Nevada
|
27-2767540
|
(State or other jurisdiction of
incorporation or organization)
|
(I.R.S. Employer
Identification Number)
|
|
|
100 Summit Lake Drive, Suite 100
Valhalla, New York
|
10595
|
(Address of principal executive offices)
|
(Zip Code)
|
|
|
|
Page
|
PART I. FINANCIAL INFORMATION
|
|
|
|
|
|
Item 1.
|
Financial Statements (unaudited)
|
|
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
Item 2.
|
||
|
|
|
Item 3.
|
||
|
|
|
Item 4.
|
||
|
|
|
PART II. OTHER INFORMATION
|
||
|
|
|
Item 1.
|
||
|
|
|
Item 1A.
|
||
|
|
|
Item 6.
|
||
|
|
|
SIGNATURES
|
|
June 30, 2014
|
|
December 31, 2013
|
||||
ASSETS
|
(in thousands, except par value and share amounts)
|
||||||
Current Assets:
|
|
|
|
|
|
||
Cash and cash equivalents
|
$
|
8,958
|
|
|
$
|
6,509
|
|
Accounts receivable, net
|
15,164
|
|
|
48,542
|
|
||
Inventories, net
|
37,497
|
|
|
49,643
|
|
||
Deferred income taxes
|
10,536
|
|
|
2,214
|
|
||
Prepaid income taxes
|
1,329
|
|
|
2,925
|
|
||
Prepaid expenses and other current assets
|
5,168
|
|
|
3,561
|
|
||
Total Current Assets
|
78,652
|
|
|
113,394
|
|
||
Property and equipment, net
|
5,132
|
|
|
7,369
|
|
||
Goodwill
|
80,974
|
|
|
—
|
|
||
Intangible assets, net
|
40,385
|
|
|
3,972
|
|
||
Deferred income taxes
|
6,101
|
|
|
827
|
|
||
Other assets
|
520
|
|
|
1,745
|
|
||
Total Assets
|
$
|
211,764
|
|
|
$
|
127,307
|
|
LIABILITIES, CONVERTIBLE PREFERRED STOCK AND
STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
|
|
|||
Current Liabilities:
|
|
|
|
|
|||
Revolving credit facilities
|
$
|
19,256
|
|
|
$
|
39,736
|
|
Term loan
|
—
|
|
|
14,500
|
|
||
Subordinated notes - related parties
|
7,322
|
|
|
—
|
|
||
Accounts payable
|
10,528
|
|
|
44,136
|
|
||
Due to shareholders
|
3,125
|
|
|
3,125
|
|
||
Other current liabilities
|
8,796
|
|
|
9,712
|
|
||
Total Current Liabilities
|
49,027
|
|
|
111,209
|
|
||
Series B redeemable preferred stock
|
14,253
|
|
|
13,713
|
|
||
Deferred income taxes
|
14,325
|
|
|
850
|
|
||
Subordinated notes
|
—
|
|
|
10,342
|
|
||
Other liabilities
|
2,051
|
|
|
1,986
|
|
||
Total Liabilities
|
79,656
|
|
|
138,100
|
|
||
Commitments and Contingencies
|
|
|
|
||||
Series A convertible preferred stock, $0.01 par value - 50,000,000 shares authorized;
48,689,555 shares issued and outstanding as of December 31, 2013
|
—
|
|
|
24,345
|
|
||
Stockholders' Equity (Deficit)
|
|
|
|
|
|
||
Common stock, $0.001 par value - 50,000,000 shares authorized; 41,906,120 and 12,700,460 shares issued and outstanding as of June 30, 2014 and December 31, 2013, respectively
|
42
|
|
|
13
|
|
||
Additional paid-in capital
|
124,758
|
|
|
(54,031
|
)
|
||
Retained earnings
|
6,567
|
|
|
18,775
|
|
||
Accumulated other comprehensive income
|
741
|
|
|
105
|
|
||
Total Stockholders' Equity (Deficit)
|
132,108
|
|
|
(35,138
|
)
|
||
Total Liabilities, Convertible Preferred Stock and Stockholders' Equity (Deficit)
|
$
|
211,764
|
|
|
$
|
127,307
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30, 2014
|
|
June 30, 2013
|
|
June 30, 2014
|
|
June 30, 2013
|
||||||||
|
(in thousands, except per-share data)
|
||||||||||||||
Net Revenue
|
$
|
22,296
|
|
|
$
|
24,520
|
|
|
$
|
60,584
|
|
|
$
|
54,053
|
|
Cost of Revenue
|
17,465
|
|
|
18,198
|
|
|
43,477
|
|
|
39,106
|
|
||||
Gross Profit
|
4,831
|
|
|
6,322
