{"url_path":"/sec/gpro/10-q/2026/item-1a","section_key":"item-1a","section_title":"Item 1A Risk Factors","topic":"sec","document":{"doc_type":"10-Q","doc_date":"2026-05-11","source_url":"https://www.sec.gov/Archives/edgar/data/1500435/0001500435-26-000018-index.html","accession_number":"0001500435-26-000018","cik":"0001500435","ticker":"GPRO","issuer_name":"GoPro, Inc.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1500435/0001500435-26-000018-index.html","primary_entity_key":"0001500435","primary_entity_name":"GoPro, Inc."},"word_count":6299,"has_tables":true,"body_markdown":"Item 1A. Risk Factors\n\nWe operate in a rapidly changing environment that involves a number of risks, some of which are beyond our control, that have in the past and could in the future materially and adversely affect our business, financial condition, and results of operations. In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2025, which could materially affect our business, financial condition or future results of operations. Except as set forth below, there have been no material changes to the risk factors set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025. You should carefully consider the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2025 and all other information contained in this Quarterly Report on Form 10-Q before making an investment decision. The risk factors contained in our public filings do not identify all risks that we face; our business, financial condition, operations, and/or future operating results could also be affected by factors that are not presently known to us or that we currently consider to be immaterial. In that event, the trading price of our shares may decline, and you may lose part or all of your investment.\n\nRisks related to our business and industry\n\nWe have incurred substantial operating losses in the last several years, and we may not be able to achieve revenue growth or profitability in the future, and if revenue growth or profitability is achieved, we may not be able to sustain it.\n\nIn the first quarter of 2026, we incurred an operating loss of $57.2 million, compared to an operating loss of $45.2 million in the first quarter of 2025, due to the combination of tariffs, lower promotional activity, an increasingly global competitive landscape, consumer-related macroeconomic issues resulting in a softer global consumer market, and the cost and availability of memory and other semiconductors. Our total revenue decreased from $134.3 million in the first quarter of 2025 to $99.1 million in the first quarter of 2026. We cannot be certain that we will be able to return to profitability through a combination of revenue growth, gross margin improvement, and actions we have taken and will continue to take to reduce our operating expenses.\n\nLooking ahead, we may experience lower levels of revenue, or lower gross margin for a variety of reasons, including, among other factors: ineffective or untimely investments in product innovation and development; product cost overruns; any delays or issues with our new product launches, such as the delayed launch of MAX2; increased component costs, including both the cost and supply of memory and other semiconductors; disrupted production due to decreased availability of critical components like memory and silicon; lower levels of marketing and advertising spend and its effectiveness thereof; increasing freight rates; shipping delays; increased supply chain costs; lower average sales pricing for our cameras; or a recession or other sustained adverse market events or macroeconomic factors such as volatility of tariff rates, or geopolitical events and uncertainty, including the effects of global conflicts, that materially impact consumer purchases of discretionary items, such as our products. For example, recently, the cost of memory components has increased sharply, including unexpected price increases ranging from 80% to 115% in the last week of March 2026. Currency exchange rate fluctuations may also negatively impact revenue and gross margin. While we have taken and will continue to take actions to moderate operating expenses, we cannot guarantee that we will be able to return to profitability through a combination of revenue growth, significant gross margin improvement, and operating expense reductions.\n\nWe may continue to experience fluctuating revenue, expenses, and profitability for a number of reasons, including other risks described in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year\n\n57\n\nended December 31, 2025, and we may encounter unforeseen expenses, difficulties, complications, delays, and other unknown factors that impact our revenue growth or profitability.\n\nWe are taking a multi-pronged approach to regaining profitability with a focus on continued innovation and new product introductions while effectively managing and implementing cost-saving measures where appropriate, which may not be effective to restore profitability in our business.\n\nIn order to become profitable, and manage our margin, we must continue to innovate, develop and introduce new products on schedule, enhance our current product offerings, grow our customer base, and stimulate customer demand for new and next-generation products and services. Our product and service offerings are at the core of our business model.