What changed in this filing

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Item 1. Financial Statements

2023-05-04 compared with 2022-11-14 · 100 added, 173 removed, 354 unchanged (44% of the section changed)

3 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

(in thousands, except per-share data)

5 unchanged sentences

Total operating expenses

Operating income (loss)

Operating loss

Interest expense

Other non-operating expense, net

Income (loss) before income tax

Income tax expense (benefit)

Net income (loss)

Net income (loss) per share

Loss before income tax

Income tax benefit

Net loss per share

Weighted average number of shares:

3 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

(in thousands)

Net income (loss)

Other comprehensive income (loss):

1 unchanged sentence

Other comprehensive income (loss)

Comprehensive income (loss)

Comprehensive loss

See accompanying Notes to the Condensed Consolidated Financial Statements (unaudited)

1 unchanged sentence

Condensed Consolida ted Balance Sheets

September 30,

(in thousands, except par value and share amounts)

5 unchanged sentences

Property and equipment, net

Deferred income taxes

Intangible assets, net

11 unchanged sentences

Common stock, $ 0.001 par value - 25,000,000 shares authorized;

16,556,798 and 16,168,147 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively

16,604,099 and 16,569,173 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively

Additional paid-in capital

6 unchanged sentences

Condensed Consolidated S tatements of Cash Flows

Nine Months Ended

September 30, 2022

September 30, 2021

Three Months Ended

March 31, 2023

March 31, 2022

(in thousands)

CASH FLOWS FROM OPERATING ACTIVITIES

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:

Depreciation and amortization

14 unchanged sentences

Purchases of property and equipment

Acquisition of a business, net of cash acquired

Net cash used for investing activities

3 unchanged sentences

Proceeds from exercise of stock options and warrants

Repurchase of common stock to satisfy employee tax withholding obligations

Repurchase of common stock

Debt issuance costs

Net cash provided by (used for) financing activities

9 unchanged sentences

Condensed Consolidated Statement o f Stockholders ’

Equity (Deficit)

Comprehensive

2 unchanged sentences

Balance at December 31, 2022

Other comprehensive loss, net of tax

Other comprehensive income, net of tax

Issuance of restricted stock

2 unchanged sentences

Balance at March 31, 2023

Other comprehensive loss, net of tax

Issuance of restricted stock

Stock options exercised

Stock-based compensation

Balance at June 30, 2022

Other comprehensive loss, net of tax

Issuance of restricted stock

Stock options exercised

Stock-based compensation

Balance at September 30, 2022

Comprehensive

4 unchanged sentences

Issuance of restricted stock

Repurchase of common stock and retirement of related treasury shares

Stock options exercised

1 unchanged sentence

Balance at March 31, 2022

Other comprehensive income, net of tax

Issuance of restricted stock

Repurchase of common stock and retirement of related treasury shares

Stock options exercised

Stock-based compensation

Balance at June 30, 2021

Other comprehensive loss, net of tax

Issuance of restricted stock

Common stock buyback

Stock options exercised

Stock-based compensation

Balance at September 30, 2021

See accompanying Notes to the Condensed Consolidated Financial Statements (unaudited)

3 unchanged sentences

Turtle Beach Corporation (“Turtle Beach”

or the “Company”), headquartered in White Plains, New York 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®, ROCCAT® and Neat Microphones® brands.

or the “Company”), headquartered in White Plains, New York 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® and ROCCAT® brands.

Turtle Beach is a worldwide leader of feature-rich headset solutions for use across multiple platforms, including video game and entertainment consoles, handheld consoles, personal computers (“PC”), tablets and mobile devices.

ROCCAT is a gaming keyboards, mice and other accessories brand focused on the PC peripherals market.

Neat Microphones is a microphones brand focused on using cutting edge technology and design to create high quality USB and analog microphones for gamers, streamers, and professionals.

VTB Holdings, Inc.

32 unchanged sentences

Financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, debt instruments and certain warrants.

As of September 30, 2022 and December 31, 2021 , the Company had not elected the fair value option for any financial assets and liabilities for which such an election would have been permitted.

The following is a summary of the carrying amounts and estimated fair values of our financial instruments as of September 30, 2022 and December 31, 2021.

September 30, 2022

As of March 31, 2023 and December 31, 2022 , the Company had not elected the fair value option for any financial assets and liabilities for which such an election would have been permitted.

The following is a summary of the carrying amounts and estimated fair values of our financial instruments as of March 31, 2023 and December 31, 2022:

March 31, 2023

December 31, 2022

5 unchanged sentences

and accounts receivable and accounts payable are stated at their carrying value, which approximates fair value due to the short time to the expected receipt or payment.

