# Turtle Beach Corp: Form 10-Q for the period ended Mar 31, 2025

- Company: [Turtle Beach Corp](/companies/tbch.md) (CIK 1493761)
- Form: 10-Q
- Filed: 2025-05-08
- Accepted by EDGAR: May 8, 2025, 17:00 ET
- Period: 2025-03-31
- Accession: 0000950170-25-067149
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1493761/000095017025067149/tbch-20250331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1493761/000095017025067149/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2025-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2025-01-01 to 2025-03-31 | $63.9m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2025-01-01 to 2025-03-31 | $40.5m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2025-01-01 to 2025-03-31 | $23.4m | us-gaap:GrossProfit |
| Research and development | 3 months, 2025-01-01 to 2025-03-31 | $4.0m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2025-01-01 to 2025-03-31 | $1.5m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2025-01-01 to 2025-03-31 | −$109.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2025-01-01 to 2025-03-31 | −$664.0k | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2025-01-01 to 2025-03-31 | −$0.03 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2025-01-01 to 2025-03-31 | −$0.03 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2025-01-01 to 2025-03-31 | 20,506,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2025-01-01 to 2025-03-31 | $40.5m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2025-01-01 to 2025-03-31 | $166.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 3 months, 2025-01-01 to 2025-03-31 | $1.8m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2025-03-31 | $11.7m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2025-03-31 | $142.2m | us-gaap:AssetsCurrent |
| Total assets | at 2025-03-31 | $247.0m | us-gaap:Assets |
| Current liabilities | at 2025-03-31 | $72.4m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2025-03-31 | $126.2m | us-gaap:Liabilities |
| Long-term debt | at 2025-03-31 | $45.5m | us-gaap:LongTermDebtNoncurrent |
| Short-term borrowings | at 2025-03-31 | $1.3m | us-gaap:ShortTermBorrowings |
| Shareholders' equity | at 2025-03-31 | $120.9m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 24,318 characters.

*The following discussion and analysis of our operations should be read together with our unaudited condensed consolidated financial statements and the related notes included in Part I of this Quarterly Report on Form 10-Q and with our audited consolidated financial statements and the related notes included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 17, 2025 (the “Annual Report.”)*

*This Quarterly Report on Form 10-Q contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements in this report are indicated by words such as “anticipates,” “expects,” “believes,” “intends,” “plans,” “estimates,” “projects,” “strategies” and similar expressions or negatives thereof. Caution should be taken not to place undue reliance on any such forward-looking statements because they involve risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied in, or reasonably inferred from, such statements. Forward-looking statements are based on the beliefs, as well as assumptions made by, and information currently available to, the Company's management and are made only as of the date hereof. The Company undertakes no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise, except as required by the federal securities laws. In addition, forward-looking statements are subject to certain risks and uncertainties, including those described elsewhere in this Quarterly Report on Form 10-Q that could cause actual results to differ materially from the Company's historical experience and its present expectations or projections.*

### Overview

Turtle Beach Corporation (“Turtle Beach” or the “Company”), headquartered in San Diego, California, and incorporated in the state of Nevada in 2010, is a premier audio and gaming technology company with expertise and experience in developing, commercializing, and marketing innovative products across a range of large addressable markets under the Turtle Beach brand. The Turtle Beach® brand is a market share leader in console gaming headsets with a vast portfolio of headsets designed to be compatible with the latest Xbox, PlayStation, and Nintendo consoles, as well as for personal computers (“PCs”) and mobile/tablet devices. Turtle Beach Corporation’s PC product portfolio includes headsets, gaming keyboards, mice and other gaming accessories focused on the PC gaming platform and it has recently expanded its brand beyond gaming headsets and launched its gaming controller product line, as well as, gaming flight simulation and racing simulation accessories. In March 2024, Turtle Beach acquired Performance Designed Products (“PDP”), another leading gaming accessory brand with a robust slate of products, including gaming controllers/gamepads for all platforms and licensing deals with popular gaming and entertainment properties, including Call of Duty and Fortnite among others. The Company has started the process of transitioning all gaming accessories under its best-selling Turtle Beach brand, with products for consoles and PC, including multiplatform gaming headsets, controllers, mice, keyboards, microphones, and flight/racing simulation accessories under one of the industry’s most recognized and trusted brand names.

