM. In 2024 COKeM has merged in Alliance.

AMPED
Distribution: a division of Alliance which serves as the exclusive supplier of physical media to retailers in the United States for
over 100 small music labels.

Distribution
Solutions: an aggregator and distributor of independent film labels in North America. Alliance acquired Distribution Solutions in
2018. Over 50 movie studios are exclusively distributed to over 30,000 retail stores through Distribution Solutions. In 2025 Distribution
Solutions has merged into Alliance Home Entertainment.

DirectToU:
consists of Alliance’s owned retail brands operating under the dbas of ImportCDs, Deep Discount, Collectors Choice Music, Collectors
Choice, Vinyl, Blow It Out of Here, Wow, Pop Market, Collectors Choice Video, and Movies Unlimited. Most of these brands were purchased
from Infinity Resources in 2010.

Mill
Creek Entertainment: an independent studio for Blu-ray, DVD, and digital distribution. With direct sales pipelines to primary retail
and online partners, Mill Creek licenses, produces, markets, and distributes film and television content to over 30,000 retail stores
and to thousands of websites across North America. Its library includes theatrical feature films, classic and contemporary television
series, original documentary productions, and pop-culture catalog titles. In 2025 Mill Creek has merged into Alliance Home Entertainment.

2

NCircle
Entertainment: founded in 2006, NCircle is an independent distributor of children’s and family entertainment content, with a focus
on programming that supports early learning. NCircle’s library includes children’s brands such as Gigantosaurus, The Cat in the Hat Knows
a Lot About That!, Llama Llama, The Octonauts, Sonic Boom, and The Snowman. In 2025 Ncircle Entertainment has merged into Alliance Home
Entertainment.

Alliance
Home Entertainment: launched in January 2025, Alliance Home Entertainment is Alliance’s dedicated home entertainment distribution
division, and was established in connection with a multi-year agreement under which Alliance serves as the exclusive distributor of Paramount
Pictures’ physical media, including DVDs, Blu-rays, and 4K UHD titles, across the United States and Canada. In January 2026, the Company
entered into an exclusive agreement with Amazon MGM Studios for physical media distribution in the United States and Canada, which is
also managed through this division. The division provides full-service support across production, marketing, and retail execution.

Alliance
Authentic: Alliance Authentic is the Company’s internally developed brand and platform for authenticated, certified collectibles,
including certified vinyl, and a marketplace for buying, selling, and trading investment-grade physical media. The platform is built
on the near-field communication (NFC)-enabled authentication and digital product identity technology held by Endstate Authentic LLC.

Handmade
by Robots: Acquired in December 2024, Handmade by Robots produces licensed vinyl collectible figures styled to resemble knitted or
crocheted plush toys, featuring characters from licensed entertainment franchises. The acquisition included inventory, tooling equipment,
and a trademark associated with the product line. See Note 16 – Business Combinations

Endstate
Authentic: a wholly owned subsidiary acquired on December 31, 2025 and focused on authentication and resale technology.
Endstate’s patented NFC-enabled authentication and digital product identity technology enables real-time product verification,
counterfeit prevention, and authenticated resale services, and supports the Company’s internally developed Alliance
Authentic brand. See Note 22- Business Combinations

Selection:

Product
Categories : Alliance consolidates and distributes a portfolio of entertainment products with over 340,000 SKUs in stock in
core media and entertainment product areas in five primary categories:

●
Gaming
Products: For the fiscal year ended June 30, 2026, gaming represented approximately 16% of Alliance revenues on a consolidated basis.
Leading products distributed are Nintendo, Microsoft, and third-party video game publishers. For the year ended June 30, 2025, gaming
represented approximately 24% of Alliance revenues on a consolidated basis.

●
Vinyl
Records: For the fiscal year ended June 30, 2026, vinyl represented approximately 33% of all Company revenues on a consolidated basis.
For the year ended June 30, 2025, vinyl represented approximately 32% of Alliance revenues on a consolidated basis.

●
Digital
Video Discs (DVD)/Blu-Ray/UltraHD: Sales for the fiscal year ended June 30, 2026, represented approximately 30% of Alliance’s
consolidated revenue. For the year ended June 30, 2025, DVD, Blu-Ray and UltraHD represented approximately 26% of Alliance revenues
on a consolidated basis.