The carrying value of the Credit Facility equals fair value as the stated interest rate approximates market rates currently available to the Company, which is considered a Level 2 input.

The carrying value of the Credit Facility approximates fair value, due to the variable rate nature of the debt, as of March 31, 2023 and December 31, 2022 .

Allowance for Sales Returns

1 unchanged sentence

Three Months Ended

Nine Months Ended

September 30,

(in thousands)

5 unchanged sentences

Inventories consist of the following:

September 30,

(in thousands)

4 unchanged sentences

Property and equipment, net, consists of the following:

September 30,

(in thousands)

9 unchanged sentences

Other current liabilities consist of the following:

September 30,

(in thousands)

Accrued employee expenses

Accrued tax-related payables

Accrued marketing

Accrued freight

Accrued royalty

Accrued legal

Accrued freight

Accrued expenses

1 unchanged sentence

Goodwill and Other Intangible Assets

The Company’s results are affected by numerous macroeconomic factors including inflation, consumer spending confidence and global supply chains.

In 2022, we have experienced a higher rate of inflation than in recent years resulting in higher cost of goods, selling expenses, and general and administrative expenses.

Such increases have had a negative impact on the Company’s revenue and profit margin which have contributed to a decline in the Company’s market capitalization and have been considered triggering events during the third quarter 2022 and accordingly, the Company performed interim goodwill and long-lived asset quantitative impairment tests as of September 30, 2022.

Goodwill and Long-lived Assets Impairment Test

The Company estimated the fair value of goodwill and long-lived assets using both the income approach and market approach.

The income approach incorporates the use of a discounted cash flow model that involves management assumptions that are based upon future growth projections.

Assumptions include estimates of future revenues, growth rates which take into account estimated inflation rates, estimates of future levels of gross profit and operating profit, projected capital expenditures and discount rates based upon industry and competitor analyses.

The market approach, specifically the guideline public company method, which estimates the fair value of the Company using revenue and EBITDA multiples of selected public company peers that have similar characteristics to the Company.

Upon completing both the income approach and market approach, the Company determined that its fair value exceeded the net carry values of their assets and liabilities.

As such, goodwill and long-lived assets were not impaired as of September 30, 2022.

Acquired Intangible Assets

Acquired identifiable intangible assets, and related accumulated amortization, as of September 30, 2022 and December 31, 2021 consist of:

September 30, 2022

Acquired identifiable intangible assets, and related accumulated amortization, as of March 31, 2023 and December 31, 2022 consisted of:

March 31, 2023

(in thousands)

10 unchanged sentences

In connection with the October 2012 acquisition of TB Europe, the acquired intangible assets related to customer relationships is being amortized over an estimated useful life of thirteen years with the amortization being included within sales and marketing expense.

In May 2019, the Company completed its acquisition of the business and assets of the ROCCAT business, and in January 2021, the Company completed its acquisition of the business and assets of the Neat Microphones business.

The respective acquired intangible assets relating to developed technology, customer relationships and trade names are subject to amortization.

Amortization expense related to definite lived intangible assets of $ 0.3 million and $ 0.9 million was recognized for the three and nine months ended September 30, 2022, respectively, and $ 0.3 million and $ 0.9 million was recognized for the three and nine months ended September 30, 2021, respectively.

As of September 30, 2022, estimated annual amortization expense related to definite lived intangible assets in future periods is as follows:

In May 2019, the Company completed its acquisition of the business and assets of ROCCAT.

The acquired intangible assets relating to developed technology, customer relationships, and trade name are subject to amortization.

During the fourth quarter of 2022, the Company made the decision to increasingly leverage the Turtle Beach brand across our product portfolio including PC products over time.

Due to this decision, the Company prepared an impairment calculation to determine the present value of the ROCCAT tradename asset using the relief from royalty method.

As a result of the present value calculation, in the fourth quarter 2022, the Company recorded an impairment charge of $ 0.8 million for the ROCCAT tradename intangible asset.

In January 2021, the Company completed its acquisition of the business and assets relating to the Neat Microphones business.

During the fourth quarter of 2022, as part of the 2023 annual operating and strategic plan process, the Company made the decision to transition microphone products to the Turtle Beach brand.

As a result of this decision, there was no longer a basis for carrying the remaining net intangible assets related to the Neat brand.

In the fourth quarter 2022, the Company recorded an impairment charge of $ 1.1 million related to the remaining Neat net intangible assets.