### Business Trends

Turtle Beach operates in nearly $200 billion global games and accessories market. The global gaming audience now exceeds global cinema and music markets with over 3.4 billion active gamers worldwide. Gaming peripherals, such as headsets, controllers, keyboards, mice, microphones, and flight and racing simulation controls are estimated to be an $11.0 billion business globally.

The console and PC gaming accessory markets are driven by major game launches and long-running franchises that encourage players to continually buy equipment and accessories. On Xbox, PlayStation, Nintendo Switch and PC, flagship games like Call of Duty, Destiny, Star Wars: Battlefront, Grand Theft Auto, Battlefield, and battle royale games like Fortnite, Call of Duty Warzone, Apex Legends, and PlayerUnknown’s Battlegrounds, are examples of major franchises that prominently feature online multiplayer modes that encourage player-to-player communication and drive increased demand for gaming headsets, controllers, and more. Many of these established franchises launch new titles annually, leading into the holidays and beyond, and as a result can cause an additional boost to the normally strong holiday sales for gaming accessories.

Additionally, some larger franchise games, for example Call of Duty and Fortnite, follow-up with multiple post-launch downloadable content or new content update packs, to keep interest and fan engagement/momentum going for months following a game’s initial release. Many gamers play online where a gaming headset, which includes a microphone, is required because it allows players to communicate with each other in real-time, provides a more immersive experience, and delivers a competitive advantage.

### Results of Operations

The following table sets forth the Company’s statements of operations for the periods presented (in thousands):

|  | Three Months Ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| Net revenue | $63,901 | $55,848 |
| Cost of revenue | 40,534 | 38,062 |
| Gross profit | 23,367 | 17,786 |
| Operating expenses | 21,831 | 23,499 |
| Operating income (loss) | 1,536 | (5,713) |
| Interest expense | 2,006 | 150 |
| Other non-operating expense, net | 303 | 370 |
| Loss before income tax | (773) | (6,233) |
| Income tax benefit | (109) | (6,388) |
| Net (loss) income | $(664) | $155 |

### Net Revenue and Gross Profit

The following table summarizes net revenue and gross profit for the periods presented (in thousands):

|  | Three Months Ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| Net Revenue | $63,901 | $55,848 |
| Gross Profit | $23,367 | $17,786 |
| Gross Margin | 36.6% | 31.8% |

#### Comparison of the Three Months Ended March 31, 2025 to the Three Months Ended March 31, 2024

Net revenue for the three months ended March 31, 2025 was $63.9 million, a $8.1 million increase from $55.8 million driven by incremental revenue from the PDP acquisition.

For the three months ended March 31, 2025, gross margin increased to 36.6% from 31.8% in the comparable prior year period primarily due to operating leverage from higher revenue from the PDP acquisition and lower promotional spend and freight costs.

### Operating Expenses

*(in thousands)*

|  | Three Months Ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| Selling and marketing | $12,453 | $9,013 |
| Research and development | 3,993 | 3,902 |
| General and administrative | 8,216 | 5,674 |
| Subtotal operating expenses | 24,662 | 18,589 |
| Insurance recovery | (3,439) | — |
| Acquisition-related cost | 608 | 4,910 |
| Total operating expenses | $21,831 | $23,499 |

21

#### Selling and Marketing

Selling and marketing expenses for the three months ended March 31, 2025 totaled $12.5 million, compared to $9.0 million for the three months ended March 31, 2024, primarily due to increased direct media marketing and incremental intangible assets amortization expenses related to the PDP acquisition.