|
|
|
17,107
|
|
|
14,947
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
||||||||
Selling and marketing
|
7,698
|
|
|
8,412
|
|
|
14,698
|
|
|
14,118
|
|
||||
Research and development
|
2,071
|
|
|
1,325
|
|
|
4,069
|
|
|
2,212
|
|
||||
General and administrative
|
4,698
|
|
|
1,660
|
|
|
8,271
|
|
|
4,030
|
|
||||
Business transaction costs
|
(484
|
)
|
|
680
|
|
|
3,744
|
|
|
680
|
|
||||
Total operating expenses
|
13,983
|
|
|
12,077
|
|
|
30,782
|
|
|
21,040
|
|
||||
Operating loss
|
(9,152
|
)
|
|
(5,755
|
)
|
|
(13,675
|
)
|
|
(6,093
|
)
|
||||
Interest expense
|
1,055
|
|
|
1,249
|
|
|
5,295
|
|
|
2,563
|
|
||||
Other non-operating expense (income), net
|
(70
|
)
|
|
84
|
|
|
(95
|
)
|
|
473
|
|
||||
Loss before income tax benefit
|
(10,137
|
)
|
|
(7,088
|
)
|
|
(18,875
|
)
|
|
(9,129
|
)
|
||||
Income tax benefit
|
(835
|
)
|
|
(3,750
|
)
|
|
(6,667
|
)
|
|
(3,487
|
)
|
||||
Net loss
|
$
|
(9,302
|
)
|
|
$
|
(3,338
|
)
|
|
$
|
(12,208
|
)
|
|
$
|
(5,642
|
)
|
|
|
|
|
|
|
|
|
||||||||
Net loss per share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
(0.23
|
)
|
|
$
|
(0.26
|
)
|
|
$
|
(0.33
|
)
|
|
$
|
(0.44
|
)
|
Diluted
|
$
|
(0.23
|
)
|
|
$
|
(0.26
|
)
|
|
$
|
(0.33
|
)
|
|
$
|
(0.44
|
)
|
Weighted average number of shares:
|
|
|
|
|
|
|
|
||||||||
Basic
|
40,827
|
|
|
12,700
|
|
|
37,296
|
|
|
12,700
|
|
||||
Diluted
|
40,827
|
|
|
12,700
|
|
|
37,296
|
|
|
12,700
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30, 2014
|
|
June 30, 2013
|
|
June 30, 2014
|
|
June 30, 2013
|
||||||||
|
(in thousands)
|
||||||||||||||
Net loss
|
$
|
(9,302
|
)
|
|
$
|
(3,338
|
)
|
|
$
|
(12,208
|
)
|
|
$
|
(5,642
|
)
|
|
|
|
|
|
|
|
|
||||||||
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
||||||||
Foreign currency translation adjustment
|
508
|
|
|
(109
|
)
|
|
636
|
|
|
(109
|
)
|
||||
Other comprehensive income (loss)
|
508
|
|
|
(109
|
)
|
|
636
|
|
|
(109
|
)
|
||||
Comprehensive loss
|
$
|
(8,794
|
)
|
|
$
|
(3,447
|
)
|
|
$
|
(11,572
|
)
|
|
$
|
(5,751
|
)
|
|
Six Months Ended
|
||||||
|
June 30, 2014
|
|
June 30, 2013
|
||||
|
(in thousands)
|
||||||
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
||
Net loss
|
$
|
(12,208
|
)
|
|
$
|
(5,642
|
)
|
Adjustments to reconcile net loss to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
3,048
|
|
|
1,890
|
|
||
Amortization of intangible assets
|
497
|
|
|
461
|
|
||
Amortization of debt financing costs
|
2,567
|
|
|
452
|
|
||
Share-based compensation
|
2,397
|
|
|
1,263
|
|
||
Accrued interest on Series B redeemable preferred stock
|
540
|
|
|
494
|
|
||
Paid in kind interest
|
769
|
|
|
—
|
|
||
Deferred income taxes
|
(6,900
|
)
|
|
(2,594
|
)
|
||
Reversal of sales returns reserve
|
(3,837
|
)
|
|
(6,112
|
)
|
||
Reversal of doubtful accounts
|
(144
|
)
|
|
(235
|
)
|
||
Provision for obsolete inventory
|
385
|
|
|
5
|
|
||
Loss on disposal of property and equipment
|
9
|
|
|
—
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Accounts receivable
|
37,406
|
|
|
55,240
|
|
||
Inventories
|
12,413
|
|
|
(2,819
|
)
|
||
Accounts payable
|
(34,150
|
)
|
|
(3,853
|
)
|
||
Prepaid expenses and other assets
|
(1,682
|
)
|
|
(708
|
)
|
||
Income taxes payable
|
1,784
|
|
|
(8,106
|
)
|
||
Other liabilities
|
(2,418
|
)
|
|
(7,465
|
)
|
||