\n\nIn order to manage our profitability, we will need to effectively manage our existing resources and may also have to continue to reduce costs. We implemented company-wide restructurings of our business, including in March 2024, August 2024, October 2024 and 2026 (announced April 2026), resulting in a reduction in our global workforce, the elimination of certain open positions and reduction of certain office space, as well as the elimination of several high-cost initiatives, to optimize our cost structure and focus our resources on cameras, accessories, subscription and service, and tech-enabled helmets. In 2025, we reduced our spending on research and development by 32% and decreased our spending on marketing by 37%. Our continued reductions in research and development spending may constrain the breadth of our product roadmap and ability to innovate. Our continued reductions in sales and marketing may reach a level at which we are unable to generate sufficient consumer awareness and demand to sustain our revenue targets, particularly given our dependence on brand marketing and community engagement to drive camera sales and subscription attach rates.\n\nReductions in force may result in unintended consequences and costs, such as the loss of institutional knowledge and expertise, attrition beyond the intended number of employees, decreased morale among our remaining employees, difficulty in recruiting employees in the future, and the risk that we may not achieve the anticipated benefits of the reduction in force. In addition, while positions have been eliminated, certain functions necessary to our operations remain, and we may be unsuccessful in distributing the responsibilities of departed employees among our remaining employees. Significant reductions in general and administrative functions, including finance, legal, human resources, and information technology, may impair our ability to comply with our SEC reporting and other regulatory obligations on a timely basis, maintain effective disclosure controls and procedures and internal control over financial reporting, manage ongoing and potential litigation, prevent IT system disruptions or information security lapses, and support day-to-day business operations. Any failure to maintain effective internal controls could result in a material weakness determination, restatement of financial results, loss of investor confidence, regulatory action, or litigation, any of which could materially and adversely affect our business, financial condition, and the price of our Class A common stock.\n\nFurthermore, all of our employees, including our executive officers, are free to terminate their employment relationship with us at any time, and their knowledge of our business and industry may be difficult to replace. If key employees leave, we may not be able to fully integrate new personnel or replicate the prior working relationships, and our operations could suffer as a result.\n\nJob candidates and existing employees often consider the value of the equity awards they receive in connection with their employment. Fluctuations in the price of our Class A common stock may make it more difficult or costly to use equity compensation to motivate, incentivize and retain our employees. For example, since 2023, our closing stock price ranged from a high of $6.46 in the first quarter of 2023 to a low of $0.48 in the second quarter of 2025. If we are unable to attract and retain highly skilled personnel, we may not be able to achieve our strategic objectives, and our business, financial condition and operating results could be adversely affected.\n\nThe reduction in workforce could also make it difficult for us to pursue, or prevent us from pursuing, new opportunities and initiatives due to insufficient personnel, or require us to incur additional and unanticipated costs to hire new personnel to pursue such opportunities or initiatives. If we are unable to realize the anticipated benefits from the reductions in force, or if we experience significant adverse consequences from the reductions in force, our business, financial condition, and results of operations may be materially adversely affected. We may undertake further similar cost-saving initiatives, which may include additional restructuring or workforce reductions.\n\n58\n\nOur products are highly dependent on the availability and cost of key components, including memory, microprocessors, and other semiconductors, and recent price volatility, limited availability, and anticipated cost increases may put further downward pressure on our gross margins and impair our ability to become profitable.\n\nKey components of our products include memory, microprocessors, and other semiconductors. There has been a worldwide, unprecedented shortage of available semiconductor components due to the increase of demand by artificial intelligence data centers, which require substantially higher processing bandwidth and memory capacity, competition from other consumer products that use similar components as our cameras, and manufacturing capacity constraints, including back-end assembly and testing. Memory component prices have increased sharply, including unexpected price increases ranging from 80% to 115% in the last week of March 2026. The significant industry-wide shortages and volatility in selling prices could continue to adversely affect our business as we compete for these components in the marketplace. Since the price of semiconductors and other critical components continues to increase and the lack of availability continues, we have had to, and may in the future need to, increase prices to offset these significant component costs and we may not be able to fully offset such higher costs through price increases. We also may not be able to manufacture enough products to meet forecasted demand. An increase in our product prices could lead to reduced consumer demand, which would adversely affect our business, revenue, and results of operations. An increase of price could also reduce the competitiveness of our products and enable foreign competitors to offer a lower-priced alternative and gain a larger market share, which would adversely affect our financial condition. Significant shortages within the semiconductor industry have resulted in a lengthening of the manufacturing lead time for memory and other semiconductor components used in our products, which may increase the manufacturing lead time of our products and adversely impact our revenue or manufacturing capacity. Extended lead times and shortages could impair our ability to meet our customer requirements, require us to pay higher prices or incur expedite fees, which could negatively impact our gross margins and results of operations.