Amortization expense related to definite lived intangible assets of $ 0.3 million was recognized for the three months ended March 31, 2023 and $ 0.3 million was recognized for the three months ended March 31, 2022.

As of March 31, 2023, estimated annual amortization expense related to definite lived intangible assets in future periods was as follows:

(in thousands)

There were no changes in the carrying values of goodwill for the three months ended September 30, 2022 from the balance as of December 31, 2021 .

There were no changes in the carrying values of goodwill for the three months ended March 31, 2023 from the balance as of December 31, 2022 .

Revolving Credit Facility and Long-Term Debt

September 30,

(in thousands)

Revolving credit facility, maturing March 2024

Total interest expense, inclusive of amortization of deferred financing costs, on long-term debt obligations was $ 0.5 million and $ 0.6 million for the three and nine months ended September 30, 2022, respectively, and $ 0.1 million and $ 0.3 million for the three and nine months ended September 30, 2021, respectively.

Amortization of deferred financing costs was $ 48 thousand and $ 142 thousand for the three and nine months ended September 30, 2022 and $ 47 thousand and $ 142 thousand for the three and nine months ended September 30, 2021, respectively.

Revolving credit facility, maturing April 2025

Total interest expense, inclusive of amortization of deferred financing costs, on long-term debt obligations was $ 0.2 million for the three months ended March 31, 2023 and $ 0.1 million for the three months ended March 31, 2022.

Amortization of deferred financing costs was $ 42 thousand for the three months ended March 31, 2023 and $ 47 thousand for the three months ended March 31, 2022.

Revolving Credit Facility

On December 17, 2018, Turtle Beach and certain of its subsidiaries entered into an amended and restated loan, guaranty and security agreement (“Credit Facility”) with Bank of America, N.A.

(“Bank of America”), as Agent, Sole Lead Arranger and Sole Bookrunner, which replaced the then existing asset-based revolving loan agreement.

The Credit Facility, which expires on March 5, 2024 , provides for a line of credit of up to $ 80 million inclusive of a sub-facility limit of $ 12 million for TB Europe, a wholly-owned subsidiary of Turtle Beach.

In addition, the Credit Facility provides for a $ 40 million accordion feature and the ability to increase the borrowing base with a “first-in, last-out”

loan (a “FILO Loan”) of up to $ 6.8 million.

On May 31, 2019, the Company amended the Credit Facility to provide for, amongst other items, (i) the addition of TBC Holding Company LLC, a wholly-owned subsidiary of VTB, as an obligor and (ii) the ability to make investments in TB Germany GmbH, a wholly-owned subsidiary of TB Europe, of up to $ 4 million in connection with the acquisition of the business of ROCCAT and up to an additional $ 4 million annually.

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 April 1, 2025 and provides for a line of credit of up to $ 80 million inclusive of a sub-facility limit of $ 15 million for TB Europe, a wholly-owned subsidiary of Turtle Beach.

In addition, the Credit Facility provides for a $ 40 million accordion feature.

On March 10, 2023, the Company entered into a Third Amendment to Amended and Restated Loan, Guaranty and Security Agreement (the “Third Amendment”), by and among the Company, VTB, TBC Holding Company LLC, TB Europe, VTBH, the financial institutions party thereto from time to time and Bank of America, as administrative agent, collateral agent and security trustee for the lenders.

The Third Amendment provides for, among other things:

(i) extending the maturity date of the Credit Facility from March 5, 2024 to April 1, 2025;

(ii) updating the interest rate and margin terms;

(iii) removing the FILO Loan facility;

(iv) updating the sub-facility limit for TB Europe to $ 15 million;

(v) increasing our undrawn commitment fee by 0.125 %;

and (vi) transitioning the reference interest rates from LIBOR to BSBY, SONIA and EUIBOR, as applicable.

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 either a rate published by Bank of America or the LIBOR rate, plus in each case, an applicable margin, which is between 0.50 % to 1.25 % for base rate loans and between 1.25 % to 2.00 % for U.S.

LIBOR loans and U.K.

loans, and between 2.00 % to 2.75 % for the FILO Loan.

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 Euro Interbank Offered Rate (“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 1.50 % 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 September 30, 2022, interest rates for outstanding borrowings were 7.50 % for base rate loans and 5.13 % for LIBOR rate loans.