●
Compact
Discs: CDs for the fiscal year ended June 30, 2026, represent approximately 14% of Alliance’s consolidated revenue. For the
year ended June 30, 2025, CDs represented approximately 12% of Alliance revenues on a consolidated basis.

●
Collectables
and Electronics: Sales in Collectables and Consumer Electronics represented approximately 4% of the Company consolidated revenue
for the fiscal year ended June 30, 2026, and approximately 4% of Alliance revenues on a consolidated basis for the year ended June
30, 2025.

3

Technology:

Alliance
continues to strengthen its competitive position through ongoing investment in two complementary areas of technology: automation of its
distribution and fulfillment operations, and proprietary product-authentication and digital identity capabilities that support the Company’s
expansion into authenticated collectibles.

Warehouse
Automation

Alliance
continues to improve its warehouse operations through targeted investments in automated handling equipment at its Shepherdsville,
Kentucky facility. In December 2022 implementation of an AutoStore Automated Storage & Retrieval System for handling primarily
LP’s, which improved warehouse speed, reliability, capacity, and accuracy. In April 2024, the Company implemented the OPEX
Sure Sort X® system to automate the sortation of non-standard size products, replacing manual sorting processes, reducing labor
costs, accelerating processing times, and lowering the potential for product damage. In 2026, an additional 5,000 totes were added for expansion of AutoStore to 57,000 totes. Together, these automation
initiatives have contributed to operational efficiencies and cost savings.

Product
Authentication and Digital Identity

On
December 31, 2025, Alliance completed its strategic acquisition of Endstate Authentic LLC (“Endstate”), establishing
it as a wholly owned subsidiary focused on authentication and resale technology. Endstate’s patented NFC-enabled authentication
and digital product identity technology enables real-time product verification, counterfeit prevention, and authenticated resale services.
This technology forms the foundation of Alliance Authentic, a premium platform designed to create authenticated, certified vinyl
collectibles and a trusted global marketplace for buying, selling, and trading investment-grade physical media. By embedding secure,
traceable digital identity into high-value physical products, these capabilities strengthen Alliance’s position in the growing
authenticated collectibles market and support the development of new technology-enabled and recurring revenue opportunities. The NFC
chip we use is NXP’s NTAG424, the data on the tag can be encrypted and using AES-128 encryption the tag cannot be cloned or
counterfeited acting as sure-fire authentication for any collectables. The chip generates a new unique code on each scan which can be
verified by a third-party server.

Customer
and Stakeholder Platforms

Alliance’s
technology platforms provide stakeholders with seamless access to the Company’s global inventory through a modern, user-friendly interface
accessible on desktop, notebook, and mobile devices.

Key
features include:

●
Advanced
product search and personalized selection tools

●
Integrated
Hubspot marketing and customer relationship management (CRM) tools supporting multi-channel retailer marketplaces. Hubspot with its
AI tools was installed and working as Februry 2026.

●
Conversational
commerce and Fintech solutions providing diverse payment options

●
Self-service
purchasing and 24/7 customer support

4

These
capabilities enhance transaction efficiency and engagement, supporting revenue growth and profitability relative to legacy distribution
systems. Management believes these platforms enhance stakeholder productivity and competitiveness.

Industry
Background

The
industries in which the Company distributes products are:

●
Packaged
Goods consisting of licensed physical media and entertainment content;

●
Gaming
Consoles and Accessories; and

●
Licensed
Toys and Collectables.

Distributors
of physical media continue to navigate changes in consumer demand, an evolving omni-channel retail environment, and ongoing supplier
consolidation. While many consumers have shifted to digital formats such as streaming music and video services, management believes a
growing market remains for collectible physical media, including vinyl records, specialty SteelBook® DVDs, CD box sets, and pop culture
collectibles. There have been news reports that consumers prefer to own their music, movies, and gaming rather than rent.

This
shift in demand, coupled with structural changes in the retail and supplier landscape, is contributing to the consolidation of distribution
networks. Management believes this presents an opportunity for distributors, such as Alliance, that are positioned to meet the evolving
needs of retailers and suppliers that wish to outsource because physical media is not their core competency.

Although
overall demand for physical media has declined, niche markets serving music and movie enthusiasts have shown growth. This trend is reflected
in the rising popularity of K-pop releases in CD and vinyl formats, special edition SteelBook® DVDs, and 4K UHD Blu-ray titles, particularly
among consumers seeking exclusive content. Nostalgia and collector-driven purchases remain a factor driving customer demand, with buyers
valuing artwork, perceived audio quality, and the intrinsic value of limited-edition formats.