Net cash provided by operating activities
|
476
|
|
|
22,271
|
|
||
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
||||
Purchase of property and equipment
|
(614
|
)
|
|
(2,862
|
)
|
||
Cash acquired in business combination
|
4,093
|
|
|
—
|
|
||
Net cash provided by (used for) investing activities
|
3,479
|
|
|
(2,862
|
)
|
||
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
||||
Borrowings on revolving credit facilities
|
54,371
|
|
|
18,000
|
|
||
Repayment of revolving credit facilities
|
(74,850
|
)
|
|
(33,000
|
)
|
||
Repayment of capital leases
|
(16
|
)
|
|
—
|
|
||
Repayment of term loan
|
(14,500
|
)
|
|
(7,500
|
)
|
||
Repayment of subordinated notes
|
(10,789
|
)
|
|
—
|
|
||
Proceeds from sale of common stock, net of issuance costs
|
37,224
|
|
|
—
|
|
||
Proceeds from exercise of stock options and warrants
|
1,095
|
|
|
—
|
|
||
Debt financing costs
|
(1,394
|
)
|
|
—
|
|
||
Proceeds from issuance of subordinated notes
|
7,000
|
|
|
—
|
|
||
Net cash used for financing activities
|
(1,859
|
)
|
|
(22,500
|
)
|
||
Effect of exchange rate changes on cash and cash equivalents
|
353
|
|
|
(109
|
)
|
||
Net increase (decrease) in cash and cash equivalents
|
2,449
|
|
|
(3,200
|
)
|
||
Cash and cash equivalents - beginning of period
|
6,509
|
|
|
5,219
|
|
||
Cash and cash equivalents - end of period
|
$
|
8,958
|
|
|
$
|
2,019
|
|
|
|
|
|
||||
SUPPLEMENTAL DISCLOSURE OF INFORMATION
|
|
|
|
||||
Cash paid for interest
|
$
|
1,562
|
|
|
$
|
1,527
|
|
Cash paid for income taxes
|
$
|
27
|
|
|
$
|
8,130
|
|
Value of shares issued to acquire HyperSound business
|
$
|
113,782
|
|
|
$
|
—
|
|
|
Series A Convertible Preferred Stock
|
|
Common Stock
|
|
Additional Paid-In Capital
|
|
Retained Earnings
|
|
Accumulated Other Comprehensive Income
|
|
Total
|
||||||||||||||||
|
Shares
|
Amount
|
|
Shares
|
Amount
|
|
|
|
|
||||||||||||||||||
|
(in thousands)
|
||||||||||||||||||||||||||
Balance at December 31, 2013
|
48,690
|
|
$
|
24,345
|
|
|
12,700
|
|
$
|
13
|
|
|
$
|
(54,031
|
)
|
|
$
|
18,775
|
|
|
$
|
105
|
|
|
$
|
(35,138
|
)
|
Net Loss
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
(12,208
|
)
|
|
—
|
|
|
(12,208
|
)
|
||||||
Other comprehensive income
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
636
|
|
|
636
|
|
||||||
Adjustment for reverse merger
|
|
|
|
7,275
|
|
7
|
|
|
113,775
|
|
|
|
|
—
|
|
|
113,782
|
|
|||||||||
Conversion of Series A Preferred
|
(48,690
|
)
|
(24,345
|
)
|
|
17,527
|
|
18
|
|
|
24,327
|
|
|
|
|
—
|
|
|
24,345
|
|
|||||||
Cashless exercise of warrants
|
—
|
|
—
|
|
|
24
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Sale of common stock, net of issuance costs
|
—
|
|
—
|
|
|
4,000
|
|
4
|
|
|
37,220
|
|
|
—
|
|
|
—
|
|
|
37,224
|
|
||||||
Stock options exercised and related tax activity
|
—
|
|
—
|
|
|
380
|
|
—
|
|
|
1,070
|
|
|
—
|
|
|
—
|
|
|
1,070
|
|
||||||
Share-based compensation
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
2,397
|
|
|
|
|
—
|
|
|
2,397
|
|
|||||||
Balance at June 30, 2014
|
—
|
|
$
|
—
|
|
|
41,906
|
|
$
|
42
|
|
|
$
|
124,758
|
|
|
$
|
6,567
|
|
|
$
|
741
|
|
|
$
|
132,108
|
|
|
(in thousands)
|
||
Legal fees
|
$
|
786
|
|
Accounting fees
|
84
|
|
|
Advisory fees
|
2,219
|
|
|
Termination and severance
|
450
|
|
|
Other
|
205
|
|
|
Total Transaction Costs