#### Research and Development

Research and development costs for the three months ended March 31, 2025 was $4.0 million, compared to $3.9 million for the three months ended March 31, 2024, due to incremental expenses related to the PDP acquisition.

#### General and Administrative

General and administrative expenses for the three months ended March 31, 2025 totaled $8.2 million compared to $5.7 million for the three months ended March 31, 2024 due to professional service costs and incremental expenses related to the PDP acquisition.

### Insurance recovery

Insurance recovery relates to the recognition of certain initial insurance claim receivables from the previously disclosed loss of inventory while in transit that occurred in the fourth quarter of 2024.

### Acquisition-related cost

Acquisition-related costs include one-time costs incurred in connection with the PDP acquisition including professional fees such as legal and accounting along with other certain integration related costs.

### Income Taxes

Income tax benefit for the three months ended March 31, 2025 was $0.1 million at an effective tax rate of 14.1% compared to income tax benefit for the three months ended March 31, 2024 of $6.4 million at an effective tax rate of 102.5%. The effective tax rate for the three months ended March 31, 2025 was primarily impacted the by the reversal of a portion of the Company’s deferred tax asset valuation allowance.

### Key Performance Indicators and Non-GAAP Measures

Management routinely reviews key performance indicators, including revenue, operating income and margins, and earnings per share, among others. In addition, we believe certain other measures provide useful information to management and investors about us and our financial condition and results of operations for the following reasons: (i) they are measures used by our Board of Directors and management team to evaluate our operating performance; (ii) they are measures used by our management team to make day-to-day operating decisions; (iii) the adjustments made are often viewed as either non-recurring or not reflective of ongoing financial performance and/or have no cash impact on operations; and (iv) the measures are used by securities analysts, investors and other interested parties as a common operating performance measure to compare results across companies in our industry by adjusting for potential differences caused by variations in capital structures (affecting relative interest expense), and the age and book value of facilities and equipment (affecting relative depreciation and amortization expense). These other metrics, however, are not measures of financial performance under accounting principles generally accepted in the United States of America (“GAAP”) and given the limitations of these metrics as analytical tools, should not be considered a substitute for gross profit, gross margins, net income (loss) or other consolidated income statement data as determined in accordance with GAAP.

We believe that the presentation of Adjusted EBITDA, defined as net income (loss) before interest, taxes, depreciation and amortization, stock-based compensation (non-cash) and certain non-recurring special items that we believe are not representative of core operations, is appropriate to provide additional information to investors about our operating profitability adjusted for certain non-cash items, non-routine items that we do not expect to continue at the same level in the future, as well as other items that are not core to our operations. Further, we believe Adjusted EBITDA provides a meaningful measure of operating profitability because we use it for evaluating our business performance, making budgeting decisions, and comparing our performance against that of other peer companies using similar measures. However, Adjusted EBITDA is not a measure of financial performance under GAAP and, given the limitations of these metrics as analytical tools, should not be considered a substitute for gross profit, gross margins, net income (loss) or other consolidated income statement data as determined in accordance with GAAP.

Adjusted EBITDA (and a reconciliation to Net income (loss), the nearest GAAP financial measure) for the three months ended March 31, 2025 and March 31, 2024, are as follows (in thousands):

|  | Three Months Ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| Net (loss) income | $(664) | $155 |
| Interest expense | 2,006 | 150 |
| Depreciation and amortization | 3,126 | 1,476 |
| Stock-based compensation | 1,912 | 1,105 |
| Income tax provision (1) | (109) | (6,388) |
| Restructuring expense (2) | 5 | 41 |
| Acquisition-related cost (3) | 608 | 4,910 |
| Insurance recovery (4) | (3,439) | — |
| Loss on inventory in transit and other costs (5) | 605 | — |
| Adjusted EBITDA | $4,050 | $1,449 |

(1) An income tax benefit of $7.0 million in the three months ended March 31, 2024 was recorded as a result of the reversal of a portion of the Company’s deferred tax asset valuation allowance.