The Company and the administrative agent entered into an amendment to the Credit Facility (the "LIBOR Transition Amendment") to replace the LIBOR rate as a reference rate available for use in the computation of interest under the Credit Agreement in favor of (i) the Applicable Rate (as defined in the Credit Facility) plus Sterling Overnight Index Average (“SONIA”) or the Euro Interbank Offered Rate (“EURIBOR”).

The Company expects to enter into an additional agreement to finalize the transition of the U.S.

LIBOR rate prior its expiration on June 30, 2023.

As of March 31, 2023, interest rates for outstanding borrowings were 10.50 % for base rate loans and 6.50 % for LIBOR rate loans, which reference interest rates were still in effect prior to the Libor Transition Amendments.

The Company is subject to quarterly financial covenant testing if certain availability thresholds are not met or certain other events occur (as set forth in the Credit Facility).

2 unchanged sentences

Obligations under the Credit Facility are secured by a security interest and lien upon substantially all of the Company’s assets.

As of September 30, 2022, the Company was in compliance with all financial covenants under the Credit Facility, as amended, and excess borrowing availability was approximately $ 25.3 million.

As of March 31, 2023, the Company was in compliance with all financial covenants under the Credit Facility, as amended, and excess borrowing availability was approximately $ 46.8 million.

In order to determine the quarterly provision for income taxes, the Company uses an estimated annual effective tax rate, which is based on expected annual income and statutory tax rates in the various jurisdictions.

3 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

(in thousands)

Income tax expense (benefit)

Income tax benefit

Effective income tax rate

Income tax benefit for the three months ended September 30, 2022 was $ 4.4 million at an effective tax rate of 26.8 % and income tax benefit for the nine months ended September 30, 2022 was $ 11.8 million at an effective tax rate of 24.5 % .

Income tax benefit for the three months ended September 30, 2021 was $ 1.8 million at an effective tax rate of ( 226.2 %) and income tax benefit for the nine months ended September 30, 2021 was ($ 0.3 ) million at an effective tax rate of ( 2.6 %) .

The effective tax rate for the three and nine months ended September 30, 2022 was primarily impacted by state taxes, certain credits and discrete deductions for employee stock option exercise, offset by nondeductible officer compensation and global intangible low taxed income.

Income tax benefit for the three months ended March 31, 2023 was ($ 0.1 ) million at an effective tax rate of 1.0 % .

Income tax benefit for the three months ended March 31, 2022 was ($ 2.6 ) million at an effective tax rate of 29.0 % .

The effective tax rate for the three months ended March 31, 2023 was primarily impacted by a true-up to foreign incomes tax payable, partially offset by the change in U.S.

valuation allowance, foreign taxes and interest on uncertain tax positions.

The Company recognizes only those tax positions that meet the more-likely-than-not recognition threshold and establishes tax reserves for uncertain tax positions that do not meet this threshold.

Interest and penalties associated with income tax matters are included in the provision for income taxes in the condensed consolidated statements of operations.

As of September 30, 2022, the Company had uncertain tax positions of $ 3.5 million , inclusive of $ 1.0 million of interest and penalties.

The Company has determined that a valuation allowance is not needed against the deferred tax asset as of September 30, 2022, with the exception of net operating losses for certain separate state filings.

This analysis is performed on a quarterly basis and includes an evaluation of all positive and negative evidence to determine whether it is more-likely-than-not that the deferred tax assets will be realizable.

This is based on generating earnings and taxable income in recent years, no tax attributes on hand that are at risk of expiring in the near future nor is there any history of expiring attributes, the cyclical nature of our business, and projections of future taxable income.

In the event that actual results differ from these estimates, the Company may need to modify the level of valuation allowance which could materially impact our business, financial condition and results of operations.

As of March 31, 2023, the Company had uncertain tax positions of $ 2.9 million , inclusive of $ 0.8 million of interest and penalties.

As required by the authoritative guidance on accounting for income taxes the Company evaluates the realizability of deferred tax assets on a jurisdictional basis at each reporting date.

Accounting for income taxes requires that a valuation allowance be established when it is more likely than not that all or a portion of the deferred taxes will not be realized.

The Company considers all positive and negative evidence in determining if, based on the weight of such evidence, a valuation allowance is required.

In circumstances where there is sufficient negative evidence indicating that the deferred tax assets are not more likely than not realizable, the Company establishes a valuation allowance.

Due to the significant 2022 pre-tax loss, coupled with cumulative book losses projected in early future years, the Company recorded a valuation allowance on its net U.S.

deferred tax assets as of December 31, 2022.

The Company’s continues to maintain this valuation allowance for the three months ended March 31, 2023.