As
major retail chains reduce shelf space for physical media, management believes distributors with direct-to-consumer capabilities and
fulfillment services for retail e-commerce platforms, such as Alliance, are increasingly well-positioned. These capabilities allow retailers
to expand product offerings without the need for incremental warehouse space or inventory carrying costs.

Suppliers
are also adapting to this shift. By partnering with distributors, such as Alliance, that serve both mass and niche channels, suppliers
can reach broader consumer bases through a more efficient distribution model. Exclusive and limited-edition releases allow suppliers
to maintain premium pricing, and collaboration on marketing and promotional campaigns can further support product visibility and sell-through.

The
physical media market remains competitive as companies seek to serve a more targeted customer base. Management believes that long-term
success in this environment requires differentiation through exclusive content, curated product offerings, and enhanced customer service.
The ability to anticipate consumer preferences and quickly deliver relevant entertainment experiences is increasingly important.

Specialized
distributors may have a relative advantage in this regard due to their agility and ability to respond quickly to market trends. In management’s
view, partnerships with artists and content creators to secure exclusive releases offer Alliance an additional competitive edge. Alliance
leverages its broad product portfolio to create bundled, exclusive collectibles that support omni-channel retail strategies and appeal
to collectors and enthusiasts.

Market
Opportunity

The
Company has identified three primary market areas where it currently conducts business and plans to grow its operations:

Content
Media

As
technology and consumer trends evolve, film, music, and gaming studios continue to re-evaluate distribution strategies to address shifting
behaviors and expanding digital and physical platforms. Despite the rise of streaming and digital delivery, consumer demand for physical
media remains resilient, driven by factors such as collectibility, superior audio-visual quality, and the intrinsic value of physical
packaging.

5

In
response to this opportunity, the Company recently launched Alliance Home Entertainment, a dedicated business unit established through
a multi-year distribution agreement with Paramount Home Entertainment. This new division will handle the exclusive distribution of Paramount’s
physical home video products across all major retail channels and direct-to-consumer platforms, including the management of catalog returns
beginning January 31, 2025. The launch of Alliance Home Entertainment positions the Company as a trusted partner for major studios seeking
a more efficient, centralized, and experienced physical media distributor.

Building
on this platform, in January 2026 the Company entered into an exclusive home entertainment license agreement with Amazon MGM Studios
for physical media distribution in the United States and Canada, covering new releases and select catalog content across wholesale, e-commerce,
and brick-and-mortar retail channels. The agreement broadens the Company’s physical media portfolio, particularly in higher-value and
collectible offerings, and leverages its scale, marketing capabilities, and omnichannel fulfillment platform.

Simultaneously,
the Company is capitalizing on demand from collectors and enthusiasts through the expansion of its physical music and video offerings,
most notably vinyl records, SteelBooks™, and special edition box sets. The Company believes that consumers continue to favor tangible
media formats for their superior sound and picture quality, unique artwork, and collectible nature.

To
further extend its reach into consumer lifestyle categories, the Company recently launched Alliance Authentic, a new brand
focused on officially licensed merchandise and collectible products from leading artists, creators, and entertainment brands. This business
complements our core media offerings and addresses growing demand for branded, limited-edition pop culture products that can be marketed
through both B2B and DTC channels.

Fulfillment

The
global e-commerce fulfillment services market continues to experience strong growth driven by increasing online sales penetration, particularly
in North America. Large retailers such as Amazon, Walmart, Target, and Best Buy are increasingly relying on fulfillment partners to
improve speed, flexibility, and service levels while maintaining cost efficiency.

Alliance
is well-positioned to serve this expanding market through its scalable third-party logistics (3PL) and direct-to-consumer
fulfillment solutions. By combining physical inventory depth, technology-driven distribution, and established carrier relationships,
the Company enables retailers, brands, and suppliers to reach their customers more effectively. As retailers and manufacturers focus
on core competencies, the outsourcing of logistics and fulfillment operations is expected to accelerate, further expanding the
addressable market for Alliance’s services.

Our
Competitive Strengths

Alliance
is one of the largest physical media and entertainment and collectibles product distributors in the world and a leader in fulfillment
and e-commerce distribution solutions. Its existing product and service offering has positioned the Company to capitalize on shifts towards
e-commerce and Omni-Channel strategies, especially as retailers and manufacturers greatly increase their reliance on their direct-to-consumer
fulfillment and distribution partners.