(2) Restructuring charges are expenses that are paid in connection with reorganization of operations. These costs primarily include severance and related benefits.

(3) Acquisition-related cost includes one-time costs we incurred in connection with acquisitions including warehouse lease impairment, professional fees such as legal and accounting along with other integration related costs.

(4) Insurance proceeds from claims related to a loss of inventory while in transit that occurred in the fourth quarter of 2024.

(5) Certain professional fees related to recovery initiatives in connection with a loss of inventory while in transit that occurred in the fourth quarter of 2024.

### Liquidity and Capital Resources

Our primary sources of working capital are cash flow from operations and availability of capital under our Revolving Credit Facility. We have funded operations and acquisitions in recent periods with operating cash flows and proceeds from debt and equity financings.

The following table summarizes our sources and uses of cash (in thousands):

|  | Three Months Ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| Cash and cash equivalents at beginning of period | $12,995 | $18,726 |
| Net cash provided by operating activities | 40,452 | 27,257 |
| Net cash provided by (used for) investing activities | 2,349 | (76,225) |
| Net cash (used for) provided by financing activities | (44,877) | 47,983 |
| Effect of foreign exchange on cash | 765 | 75 |
| Cash and cash equivalents at end of period | $11,684 | $17,816 |

### Operating activities

Cash provided by operating activities for the three months ended March 31, 2025 was $40.5 million, an increase of $13.2 million as compared to $27.3 million for the three months ended March 31, 2024. The increase is primarily due to higher gross receipts as a result of incremental PDP revenue.

### Investing activities

Cash provided by investing activities was $2.3 million for the three months ended March 31, 2025, which was primarily related to a $2.5 million working capital adjustment payment, compared to $76.2 million used for the three months ended March 31, 2024 primarily related to the acquisition of the PDP business.

### Financing activities

Net cash used for financing activities was $44.9 million during the three months ended March 31, 2025 compared to net cash provided by financing activities of $48.0 million during the three months ended March 31, 2024. Financing activities during the three months ended March 31, 2025 consisted primarily of $42.8 million revolving credit facility net repayments, $1.8 million of share repurchases, and $0.3 million of term loan repayments.

### Management assessment of liquidity

Management believes that our current cash and cash equivalents, the amounts available under our Revolving Credit Facility and cash flows derived from operations will be sufficient to meet anticipated short-term and long-term funding for working capital and capital expenditures including amounts to develop new products, fund future stock repurchases and to pursue strategic opportunities. Significant assumptions underlie this belief, including, among other things, that there will be no material adverse developments in our business, liquidity or capital requirements, or strategic opportunities that require additional capital.

In addition, the Company monitors the capital markets on an ongoing basis and may consider raising capital if favorable market conditions develop.

Foreign cash balances at March 31, 2025 and December 31, 2024 were $2.7 million and $4.5 million, respectively.

### Revolving Credit Facility

On March 5, 2018, Turtle Beach and certain of its subsidiaries entered into an amended and restated loan, guaranty and security agreement (the “Credit Facility”) with Bank of America, N.A. (“Bank of America”), as administrative agent, collateral agent and security trustee for Lenders (as defined therein), which replaced the then existing asset-based revolving loan agreement. The Credit Facility was amended on each of December 17, 2018, May 31, 2019, and March 10, 2023. The Credit Facility, as amended, expires on March 13, 2027 and provides for a line of credit of up to $50 million inclusive of a sub-facility limit of $10 million for TB Europe, a wholly owned subsidiary of Turtle Beach.

On March 13, 2024, the Company entered into a Fourth Amendment, dated as of March 13, 2024 (the “Fourth Amendment”), by and among the Company, Voyetra Turtle Beach, Inc., TBC Holding Company LLC, PDP, Turtle Beach Europe Limited, VTB Holdings, Inc., the financial institutions party thereto from time to time and Bank of America, as administrative agent, collateral agent and security trustee for the lenders.