\n\nWe may not be able to acquire and retain subscribers at all or at historical rates and subscriber count may decrease which could adversely impact our results of operations and our ability to be profitable.\n\nWe have experienced high subscriber growth in past years, but we may not be able to sustain such growth in the future or our subscriber count could decrease. In 2022 and 2023, the number of subscribers grew 43% and 12%, respectively, year-over-year. However, in the first quarter of 2026, our subscriber base declined 8% year-over-year to 2.26 million. Our subscription service is the highest gross margin product we offer. Our revenue growth and profitability are dependent on our ability to continuously attract and retain subscribers, and we cannot be certain that efforts to do so will be successful. Any changes to our subscription offerings, or increases to the offering costs, could have an adverse effect on the success and profitability of our subscription service, attracting new subscribers and retaining existing subscribers. There are many factors that could lead to slowing subscriber growth or a decline in subscribers, including a decline in camera sales, attach rates or retention rates, our failure to introduce new features, benefits, products, or services that customers desire, delay of product launches, changes to existing products, services, and pricing that are not favorably received by our customers, or changes in the perceived value of our offerings. If the attach rate is less than what we forecasted, this could have a negative impact on our overall subscriber growth plans. A decline in subscribers could have an adverse effect on our business, financial condition, and operating results.\n\nFuture profitability depends on our ability to develop new products for new markets with the goal to expand our core community of customers, and we may not be successful in doing so.\n\nHistorically, the majority of our profitability has been fueled by the adoption of our HERO and 360-camera products (such as MAX2), extensive mount and accessory ecosystem, and subscription products by people looking to self-capture images of themselves and helping those people create and share compelling and meaningful content with friends, family and followers. We believe that our future profitability depends on continuing to add versatility to our products through timely development, develop new capture perspectives and reach and expand our core community of customers of our products and services, followers, and fans, and then utilizing that energized community as brand ambassadors to an extended community. Despite this, we may not be successful in further maintaining or expanding our existing market.\n\n59\n\nWe may not be able to expand our subscription and service offerings and cannot be certain that these efforts will be successful, and as a result, we may not be able to increase our total addressable market, revenue, or operating profit. We may not be able to maintain or expand our market, revenue and gross margin through this strategy on a timely basis, or at all, or recognize the benefits of our investments in this strategy, and we may not be successful in providing tools that our users adopt or believe are easy to use, which will negatively affect our future growth.\n\nOur profitability also depends on expanding into new markets with new capture perspectives, including with tech-enabled helmets currently in development. We cannot be assured that we will be successful in expanding into markets with new capture perspectives. New markets that we attempt to enter may be highly competitive, and we may have limited experience in those emerging markets. In addition, our significant reductions in research and development spending and headcount may constrain the breadth of our product roadmap and ability to innovate. Our cost reduction measures may also limit our ability to invest in a broader product roadmap, which could narrow the scope of our future product offerings, reduce our ability to enter new markets, and constrain our total addressable market. A narrower product roadmap makes us more dependent on a limited set of product lines that are subject to increasing competitive pressure and margin erosion. If we are not successful in expanding into additional markets, and enabling new capture perspectives, we might not be able to achieve profitability and we may not recognize benefits from our investment in new areas.\n\nWe are also pursuing new market opportunities for our technology and products within the defense and aerospace sectors. In developing and marketing new products and services or adapting our technology and products for defense or aerospace applications, we expect to invest significant time and resources, including capital, and the attention of management and our Board of Directors could be diverted from other business operations. Our planned timeline for the development and introduction of new products or services may not be achieved, our expenditures may exceed revenues for longer than we anticipate, and our price and profitability targets may not prove feasible. Our ability to achieve anticipated business performance and financial results from our new business pursuits could be adversely impacted for a variety of reasons and unforeseen events, including but not limited to, lower than anticipated customer demand, higher capital needs, staffing shortages, and reduced liquidity. Furthermore, if customers do not perceive our new offerings as providing significant value, they may fail to accept our new products and services in the way we anticipate. External factors, such as competitive alternatives, including