|
$
|
3,744
|
|
|
(in thousands)
|
||
Fair Value of Parametric shares outstanding
|
$
|
104,027
|
|
Fair Value of Parametric stock options
|
9,755
|
|
|
Purchase Price
|
$
|
113,782
|
|
|
Three Months Ended
|
||||||
|
June 30, 2013
|
||||||
|
Reported
|
|
Proforma
|
||||
|
(in thousands)
|
||||||
Net Revenue
|
$
|
24,520
|
|
|
$
|
24,732
|
|
Net Loss
|
$
|
(3,338
|
)
|
|
$
|
(5,280
|
)
|
|
Six Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30, 2014
|
|
June 30, 2013
|
||||||||||||
|
Reported
|
|
Proforma
|
|
Reported
|
|
Proforma
|
||||||||
|
(in thousands)
|
||||||||||||||
Net Revenue
|
$
|
60,584
|
|
|
$
|
60,584
|
|
|
$
|
54,053
|
|
|
$
|
54,420
|
|
Net Loss
|
$
|
(12,208
|
)
|
|
$
|
(14,298
|
)
|
|
$
|
(5,642
|
)
|
|
$
|
(9,590
|
)
|
•
|
Level 1 — Quoted prices in active markets for identical assets or liabilities.
|
•
|
Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for markets that are not active, or other inputs that are observable or can be corroborated by observable market data.
|
•
|
Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.
|
|
December 31, 2013
|
||||||||||||||
|
Level I
|
|
Level II
|
|
Level III
|
|
Total
|
||||||||
|
(in thousands)
|
||||||||||||||
Financial Assets and Liabilities:
|
|
|
|
|
|
|
|
||||||||
Cash and cash equivalents - money market funds
|
$
|
19
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
19
|
|
Total financial assets
|
$
|
19
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
19
|
|
|
|
|
|
|
|
|
|
||||||||
Other current liabilities - derivative liabilities
|
$
|
—
|
|
|
$
|
(392
|
)
|
|
$
|
—
|
|
|
$
|
(392
|
)
|
Total financial liabilities
|
$
|
—
|
|
|
$
|
(392
|
)
|
|
$
|
—
|
|
|
$
|
(392
|
)
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
|
(in thousands)
|
||||||||||||||
Balance, beginning of period
|
$
|
5,001
|
|
|
$
|
3,978
|
|
|
$
|
6,266
|
|
|
$
|
7,748
|
|
Reserve accrual
|
1,790
|
|
|
5,766
|
|
|
4,840
|
|
|
5,955
|
|
||||
Recoveries and deductions, net
|
(4,362
|
)
|
|
(8,108
|
)
|
|
(8,677
|
)
|
|
(12,067
|
)
|
||||
Balance, end of period
|
$
|
2,429
|
|
|
$
|
1,636
|
|
|
$
|
2,429
|
|
|
$
|
1,636
|
|
|
June 30, 2014
|
|
December 31, 2013
|
||||
|
(in thousands)
|
||||||
Raw materials
|
$
|
2,902
|
|
|
$
|
5,499
|
|
Finished goods
|
34,595
|
|
|
44,144
|
|
||
Total inventories, net
|
$
|
37,497
|
|
|
$
|
49,643
|
|
|
June 30, 2014
|
|
December 31, 2013
|
||||
|
(in thousands)
|
||||||
Machinery and equipment
|
$
|
402
|
|
|
$
|
249
|
|
Software and software development
|
723
|
|
|
581
|
|
||
Furniture and fixtures
|
200
|
|
|
144
|
|
||
Tooling
|
1,950
|
|
|
1,756
|
|
||
Leasehold improvements
|
89
|
|
|
59
|
|
||
Demonstration units and convention booths
|
10,189
|
|
|
10,014
|
|
||
Total property and equipment, gross
|
13,553
|
|
|
12,803
|
|
||
Less: accumulated depreciation and amortization
|
(8,421
|
)
|
|
(5,434
|
)
|
||
Total property and equipment, net
|
$
|
5,132
|
|
|
$
|
7,369
|
|
|
(in thousands)
|
||
Balance as of January 1, 2014
|
$
|
—
|
|
Activity in 2014
|
|
||
Acquisition of HyperSound business
|
$
|
80,974
|
|
Balance as of June 30, 2014
|
$
|
80,974
|
|
|
June 30, 2014
|
||||||||||
|
Gross Carrying Value
|
|
Accumulated Amortization
|
|
Net Book Value
|
||||||
|
(in thousands)
|
||||||||||
Customer relationships
|
$
|
6,111