Among other things, the Fourth Amendment provided for: (i) the acquisition of PDP; (ii) the revision of the calculation of the U.S. Borrowing Base to include certain acquired assets of PDP equal to the lesser of (a) the sum of the accounts formula amount and the inventory formula amount (each as defined in the Fourth Amendment), (b) $15,000,000, and (c) 30% of the aggregate Revolver Commitments; (iii) extension of the maturity date of the Credit Facility from April 1, 2025 to March 13, 2027; and (iv) updates to the interest rate and margin terms such that the loans will bear interest at a rate equal to (1) SOFR, (2) the U.S. Base Rate, (3) the Sterling Overnight Index Average Reference Rate (“SONIA”) for loans denominated in Sterling, and (4) the Euro Interbank Offered Rate (“EUIBOR”) for loans denominated in Euros, plus in each case, an applicable margin, which is between 0.50% and 2.50% for Base Rate Loans and 1.75% and 3.50% for Term SOFR Loans, SONIA Rate Loans and EUIBOR Loans.

The maximum credit availability for loans and letters of credit under the Credit Facility is governed by a borrowing base determined by the application of specified percentages to certain eligible assets, primarily eligible trade accounts receivable and inventories, and is subject to discretionary reserves and revaluation adjustments. The Credit Facility may be used for working capital, the issuance of bank guarantees, letters of credit and other corporate purposes.

Amounts outstanding under the Credit Facility bear interest at a rate equal to (i) a rate published by Bank of America or the U.S. Bloomberg Short-Term Bank Yield Index (“BSBY”) rate for loans denominated in U.S. Dollars, (ii) the Sterling Overnight Index Average Reference Rate (“SONIA”) for loans denominated in Sterling, (iii) and the EUIBOR for loans denominated in Euros, plus in each case, an applicable margin, which is between 0.50% to 2.50% for base rate loans and UK base rate loans, and 1.75% to 3.50% for U.S. BSBY rate loans, U.S. BSBY daily floating rate loans and UK alternative currency loans. In addition, Turtle Beach is required to pay a commitment fee on the unused revolving loan commitment at a rate ranging from 0.375% to 0.50% and letter of credit fees and agent fees. As of March 31, 2025, interest rates for outstanding borrowings were 8.10% for base rate loans and 6.19% for Term SOFR loans.

The Company is subject to financial covenant testing if certain availability thresholds are not met or certain other events occur (as defined in the Credit Facility). The Credit Facility requires the Company and its restricted subsidiaries to maintain a fixed charge coverage ratio of at least 1.00 to 1.00 as of the last day of each fiscal quarter.

The Credit Facility also contains affirmative and negative covenants that, subject to certain exceptions, limit our ability to take certain actions, including the Company’s ability to incur debt, pay dividends and repurchase stock, make certain investments and other payments, enter into certain mergers and consolidations, engage in sale leaseback transactions and transactions with affiliates, and encumber and dispose of assets. Obligations under the Credit Facility are secured by a security interest and lien upon substantially all of the Company’s assets.

As of March 31, 2025, the Company was in compliance with all the financial covenants under the Credit Facility, as amended, and excess borrowing availability was approximately $51.2 million.

### Term Loan

On March 13, 2024, Turtle Beach and certain of its subsidiaries entered into a new financing agreement with Blue Torch Finance, LLC, (“Blue Torch”), for an aggregate amount of $50 million (the “Term Loan Facility”), the proceeds of which were used to (i) fund a portion of the PDP acquisition purchase price; (ii) repay certain existing indebtedness of the acquired business; (iii) to pay fees and expenses related to such transactions and (iv) for general corporate purposes. The Term Loan Facility amortizes in a monthly amount equal to 0.208333% during the first two years and 0.416667% during the third year. As the prepayment period concluded on March 13, 2025, the Term Loan Facility is no longer subject to the prepayment premium applied during the first year. The Term Loan Facility is secured by substantially all of the assets of the Company and its subsidiaries which are party to the Term Loan Facility.