potential U.S. federal government programs and existing government contracts with defense contractors, shifting market preferences and commercial and/or regulatory challenges may also impact the successful implementation of a new product or service. In addition, our pursuit of defense and aerospace opportunities, or any actual or perceived association with or funding from the U.S. government, could subject us to retaliatory actions by foreign governments, including sanctions, import or export restrictions, or other measures that could limit our ability to sell products in, or source components from, those markets, which could materially and adversely affect our revenue and supply chain. Failure to successfully manage these risks in the development and implementation of our new products or services could have a material adverse effect on our business, results of operations and financial condition.\n\nDue to the nature of our business, we are heavily reliant on third parties outside of our control both in terms of our suppliers and for our operations.\n\nWe do not have internal manufacturing capabilities and instead rely on several contract manufacturers, including component vendors, located in China, Japan, Malaysia, Taiwan, Thailand, Vietnam, the U.S., and in other countries, to manufacture our products. Our ability to meet customer demand depends, in part, on our ability to obtain timely and adequate delivery of components for our products. All of the components that go into the manufacturing of our hardware products and accessories are sourced from third-party suppliers. We do not control our contract manufacturers or suppliers, including their cost of components, capacity, bandwidth, or costs of their labor, environmental or other practices.\n\nSome of the key components used to manufacture our products come from a limited or single source of supply, or from a supplier that could potentially become a competitor. For our camera designs, we incorporate system-on-chips, sensors, lens, batteries and memory solutions that critically impact the performance of our products. These components have unique design and performance profiles, and as a result, it is not commercially practical to support multiple sources for these components for our products. Our dependence on such limited or single source\n\n60\n\nsuppliers subjects us to the risk of shortages, interruptions, price fluctuations, potential capacity limitations due to increased demand, and long lead times in the supply of these components and the risk that our suppliers discontinue or modify components used in our products. In addition, the lead times associated with certain components are lengthy and preclude rapid changes in quantities and delivery schedules, and such lead times could increase as a result of shipping disruptions, global conflicts, including any escalations or expansions of those conflicts, or other factors.\n\nIf we lose access to components from a particular supplier, experience increased competition for components, or experience a significant disruption in the supply of products and components from a current supplier, we may be unable to locate alternative suppliers or submit orders directly through supplier’s vendors of comparable quality at an acceptable price, or at all, and our business could be materially and adversely affected. In addition, if we experience a significant increase in demand for our products, our suppliers might not have the capacity or elect not to meet our needs as they allocate components to other customers. Further, if suppliers significantly increase prices of components due to inflationary pressures or other factors, increase their commitment requirements, or require cash in advance payment, we may need to identify and qualify one or more replacement suppliers. For example, recently, the cost of memory components has increased sharply, including unexpected price increases ranging from 80% to 115% in the last week of March 2026. Developing suitable alternate sources of supply for these components may be time-consuming, difficult and costly, and we may not be able to source these components from alternative suppliers on terms that are acceptable to us, or at all, which may adversely affect our ability to meet our development requirements or to fill our orders in a timely or cost-effective manner. Disruptions or loss of any of our limited or single source suppliers, or capacity limitations of the suppliers for components, could increase our costs, curtail growth opportunities, cause material delays, and adversely impact our business, financial results, and customer relationships.\n\nAlthough we have policies and procedures in place requiring our contract manufacturers and major component suppliers to comply with applicable federal, state, local and international requirements, we cannot confirm with certainty that our manufacturers and suppliers consistently comply with these requirements. In addition, if there are changes to these or other laws (or their interpretation) or if new similar laws are passed in other jurisdictions, we may be required to re-engineer our products to use components compatible with these regulations. Any re-engineering and component substitution could result in additional costs to us or disrupt our operations or logistics. Additionally, we rely on third parties such as Amazon Web Services to provide software and enterprise services.\n\nRisks related to our liquidity and indebtedness\n\nOur history of operating losses and negative cash flows from operations has raised substantial doubt about our ability to continue as a going concern.