|
|
|
$
|
2,094
|
|
|
$
|
4,017
|
|
Non-compete agreements
|
187
|
|
|
120
|
|
|
67
|
|
|||
In-process Research and Development
|
27,100
|
|
|
—
|
|
|
27,100
|
|
|||
Developed technology
|
8,880
|
|
|
14
|
|
|
8,866
|
|
|||
Trade names
|
170
|
|
|
16
|
|
|
154
|
|
|||
Patent and trademarks
|
181
|
|
|
—
|
|
|
181
|
|
|||
Total Intangible Assets
|
$
|
42,629
|
|
|
$
|
2,244
|
|
|
$
|
40,385
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
||||||
|
December 31, 2013
|
||||||||||
|
Gross Carrying Value
|
|
Accumulated Amortization
|
|
Net Book Value
|
||||||
|
(in thousands)
|
||||||||||
Customer relationships
|
$
|
5,526
|
|
|
$
|
1,623
|
|
|
$
|
3,903
|
|
Non-compete agreements
|
177
|
|
|
108
|
|
|
69
|
|
|||
Total
|
$
|
5,703
|
|
|
$
|
1,731
|
|
|
$
|
3,972
|
|
|
June 30, 2014
|
|
December 31, 2013
|
||||
|
(in thousands)
|
||||||
Revolving credit facility, maturing March 2019
|
$
|
19,256
|
|
|
$
|
—
|
|
Revolving line of credit, repaid in March 2014
|
—
|
|
|
39,736
|
|
||
Term loans
|
—
|
|
|
14,500
|
|
||
Subordinated notes
|
7,322
|
|
|
10,342
|
|
||
Total outstanding debt
|
26,578
|
|
|
64,578
|
|
||
Less: current portion of revolving line of credit
|
(19,256
|
)
|
|
(39,736
|
)
|
||
Less: current portion of term loan
|
—
|
|
|
(14,500
|
)
|
||
Less: current portion of subordinated notes
|
(7,322
|
)
|
|
—
|
|
||
Total noncurrent portion of long-term debt
|
$
|
—
|
|
|
$
|
10,342
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
|
(in thousands)
|
||||||||||||||
Income tax benefit
|
$
|
(835
|
)
|
|
$
|
(3,750
|
)
|
|
$
|
(6,667
|
)
|
|
$
|
(3,487
|
)
|
Effective income tax rate
|
8.2
|
%
|
|
52.9
|
%
|
|
35.3
|
%
|
|
38.2
|
%
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
|
(in thousands)
|
||||||||||||||
Cost of revenue
|
$
|
38
|
|
|
$
|
21
|
|
|
$
|
68
|
|
|
$
|
41
|
|
Selling and marketing
|
208
|
|
|
83
|
|
|
328
|
|
|
158
|
|
||||
Product development
|
209
|
|
|
91
|
|
|
415
|
|
|
156
|
|
||||
General and administrative
|
893
|
|
|
360
|
|
|
1,586
|
|
|
908
|
|
||||
Total stock-based compensation
|
$
|
1,348
|
|
|
$
|
555
|
|
|
$
|
2,397
|
|
|
$
|
1,263
|
|
Related income tax benefit
|
$
|
539
|
|
|
$
|
222
|
|
|
$
|
959
|
|
|
$
|
505
|
|
|
$
|
809
|
|
|
$
|
333
|
|
|
$
|
1,438
|
|
|
$
|
758
|
|
|
(in thousands)
|
|
Balance at December 31, 2013
|
1,439
|
|
VTBH 2011 Plan terminated at Merger
|
(1,439
|
)
|
2013 Plan adopted at Merger
|
2,372
|
|
Options granted
|
(1,187
|
)
|
Restricted Stock granted
|
(6
|
)
|
Forfeited/Expired shares added back
|
34
|
|
Balance at June 30, 2014
|
1,213
|
|
|
Options Outstanding
|
|||||||||
|
Number of Shares Underlying Outstanding Options
|
|
Weighted-Average Exercise Price
|
|
Weighted-Average Remaining Contractual Term
|
|
Aggregate Intrinsic Value
|
|||
|
|
|
|
|
(In years)
|
|
|
|||
Outstanding at December 31, 2013
|
3,960,793
|
|
|
4.71
|
|
8.45
|
|
|
3,031,094
|
|
Granted
|
1,187,327
|
|
|
14.30
|
|
|
|
|
||
Assumed in acquisition
|
1,392,854
|
|
|
6.02
|
|
|
|
|
||
Exercised
|
(380,216
|
)
|
|
2.88
|
|
|
|
|
||
Forfeited
|
(202,078
|
)
|
|
2.02
|
|
|
|
|
||
Outstanding at June 30, 2014
|
5,958,680
|
|
|
7.14
|
|
8.18
|
|
|
25,172,671
|
|
Vested and expected to vest at June 30, 2014
|
5,958,680
|
|
|
7.14
|
|
8.18
|
|
|
25,172,671
|
|
Exercisable at June 30, 2014
|