The Term Loan Facility (a) matures on March 13, 2027; (b) bears interest at a rate equal to (i) a base rate plus 7.25% per annum for Reference Rate Loans and Secured Overnight Financing Rate (“SOFR”) plus 8.25% per annum for SOFR Loans if the total net leverage ratio is greater than or equal to 2.25x and (ii) a base rate plus 6.75% per annum for Reference Rate Loans and SOFR plus 7.75% per annum for SOFR Loans if the total net leverage ratio is less than 2.25x; and (c) is subject to certain affirmative, negative and financial covenants, including a minimum liquidity covenant and a quarterly total net leverage ratio covenant. As of March 31, 2025, the interest rate for outstanding borrowings was 12.19%.

On August 7, 2024, the Company and Blue Torch amended the Term Loan Facility to, among other things, permit the Company to repurchase Company common stock in an aggregate amount not to exceed $30 million prior to March 31, 2025, subject to the satisfaction of certain conditions. The other material terms of the Term Loan Facility were unchanged.

As of March 31, 2025, the Company was in compliance with all financial covenants under the Term Loan Facility.

### Critical Accounting Estimates

Our discussion and analysis of our results of operations and capital resources are based on our consolidated financial statements, which have been prepared in conformity with GAAP. The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses and the disclosure of contingent assets and liabilities. Management bases its estimates, assumptions and judgments on historical experience and on various other factors that it believes to be reasonable under the circumstances.

Different assumptions and judgments would change the estimates used in the preparation of the condensed consolidated financial statements, which, in turn, could change the results from those reported. Management evaluates its estimates, assumptions and judgments on an ongoing basis. For a discussion of the critical estimates that affect the condensed consolidated financial statements, see “Critical Accounting Estimates” included in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report.

See Note 2, “Summary of Significant Accounting Policies,” to the unaudited condensed consolidated financial statements contained herein for a complete discussion of recent accounting pronouncements. We are currently evaluating the impact of certain recently issued guidance on our financial condition and results of operations in future periods.

## Market risk

As filed, 2,852 characters.

Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. The Company’s market risk exposure is primarily a result of fluctuations in interest rates, foreign currency exchange rates and inflation.

The Company has used derivative financial instruments, specifically foreign currency forward and option contracts, to manage exposure to foreign currency risks, by hedging a portion of its forecasted expenses denominated in British Pounds expected to occur within a year. The effect of exchange rate changes on foreign currency forward and option contracts is expected to offset the effect of exchange rate changes on the underlying hedged item. The Company does not use derivative financial instruments for speculative or trading purposes. As of March 31, 2025 and December 31, 2024, we did not have any derivative financial instruments.

### Foreign Currency Exchange Risk

The Company has exchange rate exposure primarily with respect to the British Pound and Euro. As of March 31, 2025 and December 31, 2024, our monetary assets and liabilities that are subject to this exposure are immaterial, therefore the potential immediate loss to us that would result from a hypothetical 10% change in foreign currency exchange rates would not be expected to have a material impact on our earnings or cash flows. This sensitivity analysis assumes an unfavorable 10% fluctuation in the exchange rates affecting the foreign currencies in which monetary assets and liabilities are denominated and does not take into account the offsetting effect of such a change on our foreign currency denominated revenues.

### Inflation Risk

The Company is exposed to market risk due to inflationary pressures affecting our costs and demand for the products we sell. In recent years, our business has been affected by global supply chain constraints and unfavorable changes in economic or political conditions in the countries and markets where we operate. Such inflationary pressures have been and could continue to be exacerbated by higher oil prices, geopolitical turmoil, and economic policy actions and could lead to a recessionary environment. Inflationary pressures can also have a negative impact on demand for the products we sell. Reduced or delayed discretionary spending by consumers in response to inflationary pressures has reduced consumer demand for our products, and may result in reduced sales.

We continue to experience the on-going impacts of a higher interest rate environment, as compared to prior years, which resulted in higher cost of goods, selling expenses, and general and administrative expenses. Such increases have had and may continue to have a negative impact on the Company’s profit margins if selling prices of products do not increase with the increased costs.