We
believe that our key strengths position us to deliver on our strategy to grow profitably, optimize our core physical media and entertainment
and collectibles product distributors’ fulfillment and e-commerce distribution solutions, and expand and continue to invest in
higher-margin advanced technology solutions and high-value services.

The
Company believes the following strengths are key to its ability to grow and maintain its position as a market leader:

●
Proven
Management Team with Significant Ownership Alignment. Senior management has more than 30 years of industry experience and maintains
significant ownership in the Company, aligning management’s interests with those of stockholders.

●
Significant
barriers to entry and market leadership. Alliance is a leader in fulfillment and e-commerce distribution with over 340,000 SKUs
in stock. The company’s market leadership is further protected by a three-pronged moat of services, selection, and technology.
The company’s platforms create efficiencies that benefit its partners in the physical media and entertainment marketplace.
As a result, both suppliers and retail customers rely on the company’s platforms to drive transaction volume.

●
Strategic
Partnerships with Major Content Providers. Through Alliance Home Entertainment, the Company has established strong distribution
relationships with major studios and independent content owners. Most recently, the Company secured exclusive physical media distribution
agreements with Paramount Home Entertainment and Amazon MGM Studios, reinforcing Alliance’s role as a key physical media partner
and unlocking new growth opportunities within the home entertainment segment.

6

●

Expansion
into Premium Collectibles and Licensed Merchandise

Alliance
Authentic, the Company’s newest division, is focused on delivering curated, premium collectible products through exclusive
licensing partnerships and proprietary brands. This leverages Alliance’s core distribution infrastructure and deep relationships
in entertainment to capitalize on the growing demand for pop culture merchandise.

●
Organic
Growth Opportunities. Alliance will seek to grow revenue and expand margins through the expansion of partnerships with vendors
and customers and investment in existing facilities.

●
Proven
track record of building scale through significant acquisitions. Since its inception, Alliance has successfully acquired and
integrated sixteen businesses that have greatly expanded the vendors and customers we are supporting. This M&A activity has built
scale and added capabilities to the Company’s platforms. Further, Alliance has demonstrated an ability to integrate those companies
into its existing platforms to fundamentally improve the acquired businesses. Alliance management believes significant consolidation
opportunities remain to drive future growth by acquiring complementary businesses and competitors.

●
Modern
technology distribution platform and interface. The Company’s technology platform increases transaction efficiency, provides
great mobile accessibility, and incorporates modern marketing and Fintech tools.

Strategy
for Future Growth

Alliance
will continue to capitalize on its services, selection, technology, strategic studio relationships, and scalable distribution infrastructure
to drive profitable growth both organically and through acquisitions. The Company continues to maintain a disciplined approach to capital
allocation while investing in strategic initiatives, expanding higher-margin product categories, and pursuing opportunities that strengthen
its market position.

Our
strategy will include:

●
Execute
Acquisition Strategy. Alliance has a proven track record of successfully acquiring and integrating competitors and complementary
businesses. With additional capital, Alliance will be able to execute its acquisition strategy more effectively.

●
Increase
Market Share. Expanding its existing product and service offerings and executing its acquisition strategy will drive Alliance’s
efforts toward increasing market share. The Company has historically built scale and added capabilities through acquisitions. It
has demonstrated an ability to execute accretive and synergistic acquisitions as well as integrate and fundamentally improve the
acquired businesses. Alliance expects to continue pursuing strategic opportunities that strengthen its platforms, expand the breadth
and depth of its content, and enhance its distribution infrastructure. Alliance will continue to actively monitor and evaluate these
and future opportunities in its acquisition pipeline in both the near and mid-term.

●
Enhance
Direct to Consumer (DTC) Relationships and Capabilities. Alliance’s DTC services are in greater demand as consumer preferences
shift and stress retailers’ e-commerce and DTC capabilities. Enhancing DTC relationships will grow existing revenue lines and
improving capabilities will generate a more attractive overall service offering.

●
Expand
into New Consumer Products. Leveraging existing relationships, Alliance can expand into new consumer product segments, growing
its product offering and providing more to its existing customer base while attracting new customers in the process.

●
Continuing
Technological Advancement. Alliance will further invest in automating facilities and upgrading proprietary software.