\n\nWe have expressed substantial doubt about our ability to continue as a going concern due to our history of operating losses and negative cash flows from operations, which have caused us to obtain relief from certain covenants in the 2021 Credit Agreement and 2025 Credit Agreement. Without the covenant relief, we would have been in default under the 2021 Credit Agreement and 2025 Credit Agreement and may have raised cross-default issues with respect to our other debt instruments. Our unaudited condensed consolidated financial statements for the three months ended March 31, 2026 have been prepared assuming we will continue as a going concern, which contemplates the continuity of operations, realization of assets, and the satisfaction of liabilities and commitments in the normal course of business. Our ability to continue operating as a going concern depends on, among other things, our ability to generate revenue in the future, the rate of revenue growth, our ability to utilize our properties and other assets, and our ability to obtain additional financing. Factors that could impact our future revenue and cash generation include, but are not limited to, tariffs, rising component costs and supply constraint, including but not limited to unprecedented increases and volatility in memory costs, reductions in the production of the memory components used in our products, further inflation, rising interest rates, softness in the sales channel and continued recessionary conditions or competition. If we are not successful in maintaining demand for our products, if component costs, including memory costs, continue to rise, or if macroeconomic conditions further constrain consumer demand, we may experience additional adverse impacts to revenue and profitability. Additional actions within our control to maintain liquidity and operations include optimizing our revenue mix and pricing strategies, and further reducing operating expenses in all areas of the business and further headcount reduction actions. We have also engaged outside advisors to evaluate strategic alternatives including a potential\n\n61\n\nsale or merger of the business and are exploring opportunities within the defense and aerospace sector to leverage our existing technology in new markets and product categories. We are also evaluating opportunities to sell certain non-critical assets, and to secure additional financing through debt or equity securities. However, the cash costs associated with restructuring actions, including severance payments, facility exit costs, and contract termination fees, may further strain our near-term liquidity and could accelerate the timing of a covenant breach or the need for additional financing. Our ability to continue as a going concern also may rely on additional strategies to mitigate costs, including potential restructuring or ongoing cost management, and those initiatives may fail.\n\nThe Company’s operations have been negatively impacted by the ongoing tariffs and the rapidly increasing price of memory. Macroeconomic factors, memory costs and availability, and competition have caused revenue to come in below our expectations for the first quarter of 2026. Going forward, we may experience lower levels of revenue, lower product margins, or higher levels of operating expenses for a variety of reasons, including ineffective or untimely investments in product innovation and development; cost overruns; any delays or issues with our new product launches, such as the delayed launch of MAX2; increased component costs, including both the cost and supply of memory and other semiconductors; disrupted production due to decreased availability of critical components like memory and silicon, lower levels of marketing and advertising spend and its effectiveness; increasing freight rates; shipping delays; increased supply chain costs; lower average sales pricing for our cameras; or a recession or other sustained adverse market events or macroeconomic factors such as volatility of tariff rates, or geopolitical events and uncertainty, including the effects of global conflicts, that materially impact consumer purchases of discretionary items, such as our products. We may need to raise additional capital to fund operating losses, develop new or enhanced products and services, retain and hire employees, respond to competitive pressures, acquire technologies, support future expansion, or respond to unanticipated events or requirements before then. In order to mitigate the going concern issues, we are actively considering strategic alternatives, realizing assets on our balance sheet, managing our continuing operations, implementing cost-cutting measures and seeking to sell or monetize certain assets. Certain monetization actions may require approval by the lenders of our Credit Facilities. We may not be successful in any of these efforts. The substantial doubt about our ability to continue as a going concern may adversely affect the price of our Class A common stock, our ability to raise capital or enter into strategic transactions and partnerships, our relationships with key stakeholders, and market perception. In particular, our financial condition may cause retailers, distributors, and other channel partners to reduce their purchases of our products, demand more favorable payment or return terms, limit the shelf space or inventory levels they are willing to carry, or cease doing business with us altogether. Any such actions by channel partners could further reduce our revenue and sell-through, accelerate declines in our subscriber attach rates, and materially and adversely affect our liquidity and results of operations.