3,067,107
|
|
|
4.63
|
|
5.76
|
|
|
14,722,017
|
|
Expected term (in years)
|
6.0 - 6.3
|
Risk-free interest rate
|
1.8% - 2.0%
|
Expected volatility
|
47.7% - 49.8%
|
Dividend rate
|
0%
|
|
Shares
|
|
Weighted Average Grant Date Fair Value Per Share
|
|||
Nonvested restricted stock at December 31, 2013
|
—
|
|
|
$
|
—
|
|
Granted
|
6,396
|
|
|
15.63
|
|
|
Nonvested restricted stock at June 30, 2014
|
6,396
|
|
|
15.63
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
|
(in thousands, except per-share data)
|
||||||||||||||
Net Loss
|
$
|
(9,302
|
)
|
|
$
|
(3,338
|
)
|
|
$
|
(12,208
|
)
|
|
$
|
(5,642
|
)
|
|
|
|
|
|
|
|
|
||||||||
Weighted average common shares outstanding — Basic
|
40,827
|
|
|
12,700
|
|
|
37,296
|
|
|
12,700
|
|
||||
Plus incremental shares from assumed conversions:
|
|
|
|
|
|
|
|
||||||||
Dilutive effect of stock options
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Weighted average common shares outstanding — Diluted
|
40,827
|
|
|
12,700
|
|
|
37,296
|
|
|
12,700
|
|
||||
Net loss per share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
(0.23
|
)
|
|
$
|
(0.26
|
)
|
|
$
|
(0.33
|
)
|
|
$
|
(0.44
|
)
|
Diluted
|
$
|
(0.23
|
)
|
|
$
|
(0.26
|
)
|
|
$
|
(0.33
|
)
|
|
$
|
(0.44
|
)
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||
|
June 30,
|
|
June 30,
|
||||||||
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||
|
(in thousands)
|
||||||||||
Stock options
|
6,051
|
|
|
3,658
|
|
|
5,859
|
|
|
3,658
|
|
Warrants
|
31
|
|
|
—
|
|
|
41
|
|
|
—
|
|
Unvested restricted stock awards
|
6
|
|
|
—
|
|
|
6
|
|
|
—
|
|
Total
|
6,089
|
|
|
3,658
|
|
|
5,906
|
|
|
3,658
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
|
(in thousands)
|
||||||||||||||
United States
|
$
|
10,894
|
|
|
$
|
10,474
|
|
|
$
|
37,979
|
|
|
$
|
33,283
|
|
International
|
11,402
|
|
|
14,046
|
|
|
22,605
|
|
|
20,770
|
|
||||
Total revenues
|
$
|
22,296
|
|
|
$
|
24,520
|
|
|
$
|
60,584
|
|
|
$
|
54,053
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30, 2014
|
|
June 30, 2013
|
|
June 30, 2014
|
|
June 30, 2013
|
||||||||
|
(in thousands)
|
||||||||||||||
Warranty, beginning of period
|
$
|
132
|
|
|
$
|
93
|
|
|
$
|
139
|
|
|
$
|
165
|
|
Warranty costs accrued
|
200
|
|
|
85
|
|
|
354
|
|
|
184
|
|
||||
Settlements of warranty claims
|
(72
|
)
|
|
(146
|
)
|
|
(233
|
)
|
|
(317
|
)
|
||||
Warranty, end of period
|
$
|
260
|
|
|
$
|
32
|
|
|
$
|
260
|
|
|
$
|
32
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
June 30,
|
|
June 30,
|
||||||||||||
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
|
|
(in thousands)
|
||||||||||||||
Net loss
|
|
$
|
(9,302
|
)
|
|
$
|
(3,338
|
)
|
|
$
|
(12,208
|
)
|
|
$
|
(5,642
|
)
|
Interest expense
|
|
1,055
|
|
|
1,249
|
|
|
5,295
|
|
|
2,563
|
|
||||
Depreciation and amortization
|
|
1,494
|
|
|
1,184
|
|
|
3,545
|
|
|
2,351
|
|
||||
Stock-based compensation
|
|
1,348
|
|
|
555
|
|
|
2,397
|
|
|
1,263
|
|
||||
Income tax benefit
|
|
(835
|
)
|
|
(3,750
|
)
|
|
(6,667
|
)
|
|
(3,487
|
)
|
||||
Business transaction costs
|
|
(484
|
)
|
|
680
|
|
|
3,744
|
|
|
680
|
|
||||
Payments to founders
|
|
—
|
|
|
—
|
|
|
—
|
|
|
527
|
|
||||
Adjusted EBITDA
|
|
$
|
(6,724
|
)
|
|
$
|
(3,420
|
)
|
|
$
|
(3,894
|
)
|
|
$
|
(1,745
|
)
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