Capitalize
on Strategic Studio Partnerships. Building on our exclusive distribution agreements with Paramount Home Entertainment and Amazon
MGM Studios through Alliance Home Entertainment, we intend to develop additional studio partnerships to expand our footprint in the
physical media market.

7

Suppliers

Alliance
distributes and markets over 400,000 products worldwide from more than 600 of the industry’s premier physical media entertainment
products suppliers. The Company maintains approximately 340,000 SKUs of unique items in its inventory.

For
the fiscal year ended June 30, 2026, Alliance’s five largest suppliers accounted for approximately 65% of total product receipt value,
which represents the cost value of inventory received from suppliers, compared to approximately 59% for the fiscal year ended June 30,
2025. One supplier accounted for approximately 23% of Alliance’s total product receipt value in each of the fiscal years ended June 30,
2026 and 2025.

Alliance
has written supply agreements with many of its suppliers. These agreements usually provide for nonexclusive distribution rights and often
include territorial restrictions that limit the countries and, in some cases, certain channels in which it may distribute the products.
Some of Alliance’s agreements with suppliers may contain limitations of liability with respect to our suppliers’ obligations
and warranties. Historically, warranty expenses have not been material.

The
agreements also are generally short-term, subject to annual renewal, and in some cases contain provisions permitting termination by either
party without cause upon relatively short notice. Certain supply agreements either require (at our option) or allow for the repurchase
of inventory upon termination of the agreement. In cases in which suppliers are not obligated to accept inventory returns upon termination,
some suppliers will nevertheless elect to repurchase the inventory while other suppliers will assist with either liquidation or resale
of the inventory.

Customers

Alliance
conducts business with most of the leading retailers of entertainment products and services around the world. Alliance serves a customer
base that is divided into categories including retailers, direct marketers, Internet-based resellers, independent dealers, product category
specialists and other distributors. Management believes that many of its customers are heavily dependent on Alliance as a partner with
the necessary systems, capital, inventory availability, and distribution and facilities in place to provide fulfillment and other services.
Alliance tries to reduce our exposure to the impact of business fluctuations by maintaining a balance in the customer categories we serve.
Alliance has over 4,000 customers shipping to over 35,000 storefronts and distributes to over 2,500 independent music and video retailers.

In
most cases Alliance conducts business with our customers under our general terms and conditions, without minimum purchase requirements.
It also has resale contracts with some of its reseller customers that are terminable at will after a reasonable notice period and have
no minimum purchase requirements. Alliance typically ships products on the same day it receives and accepts customers’ purchase
orders. Unless otherwise requested, substantially all of Alliance’s products are delivered by common freight carriers. Backlog
is usually not material to its business because orders are generally filled shortly after acceptance.

Alliance
has specific agreements in place with certain suppliers and resellers in which it provides supply chain management services such as order
management, technical support, call center services, forward and reverse logistics management, and procurement management services. These
agreements generally may be terminated by either party without cause following reasonable notice. None of the Company’s customer
contracts exceed a one-year term, with most contracts having auto-renewal clauses.

For
the year ended June 30, 2026, Alliance’s top three customers represented approximately 45% of its consolidated revenue. Alliance’s
top customer represented approximately 21% of its consolidated net sales. By comparison, for the fiscal year ended June 30, 2025, the
top three customers generated approximately 40% of consolidated revenue with one customer representing approximately 15%.

Our
Business is Affected by Seasonality

Alliance
experiences some seasonal fluctuation in demand in our business due to changes in consumer behavior and schedules of new releases. In
addition, the Company typically experiences an increase in demand in the October-to-December period, driven primarily by pre-holiday
stocking levels in the retail channel for its North American business.

