What changed in this filing

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Item 1. Financial Statements

2023-11-07 compared with 2023-08-07 · 93 added, 61 removed, 418 unchanged (27% of the section changed)

3 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(in thousands, except per-share data)

6 unchanged sentences

Operating loss

Interest expense (income)

Interest expense

Other non-operating expense, net

Loss before income tax

Income tax benefit

Income tax expense (benefit)

Net loss per share

4 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(in thousands)

6 unchanged sentences

Condensed Consolida ted Balance Sheets

September 30,

(in thousands, except par value and share amounts)

18 unchanged sentences

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

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

17,404,013 and 16,569,173 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively

Additional paid-in capital

6 unchanged sentences

Condensed Consolidated S tatements of Cash Flows

Six Months Ended

June 30, 2023

June 30, 2022

Nine Months Ended

September 30, 2023

September 30, 2022

(in thousands)

50 unchanged sentences

Balance at June 30, 2023

Other comprehensive loss, net of tax

Issuance of restricted stock

Stock options exercised

Stock-based compensation

Balance at September 30, 2023

Comprehensive

12 unchanged sentences

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

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 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

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

September 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 June 30, 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 September 30, 2023 and December 31, 2022 .

Allowance for Sales Returns

1 unchanged sentence

Three Months Ended

Six 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)

8 unchanged sentences

Acquired Intangible Assets

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

June 30, 2023

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

September 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 $ 0.0 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:

Amortization expense related to definite lived intangible assets of $ 0.2 million and $ 0.8 million was recognized for the three and nine months ended September 30, 2023, respectively, and $ 0.3 million and $ 0.9 million was recognized for the three and nine months ended September 30, 2022.

As of September 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 six months ended June 30, 2023 from the balance as of December 31, 2022 .

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

Revolving Credit Facility and Long-Term Debt

September 30,

(in thousands)

Revolving credit facility, maturing April 2025

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.

Total interest expense, inclusive of amortization of deferred financing costs, on long-term debt obligations was $ 0.1 million and $ 0.4 million for the three and nine months ended September 30, 2023, respectively, and $ 0.5 million and $ 0.6 million for the three and nine months ended September 30, 2022, respectively.

Amortization of deferred financing costs was $ 33 thousand and $ 0.1 million for the three and nine months ended September 30, 2023, respectively, and $ 48 thousand and $ 0.1 million for the three and nine months ended September 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 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.

As of September 30, 2023, interest rates for outstanding borrowings were 11.00 % for base rate loans and 8.90 % 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 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.

As of September 30, 2023, the Company was in compliance with all financial covenants under the Credit Facility, as amended, and excess borrowing availability was approximately $ 49.5 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

Nine Months Ended

September 30,

(in thousands)

Income tax benefit

Income tax expense (benefit)

Effective income tax rate

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.

The effective tax rate for the three and nine months ended September 30, 2023 was primarily impacted by the change in U.S.

valuation allowance, foreign taxes, state tax 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 June 30, 2023, the Company had uncertain tax positions of $ 2.9 million , inclusive of $ 0.8 million of interest and penalties.

As of September 30, 2023, the Company had uncertain tax positions of $ 2.9 million , inclusive of $ 0.9 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 June 30, 2023.

The Company’s continues to maintain this valuation allowance for the three and nine months ended September 30, 2023.

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

4 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(in thousands)

8 unchanged sentences

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.

During the nine months ended September 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:

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

(in thousands)

Balance at December 31, 2022

Plan Amendment

Options Cancelled

3 unchanged sentences

Performance Shares Granted

Balance at June 30, 2023

Balance at September 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 .

5 unchanged sentences

Options Forfeited

Outstanding at June 30, 2023

Vested and expected to vest at June 30, 2023

Exercisable at June 30, 2023

Outstanding at September 30, 2023

Vested and expected to vest at September 30, 2023

Exercisable at September 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 $ 2.4 million for the six months ended June 30, 2023.

The aggregate intrinsic value of options exercised was $ 2.8 million for the nine months ended September 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 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.

There were no new options granted during the nine months ended September 30, 2023.

The total estimated fair value of employee options vested during the nine months ended September 30, 2023 was $ 0.8 million .

As of September 30, 2023, total unrecognized compensation cost related to non-vested stock options granted to employees was $ 0.4 million , which is expected to be recognized over a remaining weighted average vesting period of 0.6 years.

Restricted Stock Activity

1 unchanged sentence

Shares forfeited

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.

Nonvested restricted stock at September 30, 2023

As of September 30, 2023, total unrecognized compensation costs related to the nonvested restricted stock awards was $ 9.6 million , which will be recognized over a remaining weighted average vesting period of 2.5 years.

Performance-Based Restricted Share Units

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

As of September 30, 2023 , the Company had 162,672 performance-based restricted share units outstanding.

As of September 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

Nine Months Ended

September 30,

(in thousands, except per-share data)

10 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(in thousands)

4 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(in thousands)

30 unchanged sentences

A final hearing was held on May 18, 2020, wherein the Court approved the settlement and entered final judgment.

On May 22, 2020, PAMTP LLC, which purports to hold the claims of eight shareholders who opted out of the class settlement described above, brought suit against the Company, the Company’s CEO, Juergen Stark, Stripes Group, LLC, SG VTB Holdings, LLC, Kenneth Fox, and former members of the Company’s Board of Directors in Nevada state court.

On May 22, 2020, PAMTP LLC, which purports to hold the claims of eight shareholders who opted out of the class settlement described above, brought suit against the Company, the Company’s former CEO, Juergen Stark, Stripes Group, LLC, SG VTB Holdings, LLC, Kenneth Fox, and former members of the Company’s Board of Directors in Nevada state court.

This opt-out action asserts the same direct claims that were asserted by the class of shareholders described above.

13 unchanged sentences

On December 20, 2021, the former employee filed a notice of appeal of the judgment.

Intellectual Property Dispute:

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 (“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 June 30, 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 September 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.

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.

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.

The Company warrants its products against certain manufacturing and other defects.

3 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(in thousands)

4 unchanged sentences

Operating Leases - Right of Use Assets

The Company adopted ASU 2016-02, Leases , on January 1, 2019 .

The Company determines whether an arrangement is a lease at inception.

2 unchanged sentences

Balance Sheet Classification

June 30, 2023

September 30, 2023

(in thousands)

7 unchanged sentences

Weighted-average discount rate

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:

During the nine months ended September 30, 2023, the Company recognized approximately $ 1.1 million of lease costs in operating expenses and approximately $ 1.0 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, 2023, are as follows:

(in thousands)

2 unchanged sentences

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