|
(in thousands)
|
||||||||||||||
Net Revenue
|
$
|
22,296
|
|
|
$
|
24,520
|
|
|
$
|
60,584
|
|
|
$
|
54,053
|
|
Cost of Revenue
|
17,465
|
|
|
18,198
|
|
|
43,477
|
|
|
39,106
|
|
||||
Gross Profit
|
4,831
|
|
|
6,322
|
|
|
17,107
|
|
|
14,947
|
|
||||
Operating expenses
|
13,983
|
|
|
12,077
|
|
|
30,782
|
|
|
21,040
|
|
||||
Operating loss
|
(9,152
|
)
|
|
(5,755
|
)
|
|
(13,675
|
)
|
|
(6,093
|
)
|
||||
Interest expense
|
1,055
|
|
|
1,249
|
|
|
5,295
|
|
|
2,563
|
|
||||
Other non-operating expense (income), net
|
(70
|
)
|
|
84
|
|
|
(95
|
)
|
|
473
|
|
||||
Loss before income tax benefit
|
(10,137
|
)
|
|
(7,088
|
)
|
|
(18,875
|
)
|
|
(9,129
|
)
|
||||
Income tax benefit
|
(835
|
)
|
|
(3,750
|
)
|
|
(6,667
|
)
|
|
(3,487
|
)
|
||||
Net loss
|
$
|
(9,302
|
)
|
|
$
|
(3,338
|
)
|
|
$
|
(12,208
|
)
|
|
$
|
(5,642
|
)
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
|
(in thousands)
|
||||||||||||||
Selling and marketing
|
$
|
7,698
|
|
|
$
|
8,412
|
|
|
$
|
14,698
|
|
|
$
|
14,118
|
|
Research and development
|
2,071
|
|
|
1,325
|
|
|
4,069
|
|
|
2,212
|
|
||||
General and administrative
|
4,698
|
|
|
1,660
|
|
|
8,271
|
|
|
4,030
|
|
||||
Business transaction costs
|
(484
|
)
|
|
680
|
|
|
3,744
|
|
|
680
|
|
||||
Total operating expenses
|
$
|
13,983
|
|
|
$
|
12,077
|
|
|
$
|
30,782
|
|
|
$
|
21,040
|
|
|
Six Months Ended
|
||||||
|
June 30,
|
||||||
|
2014
|
|
2013
|
||||
|
(in thousands)
|
||||||
Cash and cash equivalents at beginning of period
|
$
|
6,509
|
|
|
$
|
5,219
|
|
Net cash provided by operating activities
|
476
|
|
|
22,271
|
|
||
Net cash provided by (used for) investing activities
|
3,479
|
|
|
(2,862
|
)
|
||
Net cash used for financing activities
|
(1,859
|
)
|
|
(22,500
|
)
|
||
Effect of foreign exchange on cash
|
353
|
|
|
(109
|
)
|
||
Cash and cash equivalents at end of period
|
$
|
8,958
|
|
|
$
|
2,019
|
|
|
|
Payments Due by Period
|
||||||||||||||||||
|
|
(in thousands)
|
||||||||||||||||||
|
|
Total
|
|
Less Than One Year
|
|
1 - 3 Years
|
|
3 - 5 Years
|
|
More Than Five Years
|
||||||||||
Contractual Obligations: (1)
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Operating lease obligations (2)
|
|
$
|
3,345
|
|
|
$
|
857
|
|
|
$
|
1,202
|
|
|
$
|
1,101
|
|
|
185
|
|
|
Series B redeemable preferred stock (3)
|
|
51,928
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
51,928
|
|
|||||
Principal payments on long term debt (4)
|
|
19,256
|
|
|
19,256
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Due to shareholders
|
|
3,125
|
|
|
3,125
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Subordinated notes (5)
|
|
7,322
|
|
|
7,322
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Total
|
|
$
|
84,976
|
|
|
$
|
30,560
|
|
|
$
|
1,202
|
|
|
$
|
1,101
|
|
|
$
|
52,113
|
|
•
|
our ability to timely demonstrate or manufacture reliable products that have the features required by our HyperSound customers;
|
•
|
our ability to develop relationships with new customers that will lead to sales of our HyperSound products or licensing of our HyperSound technology;
|
•
|
our ability to develop and expand into new markets for our HyperSound audio products and technology; and
|
•
|
our ability to develop international product distribution or licensing directly or through partners.