8

How
We Manage Our Inventory

Alliance
strives to maintain enough product inventories to achieve optimum order fill rates. Alliance’s business, like that of other distributors,
is subject to the risk that our inventory’s value will be adversely impacted by suppliers’ price reductions or by technological
changes affecting the usefulness or desirability of the products comprising the inventory. It is the policy of many suppliers to offer
distributors limited protection from the loss in inventory value due to technological change or a supplier’s price reductions.
When protection is offered, the distributor may be restricted to a designated period of time in which products may be returned for credit
or exchanged for other products or during which price protection credits may be claimed. Alliance continually takes various actions,
including monitoring inventory levels and controlling the timing of purchases, to maximize its protection under supplier programs and
reduce inventory risk. However, no assurance can be given that current protective terms and conditions will continue or that they will
adequately protect Alliance against declines in inventory value, or that they will not be revised in such a manner as to adversely impact
Alliance’s ability to obtain price protection. Alliance is subject to the risk that inventory values may decline, and supplier
agreements may not adequately cover the decline in values. Alliance manages these risks through pricing and continual monitoring of existing
inventory levels relative to customer demand, reflecting its forecasts of future demand and market conditions. On an ongoing basis, Alliance
reduces inventory values for excess and obsolescence to assist in the liquidation of impacted inventories. Music CD’s and Video
Movies are 100% returnable back to Alliance’s suppliers. Products that have exclusive distributions for AMPED and Distribution
Solutions are not owned by Alliance and are treated as consignments for ownership and title.

Inventory
levels may vary from period to period, due, in part, to differences in actual demand from that forecasted when orders were placed, the
addition of new suppliers or new product lines with current suppliers, expansion into new product areas and strategic purchases of inventory.
In addition, payment terms with inventory suppliers may vary from time to time and could result in fewer inventories being financed by
suppliers and a greater amount of inventory being financed by our own capital. Our payment patterns can be influenced by incentives,
such as early pay discounts offered by suppliers.

Sales
and Marketing

Alliance’s
product management and marketing groups help create demand for Alliance’s suppliers’ products and services, enable the launch
of new products, and facilitate customer contact. Our marketing programs are tailored to meet specific supplier and customer needs. These
needs are met through a wide offering of services by our in-house marketing organization, including advertising, market research, online
marketing, retail programs, sales promotions, training, and solutions marketing. In addition, Alliance creates and utilizes specialized
channel marketing communities to deliver focused resources and business building support to solution providers.

For
its Direct-to-Consumer division, the Company deploys performance marketing strategies through digital and offline channels to drive additional
traffic and transactions from high-intent prospective customers. To increase the efficiency of its performance marketing initiatives,
the Company utilizes a Customer Relationship management platform, which provides further opportunities to personalize marketing campaigns
and target advertising to specific market segments. Alliance complements its brand and performance marketing with nurture initiatives
through email and outbound communications to ensure the Company retains high-value customers, increases brand loyalty, and drives recurring
transactions.

The
Company’s marketing strategy includes brand performance, and viral marketing. Brand marketing, which may also include the Company’s
presence on social media platforms, increases awareness among potential customers, helping them understand the benefits of using Alliance’s
platforms. In addition to brand, and performance marketing, Alliance engages in traditional public relations and communications activities,
such as trade show participation, to strengthen its brand and enable it to be less reliant on performance marketing, reducing the Company’s
customer acquisition costs. The Company’s communications team works across press and policy channels to share timely and important
news about the Company. They also oversee the execution of a consumer, product, corporate, and policy communications plan that supports
Alliance’s brand strategy.

9

Competition

Alliance
faces competition from a variety of competitors, including some of our own suppliers that sell directly to certain segments of the market,
wholesale distributors, retailers, and internet-based businesses. We are a leading company in the sale and marketing of physical media
entertainment and collectible products, including vinyl, gaming, DVDs, CD’s and consumer products and toys offerings and authenticated
collectibles, and operate in the competitive e-commerce business environment. We compete with several smaller physical media companies
in our product categories, as well as with many larger e-commerce companies in the United States and internationally. In addition, we
compete with entertainment companies that digitally download and stream their products and other established authentication businesses.
Competition is based primarily on meeting consumer product preferences and on the quality and play value of our physical media products
and experiences. To a lesser extent, competition is also based on product pricing.

Many
of the major entertainment and gaming companies are part of large, diversified companies with a variety of other operations. Some of
these competitors have substantially greater marketing and financial resources than we do and may be able to compete aggressively on
pricing in order to increase entertainment revenues and streaming placement. In addition, the resources of the major entertainment producers
may give them an advantage in acquiring other businesses or assets, including media content, that we might also be interested in acquiring.
The competition we face may cause us to lose market share, achieve lower prices for our products or pay more for third party content,
any of which could harm our business.