## Controls and procedures

As filed, 2,597 characters.

### Disclosure Controls and Procedures

Disclosure controls and procedures (as defined in Rules 13(a)-15(e) and 15(d)-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), are designed to ensure that (1) information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms; and (2) that such information is accumulated and communicated to management, including the principal executive officer and principal financial officer, to allow timely decisions regarding required disclosures.

At the conclusion of the period covered by this Quarterly Report on Form 10-Q, we carried out an evaluation, under the supervision of our Principal Executive Officer (or PEO) and our Principal Financial Officer (or PFO), of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, our PEO and PFO concluded that our disclosure controls and procedures, as defined in Rule 13a-15(e) of the Exchange Act, were ineffective as of March 31, 2025.

### Changes in Internal Control over Financial Reporting

The Company is in process of remediating the material weaknesses identified and discussed in Part II, Item 9A. Controls Procedures of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024. There have been no changes in our internal control over financial reporting during the period covered that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Our process for evaluating controls and procedures is continuous and encompasses constant improvement of the design and effectiveness of established controls and procedures and the remediation of any deficiencies, which may be identified during this process.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

## Risk factors

As filed, 3,366 characters.

***We depend upon the success and availability of third-party gaming platforms and the release and availability of successful game titles to drive sales of our gaming accessories.***

The performance of our gaming accessories business is affected by the continued success of the PC gaming market and third-party gaming platforms, such as Microsoft’s Xbox consoles, Sony’s PlayStation consoles and Nintendo’s Switch consoles. Our business could suffer if any of these parties fail to continue to drive the success of these platforms, develop new or enhanced video game platforms, or produce and timely release sufficient quantities of such consoles. Further, if a platform is withdrawn from the market or fails to sell, we may be forced to liquidate inventories relating to that platform or accept returns resulting in significant losses.

Our business is also affected by the continued success of third-party publishers developing and releasing game titles for current or future generation platforms. The timely release of flagship titles like Grand Theft Auto VI and others helps drive increased demand for our products. If such flagship titles are not released or are delayed, our results of operation may vary from past or anticipated future results of operation.

***Changes in U.S. or foreign trade policies, including the imposition of tariffs on imported goods and other trade restrictions, as well as uncertainty over such actions, may adversely impact our business and financial performance.***

We obtain components and products from numerous suppliers throughout the world. Changes in laws or policies governing the terms of foreign trade, and in particular increased trade restrictions, tariffs or taxes on imports from countries where we manufacture our products could have an impact on our competitive position, business operations and financial performance.

Recently, the U.S. government announced substantial changes in U.S. trade policy and U.S. trade agreements, including the initiation of tariffs and trade restrictions on certain foreign goods. In response to these tariffs, certain foreign governments subject to such tariffs, including China, have retaliated by imposing tariffs on certain U.S. goods, which could represent near-term challenges to our industry. Increased retaliatory tariffs imposed by other countries on U.S. exports, further increases in U.S. tariffs, and the uncertainties surrounding domestic and foreign tariffs could require us to increase our prices, which could decrease demand for our products, and in certain cases, the Company may be unable to pass along such increased costs to our customers.

We are actively monitoring and evaluating the development and potential impacts of tariffs on our supply chain and results of operations. We are also taking steps to mitigate the effects of current and potential tariffs on our business. However, we may not be able to fully mitigate the effects of any prolonged tariffs or trade disputes. Further, additional trade restrictions could be adopted with little to no advanced notice, and we may not be able to effectively mitigate the adverse impacts from such measures.

Other than noted above, there have been no material changes in the risk factors set forth in Part I, Item 1A. Risk Factors of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

Filed May 8, 2025.
Source: SEC EDGAR, the filing index for accession 0000950170-25-067149. Last ingested by Listed: Oct 24, 2026, 15:07 ET. No prices; not investment advice.