|
•
|
If our forecasts of demand for products are too high, we may accumulate excess inventories of products, which could lead to markdown allowances or write-offs affecting some or all of such excess inventories. We may also have to adjust the prices of our existing products to reduce such excess inventories.
|
•
|
If demand for specific products increases beyond what we forecast, our suppliers and third-party manufacturers may not be able to increase production rapidly enough to meet the demand. Our failure to meet market demand would lead to missed opportunities to increase our base of users, damage our relationships with retailers and harm our business.
|
•
|
The launch of next-generation consoles increases the likelihood that we could fail to accurately forecast demand for our next-generation console headsets and our existing headsets.
|
•
|
Rapid increases in production levels to meet unanticipated demand could result in increased manufacturing errors, as well as higher component, manufacturing and shipping costs, all of which could reduce our profit margins and harm our relationships with retailers and consumers.
|
•
|
trade restrictions, higher tariffs, currency fluctuations or the imposition of additional regulations relating to import or export of our products, especially in China, where all of our Turtle Beach products are manufactured, which could force us to seek alternate manufacturing sources or increase our expenses, either of which could have a material adverse effect on our results of operations;
|
•
|
difficulties obtaining domestic and foreign export, import and other governmental approvals, permits and licenses, and compliance with foreign laws, which could halt, interrupt or delay our operations if we cannot obtain such approvals, permits and licenses, and that could have a material adverse effect on our results of operations;
|
•
|
difficulties encountered by our international distributors or us in staffing and managing foreign operations or international sales, including higher labor costs, which could increase our expenses and decrease our net sales and profitability;
|
•
|
transportation delays and difficulties of managing international distribution channels, which could halt, interrupt or delay our operations;
|
•
|
longer payment cycles for, and greater difficulty collecting, accounts receivable, which could reduce our net sales and harm our financial results;
|
•
|
political and economic instability, including wars, terrorism, political unrest, boycotts, curtailment of trade and other business restrictions, any of which could materially and adversely affect our net sales and results of operations; and
|
•
|
natural disasters, which could have a material adverse effect on our results of operations.
|
•
|
cease selling, incorporating or using products or services that incorporate the challenged intellectual property;
|
•
|
obtain a license from the holder of the infringed intellectual property right, which license may not be available on reasonable terms, if at all; and
|
•
|
redesign products or services that incorporate the disputed technology.
|
3.1
|
Articles of Incorporation of Turtle Beach Corporation
|
|
|
3.2
|
Bylaws, as amended, of Turtle Beach Corporation
|
|
|
31.1
|
Certification of Juergen Stark, Principal Executive Officer, pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
31.2
|
Certification of John T. Hanson, Principal Financial Officer, pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
32.1
|
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, executed by Juergen Stark, Principal Executive Officer and John Hanson, Principal Financial Officer.
|
|
|
|
Extensible Business Reporting Language (XBRL) Exhibits
|
101.INS
|
XBRL Instance Document
|
101.SCH
|
XBRL Taxonomy Extension Schema Document
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document
|
101.LAB
|
XBRL Taxonomy Extension Labels Linkbase Document
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
TURTLE BEACH CORPORATION
|
|
|
|
Date: August 11, 2014
|
By:
|
/S/ JOHN T. HANSON
|
|
|
John T. Hanson
Chief Financial Officer, Treasurer and Secretary
|
|
|
(Principal Financial Officer)
|
1.
|
I have reviewed this quarterly report on Form
10-Q of Turtle Beach Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date:
|
August 11, 2014
|
By:
|
/s/ JUERGEN STARK
|
|
|
|
Juergen Stark
|
|
|
|
Chief Executive Officer and President
|
1.
|
I have reviewed this quarterly report on Form
10-Q of Turtle Beach Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date:
|
August 11, 2014
|
By:
|
/s/ JOHN T. HANSON
|
|
|
|
John T. Hanson
|
|
|
|
Chief Financial Officer, Treasurer and Secretary
|
Date:
|
August 11, 2014
|
By:
|
/s/ JUERGEN STARK
|
|
|
|
Juergen Stark
|
|
|
|
Chief Executive Officer and President
|
|
|
|
(Principal Executive Officer)
|
Date:
|
August 11, 2014
|
By:
|
/s/ JOHN T. HANSON
|
|
|
|
John T. Hanson
|
|
|
|
Chief Financial Officer, Treasurer and Secretary
|
|
|
|
(Principal Financial Officer)
|