\n\nWe are evaluating financing our future capital requirements through a combination of debt, equity and/or other facilities. There can be no assurance that any additional financing will be available to us on satisfactory terms and conditions, if at all. If adequate funds are not available on acceptable terms, we may be unable to develop or enhance our products and services, take advantage of future opportunities or respond to competitive pressures, adverse general economic conditions or unanticipated events or downturns in our business, any of which could have a further material adverse effect on our business, financial condition and operating results. If we are unable to raise sufficient funding, whether via debt or equity, or if we are not otherwise able to achieve management’s cash flow forecast to allow us to maintain our debt covenant compliance, satisfy our debt obligations in the near future, or maintain our liquidity and operations in the ordinary course, our business, results of operations, financial condition, and cash flows could be materially and adversely affected and we may be forced to terminate, significantly curtail or cease our operations or to pursue other alternatives, including, but not limited to, commencing a case under the U.S. Bankruptcy Code.\n\nWe are evaluating strategic alternatives, and there can be no assurance that this process will result in a transaction or other outcome that enhances stockholder value.\n\nIn May 2026, we have received approval from our Board of Directors to engage a financial advisor to assist in actively considering strategic alternatives, which may include, among other things, a sale or merger of the Company, a sale or license of certain assets or intellectual property, strategic investments, partnerships, or other transactions. There can be no assurance that the exploration of strategic alternatives will result in any transaction or other strategic outcome. The process of evaluating strategic alternatives may be time-consuming and disruptive to our business operations, may divert the attention of our management and Board of Directors from\n\n62\n\nour day-to-day operations, and may result in the loss of key employees who may be uncertain about their future roles. The process may also result in the disclosure of proprietary or competitively sensitive information to potential counterparties.\n\nThere can be no assurance that we will receive any offers, or that we will be able to consummate a strategic alternative on attractive terms, or at all, or that any strategic alternative we pursue would lead to increased stockholder value. Our ability to attract potential acquirers or transaction partners may be limited by, among other things, our declining revenue and operating losses, our level of indebtedness and the restrictive covenants in our Credit Facilities and Convertible Debentures, our stock price, the competitive environment, and prevailing macroeconomic and capital markets conditions. Certain of our debt instruments contain restrictions on asset dispositions, change of control provisions, and consent requirements that may limit the types of transactions available to us or reduce the proceeds we could realize from any such transaction. In particular, our 2025 Term Loan is subject to mandatory prepayment upon a change in control and requires a prepayment premium, and our 2021 Credit Facility and Convertible Debentures contain change of control and event of default provisions, any of which could reduce the net consideration available in a transaction or make a transaction less attractive to potential counterparties.\n\nIf we are unable to identify and consummate a strategic transaction on acceptable terms, or at all, we will need to continue to operate as a standalone business and fund our operations through existing resources, additional financing, and further cost reductions, any of which may not be sufficient to allow us to maintain operations, service our debt obligations, or return to profitability. The failure to successfully identify a strategic alternative could also result in negative market perception, further declines in the price of our Class A common stock, and increased difficulty in retaining employees and maintaining relationships with customers, suppliers, and other business partners. If our operations continue to be adversely impacted while we pursue strategic alternatives, the range and attractiveness of options available to us may narrow, and we may be required to pursue alternatives on less favorable terms or to consider other restructuring measures, including proceedings under the U.S. Bankruptcy Code.\n\nWe have substantial indebtedness in the form of convertible senior notes and credit agreements. Our indebtedness and corresponding cash debt service obligations could adversely affect our competitiveness, our liquidity, our operations, and our ability to obtain additional financing if necessary.\n\nOn August 4, 2025, we entered into a second lien credit agreement pursuant to which we borrowed $50.0 million. On November 5, 2025, we entered into Amendment No. 1 to the credit agreement and on February 27, 2026 we entered into Amendment No. 2 to the credit agreement (collectively, the 2025 Term Loan), in each case to modify certain financial covenants. As of March 31, 2026, the outstanding principal under the 2025 Term Loan was $49.4 million. The 2025 Term Loan is separate from our outstanding credit agreement which provides for a revolving credit facility, as amended from time to time (2021 Credit Facility, and together with the 2025 Term Loan, the Credit Facilities). Under the 2021 Credit Facility, we have borrowed $25.5 million as of March 31, 2026. On February 27, 2026, we entered into Amendment No. 3 to the 2021 Credit Facility to modify certain financial covenants, extend the maturity date and increase the interest rate.