The
changing trends in consumer preferences with respect to entertainment and collectibles and barriers to entry as well as the emergence
of new technologies and different mediums for viewing content, such as the growing number of streaming platform options, continually
creates new opportunities for existing competitors and start-ups to develop products and offerings that compete with our entertainment
and e-commerce offerings. In the future, the Company may face increased competition through the emergence of new competitors or business
models. Some of Alliance’s competitors may have access to significant financial resources, greater name recognition and well-established
client bases in their target customer segments, differentiated business models, technology and other capabilities, or a differentiated
geographic coverage, which may make it more difficult for Alliance to attract new customers.

The
market for physical media is becoming increasingly competitive as companies compete for a shrinking customer base. Distributors must
differentiate themselves by offering unique products, exclusive content, and superior customer service. The ability to quickly adapt
to market trends and consumer preferences is crucial. Specialized distributors often have an advantage in this regard, as they can be
more agile and responsive compared to larger more diverse distributors. Additionally, partnerships with artists and content creators
to secure exclusive releases can provide a unique competitive edge. As the market evolves, distributors that can innovate and meet the
demands of niche audiences will likely thrive.

Intellectual
Property

Alliance’s
intellectual property is an important component of its business. The Company relies on a combination of patents and patent applications,
domain names, trademarks, copyrights, know-how and trade secrets, as well as contractual provisions and restrictions, to protect its
intellectual property.

In
connection with its acquisition of Endstate, the Company acquired a portfolio of patents and patent applications relating to NFC chip-enabled
authentication of physical goods and the linking of physical assets to corresponding digital assets. As of June 30, 2026, the Company
held two issued United States patents, which expire in 2042, and 16 pending patent applications in the United States and in foreign and
international jurisdictions. The Company also owns registered United States trademarks, including its ENDSTATE marks, a registered copyright,
and various domain names, and maintains unregistered marks used in its authentication business.

The
Company intends to continue prosecuting its pending applications and to pursue additional patent protection to the extent it believes
it would be beneficial and cost effective. The Company cannot provide assurance that any pending application will result in an issued
patent, or that any issued patent will provide meaningful protection against competitors.

As of June 30, 2026, the
Company owned 22 U.S. registered or pending trademarks and one registered or pending trademark in another jurisdiction. Alliance also
owns 128 domain names including www.deepdiscount.com, www.aent.com, www.cokem.com, www.importcds.com, www.ds.aent.com, and www.AMPEDdistribution.com.

The
Company relies on trade secrets and confidential information to develop and maintain its competitive advantage. Alliance seeks to protect
its trade secrets and confidential information through a variety of methods, including confidentiality agreements with employees, third
parties, and others who may have access to the Company’s proprietary information. Alliance also requires key employees to sign
invention assignment agreements with respect to inventions arising from their employment and restrict unauthorized access to the Company’s
proprietary technology.

10

Notwithstanding
the Company’s efforts to protect its intellectual property, there can be no assurance the measures taken will be effective or that
its intellectual property will provide any competitive advantage. Alliance can provide no assurance that any patents will be issued from
its pending applications or any future applications or that any issued patents will adequately protect its proprietary technology. The
Company’s intellectual property rights may be invalidated, circumvented, or challenged. Furthermore, the laws of certain countries
do not protect intellectual property and proprietary rights to the same extent as the laws of the United States and, as a result, Alliance
may be unable to protect its intellectual property and other proprietary rights in certain jurisdictions. In addition, while the Company
has confidence in the measures it takes to protect and preserve its trade secrets, it cannot guarantee these measures will not be circumvented,
or that all applicable parties have executed confidentiality or invention assignment agreements. In addition, such agreements can be
breached, and may not have adequate remedies should any such breach occur. Accordingly, Alliance’s trade secrets may otherwise
become known or be independently discovered by competitors.

Human
Capital Resources

As of June 30, 2026, Alliance had approximately 724 employees on its payroll and approximately
143 workers hired through staffing agencies throughout the U.S. and internationally. Staffing agencies are used to flex labor capacity
to ensure the labor supply and demand are in balance. None of Alliance’s employees are subject to a collective bargaining agreement
and Alliance believes it has a good relationship with its employees and staffing agencies.

Employees
& Demographics. With respect to global demographics on June 30, 2026, approximately 49% of the Company’s payroll employees
are female and 51% are male.

Talent
& Turnover. With a focus on talent acquisition, the leadership team seeks out the most qualified candidates for open roles
and endeavors to keep them at Alliance. Alliance has a robust program for seeking out those candidates, which ranges from sourcing through
talent applications, reviewing direct applicants and using internal referrals to fill roles. Additionally, Alliance strives to promote
internally when possible. Alliance’s program resulted in an annualized turnover rate of about 12% for the fiscal year ended June
30, 2026.

