What changed in this filing

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Item 1. Financial Statements

2023-08-07 compared with 2023-05-04 · 71 added, 46 removed, 408 unchanged (22% of the section changed)

3 unchanged sentences

Three Months Ended

Six Months Ended

(in thousands, except per-share data)

6 unchanged sentences

Operating loss

Interest expense

Interest expense (income)

Other non-operating expense, net

7 unchanged sentences

Three Months Ended

Six Months Ended

(in thousands)

26 unchanged sentences

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

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

17,309,270 and 16,569,173 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively

Additional paid-in capital

6 unchanged sentences

Condensed Consolidated S tatements of Cash Flows

Three Months Ended

March 31, 2023

March 31, 2022

Six Months Ended

June 30, 2023

June 30, 2022

(in thousands)

22 unchanged sentences

Proceeds from exercise of stock options and warrants

Repurchase of common stock

Debt issuance costs

19 unchanged sentences

Balance at March 31, 2023

Other comprehensive loss, net of tax

Issuance of restricted stock

Stock options exercised

Stock-based compensation

Repurchase of common stock

Balance at June 30, 2023

Comprehensive

7 unchanged sentences

Balance at March 31, 2022

Other comprehensive income, net of tax

Issuance of restricted stock

Stock options exercised

Stock-based compensation

Balance at June 30, 2022

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

40 unchanged sentences

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

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

As of June 30, 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 June 30, 2023 and December 31, 2022:

June 30, 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 approximates fair value, due to the variable rate nature of the debt, as of March 31, 2023 and December 31, 2022 .

The carrying value of the Credit Facility approximates fair value, due to the variable rate nature of the debt, as of June 30, 2023 and December 31, 2022 .

Allowance for Sales Returns

1 unchanged sentence

Three Months Ended

Six Months Ended

(in thousands)

32 unchanged sentences

Acquired Intangible Assets

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

March 31, 2023

Acquired identifiable intangible assets, and related accumulated amortization, as of June 30, 2023 and December 31, 2022 consisted of:

June 30, 2023

(in thousands)

19 unchanged sentences

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:

Amortization expense related to definite lived intangible assets of $ 0.0 million and $ 0.5 million was recognized for the three and six months ended June 30, 2023, respectively, and $ 0.3 million and $ 0.6 million was recognized for the three and six months ended June 30, 2022.

As of June 30, 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 March 31, 2023 from the balance as of December 31, 2022 .

There were no changes in the carrying values of goodwill for the six months ended June 30, 2023 from the balance as of December 31, 2022 .

Revolving Credit Facility and Long-Term Debt

1 unchanged sentence

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.

Total interest expense, inclusive of amortization of deferred financing costs, on long-term debt obligations was $ 0.1 million and $ 0.2 million for the three and six months ended June 30, 2023, respectively, and $ 0.1 million and $ 0.2 million for the three and six months ended June 30, 2022, respectively.

Amortization of deferred financing costs was $ 33 thousand and $ 75 thousand for the three and six months ended June 30, 2023, respectively, and $ 47 thousand and $ 94 thousand for the three and six months ended June 30, 2022, respectively.

Revolving Credit Facility

20 unchanged sentences

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, 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.

As of June 30, 2023, interest rates for outstanding borrowings were 10.75 % 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 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.

As of June 30, 2023, the Company was in compliance with all financial covenants under the Credit Facility, as amended, and excess borrowing availability was approximately $ 38.5 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

Six Months Ended

(in thousands)

1 unchanged sentence

Effective income tax rate

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.

The effective tax rate for the three and six months ended June 30, 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.

1 unchanged sentence

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

As of June 30, 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.

4 unchanged sentences

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’s continues to maintain this valuation allowance for the three months ended June 30, 2023.

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

4 unchanged sentences

Three Months Ended

Six Months Ended

(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 March 31, 2023:

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.

Stark, resulting in an acceleration of the total stock-based compensation associated with equity awards granted to him.

During the six months ended June 30, 2023 , the Company recorded a total of $ 4.0 million in stock-based compensation expenses and related payroll that would not have been recognized if Mr.

Stark had not announced his retirement.

The following table presents the stock activity and the total number of shares available for grant as of June 30, 2023:

(in thousands)

3 unchanged sentences

Restricted Stock Forfeited

Balance at March 31, 2023

Performance Shares Unearned

Performance Shares Granted

Balance at June 30, 2023

On July 6, 2023, the Company’s stockholders approved an amendment to the plan to, among other things, (i) change the name to Turtle Beach Corporation 2023 Stock-Based Incentive Compensation Plan, and (ii) increase the number of shares of the Company’s common stock, par value $ 0.001 per share, authorized for issuance by 1,049,000 .

Stock Option Activity

4 unchanged sentences

Options Forfeited

Outstanding at March 31, 2023

Vested and expected to vest at March 31, 2023

Exercisable at March 31, 2023

Outstanding at June 30, 2023

Vested and expected to vest at June 30, 2023

Exercisable at June 30, 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 $ 0.1 million for the three months ended March 31, 2023.

The aggregate intrinsic value of options exercised was $ 2.4 million for the six months ended June 30, 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 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.

There were no new options granted during the six months ended June 30, 2023.

The total estimated fair value of employee options vested during the six months ended June 30, 2023 was $ 0.6 million .

As of June 30, 2023, total unrecognized compensation cost related to non-vested stock options granted to employees was $ 0.6 million , which is expected to be recognized over a remaining weighted average vesting period of 0.8 years.

Restricted Stock Activity

1 unchanged sentence

Shares forfeited

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.

Nonvested restricted stock at June 30, 2023

As of June 30, 2023, total unrecognized compensation costs related to the nonvested restricted stock awards was $ 11.1 million , which will be recognized over a remaining weighted average vesting period of 2.7 years.

Performance-Based Restricted Share Units

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 %.

As of June 30, 2023 , the Company had 256,342 performance-based restricted share units outstanding.

ability to earn and vest into such units ranging from 0 % to 200 %.

As of June 30, 2023 , achievement of the performance conditions associated with the 2023, 2022 and 2021 performance shares was deemed not probable.

Net Loss Per Share

1 unchanged sentence

Three Months Ended

Six Months Ended

(in thousands, except per-share data)

10 unchanged sentences

Three Months Ended

Six Months Ended

(in thousands)

4 unchanged sentences

Three Months Ended

Six Months Ended

(in thousands)

8 unchanged sentences

(“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.

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.

43 unchanged sentences

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

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.

The Company has not recorded any accrual at June 30, 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.

6 unchanged sentences

Three Months Ended

Six Months Ended

(in thousands)

9 unchanged sentences

Balance Sheet Classification

March 31, 2023

June 30, 2023

(in thousands)

7 unchanged sentences

Weighted-average discount rate

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:

During the six months ended June 30, 2023, the Company recognized approximately $ 0.8 million of lease costs in operating expenses and approximately $ 0.6 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 June 30, 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