\n\nAdditionally, on February 27, 2026, we entered into a securities purchase agreement (Securities Purchase Agreement) with YA II PN, Ltd. (YA II PN), in connection with the issuance and sale by the Company of convertible debentures (the Convertible Debentures) issuable in an aggregate principal amount of up to $50.0 million, which Convertible Debentures will be convertible into shares of the Company’s Class A common stock, par value $0.0001 per share (the Common Stock) (as converted, the Conversion Shares). YA II PN purchased $25.0 million in aggregate principal amount of Convertible Debentures upon the signing of the Securities Purchase Agreement. In addition, subject to certain closing conditions, YA II PN would have been able to purchase an additional $5.0 million on the business day prior to the filing of the registration statement registering the resale of the Common Stock issuable upon conversion of the Convertible Debentures, which was filed with the SEC on March 20, 2026. On March 19, 2026, the closing conditions were not met. YA II PN may still purchase and we may issue an additional $20.0 million in aggregate principal amount of Convertible Debentures on or about the second business day following the satisfaction of certain additional closing conditions.\n\n63\n\nThere can be no assurance that we will be able to repay our indebtedness when due, or that we will be able to finance our indebtedness, all or in part, on acceptable terms. In addition, our high level of indebtedness and corresponding high cash debt service obligations, could, among other things:\n\n•heighten our vulnerability to downturns in our business, adverse general economic conditions and heightened competitive pressures;\n\n•require us to dedicate a larger portion of our cash flow from operations to interest payments, limiting the availability of cash for other purposes;\n\n•limit our ability to invest in our business and future business opportunities;\n\n•limit our ability to refinance our indebtedness;\n\n•limit our flexibility in planning for, or reacting to, changes in our business and industry;\n\n•increase our cost of borrowing;\n\n•place us at a competitive disadvantage compared to our competitors that have less debt or are less leveraged; and\n\n•impair our ability to obtain additional financing in the future or sell stock to fund our working capital, capital expenditures, debt repayments, acquisitions, general corporate purposes, or other purposes.\n\nIn future quarters, we anticipate non-compliance with the restrictive covenants of the Credit Facilities, and we may seek further covenant waivers or amendments from our lenders. The lenders or debenture holder may not provide any waiver(s) of compliance or amend the Credit Facilities or Convertible Debentures.\n\nA default under any of the Credit Facilities or the Convertible Debentures could also lead to a default under agreements governing our existing or future indebtedness. If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay our indebtedness.\n\nOur ability to meet our cash requirements, including our debt service obligations, is dependent upon our ability to maintain and improve our operating performance, which is subject to general economic and competitive conditions and to financial, business and other factors, many of which are beyond our control. Our existing liquidity and capital resources may not be sufficient to sustain our business condition and service our debt obligations and if our operating results do not meet our expectations or if we experience adverse financial, business and other factors that we do not currently anticipate, we could face liquidity constraints.\n\nIf we are unable to meet our liquidity requirements, we could be forced to sell assets, restructure or refinance our debt or raise additional capital through sales of equity or debt. We may be unable to take any of these actions on satisfactory terms or in a timely manner or at all, due to many factors, including our high level of indebtedness. Any of these actions may not be sufficient to allow us to service our debt obligations or may have an adverse impact on our business. Our existing debt agreements limit our ability to take certain of these actions. Our failure to generate sufficient operating cash flow to pay our debt obligations could have a material adverse effect on us.\n\nOur credit agreements impose restrictions on us that may adversely affect our ability to operate our business.\n\nBoth the 2025 Term Loan and the 2021 Credit Facility contain restrictive covenants relating to our capital raising activities and other financial and operational matters which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions, or otherwise impact our liquidity. Specifically, the 2025 Term Loan, as amended, revised the financial covenants to adjust the minimum EBITDA, minimum liquidity amount, and asset coverage ratio requirements. The 2021 Credit Facility, as amended, revised the financial covenants, extended the maturity date, and increased the interest rate. Our ability to comply with any particular financial covenant under the Credit Facilities depends on many factors, some of which are beyond our control (including, but not limited to, tariffs and component cost increases), and could result in material adverse consequences that negatively impact our business. Any of our future indebtedness may contain similar restrictions.\n\n64\n\nIn future quarters, we anticipate non-compliance with the restrictive covenants of the Credit Facilities, and we may seek further covenant waivers or amendments from our lenders. We may also seek additional sources of financing to avoid a default under either of the Credit Facilities. We may not be able to obtain the necessary waiver or amendments or secure additional financing on favorable terms, or at all. Failure to comply with any particular covenant could result in default. In addition, each of the Credit Facilities and the Convertible Debentures contain a cross-default provision whereby a default under one agreement would result in default under the agreements covering other borrowings and vice versa. The occurrence of a default under any of these borrowing arrangements would permit the lenders under the Credit Facilities and Convertible Debentures to declare all amounts outstanding under those borrowing arrangements to be immediately due and payable. If our lenders accelerate the repayment of borrowings, we cannot assure you that we will have sufficient assets to repay those borrowings."}