The Company is subject to income taxes domestically and in various foreign jurisdictions.

4 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

(in thousands)

4 unchanged sentences

Total stock-based compensation

The following table presents the stock activity and the total number of shares available for grant as of September 30, 2022:

The following table presents the stock activity and the total number of shares available for grant as of March 31, 2023:

(in thousands)

3 unchanged sentences

Restricted Stock Forfeited

Performance Shares Unearned

Performance Shares Granted

Balance at September 30, 2022

Balance at March 31, 2023

Stock Option Activity

4 unchanged sentences

Options Forfeited

Outstanding at September 30, 2022

Vested and expected to vest at September 30, 2022

Exercisable at September 30, 2022

Outstanding at March 31, 2023

Vested and expected to vest at March 31, 2023

Exercisable at March 31, 2023

Stock options are time-based and the majority are exercisable within 10 years of the date of grant, but only to the extent they have vested.

6 unchanged sentences

Aggregate intrinsic value represents the difference between the estimated fair value of the underlying common stock and the exercise price of outstanding, in-the-money options.

The aggregate intrinsic value of options exercised was $ 0.8 million for the nine months ended September 30, 2022.

The aggregate intrinsic value of options exercised was $ 0.1 million for the three months ended March 31, 2023.

The Company uses the Black-Scholes option-pricing model to estimate the fair value of options granted as of the grant date.

There were no new options granted during the nine months ended September 30, 2022.

The total estimated fair value of employee options vested during the nine months ended September 30, 2022 was $ 3.9 million .

As of September 30, 2022, total unrecognized compensation cost related to non-vested stock options granted to employees was $ 2.0 million , which is expected to be recognized over a remaining weighted average vesting period of 1.4 years.

There were no new options granted during the three months ended March 31, 2023.

The total estimated fair value of employee options vested during the three months ended March 31, 2023 was $ 0.3 million .

As of March 31, 2023, total unrecognized compensation cost related to non-vested stock options granted to employees was $ 0.9 million , which is expected to be recognized over a remaining weighted average vesting period of 1.1 years.

Restricted Stock Activity

1 unchanged sentence

Shares forfeited

Nonvested restricted stock at September 30, 2022

As of September 30, 2022, total unrecognized compensation costs related to the nonvested restricted stock awards was $ 14.4 million , which will be recognized over a remaining weighted average vesting period of 2.3 years.

Nonvested restricted stock at March 31, 2023

As of March 31, 2023, total unrecognized compensation costs related to the nonvested restricted stock awards was $ 10.4 million , which will be recognized over a remaining weighted average vesting period of 1.9 years.

Performance-Based Restricted Share Units

As of September 30, 2022 , the Company had 256,342 performance-based restricted share units outstanding, including 167,000 issued in 2022.

As of March 31, 2023 , the Company had 256,342 performance-based restricted share units outstanding.

The vesting of performance-based restricted share units is determined over a three-year period based on (i) the amount by which revenue growth exceeds a defined baseline market growth each year and (ii) the achievement of specified tiers of adjusted EBITDA as a percentage of net revenue each year, with the ability to earn and vest into such units ranging from 0 % to 200 %.

In 2021, 37,507 performance-based restricted share units vested related to the Company's achievement of these performance measures.

Net Income (Loss) Per Share

The following table sets forth the computation of basic and diluted net income (loss) per share of common stock attributable to common stockholders:

Net Loss Per Share

The following table sets forth the computation of basic and diluted net loss per share of common stock attributable to common stockholders:

Three Months Ended

Nine Months Ended

September 30,

(in thousands, except per-share data)

Net income (loss)

Weighted average common shares outstanding —

4 unchanged sentences

Weighted average common shares outstanding —

Net income (loss) per share:

Net loss per share:

Incremental shares from stock options and restricted stock awards are computed using the treasury stock method.

2 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

(in thousands)

4 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

(in thousands)

6 unchanged sentences

Shareholders Class Action :

On August 5, 2013, VTBH and the Company (f/k/a Parametric Sound Corporation) announced that they had entered into the Merger Agreement pursuant to which VTBH would acquire an approximately 80 % ownership interest and existing

shareholders would maintain an approximately 20 % ownership interest in the combined company (the “Merger”).

Following the announcement, several shareholders filed class action lawsuits in California and Nevada seeking to enjoin the Merger.

On August 5, 2013, VTB Holdings, Inc.

(“VTBH”) and the Company (f/k/a Parametric Sound Corporation) announced that they had entered into the Merger Agreement pursuant to which VTBH would acquire an approximately 80 % ownership interest and existing shareholders would maintain an approximately 20 % ownership interest in the combined company (the “Merger”).