Compensation
Practice & Pay Equality. As Alliance evolves and expands operations, Human Resources, in partnership with the leadership
team, will continue to evaluate the existing workforce to ensure that best practices are maintained across the entire team without risk
of inequality. Pay structures for hourly employees are reviewed annually and for all other employees, compensation is benchmarked according
to the position when a vacancy becomes available. This ensures best practices in a competitive market and, as part of that review, compensation
will be realigned where appropriate for existing employees and new hires.

Regulatory
Compliance

The
Company’s overall business approach and strategy includes rigorous attention to regulatory compliance, as its operations are subject
to regulations in the following principal areas, across a wide variety of jurisdictions. Alliance’s business is subject to a wide
array of laws, regulations, and standards in each domestic and foreign jurisdiction where we operate. Alliance has a buying office in
the UK and operates under the name Fulfillment Express. Fulfillment Express sources music from the UK music suppliers that is then
transferred (exported from the United Kingdom) to Kentucky where that music product is prepared to sell in the US market. Fulfillment
Express makes no sales of any kind, for it is a buying office.

The
regulatory environment in each market is often complex, evolving and can be subject to significant change. Some relevant laws and regulations
are inconsistent, ambiguous and could be interpreted by regulators and courts in ways that could adversely affect the Company’s
business, results of operations, and financial condition. Moreover, certain laws and regulations have not historically been applied to
an innovative hospitality provider such as Alliance, which often makes their application to its business uncertain. For additional information
regarding the laws and regulations that affect the Company’s business, see “Item 1A. Risk Factors.”

11

Privacy
and Data Protection Regulation

In
processing purchase transactions and information about customers, the Company receives and stores a large volume of personally identifiable
data. The collection, storage, processing, transfer, use, disclosure and protection of this information are increasingly subject to legislation
and regulations in numerous jurisdictions around the world, such as the European Union’s General Data Protection Regulation (“GDPR”)
and variations and implementations of that regulation in the member states of the European Union, as well as privacy and data protection
laws and regulations in various U.S. states and other jurisdictions, such as the California Consumer Privacy Act (as amended by the California
Privacy Rights Act), the Canadian Personal Information Protection and Electronic Documents Act (“PIPEDA”), and the UK General
Data Protection Regulation and the UK Data Protection Act.

Alliance
incorporates a variety of technical and organizational security measures and other procedures and protocols to protect data within the
Company’s platforms and business services, including personally identifiable data pertaining to guests and employees. Alliance
is engaged in an ongoing process of evaluating and considering additional steps to maintain compliance with the California Consumer Privacy
Act, GDPR, PIPEDA, the UK General Data Protection Regulation, and the UK Data Protection Act.

Employment
Laws

The
Company is also subject to laws governing its relationship with employees, including laws governing wages and hours, benefits, immigration
and workplace safety and health.

Other
Regulation

Alliance’s
business is subject to various other laws and regulations involving matters such as income tax and other taxes, consumer protection,
online messaging, advertising, and marketing, the U.S. Foreign Corrupt Practices Act and other laws governing bribery and other corrupt
business activities, and regulations aimed at preventing money laundering or prohibiting business activities with specified countries
or persons. As the Company expands into additional markets, it will be subject to additional laws and regulations.

Periodic
Reporting and Financial Information

Our
Class A common stock and warrants are registered under the Exchange Act, and as a smaller reporting company, we have specific reporting
obligations. We file annual, quarterly, and current reports with the SEC, which include financial statements audited by our
independent registered public accounting firm. The SEC maintains an internet site that contains reports, proxy and information statements,
and other information regarding issuers that file electronically with the SEC (www.sec.gov). These reports and other important information
are available on our website at www.aent.com under the Investor Relations section, free of charge, as soon as they are filed with the
SEC. Please note that information on our website is not incorporated by reference into this report.

We
qualify as a “smaller reporting company” under SEC regulations and as a non-accelerated filer. These statuses allow us to
benefit from certain reduced disclosure obligations, including the option to provide only two years of audited financial statements,
scaled executive-compensation disclosure, and exemption from the auditor attestation requirement regarding internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act. We will remain a smaller reporting company for so long as we satisfy the applicable
public float and revenue thresholds, which are re-measured annually.