Following the

announcement, several shareholders filed class action lawsuits in California and Nevada seeking to enjoin the Merger.

The plaintiffs in each case alleged that members of the Company’s Board of Directors breached their fiduciary duties to the shareholders by agreeing to a merger that allegedly undervalued the Company.

37 unchanged sentences

On November 24, 2020, ABP Technology Limited (ABP) issued a claim for trademark infringement in the High Court of England and Wales against Voyetra Turtle Beach, Inc.

(“VTB”) and Turtle Beach Europe Limited (“TBEU”) relating to the use by VTB and TBEU of the sign STEALTH on and in relation to gaming headsets in the UK.

VTB and TBEU filed and served a Defense to the claim on February 2, 2021.

On March 31, 2021, ABP filed an application for summary judgement.

The summary judgment application was heard by the Court in November 2021 and was dismissed.

The next stage in the main proceedings will be a Case Management Conference on November 21, 2022 at which the Court will give directions for each stage to trial.

The trial is expected to be heard in April 2023.

Consumer Class Action :

On June 13, 2022, an individual filed a class action lawsuit against VTB in the United States District Court for the Central District of California.

The complaint alleges that VTB violated the Telephone Consumer Protection Act, 47 U.S.C.

§ 227(b), by sending marketing-related text messages to the plaintiff and other members of the public who have registered their telephone numbers on the national Do-Not-Call Registry.

The plaintiff seeks to represent a class of all persons in the United States whose telephone numbers were present on the national Do-Not-Call Registry and received text messages from VTB within the last four years.

The complaint seeks statutory damages and an order enjoining VTB from sending further text messages to telephone numbers listed on the national Do-Not-Call Registry.

VTB believes that the plaintiff consented to receive marketing-related text messages from VTB and maintains that it does not contact members of the public without their consent.

VTB has filed an initial response to the complaint.

The court has not yet set a trial date for this matter.

(“VTB”) and Turtle Beach Europe Limited (“TB Europe”) relating to the use by VTB and TB Europe of the sign STEALTH on and in relation to gaming headsets in the UK.

On November 16, 2022 the parties entered into a confidential settlement agreement in full and final settlement of all claims regarding this matter.

Accordingly, the High Court claim has been discontinued.

The Company will continue to vigorously defend itself in the foregoing unresolved matters.

1 unchanged sentence

Accordingly, the Company cannot predict the outcome of these matters.

The Company has not recorded any accrual at September 30, 2022 for contingent losses associated with these matters based on its belief that losses, while possible, are not probable.

The Company has not recorded any accrual at March 31, 2023 for contingent losses associated with these matters based on its belief that losses, while possible, are not probable.

Further, any possible range of loss cannot be reasonably estimated at this time.

The unfavorable resolution of these matters could have a material

adverse effect on the Company’s business, results of operations, financial condition, or cash flows.

The unfavorable resolution of these matters could have a material adverse effect on the Company’s business, results of operations, financial condition, or cash flows.

The Company is engaged in other legal actions, not described above, arising in the ordinary course of its business and, while there can be no assurance, believes that the ultimate outcome of these other legal actions will not have a material adverse effect on its business, results of operations, financial condition, or cash flows.

4 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

(in thousands)

9 unchanged sentences

Balance Sheet Classification

September 30, 2022

March 31, 2023

(in thousands)

7 unchanged sentences

Weighted-average discount rate

During the nine months ended September 30, 2022, the Company recognized approximately $ 1.1 million of lease costs in operating expenses and approximately $ 0.8 million of operating cash flows from operating leases.

Approximate future minimum lease payments for the Company’s right of use assets over the remaining lease periods as of September 30, 2022, are as follows:

During the three months ended March 31, 2023, the Company recognized approximately $ 0.4 million of lease costs in operating expenses and approximately $ 0.3 million of operating cash flows from operating leases.

Approximate future minimum lease payments for the Company’s right of use assets over the remaining lease periods as of March 31, 2023, are as follows:

(in thousands)

1 unchanged sentence

Imputed interest

Subsequent Event

On May 1, 2023, the Company announced that the Company and Juergen Stark, Chairman, Chief Executive Officer and President of the Company, have agreed that Mr.

Stark would not continue as Chief Executive Officer and President of the Company, with his employment to terminate effective as of the close of business on June 30, 2023.

On May 2, 2023, the Company entered into a separation agreement with Mr.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements